23 Economic Development, Women Entrepreneurs, and the Future

Mauro F. Guillén

The journey through the world of women entrepreneurs in the previous chapters illustrates the dynamics of venture initiation and growth that characterize all entrepreneurial activity. They also speak to the specific opportunities and challenges faced by women entrepreneurs when compared to men, and the impact of the institutional context in developing and emerging economies. In his 1911 book, The Theory of Economic Development, Joseph Schumpeter presented the entrepreneur as the hero of the market economy. Decades later, in his famous book, Capitalism, Socialism and Democracy ([1942] 1975: 82), he argued that

Schumpeter also reminded us of another feature of entrepreneurs which characterizes many of the women analyzed in this book. The entrepreneur is not necessarily an investor who puts his or her own capital at risk, but rather someone who combines resources (including capital) to launch a venture. The women entrepreneurs featured in this book succeeded only to the extent that they managed to combine resources such as knowledge, social relationships, human labor and raw materials as well as capital.

The cases of women-launched ventures in this book also speak to the potential contribution of women to economic development. Prior to the 1980s, development theorists and practitioners focused their attention exclusively on the so-called “obstacles” to development, identifying and seeking to address hindrances such as the lack of physical infrastructure or the traditional values espoused by the population, which they saw as inimical to economic growth (Guillén 2001 and Naudé 2010 for a review). During the 1980s, in the wake of some of the worst economic and financial crises in the developing world, a new mode of thought emerged, focused on the institutional underpinnings of economic dynamism. It was quickly dubbed the Washington Consensus. While it placed the emphasis on a new set of variables that could foster entrepreneurship as the engine of growth, it inherited from its predecessors in economic development thinking an inclination to impose a one-size-fits-all recipe or “best practice” for success, and an inability to specify the processes of innovation that entrepreneurs and firms were supposed to spearhead.

The specific policy consensus that emerged during the 1980s and 1990s, especially at the International Monetary Fund and the World Bank, was that fiscal discipline, financial liberalization, openness to trade and investment, privatization, deregulation and protection of property rights were necessary to create the foundations for sustained economic growth. Lackluster results in Latin America led development theorists and practitioners to enlarge the agenda to include an even more sweeping list of necessary reforms, including corporate governance, labor market flexibility, independent central banks, and anti-corruption measures, among others. This “augmented” Washington Consensus, while theoretic ally on target, placed too much emphasis on eliminating inefficiencies and on the virtues of free financial flows without seriously considering dynamic innovation as the engine of growth. Moreover, the success of this model of economic growth requires wholesale institutional reform on several fronts, something that is likely to be opposed politically, and may not always be conducive to superior economic outcomes (Rodrik 2006).

The increasing attention paid to institutions also served to reignite interest in new firm formation, small firms, and their contribution to economic and employment growth (OECD 2004; Naudé 2010). In particular, micro and small enterprises (MSEs), those with fewer than fifty employees, were found to represent a greater share of employment in developing countries than in developed ones (Nichter and Goldmark 2009), thus presenting more opportunities to accelerate economic development.

Given the emphasis on institutions, much of the research effort into the potential for new firms to accelerate economic growth was placed on the conditions that enabled and hindered firm formation. Thus, in 2002 the World Bank launched the “Doing Business” project to assess the institutional rules and regulations affecting small and medium enterprises through their life cycle, i.e. those having to do with “starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business” (World Bank 2010a). Over the years, comparative data on as many as 183 economies were compiled using teams of local experts. The underlying assumption was that “economic activity requires good rules,” an idea that was first proposed by sociologist Max Weber (1978: 328–329) and the “old institutional” school in economics that Hernando de Soto, an influential Peruvian economist, helped popularize in policy circles during the 1990s, and that the law-and-finance economists at Chicago and Harvard pioneered in terms of formal modeling and cross-national data (La Porta et al. 1998). The focus was on the formal sector of the economy, under the assumption that informality tends to limit firm growth and the potential contribution to economic development (Nichter and Goldmark 2009).

The indicators included in the Doing Business database are highly correlated with other indices of the overall business environment and competitiveness, such as those compiled by the OECD, the World Economic Forum or IMD. The body of empirical research that uses these indicators seems to confirm that better institutional conditions reduce informality, facilitate new firm formation, encourage entrepreneurship, and increase employment (World Bank 2010a; Klapper et al. 2010). These findings make a great deal of sense given that the institutional indicators measure such egregious obstacles to doing business as the number and cost of bureaucratic procedures to start a firm, do construction, register property, resolve a commercial dispute, pay taxes or engage in international trade, although other indicators are more controversial, including those having to do with labor market rigidities and investor protections. Other research and documentation efforts have focused on the motivations and prevalence of entrepreneurship in different societies. The most comprehensive dataset is provided by the Global Entrepreneurship Monitor, an academic research consortium launched in 1999 that has conducted adult population surveys on entrepreneurial activity in fifty-four countries (GEM 2009).

