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Does Gender Matter for Small Business Performance? Experimental Evidence from India

Delecourt, Solène, and Ng, Odyssa. “Does Gender Matter for Small Business Performance? Experimental Evidence from India.” Published by authors as a working paper( November 2019).

Abstract

Many well-known studies have shown that female-owned micro-enterprises are less profitable and have lower returns to capital than their male counterparts. This raises an important question: what drives the estimated gender gap in business performance? We examine this question in the context of vegetable sellers in Jaipur, India, a context where observationally women make less than men. We conduct two field experiments that keep every business aspect the same except for the gender of the owner, business aspects such as location, goods supplied, and hours of operation. In Experiment 1, we isolate demand-side constraints by training confederate sellers to sell packaged goods at fixed prices using a standardized script, thereby additionally controlling for seller behavior. In Experiment 2, we only control for supply-side characteristics. In both experiments, we find that women earn at least as much as men. Our results demonstrate that the estimated gender earnings gap in this context is not due to differential demand- side constraints or seller behavior, but instead is likely driven by differences in access to capital.

Do buyers discriminate against female-owned businesses? Two field experiments

Solène Delecourt, O. Ng. (2019). “Do buyers discriminate against female-owned businesses? Two field experiments. ” Working Paper, Stanford University.

Abstract

Gender inequality manifests itself at every step of the entrepreneurial process. By the time a woman is running her business, multiple factors have already constrained her profitability. How much of the gender gap can be explained by buyer’s behavior in the marketplace as against supply-side differences? Buyers might behave differently based on 1) a seller’s gender or 2) differential business characteristics by gender. To address this problem of confounding, we ran two field experiments that hold constant business characteristics and vary the owner’s gender, thus separating supply from demand factors. Before our randomized experiments, we collected data in India showing that men earn 50% more than women, men’s inventory is 40% larger than women’s and buyers are more likely to buy from male sellers. We set up our own market stalls in three different markets, keeping hours worked, location, size and setup constant, and provided the same type, quantity, and quality of goods to 272 owners–regardless of gender. To further test for demand-side discrimination, we also set up two shops in a large vegetable market and recruited confederate sellers to sell packaged goods using a standardized script. Our results show that providing men and women with the same business closes the gender gap in profitability, ruling out buyer’s discrimination. Women can earn as much as men, if given equal opportunity to do so. This finding challenges existing conclusions about the causes of the gender gap in business ownership and performance. 

Gender, Access to Finance, Occupational Choice, and Business Performance

Nelli S. Gazanchyan & Nigar Hashimzade & Yulia Rodionova & Natalia Vershinina, 2017. “Gender, Access to Finance, Occupational Choice, and Business Performance,” Working Paper Series 6353, CESifo.

Abstract

We analyze, in a model of occupational choice in the labour market and discrimination in the capital market, the relationship between the gender of the owner and of the top manager of a firm, access to finance, and this firm’s performance. Occupational choice serves as the link from the capital market to the labour market. The model predicts that if the lenders discriminate against female entrepreneurs, then the conditional average of entrepreneurial skill of female business owners and female top managers is higher than that of their male counterparts. We find empirical evidence in support of our model using firm-level data from the 2009 wave of the Business Environment and Enterprise Performance Survey (BEEPS) for twenty six emerging economies in Eastern Europe and Central Asia. Specifically, we find evidence of discrimination of women in the capital market. Furthermore, we find a positive effect of the female gender of a business owner and of a business top manager on business performance, after controlling for various factors, including possible constraints on access to external finance. The positive effect of a female top manager is mitigated if the firm is owned by a female, suggesting decreasing return to skill, or if it operates in certain industries where female leadership may be of special value, which could be an additional factor in the occupational choice.

Does Gender Matter for Firm Performance? Evidence from Eastern Europe and Central Asia

Sabarwal, Shwetlena and Terrell, Katherine, “Does Gender Matter for Firm Performance? Evidence from the East European and Central Asian Region“, (July 2008). SSRN Papers

Abstract

Using 2005 firm level data for 26 countries in Eastern and Central Europe, this paper estimates performance gaps between male and female-owned businesses, while controlling for location by industry and country. The findings show that female entrepreneurs have a significantly smaller scale of operations (as measured by sales revenues) and are less efficient in terms of total factor productivity, although the difference is small. However, women entrepreneurs generate the same amount of profit per unit of revenue as men. Although both male and female entrepreneurs in the region are sub-optimally small, women’s returns to scale are significantly larger than men’s, implying that women would gain more from increasing their scale. The authors argue that the main reasons for the sub-optimal size of female-owned firms are that they are both capital constrained and concentrated in industries with small firms.

Supporting Growth-Oriented Women Entrepreneurs : A Review of the Evidence and Key Challenges

Cirera, Xavier; Qasim, Qursum. 2014. Supporting Growth-Oriented Women Entrepreneurs : A Review of the Evidence and Key Challenges. Innovation, technology and entrepreneurship policy note;no. 5. World Bank, Washington, DC. © World Bank

Abstract

In recent years, support programs for women entrepreneurs have gained traction and prominence as a means to create jobs and boost productivity at the national and regional levels. However, disparities in initial resource endowments of male and female-led firms, sector sorting into low productivity activities, social norms, and institutional arrangements, constrain the growth of female-led enterprises. This note reviews the outcomes of programs supporting female growth entrepreneurs and draws lessons from available evidence to inform the design of more effective programs. The review shows that most programs are primarily geared toward microenterprises, making it difficult to draw conclusions about program design for growth-oriented entrepreneurs, but some early findings point the way forward. Management practices appear to improve as a result of business education, but there is little robust evidence to prove that support programs lead to significant improvements in business performance outcomes. Furthermore, in programs with both male and female participants, firm performance improves in some cases for male-led firms only, not for female-led firms. The note concludes by suggesting the need for more experimentation in the design and delivery of services and a new focus on strengthening the engendering of support programs to more specifically address gender-specific constraints such as social norms, entrepreneurial preferences, and institutional arrangements, changing public discourse, and paying more attention to factors that induce female entrepreneurs to diversify into higher value-added activities. Offering mentoring, networking, and other consulting services, in addition to education on basic business practices and strengthening critical areas such as gender-specific content, can potentially increase the effectiveness of these programs.

The Myth of Female Credit Discrimination in African Manufacturing

Henrik Hansen & John Rand (2014). “The Myth of Female Credit Discrimination in African Manufacturing” , The Journal of Development Studies, 50:1, 81-96

Abstract

We examine credit constraint differentials between male and female manufacturing entrepreneurs using firm data from 16 sub-Saharan Africa countries. Small enterprises owned by female entrepreneurs are less likely to be credit constrained compared to their male counterparts, while this is reversed for medium-sized enterprises. A generalised Oaxaca–Blinder decomposition shows that the gap is predominantly a pure gender effect. We argue that this finding is mainly due to female favouritism in loans to micro and small firms because the gap is reversed for medium-sized enterprises and because we find no sign of superior female entrepreneurial performance in observable indicators.

Does Gender Matter for Firm Performance? Evidence from the East European and Central Asian Region

Sabarwal, Shwetlena and Terrell, Katherine, Does Gender Matter for Firm Performance? Evidence from the East European and Central Asian Region (July 2008). Social Science Report Network (SSRN) Papers.

Abstract

Using 2005 firm level data for 26 ECA countries, this paper estimates performance gaps between male- and female-owned businesses, while controlling for their location by industry and country. We find that female entrepreneurs have significantly smaller scale of operations (as measured by sales revenues) and are less efficient in terms of Total Factor Productivity (TFP), although this difference is very small. However, they generate the same amount of profit per unit of revenue as men. We find that while both male and female entrepreneurs in ECA are sub-optimally small, women’s returns to scale are significantly larger than men’s implying that they would gain more from increasing their scale. We argue that the main reasons for the sub-optimal size of female-owned firms are that they are both capital constrained and concentrated in industries with small firms.

Bridging the gap: decomposing sources of gender yield gaps in Uganda groundnut production

Johnny Mugisha, Christopher Sebatta, Kai Mausch, Elizabeth Ahikiriza, David Kalule Okello & Esther M. Njuguna (2019) Bridging the gap: Decomposing sources of gender yield gaps in Uganda groundnut production, Gender, Technology and Development, 23:1, 19-35.

Abstract

Female plot managers in Sub-Saharan Africa often realize significantly lower crop yields than their male counterparts. Even for legumes, which are often referred to as ‘women’s crops’, yields are significantly lower. This study investigated the underlying causes of this gender yield gap in groundnut production. The analysis is based on survey data from 228 farm households from two groundnut growing regions in Uganda. We used the Blinder-Oaxaca model to decompose factors that contribute to this yield gap. Results show 63% and 44% gender yield gaps for improved and local varieties, respectively, with female plot managers realizing less than their male counterparts. Improved groundnut seeds increase female plot manager’s yields but not the yields of male plot managers. Male advantage and female disadvantage combined account for more than 70% of the yield gap in both improved and local groundnut variety production and exceed pure productivity differences. Labor use differences between female and male plot managers and variety types explain the observed yield gap. Interventions and policies that increase women’s access to productive inputs including improved seed will significantly contribute to closing the yield gap, and thereby increase crop production, food security, as well as women’s incomes.

Opportunity versus Necessity: Understanding the Heterogeneity of Female Micro-Entrepreneurs

Gabriela Calderon, Leonardo Lacovone, Laura Juarez (2016) “Opportunity versus Necessity: Understanding the Heterogeneity of Female Micro-Entrepreneurs.” The World Bank Economic Review, Volume 30, Issue Supplement_1, Pages s86-s96.

Abstract

Entrepreneurs that voluntarily choose to start a business because they are able to identify a good business opportunity and act on it—opportunity entrepreneurs—might be different along various dimensions from those who are forced to become entrepreneurs because of lack of other alternatives—necessity entrepreneurs. To provide evidence on these differences, this article exploits a unique data set covering a wide array of characteristics, including cognitive skills, noncognitive skills, and managerial practices, for a large sample of female entrepreneurs in Mexico. Descriptive results show that on average opportunity entrepreneurs have better performance and higher skills than necessity entrepreneurs. A discriminant analysis reveals that discrimination is difficult to achieve based on these observables, which suggests the existence of unobservables driving both the decision to become an opportunity entrepreneur and performance. Thus, an instrumental variables estimation is conducted, using state economic growth in the year the business was set up as an instrument for opportunity, to confirm that opportunity entrepreneurs have higher performance and better management practices.

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