Unconscious Bias
Work and Organizations

Gender bias and women-led enterprise

If you search Google for images of famous entrepreneurs, you will immediately see some familiar faces such as Steve Jobs, Bill Gates and Warren Buffet. But to see an entrepreneur who is a woman — such as Oprah Winfrey, Martha Stewart or Mary Kay Ash—you will have to scroll further down. This search mirrors broad patterns of gender inequality in entrepreneurship.

Research indicates that women entrepreneurs tend to be concentrated in female-dominated, competitive, and sometimes non-lucrative industries such as retail, food service, and interpersonal care. In comparison to men, women are less likely to be involved in product and process innovations, their businesses are smaller, and their entrepreneurial activity is less likely to create jobs. In fact, only 4.2 percent of all revenue generated by businesses in the U.S. in the late 2000s was generated by women-owned businesses.

So why are there so few women entrepreneurs and why do they make so little money? While some believe the stereotype that women differ from men by having the lack of desire, drive, and risk-taking mentality required to be a successful entrepreneur — emerging evidence demonstrates that women entrepreneurs face bias from others. For instance, recent studies have found that lenders, potential lenders and technology licensing officers systematically favor male-led start-ups.

One expert who has extensively studied the biases that women entrepreneurs face is Sarah Thébaud, assistant professor of sociology at the University of California at Santa Barbara. Thébaud argues that gender beliefs bias evaluations of the quality and viability of a venture, which discourages women from pursuing entrepreneurship, disadvantages women in their quest for financial and social support, and systematically distorts the perceived viability and investment-worthiness of a business idea.

In a recent talk given by Thébaud for Stanford’s School of Business, she presented some of her research that explores how these gender biases disadvantage women entrepreneurs.  Thébaud’s work on two reports, “Gender Status Beliefs in Entrepreneurship and Innovation: Are Women Entrepreneurs Penalized?” and “Unequal Hard Times: The Influence of The Great Recession on Gender Bias in Entrepreneurial Investment,” served as the basis for her lecture.

In “Gender Status Beliefs in Entrepreneurship and Innovation”, Thébaud shares a study where participants from both the U.S. and the U.K. evaluate two plans for new businesses within the wine industry, of which one business was framed as innovative and the other was not. To determine if there was bias against women entrepreneurs, Thébaud held the business plans constant but randomly assigned the gender of the entrepreneur proposing the plan. After reading both business plans, participants were asked a series of questions about the competence, skill and commitment of the entrepreneurs, as well as the likely profitability, competitiveness and successfulness of the business venture.

Thébaud found that when the typical, non-innovative business plan was evaluated, women entrepreneurs were rated as less competent and their business plans were rated as less worthy of investment than otherwise similar men; in essence, the same business idea was seen as being worse if it came from a woman instead of a man.

In Thébaud’s words, “Participants held lower expectations for women’s abilities and the viability of their business plans than for men’s.

These findings have important implications for the gender gap in entrepreneurship, as they demonstrate how gender stereotypes about the competence and ability of women may bias how others assess the business plans of women, which may discourage women from pursuing entrepreneurship and make it more difficult for them to obtain funding and support.

However, the bias against women entrepreneurs disappeared when the innovative business plan was evaluated.

“Innovation in a business plan has a consistently more positive effect on perceived competence and a less negative effect on the perceived quality of the venture for women than for men,” noted Thébaud.

Thébaud argues that this is due to a double standard, causing women to have to work harder than otherwise similar men to be viewed as having entrepreneurial ability. Being innovative helps them appear to be an authentic and competent entrepreneur.

So what’s a woman entrepreneur to do? Thébaud says, “Don't be afraid to put your best foot forward and make the case for how your project is novel and important.” This can be done by providing information about one's qualifications and experience, highlighting your uniqueness, and generally erring on the side of self-promotion.

Organizations, investors, and educators can work to alleviate this issue by reducing uncertainty whenever possible (for instance, setting and clearly communicating consistent standards of evaluation, holding decision makers accountable, and implementing third-party checks and balances on investment decisions) and promoting a less gendered vision of entrepreneurship when possible.

With effort and time, our gendered stereotypes about entrepreneurship can change so that we unlock the potential and ideas of all possible entrepreneurs.

For more on this topic, “Gender and Venture Capital Decision-Making: The Effects of Technical Background and Social Capital on Entrepreneurial Evaluations” is a separate study on women entrepreneurs supported by The Clayman Institute and the National Center for Women and Information Technology which suggests that strong network ties are critical for success for all women entrepreneurs.