Nan Langowitz
Director and Cofounder, Center for Women's Leadership
Associate Professor of Management
Quick, think of an entrepreneur! Did you think of Michael Dell or Sam Walton or Ben and Jerry? But what about Anita Roddick (The Body Shop) or Sandy Lerner (Cisco) or Kay Koplovitz (USA Networks)? In three separate studies of women entrepreneurs I’ve conducted over the past few years, we’ve learned a good deal more than what the business press imparts. In a research study completed last year, we studied the coverage of women entrepreneurs in the business press. The most immediate finding was that coverage is extremely low. Indeed, other scholars have coined the phrase "the invisible entrepreneurs" to describe media coverage of women business founders and their companies.
The number of women entrepreneurs is increasing at an extraordinary rate, growing at four times the national pace of business formation between 1997 and 2002. Womenowned firms now account for nearly 40 percent of U.S. businesses. But just what do we know about women entrepreneurs, and where do we learn it from? For most business people, what they know about women entrepreneurs tends to be what they learned in business school or what they read in the business press.
Looking beyond the amount of coverage, several themes were apparent in business press stories on women entrepreneurs. First, the media tends to favor what I’ve come to call "Cinderella hard-luck stories." Namely, stories in which a woman faced with some horrible adversity summons the strength and motivation to start a business. These feminized Horatio Alger stories invoke a Cinderella theme in which the woman overcomes hardship, with the benefit of neither fairy godmother nor handsome prince. The circumstance might vary from welfare mother to divorcee, but the frequent underlying message is that something unusual has caused the woman to start her own business. Why else would she do it?
Women entrepreneurs are primarily portrayed by the business media as reacting to negative circumstances, rather than seizing opportunities. This inherent message is a far cry from the glamorization of Bill Gates in his college dorm or Steve Jobs in his garage. Second, the media likes to focus on women starting businesses in fields that "women would be expected to know about," such as retail, fashion, or food, and the businesses featured tend to be small. Airport manicure shops get attention, industrial technology equipment manufacturers do not.
So, what’s the problem? The problem is that much of business media coverage of women entrepreneurs doesn’t fully reflect the facts. An on-going research project we’ve conducted on more than 200 women business leaders, points to the reality for women entrepreneurs. Why do they start their businesses? Women entrepreneurs are driven to found their firms by a desire for personal autonomy and personal achievement. They’re not down on their luck, as the human interest lens of the media would have us believe. Less than a third cited economic hardship as a motivating factor. Instead, the vast majority of women start businesses because they’re driven to achieve, and they want control over their achievement. Guess what? This is the same motivation we find for male entrepreneurs!
So, what might explain the higher rate of firm formation by women we’ve seen in the last five years? Perhaps a realization by women that they might gain both the personal autonomy they desire as well as greater financial rewards as entrepreneurs rather than as corporate executives. For despite the rising tide of the 1990s boom, in the 10 top industries that employed women in managerial positions, the pay gap actually widened to 76 cents for women versus one dollar for men, according to a report by the Government Accounting Office. And only 6 percent of the top earners in the Fortune 500 are women, according to Catalyst. In other words, the incentive to make the jump to entrepreneurship might be particularly strong for many women in corporate America. Given these environmental factors, it’s not surprising to see a higher rate of firm formation by women.
Next, although the industries the business media tends to favor are typically clothing and food related, our research shows the top industries for women entrepreneurs are professional services, technology, and construction. Indeed, in our study of more than 200 firms, apparel, food, and retailing concerns combined constituted only 6 percent of the businesses. While women do indeed found businesses like Liz Claiborne, Inc., Lillian Vernon, or Discovery Toys, the majority of businesses started by women cover a wide range of industries, just as do those started by men.
And, how do women become owners of their firms? Are they simply "wives and daughters," as another popular myth would have it? No, the majority of women business owners are not like Katherine Graham or Abigail Johnson. While our research shows that more family enterprises are indeed turning to women family members to run their firms, our research also shows that greater than 80 percent of women business owners are the founders of their firms.
Performance is another area where women entrepreneurs often get a bad rap. The oft-held belief is that they tend to lead lifestyle companies, without an interest in rapid growth or economic value creation. Yet, the average size of the firms we studied was $33.4 million, hardly lifestyle companies. Further, we found that more than a third of the firms in our study outperformed the U. S. economy in the past three years, growing at 5 percent or more versus the anemic 3 percent experienced nationwide. More than two-thirds predicted greater than 5 percent growth going forward. Our research indicates that women executives focus on customer satisfaction, new market development, and organizational culture.
And what about these women entrepreneurs as individuals? Has their success come at a high sacrifice? Happily, not. Most are highly educated and have been working since their college days. Further, the vast majority of these entrepreneurial leaders have been able to lead fulfilling personal lives – forming families and raising children. They’ve found a way to take the desire for personal autonomy that drove them to be entrepreneurs and create a rich fabric of their lives. For those women leading family firms, we’ve found the additional benefit of lower family member attrition and great family loyalty to the goals of the business.
While it’s problematic that media representation of women entrepreneurs falls short in accurately portraying reality, the bigger issue is that its effect creates what I’ve called a potential "glass barrier" for women entrepreneurs. That is, by focusing on the Cinderella story approach and small ventures in stereotypically "female" industries, business press coverage creates a misimpression of the accomplishments, skillfulness, and seriousness of women as entrepreneurs. This misimpression can serve as a glass barrier, which may diminish the inclusion of women entrepreneurs in the crucial information and relationship networks that grease the wheels of commercial success. For example, women entrepreneurs receive less than 5 percent of the pool of venture capital invested in the United States. Mythical media coverage of women entrepreneurs thereby has the potential to mislead both aspiring women entrepreneurs and the business community with whom they are interdependent, with respect to expectations for business performance and long-run success.
What’s the antidote? More research on women entrepreneurs is needed to highlight the patterns of their economic value creation, the tenor of their leadership style, and the results of their business successes and failures. More interaction with women entrepreneurs and their firms is needed in the business community. And more efforts to change the mix of role models, from whom we can all learn, are needed in schools of management as well as in the business press. Babson is at the forefront of leading these efforts. My hope is that the old myths about women entrepreneurs will soon disappear. This misimpression can serve as a glass barrier, which may diminish the inclusion of women entrepreneurs in the crucial information and relationship networks that grease the wheels of commercial success.
Reprinted with permission from the Babson Alumni Magazine
