DISCUSSIO PAPER SERIES IA DP o. 4778 hat s the Derence?! Gender, Personalty, and the Propensty to Start a Busness Marna Furdas Karsten Kohn February 2010 Forschungsnsttut zur ukunt der Arbet Insttute or the Study o Labor
hat s the Derence?! Gender, Personalty, and the Propensty to Start a Busness Marna Furdas Albert-Ludwgs-Unversty Freburg Karsten Kohn K Frankurt and IA Dscusson Paper o. 4778 February 2010 IA P.O. Box 7240 53072 Bonn Gerany Phone: 49-228-3894-0 Fax: 49-228-3894-180 E-al: za@za.org Any opnons expressed here are those o the author(s) and not those o IA. Research publshed n ths seres ay nclude vews on polcy, but the nsttute tsel takes no nsttutonal polcy postons. The Insttute or the Study o Labor (IA) n Bonn s a local and vrtual nternatonal research center and a place o councaton between scence, poltcs and busness. IA s an ndependent nonprot organzaton supported by Deutsche Post Foundaton. The center s assocated wth the Unversty o Bonn and oers a stulatng research envronent through ts nternatonal network, workshops and conerences, data servce, project support, research vsts and doctoral progra. IA engages n () orgnal and nternatonally copettve research n all elds o labor econocs, () developent o polcy concepts, and () dssenaton o research results and concepts to the nterested publc. IA Dscusson Papers oten represent prelnary work and are crculated to encourage dscusson. Ctaton o such a paper should account or ts provsonal character. A revsed verson ay be avalable drectly ro the author.
IA Dscusson Paper o. 4778 February 2010 ABSTRACT hat s the Derence?! Gender, Personalty, and the Propensty to Start a Busness * oen start ewer busnesses than en. The start-up rate aong woen n Gerany alls short o ales start-up rate by one thrd. e scrutnze ths gender gap usng ndvdual-level data ro the K Start-up Montor, a large-scale populaton survey on start-up actvty n Gerany. As a unque eature, the data cobne soco-deographc characterstcs, entrepreneurshp-related atttudes, and general personalty trats o both busness starters and non-starters. Estatng bnary choce odels and eployng decoposton technques, we nd that gender derences n soco-deographcs alone would even be n avor o hgher start-up rates aong woen, whle the dstrbuton o personalty trats s less avorable or busness start-ups aong woen and explans about one thrd o the entre gender derence. Most substantally, en opt or a start-up ore oten even gven dentcal huan captal and related endowents. Qualcatonal polces targeted towards hgher educatonal attanents o potental entrepreneurs do thus not suce to ncrease the nuber o eale busness starters. JEL Classcaton: J16, L26, M13 Keywords: entrepreneurshp, gender derence, start-up propensty, decoposton analyss, K Start-up Montor, Gerany Correspondng author: Karsten Kohn K Departent o Econocs Palengartenstr. 5-9 60325 Frankurt a Man Gerany E-al: karsten.kohn@kw.de * Arguents n ths artcle express personal vews o the authors and do not necessarly relect those o K. e thank Bernd Ftzenberger, Hannes Spengler, Katrn Ullrch, and partcpants o the G-Foru 2008 conerence, IECER 2009, and the 11 th E Suer orkshop or Young Econosts 2009 or rutul dscussons. Mare-Lena Haberstroh provded excellent research assstance. Reanng errors are our sole responsblty.
1. Introducton It s a well-known act that woen start ewer busnesses than en. Across ndustralzed countres, one ale sel-eployed on average coes along wth erely 0.64 eales. Ths observaton also holds or Gerany, where the sel-eployent rates aong en and woen n the year 2007 were 13.4% and 8.6%, respectvely (BMAÖ, 2008). In the Global Entrepreneurshp Montor (GEM; Sternberg et al., 2007), the share o woen aong nascent and young entrepreneurs vares consderably across countres. However, entrepreneural actvty rates n all countres are hgher or en than or woen. In Gerany, or nstance, the respectve rates n the year 2006 were 2.6% aong eales and 5.8% aong ales (Allen et al., 2007). Slar gender derences are observed n the K Start-up Montor or the year 2007, whch reports gender-specc start-up rates o 1.3% aong eales and 2.1% aong ales (Kohn and Spengler, 2008b). The ndvdual decson to start a busness s nluenced by the personalty o the (potental) entrepreneur and the start-up envronent. hle the start-up envronent captures, e.g., current econoc and poltcal condtons or regonal speccs, the concept o personalty coprses hard actors lke soco-deographc characterstcs, as well as sot actors such as personalty trats, abltes, atttudes, and perceptons. Ths bundle o deternants can be expected to exert derent pacts on the start-up decsons o en and woen. Gender derences n start-up actvty can be analyzed by eans o econoetrc ethods based on large-scale ndvdual-level data (de Brun et al., 2006, 2007). Langowtz and Mnnt (2007), or nstance, use GEM data to estate the eects o ndvdual characterstcs on the start-up decsons o en and woen. Coparable studes or Gerany ether use regonally selectve data such as the Regonal Entrepreneurshp Montor (agner, 2007) or ocus on sel-eployent stock rather than start-ups (e.g., Lecht and Lauxen-Ulbrch, 2005). Yet ost exstng studes do not assess the relatve portance o derent eects or explanng observed gender derences n start-up ntensty. Is the lower entrepreneural actvty o woen due to a saller huan captal endowent resultng, e.g., ro dscontnued eployent hstores or ro a lower educaton? Or does t result ro derences n behavor and atttudes beyond observable characterstcs? How uch o the derence s due to dsslar personalty trats? hat s the pact o en and woen percevng the odds o a start-up derently? How uch o the overall gender derence n start-up ntensty can be explaned by odels usng representatve ndvdual-level data? 1