The Contributions of Women to Economic Development

Development scholars and practitioners did not pay systematic attention to women until a Danish economist working for the United Nations, Ester Boserup, published her influential book, Woman’s Role in Economic Development (1970). Boserup’s analysis was so powerful because she showed the enormous extent to which women contribute to economic development. She forcefully argued that women play a key role in development, inside and outside the household. Her work inspired the United Nations Decade for Women (1975–1985) and laid the foundations for the wave of studies and programs arguing that promoting women’s role in the economy could become a major contributor to development (OECD 2004; World Bank 2001; Browne 2001; see Jaquette and Staudt 2006 for a review). The concern by development scholars interested in gender was not only to advance gender equality as a goal in its own right, but also to explore ways in which women’s economic activities could contribute to economic growth and to economic development, in the sense of a transformation of the economy through innovation.

These and other subsequent studies documented that development created a segregated labor market along gender lines, with women clustering in more labor-intensive activities in light manufacturing (e.g., textiles, food-processing) that paid lower wages, or being self-employed in the service sector (Boserup 1970; Browne 2001). Attempts were also made conceptually and statistically to distinguish among the prevalence and contributions to development of unpaid household labor, unpaid work at the family farm or business, self-employment, and entrepreneurship by women (UNIFEM 2005; International Labour Organization 2009). A related argument about women’s role in economic growth and development was formulated by Gøsta Esping-Andersen (1999), a Danish sociologist, who argued that in advanced postindustrial societies the incorporation of women into the labor force triggered the growth of all manner of market-oriented service activities that women used to perform in the household without pay. By the beginning of the 1990s entrepreneurship by women was fully recognized as a dynamic contributor to economic development. The main argument in this new line of inquiry and policymaking became that countries that did not make it possible for women to participate fully as economic agents would be underutilizing half of the talent pool (OECD 2004; World Bank 2001).

Entrepreneurship by women, however, was not found to be unproblematic. Researchers reported that entrepreneurs, whether men or women, tended to initiate activities related to their previous job experience. Given the pre-existing gender segregation by type of sector, industry or activity, the effect of previous experience on entrepreneurial activity generated a segregated pattern of entrepreneurship by gender, with women overwhelmingly launching new ventures in the service sector in general, and in retail and personal services in particular, where capital requirements tend to be lower and their household and self-employment experience more relevant (Carter et al. 2001; Carter and Shaw 2006). It is important to note that this sector of the economy produces for the most part non-tradable services, thus reducing the potential for international growth. As we shall see in the next section, the self-selection of women entrepreneurs into specific industries and activities helps explain many of the observed gender differences. In addition, in many developing countries researchers found that more than half (and in some cases more than three-fourths) of the smallest firms, accounting for a large share of total employment, were owned by women, and that they were generally characterized by slower growth rates and informal practices (Nichter and Goldmark 2009). Lastly, there is virtually no research on whether better educated women from advantaged social backgrounds are more likely to benefit from entrepreneurial opportunities, new aid or govern ment programs, and the like, thus perpetuating other sources of inequality.

The Impact of Gender on Patterns of Entrepreneurship

As is true of other related fields of inquiry, research on women and entrepreneurship is split between two seemingly irreconcilable models. First, there are researchers who propose that there is one unique and universal model of entrepreneurship, which is gender free. From this perspective, when studying entrepreneurship by women, the most important task for the researcher is to understand, explain, and provide solutions to the difficulties they may encounter, such as securing the necessary resources to launch a new venture. This type of analysis may be useful for educational and policymaking purposes, but it suffers from a serious theoretical and methodological shortcoming. Understanding differences in entrepreneurship between men and women by reference to a universal model of entrepreneurship can easily succumb to the temptation of an essentialist conception of how gender affects entrepreneurial processes and outcomes. Essentialism consists of characterizing a group of people or other entities by a small set of fixed properties, while ignoring the conditions under which such identities emerged, discounting any possibility of change or variation within the group (for a review of these arguments and the empirical evidence, see Mirchandani 1999; Lewis 2006).

