The Influence of CEO Gender on Market Orientation and Performance in Service Small and Medium-Sized Service Businesses

Article excerpt

This study examines the effects of CEO gender on market orientation and performance (growth and profitability) among a sample of small and medium-sized service businesses. Gender was found to have significant indirect effects (via market orientation) on both market performance (growth) and financial performance (profitability). That is, female-led service SMEs perform significantly better due to their stronger market orientation relative those led by males. The findings further suggest that female-led firms were slightly better than their male-led counterparts in transmitting market performance into financial performance, although the differences were not statistically significant.

Introduction

To understand the importance of research on gender in association with market orientation and performance, one only need look at recent trends in business foundings and ownership. The past decade has seen an unprecedented influx of women into the ranks of business ownership and management. In recent years (1997-2006), women-owned businesses in the United States have experienced rapid growth, especially in the services (up 69 percent to 5.3 million firms) and retail trade (up 130 percent to 1.1 million firms) sectors (Center for Women's Business Research 2006). With recent reports indicating that one of every eleven women in the United States is now a business owner (Hopkins 2003), recent estimates are that women own or co-own nearly nine million businesses or nearly 40 percent of all businesses in the United States. The National Women's Foundation (2004) reports that women are initiating new business at twice the rate of men. The upsurge in the ranks of female business owners and managers is anticipated to accelerate over the next decade as females inherit the ownership and management of companies founded during the postwar business expansion (Achua 1997; Daniels 1997).

When considering organizational behaviors and performance as reflections of top managers, it has been held that there is value in analyzing observable, stable demographic characteristics of leaders, such as age, education, and gender, an approach that Hambrick and Mason (1984) formalized as upper echelons theory. Such approaches rely on directly measurable attributes of individuals, such as gender, to proxy attitu-dinal and normative variables (Pfeffer 1983). Despite being the subject of occasional criticism (Lawrence 1997), a substantial body of research has accumulated that supports managers' demographic characteristics as potentially impacting firm performance (Michel and Hambrick 1992; Finkelstein and Hambrick 1990; Astley and Van de Ven 1983).

Over the past decade, researchers in entrepreneurship and small business have investigated the direct links between leader gender, as a key demographic variable, and performance outcomes. Comparisons of female-led versus male-led businesses on a variety of firm performance measures such as revenue, profit, growth, and discontinuance rates have yielded mixed results. While some studies supported differences in performance across female-led and male-led businesses (Du Rietz and Henrekson 2000; Fasci and Valdez 1998; Rosa, Carter, and Hamilton 1996; Cooper, Gimeno-Gascon, and Woo 1994), other researchers reported finding no differences in performance (Johnson and McMahon 2005; Watson and Robinson 2003; Watson 2002; Anna et al. 2000; Fischer, Reuber, and Dyke 1993; Kalle-berg and Leicht 1991). Notwithstanding previous efforts, the evidence regarding the effect of gender on performance remains scant and inconsistent.

Much of the research investigating gender effects sought to explain variations in performance stemming from demographic differences such as age, education, and business background (Brush 1992). More recently, it has been suggested that observed performance differences, if any, may not be due to gender directly, but rather may be indirect, perhaps via gender's influence on other variables that affect performance (Watson 2002; Anna et al. …