Do different factors affect the job-satisfaction of men and women entrepreneurs?

The sharing economy and the rise of the Airbnb entrepreneur
16th June 2018

Do different factors affect the job-satisfaction of men and women entrepreneurs?

Do different factors affect the job-satisfaction of men and women who are running their own business? That is a question that has long now been investigated by several economists and business researchers. The topic of job-satisfaction is a complex one even when it is only about wage-employees, but it becomes truly elusive when investigated through the entrepreneurship lens, since there is no universal definition of the entrepreneur to begin with (see e.g. “Self-employed” or Entrepreneur?).

A number of research papers find that the most important factor is money, and this finding is common for both men and women. It is reasonable to assume that income would be an important drive, particularly in money driven societies, where people's worth is measured by the size of their house or the brand of their sport-car, more than anything else. As the saying goes -give me all the luxury in the world, and I can live without the necessities-. Apart from income though, it is a common finding that people often cite 'being their own boss' as an important drive to starting up their business. Max Weber wrote back in 1947 that those who feel uncomfortable being subject to bureaucratic control and seek to escape its influence, will do so by creating an organization of their own, but such an organisation (e.g. a new business venture) he continues will be equally subject to the process of bureaucratisation. This might be even more so for women in wage-employment, who find it harder to climb the career ladder of corporate hierarchy that is dominated by men, and thus seek to escape it by creating their own business (Mallon and Cohen, 2001), only to discover that they now have to operate their business in a market again dominated by men (Marlow and Strange, 1994).
"When those subject to bureaucratic control seek to escape the influence of the existing bureaucratic apparatus, this is normally possible only by creating an organization of their own which is equally subject to the process of bureaucratization."

Max Weber

Many academic researchers use income as a control variable in their analysis when comparing wage-employees with self-employed (those that run their own business). A typical finding is that even though the self-employed earn on average less than wage-employees, they report higher levels of job-satisfaction, and in many cases ceteris paribus they also report higher levels of life-satisfaction. A paradox though exists where among the richest people in the world there are hardly any wage-employees. The numbers of the wealthiest people on the planet is full of entrepreneurs: people who run their own businesses. An important reason for the paradox can be due to the more efficient financial management of entrepreneurs and the more flexible tax-manoeuvring they are capable of, when compared to the typical wage-employee. For example, there is a lot of business-to-home subsidies in the case of the former while very little in the case of the latter (Bradbury, 2015). This fact alone could have a heavy impact on the income comparison of the two.

Furthermore, it is often the case that entrepreneurs will fail again and again before they actually succeed in their business ventures. Even failure though has a partial benefit in the learning experience of entrepreneurs for their future business venture. Failures might be due to a variety of reasons, such as lack of skill, experience, knowledge, network, etc., but the most important factor is capital. David Storey finds that the survival of start-up businesses is strongly associated with the initial and the accumulated stock of resources (e.g. capital) the business founders have access to.
"The role of resources is to enable the new business owner to survive the inevitable trading vicissitudes incurred by any new enterprise. The more resources they have, the more likely it is that their business will survive, stay in the game, and so have a chance of a future win."

David Storey

One then can infer that people from a more affluent background would have a greater possibility to operate a successful venture than those who are less so. The way we could imagine this for example, is by thinking of a freestyle car-race around the world, where the owner of one of the cars also owns an oil company. This one will never run out of fuel, while everyone else will struggle to get access to it. Ok maybe not the best example, but I am sure you get the general idea. Now, think the fuel as the stock of resources and the valuable initial capital than most entrepreneurs get from banks and start-up programmes, usually under strict payback rules, while our guy has all the resources to start-up independently and even more importantly, to be sheltered against a bad year or two. It is likely then that what many analysts and researcher are capturing is the short term effect of many of the business failures, but fail to see what happens in the long run. Truth be told it is rather hard to continuously follow and connect the dots of individuals who start-up businesses, fail and start-up again, or where they get their funding and how they pay their bills. Only some case studies are known and these are for media popular success-stories or some infamous failures.
"Being one’s own boss has been shown to increase individuals’ satisfaction with their job, despite drawbacks such as initially often decreased incomes through self-employment."

