Women’s entrepreneurship is on the rise globally. In the past year, 163 million women were starting businesses across 74 economies worldwide, while 111 million were running established businesses. This is according to the Global Entrepreneurship Monitor (GEM) 2016/17 Women’s Report released today with sponsors Babson College, Smith College, Korea Entrepreneurship Foundation, Tecnológico de Monterrey, Universidad Del Desarrollo, and Universiti Tun Abdul Razak.
“This not only shows the magnitude of impact women entrepreneurs have across the globe, but highlights the contribution they make toward the growth and well-being of their societies,” said Babson College Professor and report co-author Donna Kelley. “Women entrepreneurs provide incomes for their families, employment for those in their communities, and products and services that bring new value to the world around them.”
Among the 63 economies surveyed in both this and the last report produced in 2014/2015, GEM found that Total Entrepreneurial Activity (TEA) among women increased by 10%, and the gender gap (ratio of women to men participating in entrepreneurship) narrowed by 5%.
These same economies show an 8% increase in women’s ownership of established businesses, and across Europe, North America, and Asia, close on 10% increase in the positive perceptions that women have that there are good opportunities to start a business.
The 2016/17 GEM Women’s Report also adds a new consideration, notably that women are active entrepreneurial investors. While participation rates vary across different regions, the fact that more women are now investing in entrepreneurship is good news for business owners who will have stronger resource base on which to build.
Sub-Saharan Africa leads with highest TEA in the world
Female entrepreneurship rates vary significantly across the economies surveyed. GEM groups economies into five levels of economic development (using criteria identified by the World Economic Forum) and six geographic regions: East and South Asia and Pacific, Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, North America, and Sub-Saharan Africa.
Sub-Saharan Africa maintains the highest regional average TEA rate (25.9%) and strong average growth expectations, which translates into a lot of employment by women entrepreneurs in this region. On the flip side, however, it also sports the highest discontinuance rate (8.4%). Around 56% of women entrepreneurs in the region cite either unprofitability or lack of finance as a reason for closing down their business.
In South Africa, discontinuance rates are below the regional average at 5.2%. The vast majority of women entrepreneurs (71.6%) have also started a business because they are taking advantage of an opportunity rather than out of necessity suggesting that while TEA rates are the lowest in the region (5.9%), the types of businesses being started in South Africa are more sustainable. This is consistent with findings across the study that as levels of development increase (South Africa is classified as an efficiency-driven economy and is one of the best developed economies in the region), TEA rates decrease but so does business discontinuance.
Policy insight for better support of women entrepreneurs
GEM, now in its 18th year, has gained widespread recognition as the most authoritative longitudinal study of entrepreneurship in the world and, as such, it offers valuable insights to guide future research and policy decision-making as well as the design of interventions that can enhance female entrepreneurship, said GEM Executive Director Mike Herrington.
The data from this latest report highlights several key trends and paradoxes, he said. “As economic development and educational level increases, entrepreneurial participation among women declines and the gender gap increases, but business discontinuance also slows down. While the female discontinuance rate exceeds that of males in the first three levels of development, although only by about 10%, fewer women in highly developed innovation-driven economies have exited businesses, and at only two-thirds the rate of men.”
Also of note for policy makers is the finding that, on average, women exhibit a 20% or greater likelihood of citing necessity as a motive for starting a new business when compared to men – especially in the lesser developed economies. A positive finding is that that women entrepreneurs have a 5% greater likelihood of innovativeness compared to men. The highest level of innovation occurs in North America, where 38% of women report having innovative products and services.
While there are no clear cut answers in the report, the data provides an important foundation for the support of female business growth and the creation of both economic and social value around the world, commented Herrington.
“In many respects this report shows that women entrepreneurs across the world are more different than similar in terms of personal demographics, attitudes, and the types of businesses they run,” he said. “This suggests that support initiatives for women entrepreneurs need be tailored and customised per economy – rather than taking a one-size-fits-all approach.”
Total Entrepreneurial Activity (TEA)
- Among 63 economies (out of 74) featured in both this report and the previous one issued two years prior, overall female TEA rates have increased by 10 percent and the gender gap (ratio of women to men participating in entrepreneurship) narrowed by 5 percent.
o This continues the positive trend revealed in the previous report, which showed an average increase in female TEA rates of 7 percent and a narrowing of the gender gap by 6 percent over the prior two-year period among 61 economies.
- The 74 economies examined in this report show substantial differences in women’s TEA rates, ranging from 3 percent in Germany, Jordan, Italy, and France, to 37 percent in Senegal.
