Gender Gap in High-Growth Ventures: Evidence from a University Mentoring Program

Scott, E. L., & Shu, P. (2017). American Economic Review: Papers & Proceedings, 107(5), 308-11.

 

Topics: Entrepreneurship, Funding, Gender Gap, Human capital 

Year: 2017

Country: United States 

The article investigates the gender gap in the early stage of the life-cycle of a high-growth venture. Key takeaways: 

  1. At the earliest stage of founding, women interested in entrepreneurship are less likely to pursue their venture ideas full-time if they do not possess documented intellectual assets (referring to ideas originated from academic research and/or filed for the intellectual property at entry).
  2. Conditional on fulltime commitment to the venture idea, there is “no significant gender differences in rates of venture financing or achievement of commercialization”. 
  3. Identifying the obstacles that entrepreneurs face at the early stages of founding is an important step in achieving gender parity.

Summary

The gender gap in pursuing entrepreneurship and starting a business has been examined in previous studies. These studies have established that “female entrepreneurs are less inclined to start businesses in high-growth sectors due to differences in founders’ human capital, and access to finance”. However, no study has taken into account the experiences of women entrepreneurs with vast human capital (defined as majoring in engineering or computer science in college, having a graduate degree, an MBA degree, a doctoral degree, etc.). The present study aims to examine the gender gap in the early stage of a high-growth venture.  

Data

The authors use data collected from MIT’s Venture Mentoring Service (VMS), a service that provides mentoring for students who are interested in entrepreneurship. They gathered data on “651 venture ideas and 627 entrepreneurs that affiliated with VMS” from 2005 to 2012. They build three outcome measures capturing a venture’s growth and development: “receiving full-time commitment from founders, raising funding from angel investors” (individuals investing their personal finances into a startup) and/or venture capitalists (group of professional investors whose capital come from individuals, corporations or funds), and “reaching commercialization”.

Methodology

First, they conduct a two-sample t-test for equal means between female and male-generated early-stage venture ideas according to the different variables (target industry sector, entry characteristics, etc.). Second, to estimate “the gender gap in outcome measures over the venture life cycle”, they use a “logit model with standard errors clustered by sector and year of affiliation with VMS”, to test the impact of being a female entrepreneur on the venture reaching a given milestone. 

Findings

They find that “women with extensive human capital and an interest in entrepreneurship are less likely to pursue their venture ideas full-time if their ventures do not possess documented intellectual assets at the earliest stage of founding”. “But conditional on fulltime commitment to the venture idea, they do not find any significant gender differences in rates of professional venture financing or achievement of commercialization”. In practice, the results suggest that to achieve gender parity in the field, an important step is to identify the obstacles that potential entrepreneurs come across during the early stages of a venture. 

A question of future research is to examine whether this pattern is caused by over-dedication on the part of men and/or under-dedication on the part of women. 

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