In lght o these questons, our paper extends upon the exstng lterature n three an densons. Frst, we use ndvdual-level data ro the K Start-up Montor, a large-scale populaton survey on start-up actvtes n Gerany. The database s representatve or the entre populaton n Gerany and oers a large nuber o entrepreneurshp-related varables or both busness starters and a coparson group o non-starters. Second, we dstngush the eects o standard soco-deographc characterstcs such as educaton, age, or household coposton and general sot personalty trats or explanng the gender derence n start-up rates. Ths s portant as general personalty trats such as rsk averson, creatvty, need or acheveent, openness to change, and persuasveness, help explanng the ndvdual start-up decson whle usng noraton on persons atttudes towards entrepreneurshp as n related studes s not econocally reasonable. Thrd, and ost portantly, we assess the relatve contrbutons o soco-deographcs and personalty characterstcs by eans o decoposton technques. As a ethodologcal contrbuton, we eploy a technque adapted to the non-lnear case o bnary choce odels n a way slar to Farle (2005), but construct ore eanngul counteractuals usng Mahalanobs dstance atchng. Our results show that gender derences n soco-deographcs alone would even be n avor o hgher start-up rates aong woen, whle the dstrbuton o personalty trats s less avorable or busness start-ups aong woen and explans about one thrd o the entre gender derence. Derences n unobserved characterstcs agan work n the drecton o a lower gender derence. Most substantally, en opt or a start-up ore oten even gven dentcal endowents wth huan captal and related characterstcs. The paper s organzed as ollows. Secton 2 brely revews related theoretcal and eprcal evdence on the deternants o gender derences n start-up actvty. e ocus on the pacts o soco-deographcs, personalty trats and entrepreneural atttudes, and on ther relatve portance. Our eprcal nvestgaton n secton 3 coprses the ntroducton o the K Start-up Montor data, descrptve and regresson evdence on gender-specc start-up decsons, and the decoposton analyss o start-up derences. Secton 4 oers concludng rearks. 2. Related Lterature and Research Hypotheses Snce the early study o Schwartz (1976) a broad lterature on the speccs o eale entrepreneurs and gender derences n entrepreneurshp has evolved. 1 The start-up decson 1 See the survey artcles o Brush (1992, 2006), Carter, Anderson, and Shaw (2001), Carter and Shaw (2006) and Greene et al. (2003), as well as the collected volues o Lecht and elter (2004) and K Bankengruppe (2004) or Gerany. 2
o both woen and en s usually understood as resultng ro a cogntve ndvdual choce expected utlty o becong an entrepreneur ust be hgher than the expected utlty derved ro alternatve occupatons (Krueger et al., 2000). The choce s raed by a bundle o ndvdual and envronental nluences. Deternants at the acro level capture, e.g., current econoc and poltcal condtons or regonal speccs. At the cro level, the concept o personalty coprses hard actors lke soco-deographc characterstcs, as well as sot actors such as personalty trats, abltes, atttudes, and perceptons. 2 In ths regard, gender derences n start-up decsons can result ro derent rang stuatons. On the one hand, woen and en ght have derent characterstcs whch are relevant to the startup decson woen ght, e.g., be less educated then en. On the other hand, those characterstcs ght have derent pacts on the decsons o woen and en or exaple, a unversty degree ght ncrease the start-up propensty o woen to a hgher degree as the propensty o en. Fnally, woen and en ght ake derent decsons even n dentcal stuatons. 3 Eprcal research on gender derences n entrepreneurshp uses a broad range o ethods (de Brun et al., 2007). Mcroeconoetrc studes estate deternants o the start-up decson based on large cro-level data. hen gender s controlled or, the partal eect o beng eale turns out negatve across derent countres and derent data sets. 4 The ceters parbus eect or woen resultng ro ore lexble, gender-specc estates s also negatve. 5 Moreover, separate analyses or en and woen allow or dstnctve deternants o the start-up decson. The ollowng paragraphs brely revew exstng evdence on genderspeccs n soco-deographc characterstcs and personalty trats n order to otvate our eprcal nvestgaton. 2.1 Start-Up Propensty, Gender, and Soco-Deographc Characterstcs Resource-orented approaches ephasze the portance o nancal, huan, and socal captal or ndvdual start-up decsons (Cooper et al., 1994). Crucal huan captal coponents nclude educaton, age, and proessonal experence. 6 2 For exaple, Cooper (1981) derentates three broad categores o deternants: antecedent nluences coprsng deographc and personal characterstcs o the (potental) entrepreneur; ncubator organzaton, whch captures eployent status and establshent speccs n the pre-decson stuaton; and envronental actors coprsng regulatory raework and econoc condtons. At the ndvdual level, Arenus and Mnnt (2005) dstngush deographc and econoc characterstcs and perceptual varables. 3 Copare, e.g., Jungbauer-Gans (1993), McManus (2001), and Harrson and Mason (2007). 4 Copare, e.g., Blanchlower and Oswald (1998), Evans and Leghton (1989), Arenus and Mnnt (2005), and Kohn and Spengler (2008b) or Gerany. 5 See, e.g., Langowtz and Mnnt (2007) and agner (2007). 6 See Becker (1964) or the erts o general and specc huan captal. 3
