Summary: One of the chapters in the book The Illusions of Entrepreneurship by Scott A. Shane takes a cold hard look at the facts regarding women entrepreneurship (they lump together both small business entrepreneurship with high-risk, high-reward entrepreneurship), and offers many conclusions you probably won't be surprised about.

Body:

Let's talk about their interest in entrepreneurship in general.

The data indicate that women are less interested in being entrepreneurs... Even among women who are in the labor force, women are half as likely as men to start businesses, suggesting that labor force participation is only part of the story...

The data show that women are less likely than men to initiate the process of starting a business because, on average, women are less interested than their male counterparts in working for themselves.

pg 129 reference 16

Specifically, the data show that women in richer countries are half as likely as women in poorer countries to start businesses because the former can afford to choose not to work whereas the latter have to work to support their families

pg 129, reference 19

The takeaway of this section is that women are less interested in starting a small business. He tried to account for many factors in his analysis, including the idea that maybe it's because women aren't as well represented in the labor force. In addition, he considered the country in which the women lived as another factor.

Next onto performance:

unfortunately, equality between the sexes in the performance of new businesses led by women is a wish, not a reality. Across all economic sectors, new businesses led by women perform worse on almost every performance measure - survival, sales, growth, employment, and income - than new businesses led by men.

pg 130 reference 20

Average of $88k in sales in 2002 vs $1.9MM

Average business owned by a women generates only 78% of the profit of the average business owned by a man.

pg 130 reference 24

Talk about that 77% gender gap!

The four-year survival rate of new businesses with at least 1 employee that are founded by women is 8.6% lower than that of comparable new businesses founded by men

pg 130, reference 26

Essentially, it appears that of the women who do decide to start small businesses, simply looking at the financial facts regarding the businesses, they don't fare as well. There could be a preponderance of reasons for this. The author then tries to parse out potential reasons next:

Careful studies that have tried to explain why start-ups led by women perform worse than those led by men show that the difference in financial capital [e.g. access to investors] doesn't account for the performance difference

pg 131 reference 28

Despite access to capital, they do get turned down more for loans. One example of why they are actually less likely to meet lenders' standards:

They pursue opportunities that are less profitable... such as retail trade and personal services

pg 131 reference 30

A reasonable explanation:

Another common explanation ... is that women are, on average, less experienced entrepreneurs.

Does it hold up to the data?

The data to not bear out this explanation. My examination of the data from the Panel Study of Entrepreneurial Dynamics reveals that there are no statistical differences between male and female entrepreneurs in terms of the number of start-up companies founded; the number of startup classes or workshops taken; ... controlling for a variety of demographic factors... differences in the performance ... cannot be the result of differences in entrepreneurial experience.

Oh, too bad.

So what's a better explanation? ... Their goals and aspirations. Female entrepreneurs have lesser financial goals for their businesses than male entrepreneurs.

pg 132 reference 34

Now he gets to the crux of it. Essentially, the women are less driven by the financial goals of their businesses as their male entrepreneur counterparts.

less likely than male entrepreneurs to start their businesses to make money, and they have lesser financial aspirations for those businesses, even after controlling for a variety of other explanatory factors.

What about hard work and drive?

These data also show that female entrepreneurs work fewer hours per day on their new businesses than male entrepreneurs.

Are they actually learning from their mistakes or are they more delusional?

research by Dr. Brian Head of the Office of Advocacy at the U.S. Small Business Administration shows that they are also more likely to view a failed new start-up as "successful".

pg 133 reference 35

What about their motivations?

Many women become entrepreneurs to create flexible work schedules that will allow them to care for their families, particularly children.

pg 133 reference 37

Studies show that becoming a mother increases the likelihood that a woman will start her own business because home-based work allows a woman to work and care for her children simultaneously

pg 133 reference 39

I want to pause here and consider the statistical possibility that over all businesses, women may be over-represented by small home-based businesses. This book did not analyze the value of women versus men in high-risk, high-reward ventures such as tech and life sciences, and as such the data may be skewed towards the home-based businesses women tend to start. Again, though, that simply ties back into their desires and motivations, rather than ability.

Thus, it appears that many women become entrepreneurs when they have children because entrepreneurship provides the opportunity to work while simultaneously caring for children. This is a laudable goal and for many women it's the right one.

Now in my opinion, a lot of this research may not account for the new modern Empowered American Woman, but until new research is out there that says otherwise, I'm going to follow the data instead of trying to fit the data to my hypothesis.

Gender is one of the best predictors we have of who is an entrepreneur and who is not.

Let's be clear. This is not to say that they can't. Simply that they don't.

In fact, the author addresses this issue with the usual blue-pill disclaimer:

I am definitely, unequivocally, and absolutely not saying that women can't or shouldn't be entrepreneurs. And I am definitely, unequivocally, and absolutely not saying that they can't or shouldn't be just as good at entrepreneurship as men.

Gotta protect his reputation as non-misogynistic! However, just because they can be just as good as men, the data bears out what it bears out over general trends.

I realize that much of this is depressing ... But someone has to reveal what the data say.

A bitter red pill indeed!

Lessons Learned:

Well, the author provides his takeaways for us on page 134:

Gender is one of the best predictors we have of who is an entrepreneur and who is not.

Lack of access to money and business opportunities, lesser human capital, and a lack of desire for autonomy don't explain why women are less likely than men to start businesses; however, a lesser interest in running their own businesses does.

Compared to start-ups led by men, new businesses led by women have lower sales, fewer employees, less productivity, lower profits, and worse survival rates.

The lesser performance of female-led new ventures depends a lot on the lesser financial goals that female entrepreneurs have.