A second group of researchers argues that there are many types of entrepreneurship, and that gender is not just one more variable that may help explain certain processes or outcomes. Rather, women entrepreneurs may have distinct preferences for choosing, organizing and managing a venture, and may define success in terms of goal achievement, a better work/family balance or community benefits, as opposed to growth, profits and fame. Ahl (2006) reported that the foundational texts in the field of entrepreneurship (including Schumpeter 1934) used words such as self-efficacious, strong willed, resolute, skilled at organizing, visionary, daring, courageous, detached, achievement oriented, and astute to describe the entrepreneur, terms that correlate very highly with index scales of what psychologists refer to as “masculinity.” Ahl also found that the opposites of those traits correlated with index scales of “femininity.” Other re searchers observed that entrepreneurship is often defined by reference to masculine traits such as ambition, independence, individualism, competitiveness, self-reliance, and risk-taking. According to these scholars, entrepreneurship by women, however, draws on different resources and opportunities, resulting in a qualitatively different kind of economic activity based on women’s distinctive characteristics (for reviews, see Ahl 2006; Bird and Brush 2002; Brush 1992; Brush et al. 2006b, 2010; Fielden and Davidson 2010a, 2010b; Mirchandani 1999; Lewis 2006).

These opposing ways of looking at entrepreneurship by women resonate with the two classic strands in feminist thought. Liberal feminist theory holds that men and women are similar and that any differences in opportunity or achievement are the result of discrimination or structural barriers. By contrast, social or radical feminist theory maintains that men and women are different, and that the latter’s traits constitute resources that can be mobilized to pursue meaningful social or economic action in ways that are distinct from those observed in men.

Perhaps the most useful way to reconcile these two perspectives is to view gender not as a given, but as a socially constructed category, as we have seen in the previous chapters. Women are socially constructed individually and as a group in different ways depending on time and space. Thus, all gender research, including research on entrepreneurship by women, should start by unveiling the assumptions underlying such constructions in the specific context and time in which it is taking place (Ahl 2006). This preliminary step is very important in the case of studies of women entrepreneurs across time and/or space, when political, cultural, religious and other social variables are not constant.

The empirical evidence comparing men and women entrepreneurs does not offer a clear picture as to the presumed differences in terms of the motivations, processes and outcomes of entrepreneurship. The existing reviews of the massive literature on this topic conclude that overall there is little support for differences between men and women engaged in entrepreneurship, with only two exceptions: (1) men and women self-select into different kinds of entrepreneurial activities, sectors and industries, mostly based on their prior work experience; and (2) ventures founded, owned and/or managed by women tend to grow less over time, mostly as a result of structural constraints of various sorts. We have seen these dynamics illustrated by the cases of women entrepreneurs presented in the previous chapters. Virtually all of them launched a venture based on their previous experience in the household, in education, or in employment.

We have also seen illustrated in our cases the enormous range of variation in terms of the process of entrepreneurship, a feature that makes it hard to make generalizations about the experience of women entrepreneurs. Thus, it is very hard to point to a gender model of entrepreneurship whereby women think and do differently than men. This is consistent with the existing literature, which does not find systematic evidence of differences in terms of the motivations to become an entrepreneur, attitudes toward entrepreneurship, the social or psychological characteristics of entrepreneurs, the process of starting the business, the management or leadership style or even ongoing access to finance. While some studies find evidence of such differences, others do not (for reviews of the literature, see Brush 1992; Brush et al. 2006a, 2010; Carter et al. 2001; Ahl 2006; Nichter and Goldmark 2009).

Perhaps the most intensively studied aspect of entrepreneurship by women is access to finance. Several of our cases highlighted the difficulties faced by women in this area (e.g. Kisyombe, Sambo), while others did not (e.g. Debayle, al Ghunaim, Aoki). Our sample, of course, is biased towards women that did launch a venture and made at least some progress with it. Thus, it probably underestimates the funding difficulties faced by women entrepreneurs. The emerging consensus in the literature, based on more representative samples, is that access to startup capital is more limited for women than for men. Aspiring women entrepreneurs tend to be asked to provide guarantees that lie beyond their existing assets, relationships or track record. The evidence on discrimination when it comes to accessing capital on an ongoing basis, i.e. after the business is up and running, yields more ambiguous and inconsistent results, although most research indicates that the relationship between women entrepreneurs and bankers is mired by gender stereotyping. Still, much of the gap between men and women’s access to finance can be explained by previous business experience, self-selection into specific activities, sectors and industries, or track record (Carter et al. 2001; Carter and Shaw 2006).

