The U.S. Small Business Administration recently released a report noting that women-owned businesses “will increasingly face the same challenges as businesses owned by men” and that “businesses owned by men and women more and more share the same general development patterns.” The report surprised me because it’s inconsistent with data from other sources, which suggest a persistent small-business-owner gender gap that won’t go away on its own.
Bureau of Labor Statistics data show that women account for roughly the same proportion of the self-employed heads of corporations as they did 17 years ago—22.2 percent in 2010, vs. 21.9 percent in 1994. Another recent SBA report shows that the odds of a woman becoming self-employed are 60 percent less than those of a man after age, education, and marital status are factored in.
Businesses owned by women are much less likely to have employees than are businesses owned by men. The SBA reported that only 11.7 percent of women-owned businesses employed workers in 2007, vs. 23.3 percent of male-owned businesses. The average revenue of a woman-owned business was just 40 percent of that amassed by male counterparts in 2007, with four-fifths of women’s ventures generating less than $50,000 in annual revenue.
What’s responsible for the gender gap? The data suggest a not very politically correct answer: Preferences. When surveyed, men are consistently more likely than women to say they are interested in starting a business.
Widening Entrepreneurial Gender Gap
Some data suggest that differences in preferences may actually be widening. The Cooperative Institutional Research Program at the University of California-Los Angeles reports that male college students have been more interested than female college students in starting businesses since it first collected data in 1975. In fact, the gap in preferences has widened.
The gender gap emerges early. In their 2007 book, The Entrepreneur in Youth, professors Marilyn Kourilsky and William Walstad found a 14 percentage point difference in high school kids’ interest in becoming business owners.
The problem isn’t merely a lesser interest in starting companies. Women-owned businesses tend to have lower sales, profit, and employment growth than those owned by men, and research shows that women owners care more about job flexibility. Moreover, women are much more likely to start companies in industries whose businesses tend to hire fewer people and generate lower revenue.
They also tend to choose to work fewer hours than their male counterparts, studies show.
Lower-Growth Business Models
Eliminating the gender gap among small business owners isn’t going to be easy. Typical efforts to help female entrepreneurs—intervention in credit markets and business training—won’t help much because they don’t address the cause of the gender gap. Women are starting companies at a lower rate than men because they are less interested in entrepreneurship. When they do start businesses, they choose models with less growth potential than those selected by male counterparts.
The solution is to get girls who have yet to start high school interested in entrepreneurship. That requires a much longer-term approach to solving the problem than most policymakers have been willing to embrace thus far. It demands reallocating scarce resources toward teaching girls about business ownership as a career option, as well as exposing them to female role models who run companies. Programs such as Girls Inc. Corporate Camp for Entrepreneurs and the Network for Teaching Entrepreneurship’s BizCamps are good examples of what we need to invest in—and expand.
While eliminating the gap won’t be easy, we don’t have any good alternatives. If we don’t change how girls think about business ownership, the gender gap will persist indefinitely.