human capital, gender and entrepreneurial success: empirical evidence from...

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,

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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

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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

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(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 decades. Gender

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discrimination in education still exists, but mainly refers to girls and women in rural areas

(Baden & Green, 1994). Because we study Chinese entrepreneurs in urban regions in Eastern

China, we assume that gender discrimination in education is not a severe problem for female

entrepreneurs. In view of these considerations we do not expect major gender differences in

terms of general human capital in the two countries studied.

Specific Human Capital

We do, however, expect greater gender differences in specific human capital, i.e. industry-

specific work experience and managerial experience. Male entrepreneurs may have more

industry-specific experiences as compared to female entrepreneurs because they do not fulfill a

domestic role and, are therefore, more likely to invest more time in developing work and

industry specific experiences. Moreover, men are more likely to attain management positions,

because management experiences are related to male role expectations. Although role

expectations have changed significantly during the past century in favor of gender equality at

work, women are still disadvantaged in terms of career development in many countries. Women

often interrupt their careers to fulfill their domestic role as mothers. Such career interruptions

result in significantly less accumulated time in employment, and, thus, less work and industry as

well as managerial experience. Therefore, we assume that

Hypothesis 1: Female entrepreneurs have a significantly lower degree of specific human capital

than male entrepreneurs.

This line of reasoning can be extended with regard to cross-country differences, because role

expectations are developed in a specific cultural context. As a result, for example, the prevalence

rate of female entrepreneurs varies between countries (Bosma & Harding, 2007). China is a

country that has a socialistic market economy which has been allowing women to actively

participate in economic activities. The participation rate of women in the workforce is

significantly higher than in Western countries (Bu & McKeen, 2000). According to a study by

Bu & McKeen (2000), Chinese women value their occupational role more than Canadian

women. The promotion of the one-child policy and the necessity for women to increase the

households’ income foster Chinese women’s participation in the workforce. Accordingly,

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Chinese women are able to develop experiences (e.g., industry and managerial experiences) that

are related to the entrepreneurial role. By contrast, Germany is a coordinated market economy

where women are not necessarily expected to work. Role expectations in the society and high

average household incomes allow women to fulfill a domestic role. Especially in the Western

part of Germany where this study was carried out, role expectations in favor of women fulfilling

a domestic role have predominated. As a consequence, a significantly lower portion of women

have been participating in the workforce as compared to East Germany, a part of the country that

underwent a transition from a socialist to a market economy. German women are less likely to

gain specific human capital during dependent employment. We can, thus, assume that compared

to male entrepreneurs (West) German women are even more disadvantaged regarding the

acquisition of specific human capital than Chinese women because role expectancies should be

more pronounced in Germany as compared to China. Therefore, we propose that:

Hypothesis 2: The gender difference in specific human capital is significantly lower in China

than in Germany.

Gender Differences in the Relationship between Human Capital and Entrepreneurial

Success in Different Cultural Contexts

Human capital theory was originally developed to explain income differentials between

employees (Becker, 1964). In his seminal work, Becker (1964) argued that investments in human

capital influence the structure and the distribution of personal income (Becker, 1964). While the

traditional human capital approach focused on employees rather than entrepreneurs,

entrepreneurship scholars have studied the influence of human capital on firm survival and

success (e.g., Brüderl, Preisendörfer, & Ziegler, 1992; Bates, 1985, 1990). Due to its

idiosyncratic and socially complex nature, human capital embodied in knowledge and skills of

founders is rare, difficult to trade, imitate and substitute and, thus, fulfils several of the criteria

for sources of competitive advantage mentioned by the resource-based view (Barney, 1991; Amit

& Schoemaker, 1993; Hatch, & Dyer, 2004). The most important question is, however, whether

and how founders’ human capital can be utilized to create value in entrepreneurial firms.

Entrepreneurs often play a dominant role in their business, especially when they are starting

small. A high degree of human capital has several advantages for the founded business: First,

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individuals with a broader general knowledge base have a better ability to effectively scan their

environment and identify opportunities (e.g., Davidsson, & Honig, 2003; Ucbasaran, Westhead,

Wright, & Binks, 2003; Shepherd, & DeTienne, 2005; Ucbasaran, Westhead, & Wright, 2008) –

the core task of an entrepreneur and the prerequisite for entrepreneurial growth (Shane &

Venkataraman, 2000). At the same time, entrepreneurs with a high degree of human capital are

capable of successfully exploiting opportunities. Human capital of founders increases their

productivity resulting in higher firm profits which can be used to finance strategies for further

growth (Bates, 1985). For the above-stated reasons, entrepreneurial firms should benefit from

their founder’s human capital.