Fro a theoretcal pont o vew, the eect o educaton on the ndvdual propensty to start a busness s abguous. On the one hand, hgher educaton s assocated wth better opportuntes n dependent eployent, and thus wth hgher opportunty costs o a start-up. On the other hand, sel-eployent requres partcular coercal and/or techncal knowledge, whch would gve an advantage to hgher-sklled persons. Eprcal studes oten nd a postve eect o educaton on the start-up propensty o both en and woen. 7 Copared to en, woen used to have lower oral qualcatons n orer decades. Yet derences have lattened aong recent cohorts. As Lecht et al. (2004) note, the ncrease n eale sel-eployent n Gerany n the 1990 s s, to a large extent, due to an ncrease o eale unversty graduates. 8 Regardng the pact o age on entrepreneural propensty, there are also countervalng eects. Frst, the accuulaton o huan and nancal captal ncreases over the le cycle, renderng a start-up ore lkely. Second, ncreasng prvate and job-related cotent as well as shorter lespan decreases the propensty to venture upon the rsky and long-terorented nvestent o a start-up. Most eprcal studes depct an nverted U-shape pact o age aong both en and woen, ddle-aged persons show the hghest start-up rates. 9 hen coparng the age eects or en and woen, agner (2007) nds no sgncant derences. However, the relatve portance o the above channels s lkely to der. For exaple, the negatve pact o ncreasng aly-related cotent on the ndvdual startup propensty ght predonate aong woen. Proessonal experence s closely related to age and qualcaton. Its overall eect on ndvdual start-up propensty s also abguous a pror, whle eprcal evdence suggests a concave pact (Fscher et al., 1993; Jungbauer-Gans, 1993). Copared to en, woen have less proessonal experence due to aternty leave spells, ore requent part-te work, and resultng dscontnued eployent hstores. More generally, the eployent status s pvotal to the start-up decson (Blanchlower and Oswald, 1998). Uneployed persons as well as persons ro out o the labor orce have lower opportunty costs o a start-up than eployed persons and are thus ore lkely to becoe sel-eployed. 10 Persons who have already experenced sel-eployent n the past are also ore lkely to set up another busness as a 7 Copare, e.g., Dolnsky et al. (1993) and Kohn and Spengler (2008b). There s soe varaton across countres, though. See Lohann (2001) and Stroheyer (2004) or coparatve nternatonal evdence. 8 Soe nternatonal studes even note hgher educatonal attanents o eale entrepreneurs as copared to ther ale counterparts; see, e.g., apalska (1997) and Cowlng and Taylor (2001). 9 See, e.g., Bönte et al., (2007), Gottschalk and Theuer (2008), Kohn and Spengler (2008c), Lévesque and Mnnt (2006), and van Praag and Booj (2003). 10 For eprcal evdence ro Gerany see eert (2010). 4
seral entrepreneur or restarter (Metzger, 2006). Both the labor orce partcpaton rate and the share o sel-eployent are substantally lower aong eales than aong ales. Along these lnes, gender derences n huan captal such as derent proessonal experence ply derent start-up propenstes. However, even wth dentcal huan captal endowent, woen ay be expected to use ths captal derently n the process o dentyng and explotng entrepreneural opportuntes (DeTenne and Chandler, 2007). Derent eployent hstores and coparatve advantages gve rse to gender-specc segregaton n the labor arket. Feale occupatons or nstance secretary jobs ght be assocated wth less opportuntes or a start-up than ale occupatons, e.g., n handcrats. Ths has been conred by a nuber o eprcal studes. 11 Proessonal segregaton s also related to socalzaton and role odels n socety (Lauxen-Ulbrch and Lecht, 2005). Ths holds partcularly true or persons wth a gratonal background. hle grants have a hgher average start-up propensty than natves n Gerany (Kohn and Spengler, 2007), a large proporton o grants coes ro Islac countres, where ales partcpate dsproportonately n the labor arket. The observed start-up rate aong grants ght thus be drven by a partcularly hgh rate aong ale entrepreneurs. Reconclng aly and partcpaton n the labor arket s crucal to eployent decsons o both en and woen. Housework, aly chldcare, and care or the elderly stll are anly a eale doan, and so aly envronent s lkely to play a ore portant role or woen s eployent decsons as copared to en s. The eect o aly nvolveent on the decson to start a sel-eployent s abguous though (McManus, 2001). On the one hand, addtonal aly and housework dutes generally result n a lower labor orce partcpaton rate, reducng the propensty or both dependent and sel-eployent. On the other hand, sel-eployent oers a hgher degree o lexblty than jobs n dependent eployent. The opportunty to work at hoe and to arrange workng hours ore reely acltates reconclng work and aly le. 12 Ceters parbus, ths would ncrease especally eale entrepreneurshp. An analogous reasonng holds or the eect o beng head o a household. Prary ncoe earners very oten en are ore lkely to be sel-eployed due to ther hgher partcpaton rate. On the other hand, support by partners and aly ebers has been shown 11 Copare, e.g., Carr (1996), Lecht et al., (2004), Lecht and Lauxen-Ulbrch (2005), McManus (2001), Tonoyan et al. (2008), Verheul et al. (2004). Stroheyer and Tonoyan (2008) note that occupatonal segregaton s also responsble or a ale-eale nnovaton gap whch tsel s related to the saller eployent growth n woen-owned rs. 12 See Boden (1996), Brush (1992), Carr (1996), Gurley-Calvezet al. (2009), and Lohann (2001) or eprcal evdence. 5
