There is a perception that, compared to men, women are less likely to run a successful business; and there have even been studies supporting this perception. But is this really true? Research conducted by Professor John Watson found that there is no difference in the performance of female- and male-owned new ventures provided performance is appropriately measured.
It seems that many prior studies simply failed to control for size in their performance measures. We know that, for a variety of reasons, female-owned firms tend to be smaller than their male counterparts – but this does not mean they under-perform male-owned businesses. Similarly, risk was typically not considered in many of these studies, even though there is extensive evidence confirming that women tend to be more risk averse than men.
Analysing data from more than 4,000 new ventures in the U.S. Professor Watson concluded that any differences in the performance of female- and male-owned firms disappears when appropriate performance measures are used and important demographic differences are controlled for. The performance measures used in this study included 4-year closure rates; return on assets (ROA); and a risk-adjusted measure (the Sharpe ratio).
These findings should be of interest to women who are contemplating starting a new venture because a study by Dempsey and Jennings shows that young women have less entrepreneurial self-efficacy than young men and, as a result, are likely to feel less confident about pursuing an entrepreneurial career. It’s important that women are not discouraged from starting their own business based on the ‘false’ belief that new ventures initiated by women are less likely to succeed than those initiated by men.
It is also recommended that a would be entrepreneur would benefit from having a mentor or entrepreneurial role model, as this can enhance an individual’s entrepreneurial self-efficacy and reduce the uncertainty associated with starting a new business.
Robb, A.M., Watson, J. (2012), “Gender differences in firm performance: Evidence from new ventures in the United States”, Journal of Business Venturing, Vol. 27 No. 5, pp. 544-558.
Dempsey, D. and Jennings, J.E. (2014), “Gender and entrepreneurial self-efficacy: a learning perspective”, International Journal of Gender and Entrepreneurship, Vol. 6 No. 1, pp. 28-49.