- In five of the economies, women participate at equal or higher levels than men.
o These high-parity economies come from two regions: Asia (Indonesia, Philippines, and Vietnam) and Latin America (Mexico and Brazil).
o None of these economies are at the innovation-driven stage of development, where, on average, women start at 60 percent the rate of men.
o The gender gap is greatest in Jordan, an efficiency-driven economy, where female entrepreneurship rates are about one-fourth the male level.
- On average, at all development levels, women exhibit a 20 percent or greater likelihood of citing necessity motives compared to men.
o However, opportunity motives account for the majority of entrepreneurs. Even in the factor-driven economies, there are over one and a half times as many opportunity as necessity entrepreneurs.
o This is even more pronounced in the innovation-driven group, where women are over three and a half times as likely to cite opportunity versus necessity motives.
- Entrepreneurial intentions increased among women by 16 percent from 2014 to 2016 across the 63 economies participating in both this report and the previous one.
o However, the gender gap is slightly narrower for entrepreneurial intentions than it is for TEA. This suggests that women’s intentions are closer to that of men compared to TEA.
o While not everyone’s intentions translate into action, the implication is that more women than men may be dropping off in this transition between phases.
Established Business Ownership
- Across these same economies, established business rates increased by 8 percent, on average.
o Additionally, the gender ratio improved by 9 percent.
o Like TEA, as economic development increases, established business activity among women declines and the gender gap increases.
- However, while there is greater demand for entrepreneurship in developing economies than in developed economies, comparatively fewer enterprises have transitioned to the mature stage.
o Women in innovation-driven economies, on the other hand, are less likely to start businesses than those in economies at earlier stages of economic development, but women who start are more likely to have sustainable businesses.
- Established business ownership among women is lowest in MENA.
o This region also reports the widest gender gap, where women are running established businesses at one-third the rate of men.
- Latin America also exhibits a wide gender gap in established business activity, which contrasts with a relatively narrow gender gap in TEA.
- The opposite effect can be seen in North America, which reports the narrowest regional gender gap in established business activity, despite showing a wide gap relative to men in TEA rates.
- In three Southeast Asian countries—Thailand, Vietnam, and Indonesia—established business ownership rates among women are equal to or higher than TEA rates.
o Additionally, there are equal or greater proportions of established business owners among women compared to men.
- Relative to TEA, the highest level of exits per entrepreneur is in the factor-efficiency transition stage, where there are four exits for every ten women starting or running a new business.
o This declines to a little over two exits for every ten female entrepreneurs in the innovation-driven economies.
- The female discontinuance rate exceeds that of males at the first three levels of development, although only by about 10 percent more.
o But given that women are less likely than men to be starting businesses, this means that, despite a smaller pool of businesses, there are more exits for women.
o On the other hand, very few women in innovation-driven economies have exited businesses, and at only two-thirds the rate of men.
- From a regional perspective, discontinuance is highest in sub-Saharan Africa, followed by Latin America.
o This is, of course, related to the fact that more women start businesses in these regions. But it appears that these women often struggle with unprofitability, and slightly more often than men.
o Sub-Saharan Africa also cites the highest level of finance issues associated with closing a business, compared to other regions.
- The highest participation in entrepreneurship among women can be seen in the 25-34 and 35-44 year olds.
o This is true, on average, across the development levels and regional groups. It is also the case among men.
o In general, the relationship between the genders with respect to entrepreneurship rates holds throughout the age groups, when viewing averages by development level and geographic region.
- While TEA rates tend to decline with development level, the proportion of entrepreneurs with a college or higher level of education increases. To some extent, this is reflective of the general population.
o A small proportion of female entrepreneurs (14 percent) in the factor-driven stage have at least a college degree, while the majority (61 percent) of those in the innovation-degree have this level of education.
- Parity with male entrepreneurs in education levels also increases with economic development.
o In the factor-driven stage, women entrepreneurs are about two-thirds as likely as males to have a post-secondary degree or higher.
o In the efficiency-driven and higher levels of economic development, women entrepreneurs are as likely, or more likely, to have reached this level of education.
o North America shows the highest education rates among women entrepreneurs, with 84 percent having earned a post-secondary or higher education.
o Europe is notable for having more highly educated women than men entrepreneurs: 22 percent more, on average.
Attitudes and Affiliations
- Opportunity perceptions range from 57 percent of women in the factor-driven economies believing there were good opportunities around them, down to 39 percent holding these beliefs in the innovation-driven group.
- The gender gap on this indicator is relatively narrow, however; overall, opportunity perceptions among women are at 90 percent of male perceptions.
- While 67 percent of those at the factor-driven stage believe they have the capabilities for starting businesses, this declines to just under 35 percent among the innovation-driven economies.
- Additionally, the gender gap in capabilities perceptions is widest in the innovation-driven economies, at just over two-thirds the level reported in men.