to have a postve eect on entrepreneural propensty as well. The ncoe earned by the prary earner and her/hs potental entrepreneural experence would also ncrease the startup propensty o the spouse. 13 As to the eect o chldren on the start-up propensty o ther parents, eprcal evdence s xed. A nuber o studes or the Unted States report a postve eect o young chldren on the entrepreneural propensty o woen, whle there s no eect on en. 14 For Gerany, Lohann (2001) nds a postve eect or others wth older chldren, but none or others wth young chldren. Constant and Shachurove (2003) note that est Geran en have a hgher start-up propensty there are chldren below the age o 17 n the household. As lower huan captal renders the accuulaton o nancal captal ore dcult, dscontnued eployent hstores and lower ncoe ro salared eployent contrbute to less nancal resources o woen, whch n turn constran the start-up decson. 15 Moreover, socal captal and networks are crucal or the recognton o entrepreneural opportuntes, or establshng busness contacts, and the exchange o scarce resources. Aldrch et al. (1989) hypothesze that woen use derent networks than en, but agan, eprcal evdence s xed. hle Caputo and Dolnsky (1998), Croe and Brley (1992), and Jungbauer-Gans (1993) nd no gender derences n networkng actvty and network denstes, Renzull et al. (1999) conclude that derent network copostons aong en and woen are portant deternants o the start-up decson. Gender derences n socal captal and networkng actvty vary across cultural contexts, or between ndvduals ro derent gratonal backgrounds. 2.2 Start-Up Propensty and Indvdual Personalty Entrepreneural personalty s crucal or the ndvdual decson to start up a busness and the subsequent entrepreneural actvty. Schupeter (1934), or exaple, dented entrepreneurs as extraordnary ndvduals deyng conventons, orgnatng nnovatons, and thus prootng creatve destructon. Entrepreneurs recognze and explot entrepreneural opportuntes (Krzner, 1973) and they are wllng to take rsk and uncertanty (Knght, 1921). Accordng to the theory o planned behavor (Ajzen, 1985, 1991), the nteracton o socal nors, ndvdual atttudes, and subjectve perceptons ental the ntentons o a person, whch n turn govern ndvdual decsons and actons. 16 Personal attrbutes thus deterne whether a 13 See, e.g., Bruce (1999), Caputo and Dolnsky (1998), Carr (1996), and Lauxen-Ulbrch et al. (2004). 14 Boden (1999), Caputto and Dolnsky (1998), Carr (1996). 15 See Caputo and Dolnsky (1998); Haynes and Haynes (1999), and Verheul and Thurk (2001). 16 See Krueger (2003) or a synopss o related odels n cogntve psychology. 6
potental entrepreneur recognzes or creates, and thereupon explots a busness opportunty. 17 Densons o personalty dented n derental psychology nclude, e.g., the bg ve actors extraverson, eotonal stablty, agreeableness, conscentousness, and openness. 18 In the entrepreneurshp context, general personalty trats as well as atttudes towards entrepreneurshp are relevant or the ndvdual start-up decson. Shane (2003) surveys varous personalty trats whch have been dented to proote entrepreneural actvty. These nclude,.a., agnaton and creatvty, nternal locus o control and sel-ecacy, extraverson, and need or acheveent. On the other hand, trats such as rsk averson and agreeableness are typcal non-entrepreneural ones. Personalty trats der between en and woen. For exaple, woen have been ound to be ore rsk averse but also eotonally ore stable, and they have a lower sel-ecacy (lson et al., 2007; Calendo et al., 2009). 19 Soe studes copare eale and ale entrepreneurs wth respect to psychologcal characterstcs. 20 Feale entrepreneurs put a hgher ephass on autonoy, sel-actualzaton and adaptablty, but they are less prot-drven. Case studes corroborate the noton that eale entrepreneurs act ore cautously and ore delberately, but also ore anxously and uncertan than ther ale counterparts (Tchouvakhna, 2004). Gender derences n general personalty trats ay thus contrbute to explanng the lower start-up rate aong woen. Entrepreneurshp-related atttudes coprse sel-perceptons as well as subjectve perceptons o the start-up envronent. In ths context, overcondence (Horage, 2004) and unrealstc opts have been shown to be dsproportonately prevalent aong entrepreneurs. 21 Although entrepreneurshp does not pay o or a ajorty o busness starters due to hgh busness ortalty and a lower average ncoe o sel-eployed workers as copared to eployees (Halton, 2000), entrepreneurs systeatcally assess ther own entrepreneural apttude and the econoc and personal start-up envronent ore postvely than nonentrepreneurs. In turn, these postve assessents have an portant pact on the ntenton to start a busness (Gatewood et al., 1995; Krueger et al., 2000). A ew large-scale populaton surveys provde noraton on entrepreneurshp-related ndvdual atttudes. Usng data ro the Global Entrepreneurshp Montor (GEM), Arenus 17 Cp. the surveys o Eckhardt and Shane (2003), Sarasvathy et al. (2003), and Shane (2003). 18 See, e.g., Dgan (1990). 19 Usng data ro the Geran Soco-Econoc Panel (GSOEP), Calendo et al. (2009) note that hgher rsk averson decreases the propensty to start a busness aong persons n regular eployent (but not aong uneployed or persons out o the labor orce). The eect turns out slar or en and woen. 20 Cp. Sexton and Bowan-Upton (1990) and the survey o Brush (1992). 21 Cp. Craerer and Lovallo (1999), de Meza and Southey (1996), Kohn and Spengler (2008a), and Köllnger et al. (2007). 7