Another heavily researched area is networking. The women we studied relied on extensive personal and professional networks in order to launch and grow their ventures. The existing literature documents that women entrepreneurs often complain that they do not have access to the necessary resources for launching and growing their venture because their network connections are not the most appropriate for success. Those resources include not only material ones but also advice, mentorship, and role models. The existing body of research shows that women entrepreneurs, when compared to men, have fewer network ties in general, and weak (i.e. intermediary or brokerage) ties in particular. Both men and women entrepreneurs tend to have same-gendered ties, which makes it more difficult for women to find mentors and role models in fields in which there are few of them, as the cases of women like Ancharya in genomics outsourcing and al Ghunaim in investment banking. These differences are largely attributable to prior employment history and job experience. In fact, regardless of gender, salaried men and women tend to have more network contacts than the self-employed (Carter et al. 2001; World Bank 2011: 233). Although evidence for entrepreneurs is lacking, research on salaried men and women managers in the United States shows that women reap fewer benefits from weak ties and encounter more difficulties obtaining mentorship and advice. They also face different, and often more demanding, role expectations when they are “tokens,” i.e. in the numerical minority in their fields of activity (for a review, see Rothbard and Brett 2000).

Yet another area of controversy concerns work/family balance. Women’s role in the family is seen in the literature as both constraining and enabling entrepreneurship. On the one hand, research has shown that the family obligations shouldered by women can detract energy and time from other activities and make it harder for them to build the experience, reputation, and networks necessary for success. On the other, research also indicates that entrepreneurship can help women make more flexible arrangements to balance work and family than the typical 9-to-5 job, as we saw in the case of Kisyombe, and that family life can be an inspiration for certain entrepreneurial activities (Ahl 2006), as illustrated by Debayle and Escobosa. These arrangements, however, may imply that the venture is located in the household, which tends to be a major constraint on growth, at least in developing countries (Nichter and Goldmark 2009).

It is important to note that the most important explanations for the differences found between men and women entrepreneurs when it comes to accessing resources, including networking—lack of experience, limited track record, or self-selection into specific activities—in no way imply the absence of discrimination or the futility of public programs and policies geared at providing women with more opportunities. Analyzing the impact of experience and self-selection are precisely key to determining the best solutions to the obstacles that women experience when becoming entrepreneurs, which the literature has identified as having to do with a long list of interrelated factors: insufficient education or experience, barriers of access to various material resources (especially capital), lack of mentors and role models, competing demands on time, and so on (Carter et al. 2001; Carter and Shaw 2006; OECD 2004; Ahl 2006).

Previous research and the cases in this book clearly indicate that enabling women entrepreneurs to participate in all manner of activities, sectors and industries—not just in those in which they have prior experience—and to maximize the growth opportunities of their ventures will surely help them make an even greater contribution to economic development (Brush et al. 2006a, 2010; Carter et al. 2001). This is perhaps the most solid conclusion that can be reached from our efforts to understand the drives of women entrepreneurship, one that justifies the efforts at creating programs aimed at improving women’s access to professional education and social activities.

While we have emphasized self-selection as a powerful force shaping the activities of women entrepreneurs, there is no denying that discrimination places limits on women’s entrepreneurial opportunities. Perhaps the most blatant aspect of discrimination has to do with laws and regulations that place women at a disadvantage. A recent report by the World Bank covered 128 developed and developing economies. As of 2009, in forty-five countries women did not have the same legal capacity to act or engage in economic transactions, in forty-nine women were prevented from working in certain industries, and in thirty-two they did not have equal inheritance rights. Legal discrimination has an impact on entrepreneurship. Equal legal rights were found to result in a greater percentage of businesses owned or managed by women, and higher gender legal equality correlated with per capita income, although it was not clear what the direction of causality is (World Bank 2010b; see also World Economic Forum 2011).

Are There Enough Women Entrepreneurs around the World?

We illustrated in this book the positive impact that entrepreneurship by women can have on their families, communities, and countries, as well as on the women themselves. Assessing the prevalence and predicament of women entrepreneurs continues to be thwarted by the scarcity of systematic statistics and case-study evidence. Unfortunately, the World Bank’s Doing Business databases on the institutional conditions for business and on new firm registrations do not consider gender as a variable (World Bank 2010a; Klapper et al. 2010), although it has recently launched a pilot program to document in which countries women are discriminated against in laws and regulations related to doing business, including aspects such as accessing govern ment authorities, property, getting a job, dealing with taxes, building credit, and going to court (World Bank 2010b).

