FEMALE ENTREPRENEURSHIP - ASSESSING ITS GLOBAL IMPACT

Paraphrasing the current advertising campaign for Denmark’s most famous beer, if Carlsberg made studies of entrepreneurs, they would have created the Global Entrepreneurship Monitor (GEM).

Established in 1999, GEM is the most comprehensive longitudinal study of entrepreneurship ever undertaken.

Last year, more than 198,000 adults in 69 economies took part in the GEM survey, which represented an estimated 74 percent of the world’s population and 87 percent of its GDP.

And as part of its extensive research agenda, the GEM team recently released a special report that focuses on women who start and manage businesses across the World.

As with every GEM report, it is packed full of relevant and interesting statistics that should provide guidance to policymakers in supporting female entrepreneurship around the World.

The most striking fact is the scale of women in enterprise – the study estimates that 224 million women were starting or running businesses in those countries which took part in the GEM study in 2012.

Not all of these are one-woman bands - half of the businesses surveyed currently employ people in their businesses with an estimated 12 million planning to grow their ventures by at least six employees over the next five years.

Despite this enormous impact, entrepreneurial activity remains higher amongst men in most countries of the World, suggesting that more could and should be done to support more women into enterprise and, as a consequence, boost employment and prosperity.

One of the key factors identified in the report to get higher rates of female participation in self-employment is obvious, namely raising the awareness of entrepreneurship amongst women.

Not surprisingly, the research suggested that there tended to be higher rates of female entrepreneurship where women believed there were good opportunities for starting businesses, and where they had confidence, ability and spirit for this activity. In this respect, entrepreneurial role models can play a critical role in demonstrating success and in encouraging more women to follow in their footsteps.

However, a key constraint in female entrepreneurship seems to be the reluctance of women to move from an intention to become an entrepreneur to actually starting a business.

Whilst many indicate an intention to become their own boss, the research indicates that a far lower number than expected are translating this into the creation of a new business. More worrying still is that for those women who do start businesses do not stay long enough as owner-managers with many discontinuing operations before the venture matures.

Much of this could be down to the lack of business support available to female entrepreneurs in many countries. In fact, other studies have suggested that developing more women as mentors to business could be a positive step forward in addressing this issue, especially given that mentoring is seen as a key way of supporting startups to grow.

This lack of growth may also be due to the sector in which women start their businesses, with over half of female-owned firms being located in consumer services and there is some concern expressed by the authors as to why well-educated female entrepreneurs are running low potential businesses, especially in developed countries.

This is partly explained by the fact that whilst women entrepreneurs have higher levels of educational attainment than their male counterparts, they feel less likely to believe in their own capabilities to run a business successfully.

Again, this suggests that there is an enormous untapped potential in developing high growth businesses by female entrepreneurs and that there needs to be more training and focus on this area in the future.

This has significant implications for policymaking. If women have lower aspirations for growing their enterprises, then given the increasing focus on supporting growth firms amongst policymakers in order to get the most return for taxpayers’ support of business, there is a high likelihood that backing female business may fall off the economic development agenda. Given this, there needs to be a greater focus on how women can be supported to develop growing businesses.

Yet despite these concerns, it is clear that entrepreneurship is a viable career choice for an increasing number of women around the World.

Indeed, starting your own business it is becoming increasingly popular amongst young women in many countries around the World. Perhaps this is where policymakers should be focusing their efforts – on that slice of society where there is a growing appreciation of the potential of enterprise driven by both business and personal values.

Therefore, despite some progress during the last few years, we have yet to fully realise the full global potential of female entrepreneurship either in starting a business or, more importantly growing a successful venture. Certainly, there is far more that governments around the World can do to ensure we get more women to become involved in entrepreneurial activity, and as result, stimulate greater economic prosperity and jobs in their local communities.

FEMALE ENTREPRENEURS, FINANCE AND WHAT CAN BE DONE TO HELP THEIR CONTRIBUTION TO THE ECONOMY

One of the current debates in entrepreneurship research, which has been going on for over two decades, is whether female entrepreneurs are treated differently when it comes to accessing finance to start and grow their businesses.

It is an important discussion, as the number of women-led businesses in the UK has increased by 30 per cent since 2008 and they are making an increasing contribution to the economic wellbeing of the nation.