Gender studies in entrepreneurship research have frequently demonstrated that businesses run by

women under-perform firms run by male entrepreneurs in terms of economic success (see Rosa,

Carter, & Hamilton, 1996 and Parker, 2009 (chapter 6) for a literature review). There has been an

ongoing discussion on the causes for performance differentials between women and men

businesses. Systematic differences between male and female entrepreneurs exist for example

regarding the size of business start-ups (Du Rietz & Henrekson, 2000), growth aspirations (Cliff,

1998) and industry choice (Du Rietz & Henrekson, 2000). Empirical evidence on gender

differences regarding human capital is mixed. Despite the large body of research on gender

differences in human capital the different performance effects of human capital for businesses

run by women and men remain unclear (Brush, Carter, Gatewood, Greene, & Hart, 2004). A

notable exception is a study by Kalleberg & Leicht (1991) who examine the effect of different

human capital-related variables on entrepreneurial success of male and female business owners.

From a resource-based view (Barney, 1991), a unique set of different resources at founding is

critical for new venture survival and economic success. Female entrepreneurs are somewhat

disadvantaged when it comes to providing financial capital to their business. Women usually

have income losses when they interrupt their career in order to take care of their children.

Furthermore, differences in pay structure between men and women constrain women’s

opportunities to accumulate financial capital for starting a business. For example, according to

the German Institute for Employment Research (2009) [Institut für Arbeitsmarkt- und

Berufsforschung], female full-time employees earn 24 % less than male full-time employees

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(IAB, 2009). As a consequence of such wage inequalities, female entrepreneurs have less starting

capital on average than men (Brush 1992; Verheul & Thurik, 2001). Women also make less use

of external financing (Greene, Brush, Hart, & Saparito, 1999). Chandler and Hanks (1998)

demonstrate that financial and human capital are substitutable, i.e. that the same economic

performance can be achieved with high (low) levels of financial and low (high) levels of human

capital. Financial institutions such as banks or venture capital firms take the human capital of

business owners into account when making decisions about providing financial capital. Human

capital serves as a signal to potential employees and lenders and can, thus, enhances

entrepreneurial growth indirectly through an easier access to other human resources and a

decrease in capital constraints (Parker, & van Praag, 2006; Backes-Gellner, & Werner, 2007).

For example, venture capitalists apply management skills and experience as criteria for assessing

the performance potential of firms (Zacharakis & Meyer, 2000). Because women are

disadvantaged regarding the accumulation of financial assets as well as the access to externally

provided financial and other resources we argue that human capital is a more important resource

for female than for male business owners. Substitution of financial capital through human capital

is crucial for women due to the above-stated disadvantages compared to male entrepreneurs. In

addition, a recent study suggests that human capital increases growth expectancies of female

entrepreneurs but does not affect growth expectancies of male entrepreneurs (Manolova, Carter,

Manev, & Gyoshev, 2007). We assume that women entrepreneurs benefit more from a higher

level of knowledge and skills than men. Thus, we hypothesize that the strength of the

relationship human capital and entrepreneurial growth depends on the business owner’s gender.

This applies to both types of human capital because general and task-specific knowledge and

skills can be useful as (partial) substitutes for financial and other constraints women are facing

due to role expectations in the society.

Hypothesis 3: The relationship between general human capital and entrepreneurial success is

stronger for female than for male entrepreneurs.

Hypothesis 4: The relationship between specific human capital and entrepreneurial success is

stronger for female than for male entrepreneurs.

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Since role expectations are developed in a society and, therefore, largely depend on the cultural

context (Eagly, 1987), we assume that gender differences in human capital-success relationships

are associated with the national culture. The arguments developed here are similar to the

arguments justifying hypothesis 2. Due to its socialistic economy, Chinese women actively

participate in the economy in China. Thus, role expectations in China do not necessarily assign a

domestic role to females. In contrast, in the (West) German economy, many women fulfill a

domestic role and do not actively participate in the economy to a high degree as they do in

China. Since female entrepreneurs violate role expectations by choosing the entrepreneurial role

in Germany, female entrepreneurs need to create legitimacy in order to be successful. Human

capital creates legitimacy because it indicates that the entrepreneur is capable of running a

business successfully (Aldrich, 1990). Thus, it serves as a positive signal to resources providers

such as lenders and venture capitalists, customers, suppliers, employees and other stakeholders

that may have an influence on firm success (Parker & van Praag, 2006; Backes-Gellner &