Personal Affiliations with Entrepreneurs
- Despite the high visibility of entrepreneurs in American culture, only 27 percent of women in this country know one.
o A similar percentage is reported in Europe.
- In contrast, over half the women in sub-Saharan Africa personally know an entrepreneur.
- What appears to stimulate personal connections are simply the presence of entrepreneurs in one’s community. In the lower economic development levels, with high TEA rates, more than half of women know an entrepreneur personally. This declines to just over 30 percent in the innovation-driven group.
- On average, across the entire sample, 10 percent of women entrepreneurs operated their businesses solely and had no intentions to add any employees in the next five years.
- In over three-fourths of the economies, women were as likely, or more likely, than men to have self-employment businesses.
- Europe has the highest frequency of one-person female business activity, while North America, containing two advanced economies, has the lowest.
- In Netherlands, half of the women entrepreneurs were operating solely, nearly two and a half times the frequency of men in this country.
- Across the regions, the lowest average female growth expectations can be found in Latin America.
o While there are many entrepreneurs in this region, proportionately few expect to grow their businesses.
o Additionally, there is a wide gender gap, with growth expectations barely reaching 60 percent of the male level.
- Interestingly, although sub-Saharan Africa also has a wide gender gap on this indicator, average growth expectations are higher than in Latin America.
o Together with the highest regional average TEA rate, this translates to a lot of employment by entrepreneurs in this region.
- The MENA region reports the highest average female growth expectations at 37 percent, and with the highest gender parity, where women with growth expectations are just under 80 percent of the male rate.
- Over half of the women entrepreneurs in UAE, Qatar and Tunisia expect to hire six or more employees in the next five years. Moreover, women in Saudi Arabia and Morocco are more likely than men to have these ambitions.
- Innovation levels increase with economic development, with the innovation-driven economies exhibiting a substantial jump from the other development levels.
- Overall, innovation represents the indicator with the greatest female-to-male gender ratio; across all 74 economies, women entrepreneurs have a 5 percent greater likelihood of innovativeness compared to men.
- The highest level of innovation occurs in North America, where 38 percent of women report having innovative products and services.
- In sub-Saharan Africa, on the other hand, 18 percent of women state their offerings are innovative. Yet both regions, as well as Europe, show gender parity.
- Among entrepreneurs in MENA, women not only report high innovation levels, but are 60 percent more likely than men to state their offerings are innovative, with seven of the ten countries in this region reporting higher innovation levels among female than male entrepreneurs.
- The level of international sales varies dramatically, spanning from zero or less than 1 percent in three Latin American countries (Brazil, Guatemala, and Ecuador) and three Asian countries (Malaysia, Thailand, and Vietnam) to over three-fourths of women entrepreneurs in the UAE and over half in Saudi Arabia.
- On average, more than one-fifth of women entrepreneurs in innovation-driven economies state that 25 percent or more of their sales are to customers outside their economies. This is four times the level of the factor-driven group.
- Regionally, only 6 percent of sub-Saharan African women entrepreneurs are internationally-oriented, and this is somewhat more than half the level of men. On the other hand, 29 percent of women entrepreneurs in MENA are considered international, and at a higher rate than men.
- Wholesale/retail trade accounts for about 60 percent of female entrepreneurial activity among the first three development levels.
o By comparison, at the highest level of development—among the innovation-driven economies—only one-third of women entrepreneurs compete in this sector.
o This is fairly consistent with male participation in this sector; across the entire sample, women entrepreneurs are just 16 percent more likely to be starting wholesale/retail businesses.
- Over half of women entrepreneurs in the innovation-driven group are in government, health, education, and social services.
o This is the business category that women entrepreneurs dominate relative to men at all development levels.
o On average across the entire sample, they are two and one-fourth times more likely to be starting in this sector.
- Where women are less likely to be seen in the entrepreneurship ranks, is in the ICT sector. Overall, fewer than 2 percent are starting business here, amounting to a little more than one-fourth that of males on average.
- Overall, 4.6 percent of women in the 74 economies provided finance to entrepreneurs in the past three years.
o This ranges from 1 percent in Morocco to 16 percent in Cameroon.
o Entrepreneurial investment in the innovation-driven economies is a little more than one third the level reported in the factor-driven group.
- While male investment rates also decline with economic development level, this decrease is not as steep as it is for female investors, leaving a wider gender gap with higher levels of development.
o Overall, women invest in entrepreneurs at less than two-thirds the rate of men.
- About 5 percent of women in North America, Latin America, MENA, and Asia have personally provided funds to entrepreneurs.
o The other two regions, however, show contrasting results. Only 3.5 percent of women are entrepreneurial investors in Europe, while 9 percent in sub-Saharan Africa have funded entrepreneurs.