JOBS WORKING PAPER Issue No. 20 Female Entrepreneurs: How and Why Are They Different? Eliana Carranza, Chandra Dhakal and Inessa Love FEMALE ENTREPRENEURS: HOW AND WHY ARE THEY DIFFERENT? Eliana Carranza, Chandra Dhakal and Inessa Love The publication of this report has been made possible through a grant from the World Bank’s Jobs Umbrella Multidonor Trust Fund (MDTF). © 2018 International Bank for Reconstruction and Development / The World Bank. 1818 H Street NW, Washington, DC 20433, USA. Telephone: 202-473-1000; Internet: www.worldbank.org. Some rights reserved This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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The World Bank therefore does not warrant that the use of any third-party-owned individual component or part contained in the work will not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If you wish to re-use a component of the work, it is your responsibility to determine whether permission is needed for that re-use and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: [email protected]. Images: © World Bank. Further permission required for reuse. ABSTRACT This paper reviews and critically evaluates existing evidence on female entrepreneurial activity. First, we identify how female-run businesses are different, by examining both economic and non-economic outcomes which are frequently overlooked. Second, we offer a comprehensive discussion of drivers to explain why these differences. We group these drivers in four categories: (i) preferences, (ii) endowments, (iv) external constraints, and (iv) internal constraints. Third, we review evidence on the types of policies that have been effective or have potential to address the different drivers. Finally, we offer a discussion of the gaps in the literature and identify areas for future research. i ACKNOWLEDGEMENTS This report was prepared by the World Bank Group’s (WBG) Jobs Group. The principal authors are Eliana Carranza (Task Team Leader), Chandra Dhakal, and Inessa Love. The report was prepared under the general direction and ongoing support of David Robalino, Ian Walker, Alvaro Gonzales, Fareeba Mahmood, Siv Tokle, and Jennifer N. Jossell. Claudia Silaghi assisted in the final stages. The report has benefitted from the comments of the peer reviewers Komal Mohindra and Lucia C. Hanmer. The publication of this report has been made possible through a grant from the World Bank’s Jobs Umbrella Multidonor Trust Fund (MDTF), which is supported by the Department for International Development/UK AID, the Swiss Secretariat for Economic Affairs (SECO), the Private Infrastructure Development Group (PIDG), and the Governments of Norway, Germany, Austria, the Austrian Development Agency, and the Swedish International Development Cooperation Agency. ii CONTENTS ABSTRACT .......................................................................................................................................... I ACKNOWLEDGEMENTS ..................................................................................................................... II EXECUTIVE SUMMARY .......................................................................................................................1 INTRODUCTION .................................................................................................................................4 PART 1. DIFFERENCES IN OUTCOMES OF FEMALE ENTREPRENEURS .....................................................6 1.1. ECONOMIC OUTCOMES ...........................................................................................................6 1.1.1. Size ................................................................................................................................................ 6 1.1.2. Sector and industry ....................................................................................................................... 6 1.1.3. Location ......................................................................................................................................... 7 1.1.4. Productivity and profitability ........................................................................................................ 8 1.1.5. Growth .......................................................................................................................................... 9 1.1.6. Survival and failure........................................................................................................................ 9 1.2. NON-ECONOMIC OUTCOMES ................................................................................................ 10 PART 2. FOUR DRIVERS OF DIFFERENCES IN PERFORMANCE .............................................................. 12 2.1. CHOICES AND PREFERENCES .................................................................................................. 12 2.1.1. Motivation for entering self-employment .................................................................................. 12 2.1.2. Goals and growth aspirations ..................................................................................................... 13 2.1.3. Risk preferences .......................................................................................................................... 14 2.1.4. Preference for wage work........................................................................................................... 14 2.1.5. Values and personality traits ...................................................................................................... 15 2.2. ENDOWMENTS ..................................................................................................................... 16 2.2.1. Assets .......................................................................................................................................... 16 2.2.2. Education, skills and experience ................................................................................................. 17 2.2.3. Networks and social capital ........................................................................................................ 18 2.3. EXTERNAL CONSTRAINTS ...................................................................................................... 19 2.3.1. Legal system ................................................................................................................................ 19 2.3.2. Social norms and culture ............................................................................................................ 20 2.3.3. Financial discrimination .............................................................................................................. 21 2.3.4. Labor market discrimination ....................................................................................................... 23 2.3.5. Family and social responsibilities ................................................................................................ 24 2.4. INTERNAL CONSTRAINTS ....................................................................................................... 26 iii 2.4.1. Low self-confidence and self-perception