Professor Christian Linder and his co-author’s configurational analysis shows that females and males experience the support provided by the entrepreneurial ecosystem for their start-up activities differently, which in turn affects the way the new ventures are managed and has important theoretical and practical implications.
On paper, things have never looked better for female entrepreneurs. The number of self-employed women has steadily increased over the past three decades (114% in the U.S. over the past 20 years) and Arianna Huffington, Rebecca Minkoff, Sara Blakely, Huda Kattan or Tory Burch have become household names. But women-owned firms are still in the minority: 41% of all entrepreneurs worldwide. Of the 48 economies surveyed by the 2018/2019 Global Entrepreneurship Monitor, only six show roughly equal Total Early-Stage Entrepreneurial Activity (TEA) rates between women and men. Because women who have embraced entrepreneurship "still face hurdles which are vast and often very different than those experienced by their male counterparts."
We can only observe that women face considerable financial barriers in the start-up world: The British Business Bank recently found that for every £1 of venture capital (VC) investment in the UK, all-female founder teams get less than a penny... The situation is mirrored across the U.S., where funding for female founders stalled at 2.2% of VC Dollars in 2018, and Europe, where all-male founding teams receive 93% of the capital invested and account for 85% of deals. “This is a loss for the investors and for the world. Diversity fuels innovation, and the evidence shows that start-ups founded or cofounded by women make for significantly better financial investments,” write Imperial College’s President and the founder and managing partner of women-led VC firm Merian Ventures in a piece published by the Guardian.
Women entrepreneurs have poor access to financial capital, but according to Inc. only a third say lack of capital is a constraint. What almost half of female founders (48 %) cite as holding them back is a lack of available mentors or advisers. This is one of the reasons why Christian Linder investigated female and male entrepreneurs’ perceived environmental support in the article the ESCP Business School Associate Professor of Strategy & Leadership and Academic Director of the MBA in International Management (London campus) published in Small Business Economics with the International School of Management’s Professor Sonja Sperber.
Ecosystem support is vital and influences start-up strategy
Earlier entrepreneurial research has placed focus on the entrepreneur’s personal factors, predominantly on personality traits and skills. “However, this neglects the implications resulting from the sphere located outside the entrepreneurial self, explains Christian Linder. And this outside sphere - the "ecosystem” - is regarded by other scholars as highly important for entrepreneurial actions, as it has a major impact on shaping the entrepreneur’s evaluation of prospects that can potentially be realized with the new venture. Hence, entrepreneurial decisions are inevitably dependent on how individuals judge their entrepreneurial ecosystem.”
He adds that although previous studies have shown their positive effect on elementary decisions in the context of founding a new venture, little is known on how the chosen start-up strategy actually depends on the ecosystem’s perceived support. Because, however, the entrepreneur’s feeling of environmental support is among the most important factors that foster individual initiatives to start a business (as shown by University of Victoria’s Boyd Cohen), the level of support is decisive in reference to the individual entrepreneur’s demands. In this context, important differences especially between female and male entrepreneurs exist, as they face specific challenges related to their particular life situation and their different societal roles. In consequence, the specific challenges faced supposedly affect the way the ecosystem’s support is perceived. The impact of support - either from personal networks or from informal and formal institutions - accordingly must be regarded in respect of the particular gender-specific situation, as an ecosystem might prove supportive for one entrepreneur but not for another. Thus, decision-making processes potentially differ between genders due to the dissimilarly perceived support, which affects the choice of strategy. “Consequently, our research question examines the extent to which female and male strategic choices in starting a venture reflect gender-specific perceptions,” he asserts.
Women have a different perception, and take strategic decisions accordingly
With his co-author, he further uncovered several discrepancies between the gender-specific strategies chosen, which are vital for understanding fundamental differences in gender-based entrepreneurship (e.g., how women and men act differently to overcome support constraints). “Current entrepreneurial research fails to regard start-up strategies as a gender-specific expression,” he adds. “We address the complexity of entrepreneurial decisions and this prevailing gap by conducting a configurational analysis (a method developed and popularized by Charles C. Ragin) to examine the degree to which the choice of strategy is shaped by expectations regarding the ecosystem’s support, and offer precise insights into gender-specific strategies.”
Indeed, they demonstrated that both sexes have different perceptions of the support: while women tend to mobilize more resources than men in order to overcome support constraints, men are more confident of their capabilities.
Their study contributes to the debate on entrepreneurial ecosystems and start-up strategies from a configurational perspective, highlighting that strategic choices are best understood as an interaction of three components: the perceived environmental support, the entrepreneur’s estimation of feasibility, and the individual goals pursued.
Theoretical as well as practical implications
Their work has various implications: first, strategic decision-making is a permanent balancing act of entrepreneurs attempting to find a feasible solution between performance and the attainment of a certain goal. “We strongly affirm the assumption that this process cannot be analysed without taking the entrepreneurial ecosystem into account, as the decisions are based on expectations regarding informal and formal environmental support,” claims Christian Linder. As numerous basic decisions occur during the founding phase, the ecosystem’s support presumably shapes the future business, even long after the founding process. “This insight is especially important for future research, as exclusively founder-focused studies on entrepreneurial actions neglect the highly influencing potential of the entrepreneur’s surroundings.”
Secondly, they recommend that gender-specific differences require more frequent and especially more profound investigation in the research of entrepreneurship. “Our study clearly indicates that females and males differ in their support expectations and, thus, apply gender-specific founding strategies”, they write. This implication’s significance is far-reaching: the sole (empirical) investigation of “the (genderless) prototype entrepreneur” is hence not only at risk of missing focus, but also in fact can provoke results which actually do not pertain to the one (female) or the other (male) gender. Even though both genders beyond doubt can pursue the same founding intentions, the goals set by the individual depend on the perceived ecosystem’s support and the associated probability of success. “Accordingly, perceived support combined with entrepreneurial goals serves as a predictor for the eventual success of the chosen start-up strategy. Since these strategies, however, are gender-specific, we cannot drive support policies for females by solely considering the needs and requirements of males (and vice versa).”