More Than 30 Million Women Worldwide Are Entrepreneurs

Forty-one percent of entrepreneurs are women, according to a cross-national study of thirty-four countries. The first Global Entrepreneurship Monitor (GEM) report on women’s entrepreneurial activity was released today by The Center For Women’s Leadership at Babson College.

The GEM 2004 Report on Women and Entrepreneurship provides an in-depth global look at women’s entrepreneurship and highlights the important role that women play in developing and developed economies.

”The GEM study on women’s entrepreneurship emphasizes the critical role women have in new venture creation and provides insights to inform policies focused on increasing and extending the scope and reach of their entrepreneurial activities,” said Dr. Nan Langowitz, Director of the Center for Women’s Leadership at Babson College. “These findings support our goal of understanding, featuring and supporting the entrepreneurial efforts of women worldwide. ”

Key findings in 2004

In 2004, GEM estimated that about 73 million people are involved in starting a new business in the 34 countries that participated in the study. Of those, about 30 million are women. The average level of female total entrepreneurial activity (TEA) rate across the 34 GEM countries varied from 39.1% in Peru to 1.2% in Japan.

In every country in our study, men are more active in entrepreneurship than women. The largest gap occurs in middle income nations where men are 75% more likely than women to be active entrepreneurs, compared to 33% in high-income countries and 41% in low-income countries.

Overall, opportunity is the dominant motivation for women’s entrepreneurship, similar to men. Nonetheless, many more women than men are involved in entrepreneurship because of the lack of alternative job opportunities.

In low and middle income countries, the peak years to become involved in entrepreneurial activities for women are ages 25-34. In high income countries, on the other hand, the peak years for women are ages 35-44.

In low income countries, the majority of entrepreneurially active women (54%) have not completed a secondary degree. In high income countries, on the other end, women with post secondary education are the most likely (34%) to start a new business.

As in the case of men, and regardless of per capita income, the largest majority of women involved in starting a new business hold other jobs.

Regardless of per capita income, a strong positive and significant correlation exists between knowing other entrepreneurs and a woman’s involvement with starting a new business.

“Our results suggest that employed women who know other entrepreneurs are the most likely to start a new business,” said Babson Professor Maria Minniti, one of the authors of the report. “These women tend to be older and better educated in high-income countries than in low and middle-income countries. We also found that a woman’s perceptions of environmental opportunities as well as confidence in her own capabilities are a powerful predictor of her entrepreneurial behaviour.”

The GEM report shows that across all countries, a strong positive and significant correlation exists between opportunity recognition and a woman’s likelihood of starting a new business. Women who perceived the existence of business opportunities were more likely to make the decision to start a new business.

Additionally, across all countries, a strong positive and significant correlation exists between a woman’s belief of having the knowledge, skills and experience required to start a new business and her likelihood of starting one. Conversely, a strong negative and significant correlation exists between fear of failure and a woman’s likelihood of starting a new business.

Other Findings

Subjective assessments about the availability of opportunities, the ability to exploit them, and the possibility of failing in doing so are all crucial factors in a woman’s decision to start a new business.

The majority of businesses started by women employed less start-up capital as compared to men, used known technology, and targeted existing markets. This suggests that women entrepreneurs may take a more conservative approach to business formation, perhaps because of their higher involvement in necessity driven entrepreneurship.

On average, businesses started by men used more capital than those started by women (USD 65,010 vs. USD 33,201 respectively).

Women tend to have slower early growth trajectories. The vast majority of women involved in starting a new business expect to create five or fewer additional jobs within a five-year period. In low and middle income countries, only 1% of women’s new businesses qualify as having high employment potential. The percentage increases to only 1.6 in high income countries.

Further, women entrepreneurs tend to start businesses with known technology and in established markets.

Policy Implications

“In order to be effective, policies with respect to entrepreneurship need to be tailored to a country’s specific context,” said Prof. Minniti. “This is particularly important for women since they tend to be much more sensitive than men to conditions in their local environment. Nonetheless, across all countries, it is clear that support policies by themselves are not sufficient to increase women’s involvement in entrepreneurship. Women are particularly sensitive to their social environment. Mentoring and network support, especially at the local level, are at least as crucial in boosting women’s attitudes with respect to business leadership and new venture creation as financial support.”

Policy Implications for High-Income Countries

High-income countries need to sustain innovation rates and encourage the involvement of women in entrepreneurship, especially when faced with an aging labor force. Areas of importance for policy makers should include promoting entrepreneurial education at the college and post-graduate level and encouraging more women to pursue technical degrees and to commercialize their ideas. Coordinating policy to encourage equal benefits for women in the workforce, whether in traditional or entrepreneurial business roles, is vital.

Policy Implications for Middle-Income Countries

More than in other groups, women in middle income countries shy away from starting their own businesses. Areas of importance for policy makers should include to instill fundamental aspects of the entrepreneurial mindset and to increase the attractiveness of entrepreneurship as an income producing activity for women even when they have access to jobs in manufacturing or in the public sector.

Policy Implications for Low-Income Countries

Much female entrepreneurship in low-income countries is motivated by necessity, thus starting a new business represents an effective and flexible way for women to emancipate themselves and provide for their families. Areas of importance for policy makers should include literacy and financial assistance.

The Center for Women’s Leadership at Babson College provides educational
programs, conducts research, and offers executive outreach that promote the advancement and accomplishment of women at all stages of their professional development and the achievement of competitive advantage by companies focused on the talent and market power of women. For more information, visit http://www.babson.edu/cwl.

Babson College, Wellesley, Mass., USA, is recognized internationally as a leader in entrepreneurial management education. Babson grants BS degrees through its innovative undergraduate program and grants MBA and custom MS and MBA degrees through the F.W. Olin Graduate School of Business at Babson College. Babson Executive Education offers executive development programs to experienced managers worldwide.

The GEM report: The Global Entrepreneurship Monitor (GEM) was established by Babson College and the London Business School and is an annual cross-national assessment of entrepreneurship. Started in 1999 with 10 participating countries, the project has expanded to include 34 countries in 2004, representing a total labor force of 784 million.

The GEM program is a major effort aimed at describing and analyzing entrepreneurial processes within a wide range of countries. The program has three main objectives:

– To measure differences in the level of entrepreneurial activity between countries

– To uncover factors leading to appropriate levels of entrepreneurship

– To suggest policies that may enhance the national level of entrepreneurial activity

New developments, and all national reports, can be found at www.gemconsortium.org. The program is sponsored by Babson College and London Business School.

Copies of GEM cross-national assessment on women’s entrepreneurial activity are available at http://www.gemconsortium.org.