Explaining preferences and actual involvement in self-employment: Gender and the entrepreneurial personality.

Verheul, I., Thurik, R., Grilo, I., & Van der Zwan, P. (2012). Journal of Economic Psychology, 33(2), 325-341.  

Topics: Entrepreneurship, Gender differences, Preferences

Year: 2012

Country: Europe

 

The present study aims to analyze the mechanisms underlying the gender gap in self-employment by examining entrepreneurial preferences and actual involvement in entrepreneurship. 

Key takeaways: 

  1. Women’s lower involvement in entrepreneurship can be explained by their lower preference in becoming self-employed and the existence of “gender-specific obstacles to entrepreneurship”. 
  2. The gender gap can be closed by directly addressing women’s preferences and attitudes towards entrepreneurship through policies that provide clear information on administrative procedures and risks. 

Summary 

To investigate why women are less likely to become involved in the entrepreneurial process, the authors adopt a dynamic approach to entrepreneurship where they study women’s performance at the different stages of the entrepreneurial process: wanting to become an entrepreneur (cognitive stage) and actual involvement in entrepreneurship (behavioral stage). They study the relationship between preferences and actual behavior and hypothesize that having preference for self-employment will make a person more likely to engage in self-employment. Moreover, women might have a lower preference for self-employment than men, might be more risk averse, and are more likely “to perceive barriers to entrepreneurship” (“administrative complexity, insufficient information, limited access to finance, an unfavorable economic climate”), and thus less likely to engage in self-employment. 

Methodology 

The authors use a two probit equation model to test how the probability of having a preference for self-employment and actual involvement in self-employment can be influenced by gender, risk tolerance, perception of lack of financial support, perception of administrative complexities, etc. Data from the 2004 Flash Eurobarometer survey is used, with a sample of more than 8000 individuals from 29 countries, “of which 4694 are men and 3851 are women”. 

Findings 

The findings show that women “are less likely to show a preference for self-employment and are less likely to be self-employed”. Gender is thus a strong determinant of both preferences and actual involvement: “being a man increases the probability of preferring self-employment by 13.6% and that of preferring self-employment by 5.9%”. Other variables such as risk attitude and perception of an unfavorable climate are found to mediate the gender effect: men differ from women in terms of these variables and thus being a man has a positive effect on preferences. In fact, women are found to be less tolerant toward risk and “the effect of perceived administrative complexity seems more persistent” for them, which reduces their preferences and discourages them from becoming involved.

In terms of policy perspective, governments should communicate more clearly the administrative procedures perceived to be complex by women and provide information regarding risks and how to cope with them. Moreover, distinguishing female role models might have a positive influence of women’s preferences. 

As the data only include developed countries, results cannot be generalized to developing countries. Future research could benefit from adding “industry and occupation experience, household and family responsibilities, and detailed education history” as possible determinants of both preferences and actual self-employment. 

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