HBB 2-1

12/04

Abstract

Women as Entrepreneurs: Examining the Myths

Prepared by: Glenn Muske

Home-Based and Micro Business Specialist

Oklahoma Cooperative Extension Service

333 HES, Oklahoma State University

Stillwater, OK 74078

(405) 744-9931

glenn.muske@okstate.edu

Menzies, T. V., Diochon, M., & Gasse, Y. (2004). Examining venture-related myths concerning women entrepreneurs. Journal of Developmental Entrepreneurship, 9(2), 89-107.

Implications for Cooperative Extension. While often assumed in the literature and by the popular press that women business owners face additional factors that may hinder the development and success of a business, this research finds that many of these myths have little reality in fact. Dispelling such ideas is important for both the mental mindset of the female business owner as well as policy makers, business consultants, investors, bankers, and the general population. The research does identify areas where educational opportunities do exist within this group however. Specifically programs designed on how to start a business and developing partners to help operate the business are two such opportunities.

Overview. Women are increasingly choosing business ownership as a career path. Statistics from the Small Business Administration indicate that women may be starting more than one-half of the new businesses formed each year. Yet even with that tremendous growth in women-owned and operated businesses, there are many myths that continue on in regards to the hurdles that women face when starting and operating a business. These myths have been found to increase the difficulty for women, and in reality all business owners, in becoming successful. The authors in this exploratory study examined the myths identified in an earlier work to investigate whether or not there was any truth to these existing myths.

The myths identified include the following and are all suspected to limit business success:

1. Not having the right educational backgrounds.

2. Not having the right experience.

3. Not having the necessary networks and social contacts.

4. Not having the financial savvy or resources.

5. Opening business ventures that are unattractive to venture capital.

6. Failing to develop business plans.

7. Starting businesses that are not high-growth in nature.

The myths identified develop out of three theoretical constructs. First, human capital theory, in this case in terms of the business owner, considers the age, education, and experience of the business owner as important factors in determining business success. Second, social capital theory would suggest that networks and relationships of trust are important determinants of business success. Finally, financial capital theory suggests that larger, more well-funded businesses that have access to larger pools of capital are more likely to succeed. This theory has typically found those

businesses to be more often controlled by men. While both women and men would seem to have access to the same sources of capital, research has found that women are less likely to use credit, bank loans or supplier credit.

The authors of the article were interested in testing whether or not women who were starting a new business were more likely to have such hurdles to overcome.

Methods. The survey studied Canadian households where business owners were in the first year of business, 1.8% of all households studied. The sample was representative of all Canadian households from across all provinces. Five-hundred ninety three businesses were identified in the initial screening. Due to refusals, businesses that had already closed, and disconnected phone numbers, the researchers were only able to interview 144 of the identified new business owners.

Results. The respondents came proportionately from all the areas of the country except the West were fewer start-up business owners were found. The average business owner was 41 and living with a partner (75%). One-third worked full time and another nearly 20% worked part-time in another job while trying to start his or her business with another 10% seeking work while in the start-up phase. Nearly 50% of men but only 25% of women had taken a course on how to start a business.

In examining the 7 myths, women and men had similar educational achievements. The difference between the groups was in the subject matter studied. Men were more likely to have taken applied science and computer courses while women were more likely to be health and natural science majors.

Women and men had similar experience in terms of years of experience in the industry of their current start-up and in management. No
differences were found in the percentage who had parents who had operated a business. Although not significant but substantial was the fact that 71% of women were starting their first business while only 50% of men were on their first try. Also women and men were similar in where they sought assistance when starting. Interestingly, 40% received no help but that be attributed to the fact that over two-thirds did not approach help services.

Generally women and men were similar in their level of financial savvy and resources available. Both had prepared projected financial statements, invested their own funds, asked for loans, and used some of the household net worth or income to help start the business. Women were however less likely to have a non-family member as a business partner.

In line with one’s education, women were less likely to be starting businesses that might be considered high-tech and thus more attractive to venture capitalists. Men held more patents and copyrights. There was no difference though in the amount the business spent on research and development.

Both men and women were as likely to have done a business plan. Also, both groups had equal ideas about the growth potential of their businesses.

Summary. As the results indicate, there are far less differences between women and men who are currently starting a business than what the literature and popular press might suggest. Certainly the issue of the type of business started and the use of partners from outside the family are significant results that may influence both the success and growth potential of a business. Overall however, the myths seem largely to be unsubstantiated among this sample suggesting more research with a broader sample would be an important step in further dispelling these ideas.