Previous research has suggested that women-owned businesses tend to start-up with lower levels of capitalisation, lower ratios of debt finance and much less likelihood of using private equity or venture capital.

Some have argued that this is due to the type of business that female entrepreneurs run and there is evidence to suggest that women manage firms with lower sales levels and liabilities as well as lower levels of salary, and that they cluster in less profitable sectors such as health, social work or professional activities.

Others have suggested that banks have, in the past, indirectly discriminated against women who apply for a loan to establish or expand a business. There are also some studies that have indicated that as women are less risk averse than men, there is a greater reluctance to assume debt within their businesses.

Yet recent evidence suggests that the situation on funding for female owned businesses may be changing.

The latest publication from the SME Monitor, which focuses specifically on women led businesses, showed that, as expected, women-led businesses are typically small, somewhat younger than male-owned firms and more likely to be run from a personal account than a business account.  They will also tend to be slightly less profitable.

Women led businesses are also less involved with external finance with 40 per cent not accessing any sort of funding at all from the banks. They were also less likely to be seeking finance in the near future.

However, it is surprising to note, as some research had suggested a bias against women by banks, that they are actually more successful with loans, with 70 per cent of applications being approved as compared to 56 per cent for men, especially among micro enterprises.

This is a startling revelation and goes against much of the perceived wisdom about lending to female entrepreneurs. Indeed, a detailed review from the office of the Deputy Prime Ministeron access to finance for women did recognise that the results from the SME Monitor indicated that there were encouraging signs that the discrimination against women had been addressed. However, the “Banking on Women” report suggested that such positive news still did not deal with the perception amongst women that such discrimination was still taking place and there was more that the financial sector could do to take women into account as part of their customer base.

So how such discrimination, perceived or otherwise, be overcome? As the Women’s Business Council (WBC) suggested last week, one way of dealing with this issue is to ensure that female entrepreneurship becomes mainstreamed as a business activity rather than something which the minority of women get involved in.

With the proportion if working age women involved in entrepreneurial activity being 6 per cent in 2012 as compared to 12 per cent for men, increasing the number of female owned firms could have a major impact on the UK economy.

And the solution to this, as Nick Clegg’s report alludes to, is to ensure that women do not perceive that there should be any gender related barriers to becoming a successful entrepreneur.

One possible solution would be to promote entrepreneurship in education and ensure that young women are equipped with the skills, networking and confidence to create a new generation of female entrepreneurs.

This includes increasing the availability of viable female role models to inspire women to believe that becoming an entrepreneur could and should be a viable career option for many.

Yet, in Wales there seems to be very little focus on developing more women entrepreneurs, despite the presence of an organisation such as Chwarae Teg that was once given considerable backing to undertake such activities. Certainly, giving Chwarae Teg and other bodies more support to help greater participation by women in enterprise could create thousands of new jobs at a time when many women who want to work simply can’t get a job.

And with signs that the banks are finally getting funding out to female entrepreneurs, this could be the best time for women in Wales, with the right support, to start a new business.

THE GROWING IMPORTANCE OF WORKING MOTHERS

According to recent research from the USA, a record number of women in the American workforce are the sole or primary breadwinners for their families.

In a finding that shows the massive change in working practices over the last fifty years, mothers now bring the majority of funding into 40 per cent of households, up from 11 per cent in 1960.

And whilst most of these families tend to be headed by single mothers, the number of married mothers who are bringing in more income than their husbands is also increasing. Indeed, in nearly a quarter of American marriages, the woman is the major breadwinner.

So what are attitudes of America to this finding?

Not surprisingly, they are mixed. Whilst 67 per cent stated that the extra income from working mothers made it easier for families to earn enough to live comfortably, 74 per cent said that it had also made it harder for parents to raise children.

Another contradictory finding is that whilst the vast majority have rejected that women should return to their traditional roles, over half said that children are better off with the mother being at home as compared to only 8 per cent for a father.

Yet, the number of stay at home fathers in the USA is increasing and is up 78 per cent from a decade ago although they still only account for 3.6 per cent of all at home parents.

But while the gender balances between the home and the workplace is changing, it is clear that many organisations still don’t understand the importance of work-life balances, especially amongst the growing number of women who want to build successful careers in business and also be with their families.

As a result, some have speculated that this could see an increase in female entrepreneurship over the next few years where customer service is more important than the hours you work.

