The government has decided to turn its attention to female entrepreneurship. What excellent news that is. However, if they start with a logical error - even an empirical one - they’re never going to find a solution to the problem they identify, are they?
The complaint is that fewer women than men start businesses. OK, but the important question then becomes, well, why?
The UK is virtually unrivalled as a place to start and grow a business. Today there are nearly six million of them, a 25 per cent increase since 2010.
Yet, shockingly, only one-fifth of these businesses are run by women – even though there are almost one million more women than men living in the UK. Men are twice as likely as women to be entrepreneurs.
OK, then the error - or what should be perceived as one:
“The fact that Britain is home to so many new, innovative businesses is something to be proud of,” said Mr Jenrick. “But the fact that so few of them are started by women is shocking. This is not because of a lack of talent or appetite.
“Therefore, it’s vital that we identify the barriers that are hampering entrepreneurial women from securing the backing that businessmen have taken for granted.”
That error is in that assumption about appetite. For we do have substantial research into patterns of male and female entrepreneurship. If we think of the spectrum, from self-employment to trying to found the next Google, we find that for many women it’s self-employment and the manner in which that mixes well with family responsibilities which is a driver. Female owned businesses tend to be smaller, depend less upon outside capital and are less profitable. As an EU funded study tells us:
Women accounted for only 29% of the 40.6 million entrepreneurs in the EU in 2012. Women entrepreneurs tend to operate in smaller businesses; usually go solo; tend to concentrate on sectors that are considered by financiers to be less profitable; tend to have lower growth and turnover compared to male-owned businesses. Women entrepreneurs tend to self-assess the level of innovation of their own business lower than male counterparts. They tend to start off with less capital, borrow less and use family, rather than debt or equity finance. Domestic circumstances often force women into periods of intermission; this hinders their ability to accumulate social, cultural, and financial capital, and constrains the generation of a respectable credit history. Women entrepreneurs are more reluctant to assume a position of debt compared to men. This is down largely to lower levels of self-confidence in their business. Women entrepreneurs generally have less powerful professional networks, compared to men.
Note that all of this is, of course, on average. That there are female entrepreneurs as rapaciously accepting of risk as any male counterpart is entirely true. Just perhaps not of the entire population - which accords well with our more general observations about risk appetite across gender.
We do know that male and female entrepreneurs are different along some axes, that the businesses they found are. Crudely, but not entirely inaccurately, women tend to found something which is either self-employment or a small step up from it. Men are more likely to try and hit that six out of the ground.
Which brings us to our question - why? It could be because societal expectations or structures are that women have a harder time accessing finance, mentoring and so on, thus the government’s attention to such things will be welcome. Well, in the manner that anyone from the government claiming they’re here to help might be. It might also be that the appetite for high risk billions or bust start ups is higher in men - on average again - than women.
Which is where the error is. The government is already ruling out that second possible explanation. But that’s the very question we want answered first, isn’t it? If people don’t want to do summat then that’s that, isn’t it.
We need to find out why female entrepreneurship is different from male before we go to try and cure whatever ails it. For it might be that nothing ails at all, it’s just a matter of personal preferences - and why should we be trying to change those?