War of the Sexes
Though the number of U.S. firms led by women grew 19.8 percent from 1997 to 2002, compared with 10.3 percent for firms in general, a new study by the Kauffman Foundation shows that women-led firms are being outperformed by almost all economic standards.
The study, titled "Characteristics of New Firms: a Comparison by Gender," surveyed 5,000 businesses founded in 2004, tracking their progress annually through 2007. It found that, despite the rapid growth of the number of businesses founded by women, those headed up by men tend to be more profitable and last longer.
This could be because nearly 62 percent of women started their firms with less than $25,000, compared with 55.9 percent of men, and that a higher percentage of women had "low" credit scores (38.1 percent) compared to men (31.6 percent).
"We found that women raise significantly smaller amounts of capital to start their firms," says Susan Coleman, professor of finance at the University of Hartford and co-author of the study. "That has implications on their ability to survive, grow the firm, introduce new products and services, and invest in research and development or expand in any way."
Coleman explains that a higher percentage of women-led businesses are based from home, which tend to be smaller and generate lower performance numbers. Some research also suggests that women may be more risk-averse than men, and less willing to take on the debt required to raise capital and create a larger business.
Of course, says Coleman, it's possible that women also define success differently than men do. "If you talk about size, revenues, earnings, and employment, and those are the yardsticks you use, yes, men-owned firms are more successful," says Coleman. But, she adds, women often start companies not to make millions and grow a huge company, but to do something they feel passionate about, create their own schedule, and be their own boss.
"There's not just one definition of success, and you can't assume all entrepreneurs have the same goals. Based on individual motivation, many women-led firms are just as successful as male-led ones."