Women Receiving Less Capital Than Men

There has been some recent concern over the reasons why women entrepreneurs typically do not receive as much capital funding as their male counterparts. Kate Eddleston, Ph.D. and Assistant Professor of Entrepreneurship and Innovation at Northeastern University’s College of Business Administration presents what she believes are some of the reasons.

"Women have a higher probability of borrowing from family and friends; however, they have made strides in gaining similar access to line-of-credit loans from commercial banks as men (see JSBM study by Haynes & Haynes for details). Research by Coleman (JSBM) also showed that women are less likely to use external financing as a source of capital. However, women have also been found to pay higher interest rates and to be more likely to put up collateral than men for capital," Dr. Eddleston points out.

"Women are more likely to establish maximum business size thresholds beyond which they would not like to expand (and the thresholds are smaller than those of male entrepreneurs). Thus, women appear less interested in growth (and thus, have less of a need for external funding). (see JBV study by Cliff 1998 for details)," Prof. Eddleston adds. "Growth for women has also been found to be a very deliberate choice - they tend to understand the costs and benefits of growth.

"Women are underrepresented in their proportion of high-growth firms. They tend to be in service businesses (which are not capital intensive), and also, many start home-based businesses (which again, do not require much financing), " Dr. Eddleston concludes. "Also, women are often seeking very different things from entrepreneurship than their male colleagues. Many women start businesses to better balance work and family, or they manage their businesses so as to maximize socioemotional characteristics (as opposed to seeking status, growth and wealth like many men) (see my recent JBV).
But at the same time, one has to wonder if the higher price women pay for capital (which suggests some form of discrimination) limits the growth of women's businesses."

Below is Professor Eddleston’s bio:
Professor Eddleston received her PhD in Management from the University of Connecticut and her graduate degree from Cornell University and Groupe Essec (IMHI). Her research has appeared in journals such as the Academy of Management Journal, Academy of Management Executive, Academy of Management Perspectives, Human Resource Management Review, Journal of Occupational and Organizational Psychology, Entrepreneurship Theory and Practice, Journal of Business Venturing, and Journal of Applied Psychology. Professor Eddleston has recently been selected as a Family Owned Business Institute Research Scholar by the Family Owned Business Institute of the Seidman College of Business at Grand Valley State University.