Werner, 2007). Such positive signaling should be especially useful for female entrepreneurs in a

society that associates women with a domestic role. Social structures also influence gender wage

inequality. Such inequalities still exist in many countries, but they have been declining in recent

years (IAB, 2009). The results of a study recently presented by the Institute for Employment

Research (2009) [Institut für Arbeitsmarkt- und Berufsforschung] indicate that German women

are still disadvantaged regarding the access to higher-paid jobs. As a result of the remaining

social structures in favor of domestic roles for women, Germany was the only European country

where the wage inequality between men and women could not be decreased within the past 15

years (IAB, 2009). In Germany, female entrepreneurs do not only violate role expectations, they

have also considerable disadvantages concerning the accumulation of start-up capital. Thus,

female entrepreneurs are forced to develop more legitimacy than male entrepreneurs in

Germany, while this effect is less prevalent in China as an economy where women actively

participate in the workforce. Therefore, we hypothesize that:

Hypothesis 5: The gender difference in the relationship between general human capital and

entrepreneurial success is lower in China than in Germany.

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Hypothesis 6: The gender difference in the relationship between specific human capital and

entrepreneurial success is lower in China than in Germany.

METHODS

Sample

In order to test our hypotheses, we use data collected in a larger project on entrepreneurship in

China and Germany funded by the German National Science Foundation. This study compared

two samples of business owners/managers from China and Germany. The data were collected in

2004 and 2005. In order to ensure that the samples are comparable, the participants were selected

by using three criteria: First, the participant had to be the owner and active manager of the

business (Stewart & Roth, 2001). A required ownership share of at least 10 percent ensures that

the participants have a significant interest in the business. Second, the enterprise had to have at

least one employee. We introduced this criterion because there is a qualitative difference

between business owners who work alone and owners who have employees (Cowling, Taylor &

Mitchell, 2004). The employment of other people is associated with changes in self-perception,

responsibilities and managerial requirements (Frese & de Kruif, 2000). Third, the participant’s

enterprise had to belong to one of four different industries: car and machinery components

manufacturing, software development, hotel and catering, and building and construction. We

introduced this criterion to ensure that we have comparable enterprises sampled in the two

countries.

We used Yellow Pages and lists provided by the Chinese local government and the German

Chamber of Commerce to identify business owners. We contacted potential participants in four

provinces (Hubei, Hunan, Jiangsu, and Zheijang) and two municipalities (Chongqing and

Shanghai) in Eastern China and one federal state (Hesse) in Germany. We phoned randomly

selected participants in order to ask for participation in our study. People who agreed to

participate were interviewed and asked to fill out a questionnaire. The Chinese sample consists

of 298 business owners; the response rate was 65%. The German sample was drawn in the

Rhine-Main area and consists of 290 business owners; the response rate was 42 percent. Among

the 298 Chinese participants were 36 women; that equals 12.1 percent. With a share of 19.0

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percent women were slightly more represented in the German sample. These relatively low

shares of women in both sub-samples reflect the gender gap in entrepreneurial activities which

was shown in previous studies (e.g., Sternberg, Brixy, & Hundt, 2007; Bosma, Acs, Autio,

Coduras, & Levie, 2009). Because a number of participants did not answer to all questions asked

in the questionnaire, the sample size is somewhat reduced in the regressions. Exact numbers can

be found in the respective tables.

Measures

Human Capital. In line with Becker (1964), we distinguish between general and specific human

capital. General human capital is not directly related to the specific tasks of entrepreneurs, but

may be useful for the exploration and exploitation of opportunities as well as the everyday tasks

of running a business. Entrepreneurship researchers have applied different measures to assess

general human capital. Although we acknowledge that direct measures of knowledge such as

have several advantages (Unger et al. 2008), we used the number of years in education as a

proxy for general human capital of business owners (Brüderl, Preisendörfer, & Ziegler, 1992).

Specific human capital in the entrepreneurial context describes knowledge and skills that directly

relate to the tasks of an entrepreneur. Because the entrepreneur needs to fulfil a number of tasks

when operating her/his business, several different types of specific human capital can be

distinguished. Due to the high relevance of leadership and management skills, managerial

experience is an especially important type of task-specific human capital. Thus, we included a

categorial variable assessing the level of previous managerial experience. The categories include

no managerial experience (0), experience in lower management positions (1), experience in

middle management positions (2), and experience in upper management positions (3). Industry

experience can help entrepreneurs to identify opportunities, interact with customers and

employers and scan the competitive environment. We use the number of years an entrepreneur

has been working in the industry in which he set up the business as an indicator for industry

experience.

