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HUMAN CAPITAL, GENDER AND ENTREPRENEURIAL SUCCESS: EMPIRICAL EVIDENCE FROM CHINA AND GERMANY

Human Capital, Gender and Entrepreneurial Success: Empirical Evidence from China and Germany

Nina Rosenbusch, Friedrich Schiller University Jena, Germany

Andreas Rauch, Rotterdam School of Management, Erasmus University, The Netherlands

Simon C. Parker, University of Western Ontario, Canada

Jens M. Unger, Justus Liebig University Giessen, Germany

Abstract

Entrepreneurship scholars have frequently emphasized that gender differences exist with respect to accumulated human capital of entrepreneurs and entrepreneurial success. At the same time, human capital of entrepreneurs influences the success of their firms. Gender differences may not only occur with regarding human capital itself, but also regarding the relationship between human capital and entrepreneurial success. In this paper, we aim to detect whether gender differences in entrepreneurship depend on the cultural context. To derive our hypotheses we combine social role theory and the resource-based view of the firm. Drawing on a sample of German and Chinese entrepreneurs we find that gender gaps in human capital differ depending on the national culture. In addition, we reveal that different human capital related factors determine the success of women- as compared to men-owned businesses.

Introduction

Entrepreneurial activities by women have attracted a considerable amount of interest among policy-makers who have recognized the potential of female entrepreneurship for increasing economic growth and job creation. Although the gender gap in entrepreneurship has narrowed during the past decades, the share of female entrepreneurs engaged in venture creating activities is still comparatively low in many countries (Delmar & Davidsson, 2000; Reynolds, Carter, Gartner, & Greene, 2004; Arenius & Minniti, 2005; Bosma, & Harding, 2007; Parker, 2009). Researchers have addressed gender differences in entrepreneurship with respect to venture creation, growth aspirations (Cliff, 1998), innovation (Strohmeyer & Tonoyan, 2005), and new venture performance in terms of survival (Kalleberg, & Leicht, 1991), growth (e.g., Alsos, Isakson, & Ljunggren, 2006; Coleman, 2007; Kalleberg, & Leicht, 1991) and profitability (Coleman, 2007; Watson, 2002). A prominent explanation for gender differences in entrepreneurial performance is that women have fewer resources as compared to male entrepreneurs and, therefore, lack important prerequisites to achieve success (e.g., Lerner, Brush, & Hisrich, 1997). This resource gap may be a result of different role expectations and associated career paths that influence human as well as financial capital. However, such differences in the professional careers of men and women due to role expectations may largely depend on the cultural context and, subsequently, on the participation of men and women in the work force in general. As a consequence, gender differences in human capital and entrepreneurial success may not exist universally, but depend on the cultural context. In addition, social role expectations may have a crucial impact as to how men- and women-led businesses benefit from their founders human capital.

In order to detect how social role expectations influence gender differences in human capital as well as its impact on firm performance we study small business in China and (Western) Germany. A comparison of these two countries is very useful for studying gender differences due to several reasons. First, (Western) Germany and China differ significantly regarding masculinity and other cultural dimensions (Hofstede, 1980). Cultural values, in turn, influence social role expectations. Furthermore, economic and institutional conditions have an impact on social role expectations. China is a country in transition, whereas Germany is an established social market economy. Average household incomes are much lower in China, which forces women into paid employment. The participation rate of women in the workforce has traditionally been much higher in China than in (Western) Germany. For the above-stated reasons it can be expected that social roles associated with women differ significantly between the two countries.

Within the scope of this study, we apply social role theory and the resource-based view of the firm to explain how human capital of the founder determines the success of entrepreneurial firms owned by men and women. In so doing, we aim to make three contributions to entrepreneurship research. First, we intend to reveal whether gender differences with respect to entrepreneurs human capital depend on the cultural context. In particular, we study entrepreneurs in Germany and China two countries that do not only differ regarding masculinity and other cultural dimensions (Hofstede, 1980), but also regarding the role women play in the economic system. Further, we aim to demonstrate whether men and women benefit from the same or different sets of human capital-related factors. Lastly, we examine whether these findings apply universally. Our results are of considerable importance for policy-makers in different countries who intend to support male and female entrepreneurship in customized programs.

The paper is organized as follows. First, we present theoretical arguments derived from social role theory, human capital theory and the resource-based view of the firm to derive our hypotheses. In the following methods section we describe the sample of German and Chinese entrepreneurs and the operationalization of variables. Results are discussed with reference to their contribution to the existing literature and policy implications.

Theoretical background and hypotheses

Gender Differences in Human Capital

Previous research has shown that the proportion of female entrepreneurs is low compared to male entrepreneurs (Delmar & Davidsson, 2000; Reynolds, Carter, Gartner, & Greene, 2004; Arenius & Minniti, 2005; Bosma, & Harding, 2007). Moreover, women-owned business ventures have a lower propensity than men-owned ventures to grow and be successful (Welter, et al. 2003). A prominent explanation for such gender differences is that compared to male entrepreneurs female entrepreneurs lack critical human and financial resources to start and run a business successfully (e.g., Lerner, Brush, & Hisrich, 1997). Within the scope of this study we focus on gender differences in human capital levels of entrepreneurs and their impact on entrepreneurial performance. Thereby, we adopt a human capital definition provided by Becker (1964). We consider human capital as the skills and knowledge an entrepreneur acquires during his life, e.g., through schooling, work experience, and training. Empirical research shows that human capital of founders is an important resource for entrepreneurial firms (Unger, Rauch, Frese, Rosenbusch, & Steinmetz, 2008).

A considerable amount of research has examined gender differences in human capital of entrepreneurs. However, empirical evidence on this issue is mixed. A number of studies report that female entrepreneurs have less valuable work, managerial and self-employment experience (e.g., Boden & Nucci, 2000; Hisrich & Brush, 1983; Watkins & Watkins, 1983; Kalleberg & Leicht, 1991). Other studies find that female entrepreneurs have similar amounts or even more education than male entrepreneurs (e.g., Cowling & Taylor, 2001; Birley et al. 1987). Inconsistencies in empirical results on gender gaps in human capital may be at least partially attributable to the focus on different types of human capital, as well as to different cultural settings that influence human capital endowments of male and female entrepreneurs.

In this study, we use social role theory to explain gender differences in human capital in different cultural settings. Social role theory assumes that expectations in society assign different roles to women and men (Eagly, 1987). Thus, in many cultures, women are expected to fulfill a domestic role, while men are expected to fulfill career-related roles. Such social role expectancies affect various behaviors, such as educational or occupational choices. Human capital theory distinguishes between general and specific human capital (Becker, 1964). General human capital refers to general knowledge and skills acquired for example through education and work experience. By contrast, specific human capital is defined as knowledge and skills which are specific to a task. In the case of entrepreneurs, specific human capital refers to knowledge and skills that are useful for establishing and running a business. Gender differences in human capital as well as cultural influences on gender differences in human capital may depend on the type of knowledge and skills. One reason for this phenomenon is that many western and transition countries have reformed their educational system in favor of girls and women although role expectancies in the labor market have not seriously changed. Hence, it is necessary to distinguish between general and specific human capital.

General Human Capital

In this study, the number of years spent in the educational system reflects the general human capital of an entrepreneur. In Germany, the proportion of girls that obtain advanced degrees in schools has risen constantly since the reform of the educational system in the 1970s. According to the Federal Statistical Office [Statistisches Bundesamt], today slightly more girls than boys earn school degrees permitting entrance to a university; and the share of female students in the German university system reached 48 percent in the academic year 2006/2007. In China, access of women to school education has also greatly improved over the past few deca

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