Frontiers of Entrepreneurship Research 1994

Frontiers of Entrepreneurship Research

Abstracts from the 1994 Edition

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    Raji Srinivasan
    Carolyn Y. Woo
    Arnold C. Cooper

    Krannert Graduate School of Management
    Purdue University
    West Lafayette, IN 47907


    Over the past two decades, there has been a meteoric rise in the number of female- owned establishments and in the research about them. Particular attention has been given to the skills and motivations leading up to new fm start-ups, common problems faced by women during start-up and degree of similarity in skills and success of male and female entrepreneurs. This paper contrasts the determinants of success between male and female entrepreneurs. Success is measured at two levels: mere survival and significant growth of the venture.

    Literature Review
    While the number of women-owned firms has been growing at a rapid pace, these am are smaller in size and younger - the average size of an eight-year old fm is ten or less employees (Msrich & Brush, 1988). Trait analyses have shown that the female entrepreneurs do not differ from the male entrepreneurs on attributes associate,'- with entrepreneurial success (Sexton & Bowman- Upton, 1990). However, the average sales, earnings and growth rate of women-owned firms are found to be much lower than those of their male counterparts (Sexton & Robinson, 1989; Fischer, et al. 1993). Other researchers have found that women are no more likely to fail and are just as successful as men (Kalleberg & Leicht, 199 1). With regard to determinants of entrepreneurial success, studies have found a strong causal link between experience (industry and managerial), formal education and successful performance (Hisrich & Brush, 1988; Fischer et al. 1993). Considerable research has also found that pan of the relatively high failure rate of women-owned firms can be attributed to discrimination by business support networks (Buttner& Rosen,1988; Riding & SwM 1990).

    This paper seeks to examine whether survival and growth rates are indeed different for firms owned by male and female entrepreneurs and if the survival and growth determinants are different. Previous research findings are mixed, but suggest that a number of variables associated with the entrepreneur, the processes of starting and industry membership may bear upon measures of success for new ventures. We therefore hypothesize:

    (1) women-owned firms have a higher probability of discontinuance and a lower probability of growth than those owned by men;
    (2) the determinants of survival and growth probabilities (attributes of the entrepreneur, processes of starting and industry membership) do not differ for firms owned by women and by men.

    The sample consists of 2994 entrepreneurs and their firms tracked over a three-year period. In May 1985, approximately 13,000 questionnaires were distributed to members of the National Federation of Independent Businesses (NFIB) who reported that they had recently become business owners. Responses were obtained from 4814 entrepreneurs, of whom 2994 were found to have become owners in the preceding 17 months. 'Me study focuses on these 2994 entrepreneurs; at the time of the first questionnaire, the average entrepreneur had been in business for 11 months. The sample represented all industries and geographic areas of the U.S. The reporting firms were sent follow-up questionnaires in May 1986 and May 1987. For the firms which survived and also returned survey responses in the third year, growth in the number of employees could be determined.

    Survival is determined by the status of the firm at the end of the third year and is a binary variable. Growth is measured in ten-Ns of increase / decrease in the number of employees and is also a binary variable. Those firms for which there was no change in number of employees were not considered). Independent variables included entrepreneurial attributes (formal education, prior work experience, need for autonomy, need to earn a living and an ambition to run a successful organization), processes of starting (availability of professional advice, trade connections, capital, percentage of outside funding, similarity to previous work, planned entry) and industry membership (retail, professional services and other). Given the categorical nature of the dependent variables, logistic regression (LOGM) was used to test the hypotheses. The regressions were run for the entire sample, the sub-sample of only male entrepreneurs and the sub-sample of only female entrepreneurs

    Of the 2994 entrepreneurs, 665 were women with 473 (71 %) surviving to the third year. The survival rate was 78% for male entrepreneurs. Among those who survived, 164 women and 707 men responded to the third questionnaire. Of these, 29% of the women-owned firms (24% for men) declined in size while 46% ( 57% for men) of the women-owned firms grew. For the total sample, gender was a significant determinant of both survival and growth, providing support for the first hypothesis. With regard to the survival function, significant determinants for the male sample were capital, professional advice, planned entry and similarity with past operations. The determinants for the women were slightly different: they included need to run a successful firm, professional advice, trade connections and similarity with past operations. With respect to the growth function, significant determinants for the male sample included similarity with past operations and percentage of outside funding; initial firm size (number of employees) was negatively related to growth. The significant determinants for the female sub-sample were altogether different. They include need for autonomy (personal trait); capital, trade connections, planned entry, similarity with past operations (start-up variables) and being in a professional industry. For these Ewm, desire to earn a living, business courses taken and initial capital were negatively related to growth.

    Conclusions and Implications:
    Clearly, the study lends support to previous research findings UW survival and growth rates of women- owned firms are lower than those of male-owned firms. The study also shows that start-up variables play a critical role in both the survival and growth of firms. While the survival determinants were found to be only slightly different for male and female owned, the growth determinants were quite distinct. The motivational variables play a more significant role for the women (as seen also in the literature) ; surprisingly, their survival and growth do not depend on (initial) capital. Also, being a professional (industry) enhances the probability of growth for the female entrepreneurs may reflect not only the opportunities in such industries, but also the way in which professional credentials may be of particular benefit to women.

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