and Mnnt (2005) conr that subjectve perceptons about the sutablty o econoc condtons or a start-up, as well as perceptons o one s own entrepreneural apttude correlate postvely wth ndvdual start-up propensty. Langowtz and Mnnt (2007), usng the sae data set, ocus on gender derences and conclude that woen s less postve atttudes about ther entrepreneural apttude and about the start-up envronent contrbute to the lower start-up propensty aong woen. Reerrng to the Geran Regonal Entrepreneurshp Montor (REM), agner (2007) stresses hgher ear o alure as a drvng actor behnd woen s lower start-up propensty. 22 Gender derences n entrepreneural atttudes also persst ater controllng or addtonal ndvdual characterstcs: ceters parbus, woen show a lower level o opts and start-up-related sel-condence, as well as a hgher ear o alure (Köllnger et al., 2008). In su, woen have derent entrepreneurshp-related atttudes than en. Insoar as these atttudes are related to the start-up decson, they ay contrbute to the observed gender derence n start-up rates. Yet a caveat apples when nterpretng entrepreneurshp-related atttudes collected n survey data. At the te o the survey ntervew, when ntervewees entrepreneurs and non-entrepreneurs state ther assessents, the decson to start-up or not has already been ade. Thereore, the assessents are subject to a hndsght bas (Fschho, 1975; Thaler, 2000). Entrepreneurs justy ther start-up decson ex post and assgn hgh values to, e.g., ther entrepreneural qualcaton and econoc condtons. Estated eects o these endogenous atttudes on the ndvdual start-up decson wll thus be based and ust not be nterpreted as start-up deternants. 2.3 Relatve Iportance o Start-Up Deternants Soco-deographcs as well as personalty trats deterne ndvdual start-up decsons. The role o each o these deternants or explanng the gender derence n start-up rates ght be twoold: Frst, woen and en ght der n characterstcs whch are relevant to the start-up decson. Second, characterstcs ght have derent pacts on the decsons o woen and en. Soe recent studes eprcally analyze the relatve portance o soco-deographc characterstcs and entrepreneurshp-related atttudes. Langowtz and Mnnt (2007) estate gender-specc probt odels o the start-up decson. Once easures o entrepreneurshprelated perceptons are ncluded n ther estatons, the nluence o soco-deographc 22 See also Bergann (2004) or slar results based on the sae data set. Yet erner and Kay (2006), usng a survey data set o ndvduals vstng start-up ars n Gerany, conclude that entrepreneural sel-percepton has no specc gender eect. 8
varables becoes nsgncant or en as well as or woen. The authors thus suppose a partcular portance o atttudnal derences. Agan usng GEM data and eployng a non-paraetrc resaplng ethod, Mnnt and ardone (2007) conclude that gender derences n huan captal endowent and household ncoe are neglgble n coparson to derences n entrepreneurshp-related perceptons. The eployed resaplng ethod allows Mnnt and ardone to put en and woen n dentcal econoc envronents and soco-deographc crcustances wthout dstrbutonal assuptons. However, the pure resaplng does not capture behavoral derences or gven characterstcs. agner (2007) chooses a atchng approach and copares the observed start-up rate o en wth the estated rate aong atched en wth the characterstcs o woen. The latter turns out larger. So the gender derence n start-up rates would even be hgher en had the sae characterstcs as woen. The observed gender gap would entrely be drven by behavoral derences. However, agner s result s ragle nsoar as the atchng approach reles on ew covarates only, and erely the eect o ear o alure ders sgncantly between en and woen. All n all, the sparse eprcal evdence so ar suggests that derences n observed characterstcs and atttudes, as well as behavoral derences deterne the derent start-up actvty o en and woen. Moreover, a strong eect o atttudes or perceptons s expected. Yet all o the above studes ake use o entrepreneurshp-related atttudes surveyed ex post and thereore suer ro the proble o hndsght bas. Vald eprcal odels should rely on ore general personalty trats. 3. Eprcal Investgaton Our eprcal analyss ollows a three-step procedure. Frst, we copare ale and eale entrepreneurs and non-entrepreneurs wth respect to varous soco-deographc characterstcs and personalty trats. Ths yelds nsghts as to whether en and woen have derent observable endowents. Second, we estate probt odels o the start-up decson. Testng or equalty o eects estated or en and woen then provdes nsghts as to whether the endowents have gender-specc pacts. Thrd, we predct start-up rates based on our estates and decopose the gender derence nto characterstcs eects capturng derences n observed endowents, a base eect, and coecents eects, whch capture derences n start-up behavor or gven characterstcs. The decopostons yeld nsghts nto the relatve portance o the derent deternants. 9
3.1 K Start-Up Montor e use data ro the 2007 K Start-up Montor (c. Tchouvakhna and Hoann, 2003/04; Kohn and Spengler, 2008b). The K Start-up Montor s a representatve coputer-asssted telephone (CATI) survey on start-up actvty n Gerany. Its yearly cross sectons are conducted aong 40,000 randoly selected nhabtants. Entrepreneurs are dented as those persons who started a new busness or took over an establshed r wthn 12 onths beore the ntervew. The eployed broad entrepreneurshp concept ncludes ndustral and coercal sel-eployent as well as reelancers, and ull-ters as well as part-ters. Entrepreneurs are asked a broad set o questons about ther person and ther start-up project. In addton, a subsaple o 7,500 non-entrepreneurs also answers detaled questons about ther soco-deographc background, and thus serves as a coparson group. Table B.1 n Appendx B dsplays the dentons o correspondng varables used n our analyss. In addton to conventonal soco-deographcs, the 2007 questonnare contans a broad range o personalty-related questons, coprsng both general personalty trats and entrepreneurshp-related atttudes (Table B.2 n Appendx B). On the one hand, ntervewees revealed ther subjectve perceptons about the sutablty o current econoc condtons and ther personal le crcustances or a busness start-up, the desrablty o sel-eployent, the reputaton o entrepreneurs, and ther ndvdual entrepreneural apttude on a ve-pont Lkert scale. On the other hand, they assessed ore general stateents regardng personalty trats such as rsk tolerance, openness, cogntve sklls, need or acheveent, eotonal stablty, persuasveness, creatvty, and deternaton. 23 Stateents and assocated varables are dsplayed n Table B.2 n Appendx B. 3.2 Gender-Specc Start-Up Intenstes oen partcpate less n entrepreneural actvty than en. In the year 2007, gender-specc start-up ntenstes.e., the share o eale or ale busness starters n the respectve populaton aged 18-64 years were 2.1% aong ales and 1.3% aong eales. The evoluton o woen s share n all entrepreneurs over the years 2000 2007 s dsplayed n Fgure 1. - Fgure 1 about here - th a varaton between 34 and 40%, woen s share s always consderably below 50%. Moreover, ther share aong ull-te entrepreneurs (28 to 37%) s arkedly lower than ther 23 ote that the desgn o a large populaton survey does not pert the use o derent tes or sngle densons o personalty. 10
share aong part-ters (36 to 46%). So startng a busness as a part-te project s a relatvely attractve opton or woen who wsh to cobne eployent and housework dutes or parentng. In addton, woen ght be ore cautous and thereore choose the lower rsk o a part-te start-up rst, wth the opton o swtchng to ull-te seleployent ater a successul establshent o ther busness (Tchouvakhna and Tlleßen, 2006). Over te, woen s share n part-te entrepreneurs vared erely unsysteatcally. Yet the respectve share aong all ull-te entrepreneurs has been steadly ncreasng snce the year 2003. The ncreasng nlow results n a growng stock o sel-eployed woen (Lauxen- Ulbrch and Lecht, 2005). On the one hand, ths evoluton s n lne wth recent years trend towards growng labor orce partcpaton o woen. On the other hand, woen ay also have sezed ther start-up chances durng the econoc upswng to a larger extent than en. 3.3 Characterstcs o Entrepreneurs and on-entrepreneurs by Gender Table 1 copares soco-deographc characterstcs, personalty trats, and entrepreneurshprelated atttudes o en and woen, dstngushed by ther entrepreneural status. Table 1 about here On average, eale entrepreneurs start at a sgncantly hgher age as copared to ther ale counterparts. They rst start a aly and decde or a start-up later. As to educatonal attanent, ales went to a techncal school ore oten and hold a degree as a aster cratsan or techncan. Apart ro ths, eale and ale entrepreneurs are educated equally well. oen ore oten start ro out o the labor orce or ro whte-collar occupatons, and less oten ro blue-collar occupatons. On the other hand, ale starters have ore oten ganed experence n prevous sel-eployent or n leadng postons as executve eployees. The share o entrepreneurs ro Eastern Gerany and the share o oregners both are lower aong woen than aong en. Male entrepreneurs ore oten lve alone n ther household, but on average, eale entrepreneurs are ore oten responsble or runnng the household. Moreover, young chldren are coparably coon n households wth eale entrepreneurs. hen coparng ales and eales n the populaton o non-entrepreneurs, one partly observes the sae gender derences as aong entrepreneurs. For exaple, the ale donance aong techncans and aster cratsen, the prevalence n derent proessonal statuses, and dstrbuton o household and aly work also shows aong non-entrepreneurs. However, there are only nor gender derences n the dstrbutons o age, gratonal 11
status, and regon o resdence. As a consequence, young en and en wth a gratonal background are overrepresented n start-up actvty, whle woen ro Eastern Gerany and en ro sall ctes are underrepresented. Regardng general personalty trats, ale entrepreneurs have a sgncantly hgher need or acheveent and assess theselves a hgher level o cogntve sklls as copared to eale entrepreneurs. Yet the sae gender derences hold true aong non-entrepreneurs. 24 The overall level o approval vares arkedly between the derent trats. For exaple, rsk tolerance and openness receve low scores o approval, whle need or acheveent and deternaton receve hgh ones. hat s ore, entrepreneurs o both genders generally report hgher scores concernng all personalty trats (except or eotonal stablty) as copared to non-entrepreneurs. They are less rsk averse, ore open and ore persuasve, ore creatve and ore deterned, and they have a hgher need or acheveent. As the personalty scores ste ro sel-assessents o the survey partcpants, we cannot be sure whether the observed derences relect true derences n trats or also result ro a ore aratve assessent behavor o starters. However, as the chosen stateents are not drectly related to busness start-ups, observed derences are vald or explanng the start-up decson and respectve gender derences. Asked or entrepreneurshp-related atttudes, ale starters consder the sutablty o econoc condtons or ther start-up, as well as the reputaton o entrepreneurs n general, sgncantly ore postve than eale starters. Further gender derences regardng the general desrablty o sel-eployent, the sutablty o personal crcustances or a busness start-up, and personal entrepreneural apttude turn out nsgncant aong the group o starters. In the populaton o non-starters, however, en assgn hgher scores to alost all atttudes than woen. In addton, starters o both genders generally report hgher scores than non-starters. Entrepreneurs reputaton s the only excepton. hle entrepreneurs have qute a postve reputaton n the entre populaton, entrepreneurs theselves becoe dsllusoned ater a start-up and ths holds partcularly or woen entrepreneurs. These results ndcate the presence o entrepreneural overcondence aong eale as well as ale busness starters. Moreover, as the entrepreneurshp-related atttudes are clearly endogenous to the start-up decson, they should not be used as deternants when estatng the ndvdual start-up decson. 24 ote that gender derences turn out sgncant aong non-starters ore easly as the nuber o non-starters n the saple s uch hgher than the nuber o starters. 12
3.4 Regresson o Start-Up Decson e estate probt odels o the ndvdual start-up decson. 25 Table 2 dsplays the results o pooled regressons or en and woen. Table 2 about here Speccaton (1) o Table 2 uses all observatons n the saple. On average, the start-up propensty o woen s sgncantly lower than en s by 0.9 percentage ponts (pp). Copared to the (unweghted) reerence probablty o 2.6% aong ales, ths aounts to a derence o about one thrd. 26 A slar gender derence s obtaned ro speccaton (2), whch uses only observatons ro the estaton subsaple, n whch busness starters are explctly overrepresented. 27 Moreover, the negatve gender eect bascally prevals when controllng or soco-deographcs (speccaton 3) and personalty trats (speccaton 4). The eects o soco-deographc varables estated n speccaton (3) broadly conr expectatons ro the descrptve coparson o entrepreneurs and non-entrepreneurs above. For exaple, we observe an nverted U-shape nluence o age on ndvdual start-up propensty. A hgher educatonal attanent ncreases the probablty o a start-up, as well as prevous sel-eployent or uneployent spells, or non-partcpaton n the labor arket. orkng n blue-collar occupatons as well as beng a cvl servant decreases the start-up probablty (relatve to whte-collar occupatons). hle ceters parbus ndvduals ro Eastern Gerany have a lower start-up propensty, there are no sgncant derences between persons wth a gratonal background and those wthout. hen controllng,.a., or proessonal status and age, there are no sgncant derences related to household and aly copostons. Speccaton (4) o Table 2 addtonally ncludes personalty trats. Ceters parbus, openness to change, need or acheveent, persuasveness, and creatvty ncrease the probablty o a start-up, whle the other trats have no sgncant eect. In coparson to speccaton (3), the pact o ost soco-deographc varables reans unchanged. Includng personalty trats thus provdes addtonal noraton to explan the start-up decson. 28 Only the eect o prevous sel-eployent loses sgncance and gets neglgbly sall. Thus sel-eployed 25 As an alternatve to estatng probt odels, we also estated lnear probablty odels (LPM). LPM results, whch are generally n lne wth the probt ones, are avalable ro the authors upon request. Appendx A.1 ntroduces our estaton notaton n order to acltate the exposton o the decoposton approach eployed below. 26-0.0090 / 0.0263 = - 0.3422. 27 The estaton subsaple contans all busness-starters as well as the rst 7,500 non-starters n the saple, or who soco-deographc characterstcs and personalty varables are avalable. The oversaplng o starters s one way to crcuvent the rare-events proble requently encountered when estatng the start-up decson. The estated relatve gender derence s - 0.0342 / 0.1104 = - 0.3098. 28 The Pseudo R 2 also ncreases arkedly ro speccaton (3) to speccaton (4). 13
persons whether they have recently started an (addtonal) project or not stand out as ndvduals wth a dsproportonately entrepreneural personalty. It s ths personalty rather than the status o sel-eployent per se whch drves the start-up decson. Separate, gender-specc probts are estated n Table 3. Ths allows the pacts o the covarates to vary between ales and eales. 29 Table 3 about here By and large, the deternants are slar to those obtaned ro the pooled regressons above. However, there are soe notable gender derences n the partal eects. For nstance, we nd countervalng eects o age. hle younger en start-up sgncantly ore oten than en aged 35 to 44 years, older woen are less lkely to start than edu-aged woen. Ths ceters parbus eect s n contrast to the observed uncondtonal pcture. Hence older woen ght ace hgher opportunty costs o a start-up steng, e.g., ro a stronger nvolveent n aly dutes. Alternatvely, ther dscontnued eployent hstores ght haper later years re-entry n the labor arket n general, and start-ups nto sel-eployent n partcular. oen wth a unversty or techncal college degree, as well as woen ro out o the labor orce have a hgher propensty to start a busness (as copared to the respectve reerence categores). The correspondng eects aong ales tend to be saller. The observed derence n start-up rates between Eastern and estern Gerany s drven by eales only. hereas woen n East Gerany start sgncantly less oten than woen n the est, there s no East-est derence aong ales. Ths result lkely relects the hgher partcpaton rate n dependent eployent aong East Geran woen. 30 Relatve to Gerans, en wth a gratonal background have a sgncantly hgher propensty o a busness start-up. Yet there s no gratonal eect aong woen. Ths observaton lkely results ro tradtonal role odels aong grants ro Turkey and Eastern Europe, who account or the lon s share o persons wth a gratonal background (Kohn and Spengler, 2007). Fnally, whle agan dutes o runnng the household have no ceters parbus eects on the start-up decson, the presence o chldren n the household sgncantly ncreases the start-up probablty o en, but t does not aect woen s start-up decsons. 29 Tests or sgncance o the derences dsplayed n coluns (5) and (6) o Table 3 are obtaned ro ully nteracted pooled estatons. 30 In the year 2005, labor orce partcpaton rates aong eales were 72.1% (65.5%) n Eastern (estern) Gerany. th respectve nubers o 79.1% (East) and 80.8% (est) there were bascally no derences aong ales (Bundesagentur ür Arbet, 2007). 14
Coluns (3) and (4) o Table 3 addtonally account or personalty trats. As t turns out, a hgher degree o rsk tolerance has a postve pact on en s start-up decsons, but t does not nluence woen s decsons. In ths respect gven the slar dstrbutons o rsk averson aong en and woen en are ore lkely to start up. On the other hand, persuasveness ncreases the start-up probablty o woen only. It has no eect aong en. Ater all, need or acheveent s an portant deternant aong both en and woen. Yet the eect o ths trat s sgncantly larger or ales. In su, the regresson results rst corroborate the noton that the start-up decsons o en and woen are to soe extent drven by derent deternants. Second, the pure gender eect, whch s not explaned by any observable characterstc, s arkedly reduced when personalty trats are ncluded n the regressons. 31 The latter ght thus explan a szeable proporton o the observed gender derence n start-up rates. 3.5 Predcton and Decopostons Based on the separate probt estatons and usng the notaton sketched n Appendx A.1, we { } calculate average predcted probabltes o a busness start-up or both genders g, : g g g g g g g g g g (1) Y 1 = Φ( X 1 ) = Φ( ). g = 1 g = 1 The projectons dsplayed n the rst block o Table 4 below consstently trace the observed shares. hether personalty trats are ncluded n the analyss or not, the average projecton or woen s lower by one thrd as copared to the average projecton or en. 32 0 Derences n Observed Characterstcs and Behavoral Eects How uch o the gender derence n start-up rates s due to derences n observable socodeographc characterstcs? How uch s explaned by derent personalty trats? And how large s the contrbuton o behavoral eects or gven soco-deographcs and personalty trats? As a rst step to answer these questons, we use standard Blnder-Oaxaca-type 31 Reerrng to the estated reerence probabltes, a relatve gender derence o (0.0777-0.0564) / 0.0777 = 0.2741 results ro speccatons (1) and (2). Speccatons (3) and (4) result n (0.0610-0.0664) / 0.610 = - 0.0885. 32 0.0361 / 0.1083 = 0.3333, just as 0.0362 / 0.1085 = 0.3336. Copare the gures n ootnote 26. 15
decopostons adapted to the non-lnear case. 33 The derence n projected start-up rates s decoposed nto a characterstcs eect and a coecents eect : (2) Y Y = Y Y 14243 characterstcs eect Y Y 14243 coecents eect = Y Y 14243 characterstcs eect Y Y 14243 coecents eect where Y g are dened n equaton (1). The characterstcs (or endowent) eect captures a rst part o the gap whch s attrbuted to gender derences n the dstrbuton o observed characterstcs (both soco-deographcs and personalty trats). The coecents (or returns) eect captures a second part o the gap whch s due to derences n the coecents estated or both genders. Econocally speakng, the coecents eect relects gender derence n behavor or gven characterstcs. The decopostons n equaton (2) der wth respect to the underlyng counteractual stuatons. The rst counteractual, g Y ~ g Y, denotes the predcted start-up rate o a hypothetcal person wth the average characterstcs o eales, gven the person was acng the returns o ales. In contrast, the second counteractual,, uses the estated returns o woen and denotes the projected start-up rate o a hypothetcal person wth the average characterstcs o ales. 34 The constructon o the counteractuals s descrbed n Appendx A.2. Table 4 reports results o the respectve decopostons. Table 4 about here Derences n soco-deographc characterstcs alone explan only a neglgble proporton o the gender gap n start-up rates. In colun (A) o Table 4, the characterstcs eect does not exceed a share o 11%. Addng derences n personalty trats n colun (B) ncreases the characterstcs eect to the range o 11 to 22%. Hence, woen had the sae socodeographcs and the sae personalty trats as en, the gender gap would be reduced by up to one th. Taken at ace value, ths thought experent would ncrease woen s start-up ntensty ro 1.3 to 1.4% or 1.5%. 35 In turn, the larger proporton o the gender gap (78 to 89%) can not be explaned by derences n observed characterstcs at all, but s drven by behavoral derences or gven characterstcs and derences n unobserved deternants. Ŷ 33 Blnder (1973), Oaxaca (1973). Copare also Farle (1999, 2005) and Farle and Robb (2007). 34 It s well-known that the decopostons resultng ro derent counteractuals do not necessarly yeld dentcal results. