Studies Show Women Are Better Entrepreneurs, Board Members and Managers

FemaleCEO.jpg

Is it controversial to put a stake in the ground and say that women are better entrepreneurs than men? One author doesn’t think so based on results from recent studies.

By Jim Fisher (Editor, Small Business for Real People)

Is it controversial to put a stake in the ground and say that women are better entrepreneurs than men?

Not really. As a blogger who follows science out of the world’s leading research institutions, studies published over the past several years confirm this conclusion. For a variety of reasons, women make for better corporate boards members, better managers and better entrepreneurs than men.

Check out some of the latest research on the topic:

Female-Owned Businesses Outlast Male-Owned Businesses

In a study titled Business Survival 101: Put a Woman in Charge, researchers at Cornell University concluded the key to long-term survival for many businesses is having a woman in charge.

Many businesses survive longer under female ownership, according to research by Michele Williams, assistant professor of organizational behavior in the ILR School, and Arturs Kalnins, associate professor of strategy at the School of Hotel Administration.

"We find that female-owned businesses consistently out-survive male-owned businesses in many industries and areas," said Michele Williams, assistant professor of organizational behavior in Cornell's ILR School.

The researchers also concluded that in cities with populations of more than 500,000, female-owned businesses lasted longer. Elsewhere, male-owned businesses survived longer, according to the report.

Women Are More Thoughtful Decision Makers and Leaders

In March 2013, researchers Chris Bart and Gregory McQueen of McMaster University published a study titled Women Make Better Decisions Than Men. Their conclusion was that women's abilities to make fair decisions when competing interests are at stake make them better corporate leaders.

This was based on their survey of more than 600 board directors. Their answers showed women are more likely to consider the rights of others and to take a cooperative approach to decision-making. This approach translates into better performance for their companies.

Having a Woman on the Board is a Smart Business Decision

In the same Women Make Better Decisions Than Men study, Bart and McQueen found multiple reasons explaining why female board members tend to help the business make better decisions.

"We've known for some time that companies that have more women on their boards have better results," explains Bart. "Our findings show that having women on the board is no longer just the right thing but also the smart thing to do. Companies with few female directors may actually be shortchanging their investors."

Female corporate directors are significantly more inclined to make decisions by taking the interests of multiple stakeholders into account to arrive at a fair and moral decision. They also tend to use cooperation, collaboration and consensus-building more often — and more effectively — to make sound decisions.

The researchers noted that women also seem to be predisposed to be more inquisitive and to see more possible solutions. At the board level — where directors are compelled to act in the best interest of the corporation while taking the viewpoints of multiple stakeholders into account — this quality makes them more effective corporate directors, explains McQueen.

Globally, women make up approximately nine percent of corporate board memberships. Arguments for gender equality, quotas and legislation have done little to increase female representation in the boardroom, despite evidence showing that their presence has been linked to better organizational performance, higher rates of return, more effective risk management and even lower rates of bankruptcy.

Bart's and McQueen's conclusion includes that boards with high female representation experience a 53 percent higher return on equity, a 66 percent higher return on invested capital  and a 42 percent higher return on sales.

They also found that:

  • Male directors, who made up 75 percent of the survey sample, prefer to make decisions using rules, regulations and traditional ways of doing business or getting along.

  • Female directors are less constrained by traditional parameters and are more prepared to rock the boat than their male counterparts.

  • Having just one female director on the board cuts the risk of bankruptcy by 20 percent.

  • When female directors are appointed, boards adopt new governance practices earlier, such as director training, board evaluations, director succession planning structures.

  • Women make other board members more civilized and sensitive to other perspectives and reduce “game playing.”

  • Female directors are more likely to ask questions rather than nodding through decisions.

Women Make Better Business Partners Than Men

If you're a woman thinking of starting a business with a male partner, think twice. Why?

Research from the University of North Carolina at Chapel Hill documents that the man is more likely to take over and their female business partners ultimately end up moving into secondary roles.

“Women who start new businesses with men have limited opportunities to move into leadership roles, according to sociologists,” the study’s summary reads. “The research also found that when women co-found a business with their husbands, they have even fewer chances to be in charge. The study comes on the heels of a recent debate about businesses with all-male boards of directors and adds to a growing body of knowledge that documents women's limited access to leadership roles in the business world.”

"This work raises awareness of the conditions that limit women's access and also makes us aware of what might be done to increase the likelihood that women will attain positions of authority," said Tiantian Yang, a graduate student in the department of sociology in UNC's College of Arts and Sciences who led the study.

The researchers used a nationally representative sample of 362 mixed-sex startup teams, with 880 entrepreneurs on those teams. Aldrich said the sample included small, everyday businesses that were still in the startup stages, such as bakeries, gift shops and building contractors.  Seventy percent of the mixed-sex teams studied were husband-wife teams.

"Our explanation for more pronounced gender inequality in spousal teams is that when husband and wife work together, they carry with them the cultural expectations for the male breadwinner and the female homemaker roles into the business setting," said Yang. "And the more children there are at home, the more it amplifies the expectation that the woman will also take on the role of leader of the household."

The researchers found that gender inequality in entrepreneurial teams can be reduced when people adopt organizational templates such as signing a formal operating agreement and developing a business plan in the early stages of the company's founding. They found that men are 85 percent more likely than women to be in charge when team members have not signed a formal ownership agreement, but men and women have about the same chance to lead a team when that team has adopted such an agreement.

Just recap some of the latest research on women in business, research shows that women:

  • Are 1.17 times more likely to create social ventures

  • Are 1.23 times more likely to pursue environmental ventures

  • Make fair decisions when competing interests are at stake

  • Are less constrained by rules, regulations and traditional ways of doing business

  • Tend to be more inquisitive and to see more possible solutions

  • Are more prepared to rock the boat than their male counterparts

  • Many women-owned businesses tend to survive longer that do their male owned competitors

Having a woman or women on corporate boards is shown to lead to:

  • Better organizational performance

  • Earlier adoption of new governance

  • Less “game playing”

  • More effective risk management

  • A higher return on equity, invested capital and return on sale

  • A reduced risk of bankruptcy by 20 percent

What are your thoughts on this research? Do you believe it proves that women make for better entrepreneurs?


About the guest blogger: Instructor Jim Fisher has written about entrepreneurship and small business for over thirty years, and taught small business management skills and beginning business classes and workshops for nearly as long. He ran his own marketing communication practice for over ten years, owned a business in the travel industry, and has written for magazines ranging from Life to Opportunity. He currently writes and edits a blog, Small Business ~ Real People, while finishing work on his book, The Smart Start System for Starting the Business of your Dreams.