Entrepreneurship: For the Gender Gap, Time to Look Beyond Personality
Men are several times more likely to be entrepreneurs than women. Many have wondered whether this gender imbalance can be explained by personality differences. New research shows that key personality traits of entrepreneurs have a role to play, but not as big a role as one might expect. About one-third of the gender gap in entrepreneurship can be explained by gender differences along 14 distinct personality traits, according to a team led by Ola Bengtsson of Lund University, Sweden. Research was presented at Smith School of Business's Economics of Entrepreneurship and Innovation Conference.
It is said that men are from Mars and women from Venus. But is this a good enough reason to explain why so many more men than women are entrepreneurs?
In most developed countries, men are several times more likely to be entrepreneurs than women. This gender imbalance invites all sorts of speculation based on worldview: Women are not wired for the risk-taking required to establish a business. Women face discrimination when trying to start out on their own. The education system streams children in different directions.
A team of Swedish researchers decided to add rigour to the debate by exploring the extent to which personality traits can explain the gender gap among entrepreneurs. The researchers found that psychology certainly has a role to play, but not as big a role as many would think.
“We did this paper because we wanted to add some hard facts to the debate in Sweden,” says Ola Bengtsson, professor of finance at Lund University. Bengtsson presented his team’s findings at Smith School of Business's Economics of Entrepreneurship and Innovation Conference.
Differing personality traits
Bengtsson worked with colleagues Tino Sanandaji of University of Chicago and Magnus Johannesson of Stockholm School of Economics. They based their study on 7,331 individuals between the ages of 51 and 66 drawn from the Swedish Twin Registry, the largest twin registry in the world.
They first compared men and women on 14 key personality traits and found statistically significant differences in 11 of 14 traits. They found women are more risk averse, less ambiguity averse, have weaker numeracy skills, have weaker sense that they can control events that affect them, are less favourable to civic engagements, are less behaviourally inhibited, and are less tolerant of greed and more trusting in others.
They then applied the same 14 personality traits to the likelihood of being an entrepreneur. They found that, compared to the general population, entrepreneurs are less risk averse, less ambiguity averse, more aware of opportunity costs, more tolerant of greed, have stronger sense that they can control events that affect them, are more favourable towards civic engagements, and are less behaviourally inhibited.
“Our findings broadly support the popular view that entrepreneurs are outgoing people willing to cope with uncertainty,” they write.
In their third step, the Swedish researchers combined their findings on gender differences in personality traits with the personality traits of entrepreneurs. Their analysis showed that psychology can only explain a modest part, perhaps one-third, of the gender difference in entrepreneurship.
“Some personality traits have gender differences but do not determine entrepreneurship,” they write. “Conversely, some traits determine entrepreneurship but have no gender difference.”
So if psychological factors do not fully explain the gender gap among entrepreneurs, what does? Possible explanations include greater difficulty in accessing credit, women working fewer hours due to family responsibilities, upbringing, or lack of role models. Or some other factor.
Entrepreneurs versus others who are self-employed
Apart from gender differences, Bengtsson and colleagues were able to tease out distinctions between entrepreneurs and other self-employed individuals. The researchers define entrepreneurs as expanding their business through innovation. By contrast, self-employed non-entrepreneurs (such as plumbers and mom-and-pop store owners) do not strive to expand over a certain limit, do not innovate, and have no or few employees. The researchers offered respondents these definitions and asked them to self-identity as either entrepreneurs or self employed.
From this, the researchers made a couple of noteworthy findings. One, the gender difference among entrepreneurs is much stronger than among self-employed non-entrepreneurs. Two, the psyche of entrepreneurs is different from that of other self-employed individuals. Entrepreneurs are less risk averse; more aware of opportunity cost; more strongly believe that their own efforts matter in life outcomes rather than fate or luck; are more tolerant of greed; and are happier.
These differences, and the fact that only one-third of all self-employed respondents identified themselves as entrepreneurs, is a wake-up call for researchers, most of whom consider all self-employed as entrepreneurs.
“The way entrepreneurs differ from the rest of the population is very different from the way other self-employed people differ from the population,” says Bengtsson. “This suggests that if you want to study entrepreneurship, you have to be careful to differentiate between the two groups.”
— Alan Morantz