Academic journal article Entrepreneurship: Theory and Practice

New Venture Financing and Subsequent Business Growth in Men- and Women-Led Businesses

Academic journal article Entrepreneurship: Theory and Practice

New Venture Financing and Subsequent Business Growth in Men- and Women-Led Businesses

Article excerpt

This study investigates the possible funding gap for women-owned compared with men-owned new businesses. With longitudinal data from new businesses in Norway, gender differences in funding perceptions and behaviors, as well as in actually obtained amounts of funding, are explored. While there are few detected gender differences with respect to funding perceptions and behavior, women obtain significantly less financial capital to develop their new businesses. Moreover, the results indicate that the lower levels of financial capital that women business founders achieve are associated with lower early business growth compared with their male counterparts.


Entrepreneurship is still a male-dominated activity in the twenty-first century. In spite of growing rates of participation in new venture creation among women, particularly in North America, women remain substantially underrepresented among entrepreneurs in Western countries (Reynolds, Bygrave, Autio, Cox, & Hay, 2003). In the Nordic countries, the share of women entrepreneurs has been stable and low (about 25%) for the last decade (Kolvereid, Alsos, & Amo, 2004; Ljunggren, 1998). Norway, though often portrayed as a country where equality between the genders is well developed, exposes the same tendencies.

Not only do women start businesses to a lesser degree than men, but the few who take this step seem to achieve less growth in their businesses than their male counterparts (Cliff, 1998). Research on potential differences between women and men entrepreneurs look for explanations of these differences (see, e.g., Alsos & Ljunggren, 1998; Cliff, 1998; Miskin & Rose, 1990; Rosa & Hamilton, 1994; Sonfield, Lussier, Corman, & McKinney, 2001). Results have been various, but in total, there seem to be more similarities than differences between the genders when it comes to motivations, risk aversions, start-up activities, and so forth.

In the early stages of a business, the possibility for funding can be crucial both for business survival and growth. Brush, Carter, Gatewood, Greene, and Hart (2004) assert that a funding gap hinders the growth of women-led businesses. Moreover, undercapitalization has been identified as a major source of lower growth and poorer performance of women-owned businesses (Carter, 2000; Carter & Rosa, 1998; Marlow & Patton, 2005). It has been suggested that women and men differ when it comes to their strategies and perceptions of business funding (Carter & Rosa, 1998; Verheul & Thurik, 2001). Further, there has been some research on the business owners' gender and access to debt capital (Buttner & Rosen, 1992; Carter, Shaw, Wilson, & Lam, 2006; Fabowale, Orser, & Riding, 1995; Riding & Swift, 1990), but little related to gender and access to external equity funding (Carter, Brush, Greene, Gatewood, & Hart, 2003). Several researchers point to the need for more research on the demand side of business funding (Brush, Carter, Gatewood, Greene, & Hart, 2002; Mason & Harrison, 1999). Most previous studies have been conducted on businesses that have passed the early growth stage. The knowledge on business funding in the start-up phase and early business growth is scarce, especially when gender is focused upon.

This study seeks to contribute to knowledge on gender, business funding, and business growth by examining gender differences in total financial capital resources at start-up and during the early phases of fledging new businesses, as well as consequences for early business growth. In particular, we investigate possible gender differences in perceptions and behaviors to access business funding and their relation to achieved funding and subsequent growth. A model on the effects of gender on business financing and early business growth is developed and tested with longitudinal data from newly registered firms. We examine the proposed funding gap for women-founded businesses compared with men-founded businesses. …

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