I’ve already dealt with the stifling effects that unmeritorious female board membership has on a company – an effect that reverberates down the company line, within the industry, and throughout the whole economy over time. A whole nation of risk-averse companies stifles profitability, economic growth, innovation, job growth, income growth, and most importantly, quality of life. Now I’ll turn to another engine of job growth, innovation, and wealth creation that percolates most when men are in charge: small businesses.
If you read the opening lines of the Small Business Association’s 2007 report “Are Male and Female Entrepreneurs Really That Different?” you’d come away with the feeling, in answer to the rhetorical headline, that no, they really aren’t all that different. This fits the narrative prevalent in so many other facets of society that favors equality and negligible gender disparity.
The study states:
“While gender was shown not to affect new venture performance when preferences, motivation, and expectations were controlled for…”
Throughout all of the tables of bi-variate and regression analysis, the theme is that if women didn’t have structural barriers in the way – if they had equal access to capital and similar socialization into business networks – women-owned small businesses would be just as successful as men’s. What the research overlooks is that small businesses started by men tend to have emergent properties that businesses started by women don’t seem to have.
To compare apples to apples, the researchers controlled for management experience, number of previous start-ups, age, race, household size, and other factors to determine the differences between men and women that deal solely with the characteristics of each gender rather than the benefits or impediments each might face due to their gender. Even though the beginning of the research indicates “Move along, nothing to see here; women are still down-trodden,” a closer look reveals that there are robust differences in male and female entrepreneurs. We have to analyze those findings to understand the emergent properties of male start-ups.
1. Men are more likely to found technologically-intensive businesses, businesses that lose their competitive advantage quickly, and businesses with a geographically-dispersed customer base.
Even though the research found that if control variables are accounted for – management experience, prior start-ups, age, race, etc. – men are still more likely to engage in technology-intensive businesses. This is important to my original thesis. Despite the finding that maleness didn’t indicate more employees or superior performance for start-ups, thinking about the nature of business would alter the picture a little bit. Technological businesses increase innovation and decrease costs. Not even counting the jobs created within the company, these types of businesses are more likely to create jobs for other companies and throughout the whole economy since their products travel further through the supply chain of other companies.
I can make a safe assumption that, with their greater technological-intensiveness, businesses started by men pay their employees a higher wage. Technology is positively correlated with wages. So even if male-powered start-ups didn’t create absolutely more jobs, they create better jobs and help support businesses that create jobs outside of the organization. To make a trite comparison, starting up a bakery or an art gallery has lower returns to scale than a tech-industry start-up.
Companies founded by men tend to deal with geographically- disperse customers. Like Marco Polo, successful companies spread their products out across the world; that successful product begets new ideas and other new products that take humans to build, market, and sell.
Further, the rapid turnover of competitive advantage indicates that men are more at ease with increasing the churn of innovation. While this may not bode well for those companies that fail, the “start-up compost” creates freshness and innovation on which the economy thrives.
2. Men are significantly less likely to prefer low-risk/low-return businesses.
On the whole, risk-taking in capital decisions has positive externalities and creates superior returns. Part of the story of the economy’s success is its failures – part of the start-up compost mentioned above.
Going back to Baumeister, men’s low risk-aversion is the story here. Risk is inextricable from maleness; when we discuss the goodness of start-ups begun by men, their riskier nature is the reason the economy and the culture have succeeded so far.
The Guardian Life Small Business Research Institute forecasts that small businesses started by women will create 5 – 5.5 million new jobs by 2018 – more than half of the jobs created by small businesses. Here are the Institute’s parameters:
“This job growth projection is based on a rigorous analysis of converging factors, including the faster growth rate of female-owned vs. male-owned businesses; higher college graduation rates by women than men; and the predicted growth of industry sectors and occupations traditionally dominated by women.”
It’s likely that the forecast makes the assumption that female-owned businesses will employ the same risk strategy and have the same returns as male-owned businesses. In the long-run, male businesses will create more jobs, innovate more, and build more wealth precisely because of the innate riskiness of men. Women simply can’t compete on this parameter.
3. Men are more likely to start businesses to make money, consider their business more important than family, and enter a business in order to become a community leader.
The research states that there isn’t a significant difference in the number of jobs created by male start-ups or female start-ups. One can’t help but figure, though, that businesses that have a profit-motive or a pro-community stance will create jobs and give back more than those that were begun in order to create a more amenable work-life balance – such as those businesses that women start.
This underscores other positive externalities of male-owned small businesses. They pay more tax revenues and higher marginal rates. Their owners are less likely to “settle” for a malleable work-life balance; they’re driven to succeed on multiple fronts. Going back to Baumeister, this is one of the lynch-pins of men’s contribution to our existing culture. Men’s risk-taking and desire to make a name for themselves are all strategies predicted by Baumeister in his speech. By engaging in these strategies across the whole economy, men create more “stuff” than women.
Men embrace technology, they take risk, they venture into uncharted territory, the embrace the profit motive, they focus on their business qua the business, and they define themselves according to what they do in the office, factory, laboratory, or boardroom. Whatever this says about the personal lives of these particular men is irrelevant; our society wouldn’t be where it is today if it weren’t for such investment. If one values the remaining fragments of our culture and economic freedom, he has to appreciate the dedication that this investment takes. He also has to realize the true nature of this innovative bent. And the reality is that men, by and large, hold these qualities in spades, although you wouldn’t know that by reading popular press or even government agency reports.
The tack of some feminists is to teach us all, through reports like the SBA’s, that women could do it if they were given the chance. But there are other factors at play that. When given equal opportunity women don’t have the tools to perform as well in business as men.