Entrepreneurial Success. Measuring entrepreneurial success has been a challenge for

entrepreneurship researchers. A variety of measures has been used in the past, often without

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justification (Brush & Vanderwerf, 1992; Murphy, Trailer & Hill, 1996). In general, the

performance of firms is a multi-dimensional construct (Cook, Crook, & Shook, 2005) with

survival being the minimal criterion. One dimension of firm performance which is of high

relevance for entrepreneurial firms is growth. High growth enables firms to overcome liabilities

of smallness (Stinchcombe, 1965) and reach increased profitability levels in the long run. In

addition, small firm growth and the resulting job creation is a desirable outcome from a

macroeconomic perspective. Thus, we considered the growth dimension of entrepreneurial

success within the scope of this work. More precisely, we use the employment growth rate for

measuring entrepreneurial success. To account for skewness we calculated the difference

between the natural logarithm of the number of employees in 2003 and 2001.

Control Variables. The age of the firm may have a significant impact on firm performance due to

liabilities of newness (Freeman, Carroll, & Hannan, 1983) that constrain a firm’s potential to

succeed. Thus, we included firm age calculated as the number of years between the firm’s

founding and 2001. Because industry characteristics may also determine firm performance to a

significant extent (Porter, 1980), we include industry dummies to account for inter-industry

differences in entrepreneurial success.

RESULTS

To test our first three hypotheses we performed Mann-Whitney-U-Tests for the number of years

spent in education and industry experience as well as the ordinal-scaled variable managerial

experience. Table 1 depicts the results of the different tests to compare means.

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Table 1

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The results show that female entrepreneurs are not disadvantaged regarding levels of general

human capital. We hypothesized that women acquire less specific human capital than males due

to role expectations (hypothesis 1). We found that women have indeed significantly less

managerial experience (Z = 4.096, p < .01). However, the other measure of specific human

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capital –industry experience – did not show a significant gender difference. Thus, we find only

moderate support for hypothesis 1. In hypothesis 2 we argued that gender differences in specific

human capital are more severe in Germany than in China due to different role expectations and

participation rates of women in the workforce. Our data support this hypothesis in terms of

gender differences in managerial experience. Whereas we observed a significant difference

between female and male entrepreneurs in Germany, we do not find significant gender

differences in managerial experience for Chinese entrepreneurs. Again, there are no significant

effects for industry experience.

Hypothesis 3 and 4 assumed that the relationship between human capital and success is stronger

for female than for male entrepreneurs. To test these hypotheses we performed separate

regression analyses for women- and men-owned businesses. Table 2 depicts the regression

results. Model 1 includes firm age and industry dummies as controls. In model 2, we add

measures of general and specific human capital.

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Table 2

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For both male and female entrepreneurs, general human capital, i.e. the number of years spent in

education, did not have a significant influence on entrepreneurial success. In addition, we did not

observe a significant difference between the coefficients for the two groups (Z = .264, p > .10) 1.

Hypothesis 3 is, therefore, not supported. Hypothesis 4 assumed that the relationship between

specific human capital and success is stronger for female as compared to male entrepreneurs.

Our analyses showed that industry experience has a negative impact on entrepreneurial success

in both, men- and women-owned businesses. The negative effect is stronger for women-owned

businesses (Z = 2.232, p < .05). Thus, the gender effect is significant, but not in the hypothesized

direction. However, Hypothesis 4 was supported for management experience; managerial

experience had a significantly positive effect on the performance of women-owned businesses,

1 The Z-Value refers to the difference between the regression coefficients for women- and men-owned businesses (Paternoster, Brame, Mazerolle, & Piquero, 1998).

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but did not influence the success of businesses owned by men. The difference between the two

regression coefficients was significant (Z = 2.376, p < .01).

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Table 3

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Hypotheses 5 and 6 proposed cross-country differences in the relationship between general and

specific human capital and entrepreneurial success. In order to test such cross-country

differences, we performed moderated regression analyses where gender is the moderator of the

human capital-success relationship separately for both countries (Table 3). Whereas we observed

a significant moderating effect of gender on the relationship between human capital and

entrepreneurial success in German firms (p = .011), our data did not show a significant gender

effect in China (p = .695). More specifically, this cultural effect refers to specific human capital.

