Critical Success Factors in the Performance of Female-Owned Businesses: A Study of Female Entrepreneurs in Korea

By Lee, Sang Suk; Stearns, Timothy M. | International Journal of Management, March 2012 | Go to article overview

Critical Success Factors in the Performance of Female-Owned Businesses: A Study of Female Entrepreneurs in Korea


Lee, Sang Suk, Stearns, Timothy M., International Journal of Management


Entrepreneurial success has long been considered to differ by gender of the business owner. Previous studies of female business owners have focused on personal characteristics, such as motivation and experience, as predictors of business success. Relatively few studies have explored the relationship between the motivations of female entrepreneurs and critical success factors in female owned business. The objective of this research is to investigate a model that incorporates all three dimensions. Findings from the constructed model propose to shed light on how these critical factors interrelate and to provide insight into the strength of the relationship each has with the other critical factors. Responses to a specifically developed survey of 228 randomly selected women business owners from the membership of Korean Female Entrepreneurs Association served as the data set for analysis. Measures of entrepreneurial motivation were derived from the responses and tested using a structural equation model. Business performance was measured by estimates of improvement of sales and profitability provided by the subjects. Each of the three measures of entrepreneurial motivation were found to affect the successes of the businesses as did the critical success factors of family support and knowledge, communication skills, knowledge of business, product competency, business capability, and availability of resources.

Introduction

The substantial increase in the number of female business owners and their contribution to economic growth and job creation in the last decade, in most developed countries, is accompanied by an increasing number of studies on the phenomenon of female entrepreneurship (Verheul et al. 2002). Female owned businesses, in particular, represent an important and growing part of the U.S. economy. According to the National Foundation for Female Business Owners (NFWBO 2005), there are more than nine million female owned businesses in the United States, representing 38 percent of all businesses. Between 1997 and 2004, the estimated growth rate of female owned firms was nearly twice that of all firms (17 percent vs. nine percent), employment expanded at twice the rate of all firms (24 percent vs. 12 percent), and estimated revenues kept pace with all firms (39 percent vs. 34 percent) (NFWBO 2005).

Female owned businesses spend an estimated $546 billion annually on salaries and benefits ($492 billion on salaries; $54 billion for employee benefits - health, retirement, and insurance). Health benefits comprise the largest share of benefit expenditures; it is estimated that in 2004 this expenditure was $38 billion. Female owned firms employ 19. 1 million people and generate $2.5 trillion in sales. Fifty percent or more of privately held female owned firms are just as likely as all privately held firms to have employees (23 percent of female owned firms compared to 25 percent of all firms). Annual expenditures by female owned enterprises in the following areas are estimated to be $103 billion: information technology ($38 billion), telecommunications ($25 billion), human resources services ($23 billion), and shipping ($17 billion). Between 1997 and 2004, 50 percent of female owned firms diversified into all industries. The fastest growth was in construction with 30 percent. Transportation, communications, and public utilities yielded a 28 percent growth and agricultural services, a 24 percent growth. The number of female owned firms with employees expanded by an estimated 28 percent between 1997 and 2004, three times the growth rate of all firms with employees. As of 2004, almost two-thirds (63 percent) of all female owned businesses were privately held majorities (5 1 percent), or more female owned for a total of 6.7 million firms, employing 9.8 million people and generating $1.2 trillion in sales.

Much of the research on entrepreneurial activity indicates that many female encounter barriers because they lack the requisite skills, training, and background. …

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