However, not everyone can run their own business and with more women going into the workforce to earn income for their families, it is critical that governments should adjust their own policy thinking to take this into account.

As I have pointed out previously in this column, one of the biggest barriers for women to return to the workforce after having children is the massive current cost of childcare.

And whilst the coalition government has rightly acted to relax rules around nurseries, thus hopefully making them cheaper to run and therefore passing on these lower costs to parents, this is nowhere near what could be done to help families where both parents are working.

In fact, I remain disappointed that there has been no serious examination by the Treasury on how childcare and other family costs could be made tax deductible either directly for working parents or even for the hundreds of thousands of grandparents who currently do childminding at no cost.

Indeed, only last week, a study showed that almost 20 per cent of grandmothers in the UK provide at least ten hours of childcare a week, and around 90 per cent of them provide this care for free. Based on average childminder rates, that care would be worth £7.3 billion, nearly double what it was a decade ago.

So much remains to be done to ensure that government policies reflect the real changes that are happening in the workplace. With less than two years to go of this current administration, I hope that some of the radicalism we saw back in the summer of 2010 will reassert itself and that ministers will develop policies that really help hard working families around the country, especially if both parents of those families are working.

 

THE FINANCIAL CHALLENGES FOR WOMEN ENTREPRENEURS

The latest sketchbook video from the Kauffman Foundation examines the way in which women are facing greater challenges than men in getting financing for their companies, which is one of the reasons why this untapped population is not scaling businesses. It examines some of the underlying causes for those challenges. 


According to the narrator, Alicia Robb (who is also one of the authors of A Rising Tide, a new book that delves into the topic of financing strategies of women-owned firms), "You hear a lot about the number of women-owned businesses growing faster than firms overall, but that's really just a reflection of the lower base. "If you look at revenues or employment or payroll, [women-owned firms] are not growing faster than male-owned businesses; they are actually growing slower."



This reflects the findings of a paper I recently co-authored on the subject of financing for female entrepreneurship.  "Differences in perceptions of access to finance between potential male and female entrepreneurs: Evidence from the UK", published in International Journal of Entrepreneurial Behaviour and Research(Vol 18, No 1) examined whether being female increases the probability that an individual feels difficulty in obtaining finance is a barrier to starting a business.  

Although the actual financial barriers faced by female entrepreneurs have been extensively studied, this is one of the first studies to focus on the concept of perceived financial constraints faced by potential female entrepreneurs.  The results suggest that a greater proportion of women are solely constrained by financial barriers than their male counterparts. The gender of the respondent was also found to interact with a number of other personal characteristics in a significant manner. In terms of practical implications, this finding suggests that policymakers should be encouraged to market the availability of start-up finance from various sources to encourage women to attempt to obtain the necessary finance rather than being discouraged at the first hurdle.

SUPPORTING FEMALE ENTREPRENEURS

If you were asked to name any famous female entrepreneurs, who would you mention? Laura Ashley, Anita Roddick, Estee Lauder, Deborah Meaden?

Compare this to the long list of male entrepreneurs you could name at the same time. Yet, as the latest report from the Global Entrepreneurship Monitor (GEM) team shows, women are making a real impact on entrepreneurship across the World.

According to the latest data, more than 104 million women aged between 18-64 years old were actively engaged in starting and running new business ventures in 2010 in 59 countries. In addition, another 83 million women were running established businesses demonstrating the real impact they have on the development of enterprising economies across the World.

Despite this, the rate of entrepreneurial activity by men remains far higher. In fact, the study shows that women are less likely to consider entrepreneurship than men and when they do start a business, they are more likely to be motivated by necessity rather than an opportunity in the market-place.

Indeed, during the last eight years, the GEM study has shown that women’s perceptions about entrepreneurial opportunities have declined in most developed economies. Additionally, women are more likely to be discouraged from considering starting a business due to fear of failure and less likely to believe they have the skills to start and run a new venture.

As a result, it is not surprising that the growth expectations of women-run businesses are lower than for those run by men with twice as many men as women expected to add 20 or more employees to their companies.

Why is the case?

Much of the research in this area has tended to focus on gender differences in the access to, and use of, entrepreneurial finance, which is key to the birth and growth of new businesses. For example, studies have shown that female owned businesses tend to start with lower levels of overall capitalization than that used by male-owned firms. They also have lower ratios of debt finance and are less likely to use private equity or venture capital.

