Female Entrepreneurship in Developing Countries

This summary of research by Maria Minniti and Wim Naudé on Female Entrepreneurship in Developing Countries provides an interesting snapshot on the gender dimensions of entrepreneurship in developing economies.

It presents a series of stylized facts on what is known from the last 30 years of research on female self-employment and new business creation. These include:

  • Significantly fewer women than men own and manage businesses worldwide: “Evidence to date suggests that a variety of reasons contribute to explaining observed differences in entrepreneurial behaviour across genders, and that such differences have significant implications at the macroeconomic level”.
  • The businesses owned and managed by men and women are different: women’s businesses tend to be smaller and to grow less than those owned by men. Also, women’s businesses tend to be less profitable than those of men and to generate lower sales turnover than men, even in same industry comparisons.
  • The prevalence rates of female entrepreneurship tend to be relatively higher in developing then in developed economies: “In many cases opportunities and incentives are unfavourable for women to begin businesses, even when they have the abilities and knowledge”.

“Larger gender gaps in start-up activity are found in middle-income countries, whereas they tend to be narrower in lower-income countries probably because many women start businesses out of necessity. Surprisingly, women in poorer countries tend to be more self-confident about their abilities (skills and knowledge) to become entrepreneurs and less afraid of failure compared to women in middle- and high-income countries—notwithstanding subjective and possibly biased perceptions about self-confidence, fear of failure, and existence of opportunities or significant and systematically associated determinants of the gender gap across all countries”.

The authors conclude by identifying a few avenues where further research is warranted:

  1. More theory is needed because theoretical developments have not kept pace with the large amount of empirical studies.
  2. A significant and yet unresolved issue concerns what variables should enter the utility function of individuals when studying their allocation of time between household production, waged labour and self-employment—particularly in developing economies and when alternative views of the familial unit are considered.
  3. Investigations into the cultural factors and migrations among the self-employed provide another very fertile area of inquiry for both theory and empirical work—with the possibility of making not only a significant contribution to science but also to policy and management practices.
  4. Discrimination has been suggested as a possible explanation for the gender gap in entrepreneurship and this is likely to be more significant in poorer countries, although the evidence is mixed.
  5. Very little is known about how the level of aggregate activity influences women’s decisions about entrepreneurship and even less is known about how the latter contribute to growth –– a solid understanding of how the distinctive characteristics of female entrepreneurship are accounted by existing models of growth would be very desirable for both science and policy.
  6. The study of institutions and how they promote or discourage female entrepreneurship is particularly needed for its policy implications, especially in developing countries where issues of institutional development has in recent years been emphasised.