Martin Binder and Alex Coad

Another issue that comes out from business research is that access to finance is gendered and it is unequally harder for women entrepreneurs. Several research papers point out that women have a greater difficulty in securing funding for their business ventures, and when they do, it is under very strict terms. A typical requirement for a bank loan is collateral, which in many cases consists of the house owned by the aspiring entrepreneur. For historic reasons related to social structure, house ownership has been in the hands of men. Thus, a big obstacle for women who wish to acquire some funding to start their own business. One would not be wrong to assume that not having adequate access to finance is likely to have a large impact on the survival of female business ventures. Commonly, women entrepreneurs will be concentrated in lower barrier and lower risk industries, where little room for growth can be found. Also, a large number of women are found to run their small business from home, trying to combine running a business with caring for their family (e.g. children). .
"The mean survival rates of male-owned businesses in these two cohorts [namely 1980–1982 and 1985–1987] are 4- to 6% higher, respectively, that those of businesses owned by women."

Richard Boden and Alfred Nucci

To summarise, there seems to be a great confusion about the importance of financial benefits and non-financial benefits, which likely stems out of the lack of understanding of the important role of gender in why people choose into entrepreneurship. I remember reading a highly cited 1994 business research paper, which explained that they did not bother to ask women to participate in their research because they did not expect women to have different preferences from men. The reality is that women entrepreneurs have to operate in a business world that has been managed by men for a very long time. Most of what we know probably is from male dominated data of the past, ignoring recent trends and the rise of women in business. The gatekeepers in their majority are likely to be men, who make female business survival much harder than they should, be it consciously or unconsciously. Yes, both men and women rank income first as"the most important thing", but after that the ranking is quite different between genders. Our understanding about what motivates men and women entrepreneurs is increasing everyday, and things are indeed changing, but not so fast, and in some cases not in the right direction (see e.g. Why aren’t there more female entrepreneurs?). Governments should create policies that balance out the market imbalances with regards to female entrepreneurship and the extra difficulties that women entrepreneurs face beyond those of male entrepreneurs.
"...if collateral is insufficient lenders will not offer finance, so potentially sound projects go unfunded."

James Curran & David Storey


References

Binder, M. and Coad, A., (2013). Life satisfaction and self-employment: A matching approach. Small Business Economics, 40(4), pp.1009-1033.

Boden Jr, R.J. and Nucci, A.R., 2000. On the survival prospects of men's and women's new business ventures. Journal of business venturing, 15(4), pp.347-362.

Bradbury, B. (2015). Are the Low-Income Self-Employed Poor? Are the low income self-employed (Social Policy Research Centre Discussion Paper No. 73). Sydney.

Coad, A., Frankish, J., Roberts, R.G. and Storey, D.J., 2013. Growth paths and survival chances: An application of Gambler's Ruin theory. Journal of Business Venturing, 28(5), pp.615-632.

Curran, J., & Storey, D. (2002). Small Business Policy in the United Kingdom: The Inheritance of the Small Business Service and Implications for its Future Effectiveness. Environment and Planning C: Government and Policy, 20(2), 163-177.

Mallon, M. and Cohen, L. (2001) ‘Time for a Change? Women’s Accounts of the Move from Organizational Careers to Self-Employment’, British Journal of Management, 12(3), pp. 217–230.

Marlow, S. and Strange, A. (1994) ‘Female entrepreneurs – success by whose standards?’, in Tanton, M. (ed.) Women in management: A developing presence. London: Routledge.

Parker, S., (1999). ‘The Inequality of Self-employment and Employment Incomes: A Decomposition Analysis for the UK’, Review of Income and Wealth, Vol. 45, 263-274.

Saridakis, G., Mole, K., & Storey, D. (2008). New small firm survival in England. Empirica, 35(1), 25-39.

Weber, M., 2009. The theory of social and economic organization. Simon and Schuster.

Leave a Reply

Your email address will not be published. Required fields are marked *