The gender effect regarding the benefits of specific human capital, i.e. industry and managerial

experience, is prevalent in Germany, but does not occur in China. A Chow test indicates that the

results of the two regressions for the Chinese and the German sub-sample differ significantly (F

= 5.773, p < .01). In Germany, the relationship between specific human capital and

entrepreneurial success is stronger for women-owned businesses.

DISCUSSION AND IMPLICATIONS

Our analyses revealed that gender differences exist with respect to human capital itself, but also

regarding the impact of human capital on entrepreneurial success. We used social role theory to

explain these differences. Role expectations are important contextual factors which influence

gender differences in entrepreneurship. Such role expectations are embedded in the cultural

context. We, thus, proposed that gender differences do not apply universally but depend on the

national culture. Our findings largely support this proposition. We found that gender differences

are more prevalent in Germany than in China. This result indicates that gender differences are

more common in a context where women are expected to take a domestic role.

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More precisely, we found that gender differences do not exist for general human capital. On one

hand, that means that female entrepreneurs in Germany and China are not disadvantaged

regarding the level of general human capital in terms of education. Both countries underwent

reforms of the educational systems that allowed girls and women to obtain an education equal to

that of men. Shares of female students in school and university education have risen dramatically

over the past decades. However, one needs to keep in mind that gender gaps in education still

exist in rural China (Baden & Green, 1994). Therefore, studies in rural China could lead to

different results with respect to gender differences in education. In the German context, regional

variations in the education systems of the federal states should not result in gender differences.

Our data on general human capital can, thus, be expected to be representative for the whole

country. Although our findings demonstrate that female entrepreneurs in urban China and

Germany are not disadvantaged in the acquisition of general human capital in the educational

system, this result may not occur in other countries, e.g., in developing countries (Glick, 2008).

Similar studies in other national contexts may, thus, provide further insights. Moreover, we

hypothesized that general human capital may be more useful for women than for men because

female entrepreneurs benefit more from increased legitimacy through human capital due to role

expectations in the society to the disadvantage of women engaging in entrepreneurial activities.

This notion is not supported by the data. General human capital does not affect entrepreneurial

success in both, men- and women-owned businesses. One reason for this finding may be that

lenders, venture capitalists, customers and suppliers do not regard education as an indicator for

entrepreneurial capabilities. Furthermore, general human capital may indeed not be of the same

relevance for entrepreneurial success as specific human capital.

Task-specific human capital is only partially affected by gender differences. The results for

specific human capital depend on its type. Comparisons between male and female business

owners showed that there is no gender difference in industry experience. Surprisingly, we found

that industry experience is detrimental for entrepreneurial success across women- and men-

owned businesses. A higher level of industry experience should increase the entrepreneur’s

ability to deal with customers and suppliers, and to generate knowledge about movements of

competitors. However, a work background with experiences in diverse industries may be

beneficial in terms of opportunity recognition. Diversity of work experience enables

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entrepreneurs to scan a broader environment including more than one industry. The combination

of knowledge about different industries may lead to new ideas that result in the creation and

exploitation of opportunities. Thus, it may be the diverse experience in several industries that

makes entrepreneurs and their businesses successful. Previous studies on the relationship

between industry experience and entrepreneurial success found inconsistent results. In a gender

study, Kalleberg & Leicht (1991) demonstrate that industry experience does not have significant

effects on business survival and success in both, men- and women-owned firms.

The most important difference between male and female entrepreneurs occurred for managerial

experience. First, women have significantly less managerial experience than men. However, this

applies only to the German context. We attribute this finding to different role expectations in the

two countries and a greater participation rate of women in the workforce in China. Even more

interesting than gender difference in managerial experience is the gender effect in the

relationship between managerial experience of entrepreneurs and the success of their firms.

German women benefit most from managerial experience. Because female entrepreneurs in

Germany violate the role expectations of the society they need to rely on specific human capital

to increase their legitimacy. Managerial experience then serves as a signal to stakeholders of the

firm, such as lenders, employees, customers and suppliers that entrepreneurs have to deal with

when aiming at successfully running a business.