So are women turned off starting a new business because they have different perceptions to men, especially in terms of accessing finance?

That is the question that I have attempted to answer recently along with my colleagues Dr Caleb Kwong and Dr Piers Thompson from the University of Essex and Cardiff Metropolitan University respectively. Drawing on data from 49,107 individuals questioned as part of the Global Entrepreneurship Monitor (GEM) adult population survey undertaken in the UK, the research examined “Differences in perceptions of access to finance between potential male and female entrepreneurs”.

Not surprisingly given previous studies, the results from the study confirmed that women are more likely to perceive that they are financially constrained than their male counterparts. Additionally, the research found that gender plays an influential role in preventing potential female entrepreneurs from starting a new business when no other barriers exist. In fact, the models developed found that women are around 10 percent more likely than men to perceive finance to be the only barrier to entrepreneurship. Those are the findings but what are the implications for policymakers?

Certainly, the analysis suggests that there is a role for support bodies to develop specific mechanisms to deal with this issue. For example, the availability of start-up finance from various sources could be marketed by different support organisations to encourage women to attempt to obtain the necessary finance rather than being discouraged at the first hurdle. This includes the need to increase both financial awareness and literacy so that potential female entrepreneurs are aware of all financial options open to them as well as increasing their ability to utilise those funding sources they have knowledge of. These should not only emerge from public bodies and women's stakeholders groups, but also from the private sector and community-based organisations, such as credit unions, which have greater outreach abilities.

The study also found a stronger effect from education in reducing these perceptions of financial constraints for women. This implies that female graduates could provide a source of potential entrepreneurs who are less likely to perceive obtaining finance to be a problem and are more positively positioned to be capable of acquiring external funding. Given this, there is no reason as to why higher education institutions could not play a vital role in supporting the development of female entrepreneurs.

For example, Welsh universities could increase the level of female entrepreneurial activity by advertising the benefits and potential of entrepreneurship as a career. This could be undertaken through cross faculty entrepreneurship education programmes which address the needs of all the student population rather than just business students. More importantly, they could provide enterprise initiatives that are specifically targeted towards the specific needs of potential female entrepreneurs within the student population.

Recent research has shown us that new firms create almost all new net jobs in the economy and yet women are, as this study suggests, facing specific barriers which may disincentives them from taking part in entrepreneurial activity. Certainly, if we can get more women to consider establishing a new venture, then it can only benefit the Welsh economy at a time when we need every job we can get.

DIFFERENCES IN PERCEPTIONS OF ACCESS TO FINANCE BETWEEN POTENTIAL MALE AND FEMALE ENTREPRENEURS

Another paper has been published from the research undertaken by the Global Entrepreneurship Monitor research team for Wales.

The paper "Differences in perceptions of access to finance between potential male and female entrepreneurs: Evidence from the UK" has been published in International Journal of Entrepreneurial Behaviour & Research(Vol 18, No 1).

The purpose of the study is to examine whether being female increases the probability that an individual feels difficulty in obtaining finance is a barrier to starting a business. The study aims to extend this to examine if a pure gender effect exists or whether it is the interaction of gender with demographic, economic and perceptual characteristics that plays the most important role in the perception of financial constraint. Although actual financial barriers faced by female entrepreneurs have been extensively studied, this is one of the first studies to focus on the concept of perceived financial constraints faced by potential female entrepreneurs.

The data within this study are drawn from the Global Entrepreneurship Monitor (GEM) adult population survey between 2005 and 2007. The first stage of the study splits male and female respondents into separate sub-samples and runs individual regressions on each portion of the sample. The second stage of the study combines the male and female portions of the sample to directly examine the differences in perceived financial constraint between genders.

The results suggest that a greater proportion of women are solely constrained by financial barriers than their male counterparts. The gender of the respondent was also found to interact with a number of other personal characteristics in a significant manner.In terms of practical implications, this finding suggests that policymakers should be encouraged to market the availability of start-up finance from various sources to encourage women to attempt to obtain the necessary finance rather than being discouraged at the first hurdle.

FEMALE ENTREPRENEURSHIP - HOW CAN IT BE ENCOURAGED FURTHER IN WALES?

