Funding new business ventures: Are decision makers biased against women entrepreneurs (original) (raw)
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Entrepreneurship Theory and Practice, 2007
Previous research provides unequivocal evidence that women-owned businesses start with both lower levels of overall capitalization and lower ratios of debt finance. Structural dissimilarities between male-owned and female-owned businesses explain most, but by no means all, of these contrasting funding profiles. Explanations of residual differences, viewed in terms of supply-side discrimination or demand-side debt and risk aversion, remain controversial. Using experimental and qualitative methodologies, this study explores the role of gender in bank lending decisions, focusing on the criteria and processes used by male and female loan officers. Results reveal similarities in the criteria used to assess male and female applicants but show modest differences in the emphasis given to certain criteria by male and female lending officers. The processes used by male and female lending officers to negotiate loan applications revealed the greatest differences.
Bank loan officers' perceptions of the characteristics of men, women, and successful entrepreneurs
Journal of Business Venturing, 1988
Much anecdotal evidence suggests that women, compared to similarly situated men, have great difficulty securing financing for entrepreneurial endeavors. In addition, a mounting body of evidence illustrates how women in managerial roles are perceived in terms of sex stereotypes rather than in terms of their accomplishments. The present study extends this line of research to investigate whether female entrepreneurs are also viewed in terms of sex stereotypes.
Gender Bias and Venture Funding: Discussing Bias in the Entrepreneurship Classroom
Entrepreneurship Education and Pedagogy
We report on the findings from an in-class experiment that represents a learning innovation which can enable classroom-based conversations about bias in the domain of entrepreneurship. More specifically, the present learning innovation explores gender bias in venture funding with regard to entrepreneurship. In an introduction to entrepreneurship class, we randomly assigned students to one of the three experimental conditions—students evaluated an executive summary for a venture either written by a woman, or a man, or one in which the gender was neutral (i.e., the control group). Students acted as if they were considering an investment and reported whether, for example, the executive summary was well written as well as how much equity they would want in the venture as a potential investor. Overall, these results provide evidence consistent with the inference that the students sampled in this study did not use gender as a decision-making heuristic when evaluating entrepreneurial oppor...
Differences in perceptions of access to finance between potential male and female entrepreneurs
International Journal of Entrepreneurial Behavior & Research, 2012
PurposeThe purpose of this 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.Design/methodology/approachThe 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.FindingsThe findings suggest that a greater proportion of women are solely const...
Female business owners are more likely to be discouraged from applying for a bank loan compared to male business owners because they fear that their application will be rejected. Analyzing data from three ‘Surveys of Small Business Finances,’ our study examines the likely reasons why they are discouraged. Using the maximum likelihood approach, we estimate the probability of loan denial. We found evidence of bank discrimination against female-owned businesses, which in turn prevents women entrepreneurs applying for credit (feedback effect). We recommend that further investigation of this feedback effect of loan denial on business owners’ decision making process be undertaken.
Journal of Business Venturing Insights, 2020
This study shows that women may be at a disadvantage when signaling that they are "entrepreneurial" to venture capitalists. We demonstrate how gender-based disadvantages may arise from role incongruence in entrepreneurship by analyzing multi-source data from 131 venture capital applications, venture capitalists' cognitions, and their funding decisions. Our analysis indicates that women who signal an entrepreneurial attitude are more likely to elicit prevention considerations from venture capitalists, whereas men who signal such an attitude are more likely to elicit promotion considerations. We also find that promotion considerations increase the amount of financing, whereas prevention considerations decrease the amount of financing. Our study increases knowledge about the gendered cognitions that underlie implicit bias among investors and knowledge about the effects of regulatory focus on funding outcomes by exploring the interaction between gender and entrepreneurial attitude.
SSRN Electronic Journal
One proposed solution to closing the gender gap in venture capital is to encourage female investors to invest in female entrepreneurs. This paper explores how gender homophily affects the long-term success of male-founded and female-founded firms, defined as the continued ability to raise venture financing. Using longitudinal data on venture-backed firms in the United States and employing matching methods, we find that female-founded firms backed only by female investors are two times less likely to raise additional capital compared to those whose first-round investors include male venture capitalists. We find no equivalent effect for malefounded firms. We propose that when female entrepreneurs receive funding from female investors, the market interprets this as an expression of diversity activism, rather than as a signal of quality. We test this explanation in an experimental setting and show that a female-female investment relationship produces a competence discount for the female entrepreneur, leading to lower evaluations of quality for female, but not male founders.
International Journal of Entrepreneurial Behaviour & Research, 2012
Purpose -The purpose of this 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. Design/methodology/approach -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. Findings -The findings 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. 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. Originality/value -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.
A comparison of assistance needs of male and female pre-venture entrepreneurs
Journal of Business Venturing, 1990
In spite of the proliferation of studies of female entrepreneurs, few re-EXECUTIVE searchers have attempted to directly compare female and male entrepre-SUMMARY neurs in terms of their problems, the assistance received in addressing these problems, the value of outside consulting services, and the number of startups subsequent to counseling. Such studies are needed, not only to determine if there are differences in the problems male and female entrepreneurs face, but more importantly, to determine if any of these differences affect the successful development of new ventures. The fact that the SBA recently established a special training program for women entrepreneurs funded by a new $10 million grant, approved by Congress in 1988 (H.R. 5050) makes the issue even more timely and pertinent.