A limitation of our study is the focus on only two countries which decreases the generalizability

of results on our cross-country hypotheses. More research in other cultural contexts could

provide useful insights on how role expectations affect human capital and its implications for

entrepreneurial success in men- and women-owned businesses. This line of research provides

several contributions to academic research as well as practical implications. Our results suggest

that human capital does not necessarily lead to entrepreneurial success. In fact, the impact on

success not only depends on the type of human capital, but also gender and cultural context can

explain inconsistencies in research results (Unger et al., 2008). For disadvantaged sub-groups,

human capital seems to be more important than for the whole population of business owners.

This may not only apply to female entrepreneurs in certain cultural contexts, but also to other

disadvantaged groups such as ethnical minorities. Entrepreneurs who need to build up legitimacy

16

benefit from human capital to an above-average degree. In addition, human capital can substitute

a lack of financial capital (Chandler & Hanks, 1998) which female entrepreneurs are often faced

with when starting a business.

Our results offer the opportunity to derive practical implications for (nascent) entrepreneurs,

business owners, resource providers and policy-makers. Women who have the intention to start a

business at a later stage of their lives should aim at gaining managerial experience. This is often

not an easy task especially in a society that mainly relates them to a domestic role and where

disadvantages for women in dependent employment exist. Although gender equality is a

contractual principle of the European Union, women in Germany and many other countries are

still disadvantaged regarding the filling of management positions with decision power (European

Commission, 2007). That makes it difficult for women to gain important managerial experience

before starting a business. Policy-makers should, therefore, put more effort to promote gender

equality throughout the economic system. An attempt by the German government to promote

parental leave for fathers is a first step in this regard. In addition, entrepreneurship support

programs customized for women should include training that provide women with task-specific

human capital instead of purely focusing on financial support.

17

TABLES

Table 1: Descriptive Statistics of Female and Male Entrepreneurs and Results of Mann-Whitney U-Test

- Overall Sample -

Female Entrepreneurs Male Entrepreneurs Z-Value p-Value

N Mean SD N Mean SD

Years in Education 68 16.066 4.959 383 15.194 5.065 .990 .322

Industry Experience 73 11.658 11.806 389 11.356 11.104 .032 .974

Managerial Experience 78 1.385 1.176 409 1.976 1.059 4.096 .000

- Chinese Subsample -


N Mean SD N Mean SD


Industry Experience 27 3.278 4.805 173 5.272 6.386 1.530 .126


18

- German Subsample -


N Mean SD N Mean SD


Industry Experience 46 16.576 11.950 216 16.229 11.673 .308 .758


19

Table 2: Results of Regression Analyses on the Relationship between Human Capital

and Entrepreneurial Success in Women- and Men-owned Businesses

Women-Owned Businesses Men-Owned Businesses

Model 1 Model 2 Model 1 Model 2

Software Industry .286 .140 .144** .095

Hospitality Industry .067 -.066 -.031 -.067

Car and Machinery Components Industry .237 .320* .307*** .276***

Firm Age -.256 -.011 -.216*** -.128**

Years in Education -.045 .004

Industry Experience -.609*** -.286***

Managerial Experience .348** -.005

F-Value 1.802 8.577 11.579 19.783

Adjusted R² 0.074 0.375 .130 .193

Significance of R² Change (p-Value) .150 .001 .000 .000

N 37 37 236 236

* p < .10 ** p < .05 *** p < .01

Dependent variable: employment growth rate

20

Table 3: Results of Moderated Regression Analyses on the Relationship between Human Capital and Entrepreneurial Success in

Chinese and German Businesses

All Businesses Chinese Businesses German Businesses

Software Industry .103* .096 .003 .006 .228*** .228***Hospitality Industry -.069 -.093 -.288** -.294** .031 .017Car and Machinery Industry .268*** .262*** .162 .152 .133* .130*Firm Age -.121** -.106** -.146 -.148 -.079 -.072Years in Education -.004 .200 .085 .337 -.098 .091Industry Experience -.322*** .050 .063 -.333 -.268*** .298Managerial Experience .056 -.416** -.248*** -.380 .108 -.480**Gender .008 .081 .205** .378* -.016 .211**Years in Education x Gender -.244 -.289 -.224Industry Experience x Gender -.402** .465 -.627***Managerial Exp. x Gender .520*** .145 .683***

F-Value 26.424 31.077 9.579 10.062 10.901 14.711Adjusted R² .220 .246 .111 .098 .139 .176Significance of R² Change .000 .003 .000 .695 .000 .011N 261 261 119 119 142 142

* p < .10 ** p < .05 *** p < .01

Dependent variable: employment growth rate

21

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