In general, the situation of women entrepreneurs is closely related to the overall status of women in the society and the economy (Brush et al. 2010; Carter et al. 2007; Fielden and Davidson 2010b). It is no surprise that, even after decades of effort, the socio-economic status of women around the world is not on a par with men, and that the progress that women have experienced towards gender equality is unevenly distributed by country. In 47 out of 192 countries and territories included in Table 23.1 (below), the average number of children per woman (i.e. the total fertility rate) is equal to or greater than 4. These are mostly poor countries in which women lag behind in terms of educational opportunity (see Table 23.2 below, with the correlations between pairs of variables). Having children triggers a number of complex effects on the chances that a woman will achieve high educational status, enter the labor market, pursue self-employment, or launch her own business, as the case studies in this book illustrate. In fact, the proportion of women who participate in the labor force, or the share of the total labor force that they represent, is not correlated with education, number of children or per capita income. A host of cultural, legal, and institutional variables also seem to intervene.

Global statistics on the prevalence of women entrepreneurs are of poor quality and coverage. The World Bank’s World Development Indicators reports the proportion of incorporated businesses in which women participate as owners. This statistic is not available for the richest countries in the world. Within the developing and emerging economies for which data exist, the higher the per capita income, the labor market participation by women, and especially the ratio of female-to-male enrolled in university, the greater the proportion of women who are business owners. Higher fertility, by contrast, is associated with a lower proportion of women who are business owners. It should be noted that these last two variables could be driven by religious and legal practices that simultaneously promote large families and prevent women from being entrepreneurs or business owners (World Bank 2010b).

The survey data collected by the Global Entrepreneurship Monitor (GEM 2009) reveals other nuances. The proportion of adult men or women engaged in early-stage entrepreneurial activity (i.e. 42 months or less in duration) increases with the number of births and decreases with per capita income, whereas the proportion of men or women who are established business owners does not. This may be an indication that in many countries both men and women are driven to start a business out of necessity rather than in pursuit of a distinct, attractive opportunity. The GEM study corroborates this suspicion: the ratio of opportunity-to-necessity motivations, as reported by the respondents, is negatively correlated with early-stage entrepreneurial activity but not correlated at all with established business ownership, for either men or women. This ratio measures how frequent are women entrepreneurs who launched a business in response to an opportunity (e.g. Monteiro or Debayle) relative to those who started a business out of necessity (e.g. Kisyombe or Escobosa). Most importantly, the higher the per capita income of the country, the greater the opportunity-to-necessity ratio. This indicates that the poorer the country, the more men and women start a business out of necessity, i.e. for lack of other viable alternatives of employment or income. With the exceptions only of Japan and Thailand, in the other thirty-nine countries for which data are available, the ratio of opportunity-to-necessity was lower for women than for men. This piece of information, though, needs to be carefully examined before jumping to any conclusions, because the question of motivation to become an entrepreneur can be asked only of those who actually decided to become entrepreneurs (see also World Bank 2011: 207).

Intriguingly, countries with more women business owners, more women engaged in early-stage entrepreneurial activity or more women who are established business owners do not necessarily have a greater proportion of seats in parliament occupied by women. However, a higher opportunity-to-necessity ratio for female or male entrepreneurs is highly correlated with more women in parliament, perhaps indicating that opportunity-driven entrepreneurship is higher in countries in which women are politically more empowered, and that these variables are likely jointly determined by a set of other social, political, and cultural institutions.

This evidence underscores the main conclusions to be drawn from this book, which are all related to the context in which entrepreneurship takes place. First, the experiences of women entrepreneurs vary immensely from case to case as well as across industries and countries. Second, while it is difficult to generalize, there are distinct patterns of self-selection into

specific entrepreneurial activities based on previous household and non-household experience. Third, while gender discrimination does not account for all of the difficulties experienced by women entrepreneurs, there are many legal, cultural and political barriers that policymaking could address. Fourth, women find the resources to pursue entrepreneurial ventures in a variety of spheres, including the family, social networks, and various programs and initiatives available to them. The difference with male entrepreneurs lies not in the nature of the resources or in how they are combined, but in the degree to which women have access to them. And fifth, women’s entrepreneurial ventures have the potential to raise communities and countries up economically. More of them will surely help reduce poverty and develop better communities, as the cases in this book amply demonstrate.