Gender, Strategy and Performance in Small Businesses
A study on the impact of gender on strategy and performance
What has been done before?
The studies on the link between gender and performance are relatively numerous whereas studies on the link between gender and strategy are relatively scarce. Here are some of those we have found interesting:
The link between performance and gender in large companies
Most studies focus on large companies and they underline that a higher proportion of women on boards and in top-management positions improves the firm’s performance.
Isidro and Sobral's study (2015) states that women on boards indirectly impact the firm's performance because they tend to support ethical behaviour, which has a positive effect on firm value. Nina Smith, Valdemar Smith and Mette Verner (2006) explain the postive impact of women on performance with educations: indeed, these women occupying top-management positions and who are part of boards of direction are all highly qualified.
Most papers focus on large companies. But what about small companies? Here are the two statements that our thorough helped us bring to light!
-
Women-owned small businesses are less performant than men-owned businesses more particularly in terms of number of employees, but also in terms of sales turnover, capital assets, range of markets and incomes (Rosa, Carter and Hamilton, 1996; Londstreth, Stafford and Mauldin, 1987; Kalleberg and Leicht, 1991).
-
Despite the apparent underperformance of businesses owned by women, many papers state that women and men entrepreneurs are rather similar. There are differences but they are not that significant.
-
The motivational factors to become entrepreneurs are rather similar (Thurik and Verheul , 2001).
-
The differences in terms of financial capital sources are somewhat limited: women might have more difficulties when trying to access a financial capital to start their company more particularly because bankers tend to require more guarantees when taking out a loan (Orser, Riding and Manley, 2006). However, some studies show that business angels do not take into account the gender of the start-up leader and some of them are even willing to relax their investment criteria if they are dealing with a woman (Harrison and Mason, 2007)
-
Difference in terms of education is also limited : all of them are highly-qualified (Lerner, Brush and Hisrich, 2013), though men tend to have more experience in the very same sector on which their firm is operating (Bosma, Van Praag, Thruil and al.; 2004)
-
The two features on which a minimal difference exists would be risk-adversity and social network. Women entrepreneurs tend to be more risk-adverse (Jianakoplos and Bernasek, 1998) and less networked than men entrepreneurs (Fischer, Reuber and Dyke, 1993; Cohoon, Wadhwa and Mitchell, 2010)
To summarize, we have less performant businesses and few differences between successful men and women entrepreneurs. This is somewhat paradoxical: why would their businesses underperform if the differences are not huge ? That was the beginning of our research question.
What About small companies and women-entrepreneurs?
What about strategy?
We decided to answer this mystery through the prism of strategy, which hasn’t really been done before.
We decided to use Michael Porter’s generic strategies (1980) which is a particularly relevant and simple reading grid of the strategy implemented by a firm. According to him, there are two types of strategies: the cost strategy and the differentiation strategy. Each of them has two variants: focus and leadership.
What does that mean ? Well, it means that the size of the market must be taken into account. When the firm is operating on a niche market, Porter talks about “focus” and when it is operating on a large market he talks about “leadership”. Therefore, there are four types of strategies : cost leadership, cost focus, differentiation leadership and differentiation focus.
Source: Jim Riley. In: Tutor2u. Slide 4 of the slideshow. [online] [consulted on 05/11/2016]. Available on:
http://www.tutor2u.net/business/reference/porters-generic-strategies-revision-presentation
Using this grid has never been done before so we thought it would be interesting to tap it. What we wanted to know was if there were differences of strategy between men and women entrepreneurs all the more since the papers on the link between strategy and gender are nearly nonexistant: the few that exist argue that there are differences (S. Birley, C. Moss and P. Saunders, 1987) . According to some of them, women focus on the qualitative aspect of their service/product (Kalleberg and Leicht, 1991).
However, the link between women-entrepreneurs, strategy and performance hasn’t been done yet. In fact, most papers focus on the personal characteristics of women (experience, network, motivation…) to explain the underperformance of women-led firms.
This led us to our research question: To what extent the strategies implemented by women-entrepreneurs impact their firm’s performance?
To put it in a nutshell...