Western Mail Article 5th November 2011

Last month, a campaign was launched to increase the number of women entrepreneurs in the UK by 100,000 over the next decade.

Everywoman, the largest female business community in the UK, has linked up with the Federation of Small Businesses (FSB)'s Real Life Entrepreneurs Campaign to help encourage more women to set up new ventures in the UK.

Their argument is simple, namely that an extra 150,000 start-ups would be created per year if women started businesses at the same rate as men. This is not surprising as, according to the last Global Entrepreneurship Monitor report for the UK, female early-stage entrepreneurial activity in 2010 was 4 per cent of the adult population as compared to 9 per cent for men i.e. the ratio of female to male early-stage entrepreneurial activity was 44 per cent.

As well as a focus on encouraging more women, the FSB's campaign will also promote enterprise amongst young people, the over-50s, those with disabilities, ex-armed forces personnel and those who are currently living on benefits.

This strategy by the FSB should be widely applauded but for those of us who have been involved in entrepreneurship in Wales, it has a sense of real deja vu, given that, over a decade ago, there was a particular focus within the Entrepreneurship Action Plan for Wales on encouraging more starts-ups amongst women, minority ethnic groups, social enterprise and young people.

In fact, I remember that, thanks to the promotional campaigns managed by the Welsh Development Agency and the various start-ups programmes targeted at women, female entrepreneurship in Wales in 2004 was at three quarters that of the male entrepreneurial activity, one of the best gender balances in the whole World. By focusing on issues such as blocked mobility in the workplace and the issue of the so-called glass ceilings, more women in Wales were encouraged to start their own business.

Since the demise of the Entrepreneurship Action Plan in 2005, the targeting of enterprise support towards women has also died a death. In fact, there is now a policy by the Welsh Government that all new businesses are exactly the same and, as a result, there is no specific support to encourage more women to start their own businesses.

Indeed, there is an expectation that women should conform to male behaviours despite overwhelming academic evidence that female experience and practice can differ significantly to those of male entrepreneurs.

For example, there is strong evidence that women start businesses with fewer resources, restricted access to business clients, and slower and less reliable delivery of orders from suppliers. In terms of finance, there is also a widespread belief that women face greater difficulties in obtaining funding for a business start than their male counterparts, with female entrepreneurs starting off with lower levels of cash in the business.

Unlike what is happening in Wales, research shows that enterprise training courses should focus on addressing the weaker financial position that many women start from, given the reluctance of women to take on debt at start-up, which has long term implications for the development of their business. In addition, there should be greater use of training materials that feature successful women entrepreneurs in a variety of industries. Such role models expand the horizons and stimulate the aspirations of potential female entrepreneurs.

Women are a key part of any enterprise economy, and with female unemployment at its highest for twenty three years, there could, and should, be a focus on encouraging greater numbers of female run businesses if Wales is to emerge from the economic downturn as a more entrepreneurial nation.

So what could the Welsh Government do?

According to the Women’s Enterprise Policy Group, policymakers could introduce a number of measures to realise the multi-billion pound opportunity which growth from female-led enterprises can bring to the economy. These include the appointment of a women’s enterprise champion within government to raise awareness of economic benefits of encouraging more women to start and grow businesses. There should also be investment in business growth programmes for existing female entrepreneurs and doubling the number of women entrepreneurs using mentors and/or networking opportunities by promoting activities amongst networking groups. Finally, given the importance of higher and further education in economic development, government should ensure that current university and college entrepreneurship support is attractive and useful to young women, closing the gap between the numbers of young men and young women starting businesses.

Whereas very little is being done in Wales, the same is not true elsewhere in the UK. For example, a new £5.5m Women’s International Centre for Economic Development in Liverpool has just opened to provide a range of services focused on women’s start-up businesses and small and medium-sized enterprises. This includes ’incubation’ units for new and high growth women enterprises and an international research and knowledge centre focused on women’s enterprise and wider economic development issues.

The first woman to hold the business and economic development portfolio in the Welsh Government has hit the ground running with the creation of taskforces which are examining everything from micro-businesses to city regions to business rates.

Given this, isn’t it time also for this government to also look closely at the massive entrepreneurial potential that exists amongst half of the Welsh population and do something positive to encourage more female entrepreneurs in Wales?