Does Gender Matter? Women Business Angels and the Supply of Entrepreneurial Finance
Harrison, Richard T., Mason, Colin M., Entrepreneurship: Theory and Practice
There is a substantial literature on the relationship between gender and access to finance. However, most studies have been concerned with access to debt finance. More recently, the focus of this research has broadened to examine women and venture capital. This article extends the focus further by examining the role of women in the business angel market, which is more important than the formal venture capital market in terms of both the number of ventures supported and total capital flows. Based on a detailed analysis of business angels in the U.K., the study concludes that women investors who are active in the market differ from their male counterparts in only limited respects. Future research into women business angels, and the possible existence of gender differences, needs to be based on more fully elaborated standpoint epistemologies that focus on the experience of the woman angel investor per se, and center on the examination of the role of homophily, social capital, networking, and competition in investment behavior.
The role of gender in access to business finance has been the subject of extensive research, debate, and policy concern in recent years as part of a wider interest in issues of women's entrepreneurship and business ownership (Ahl, 2004, Carter, Anderson, & Shaw, 2003; Duchenaut, 1997; Gatewood, Carter, Brush, Greene, & Hart, 2003; Leitch & Hill, 2006). Reflecting the nature of the funding environment and the characteristics of the ventures established by women entrepreneurs, much of the debate on gender and finance has been concerned with access to loan finance and with the role of the banks in creating or perpetuating gender-based differences in access to finance (Buttner & Rosen, 1988, 1989; Carter & Rosa, 1998; Coleman, 2000; Fay & Williams, 1993; McKechnie, Ennew, & Read, 1998; Read, 1998; Riding & Swift, 1990; Verhuel & Thurik, 2001). Despite the volume of research, there is no unequivocal support for the idea that there are gender-based differences in access to finance: While several studies "report discrimination ... it seems to be related to structural factors rather than gender per se" (Ahl, 2004, p. 99). From a policy perspective, two fundamental questions remain unanswered in unequivocal terms: Is there a real shortage of capital for women entrepreneurs (the funding gap), and to what extent are the constraints faced by women entrepreneurs due to the "general business environment, a lack of information, firm characteristics, gender-based discrimination or other factors?" (Koreen, 2000, p. 4).
More recently, attention has shifted to the examination of a number of gender-related features of the venture capital market (Carter, Brush, Greene, Gatewood, & Hart, 2003; Greene, Brush, Hart, & Saparito, 1999). Based on an assessment of the empirical evidence, on the demand-side, only a very small proportion of women-owned businesses raise venture capital. On the supply-side, there very few women involved in making investments, either as venture capital fund managers or as business angels, leading to suggestions that gender homophily (1) (the existence of sex-segregated social networks: Aldrich, 1989; Moore & Buttner, 1997; Ruef et al., 2003) will constrain the women entrepreneurs' search for, and access to, capital. These features may be related: The limited participation of women as investors may go a considerable way toward explaining the limited use of venture capital as a financing source by women entrepreneurs. However, as the DIANA project notes, "missing from research is an understanding about the interaction between the demand- and the supply-side for equity capital" (Brush, Carter, Gatewood, Greene, & Hart, 2004). Furthermore, as access to funding by new and early stage ventures frequently follows a "pipeline" model where the entrepreneurs' own resources and capital from family and friends provide the initial funding, followed by angel investment and then institutional venture capital (Harrison & Mason, 2000), gender-based differences in access to venture capital may reflect differential access to investment at an earlier stage in the funding pipeline. …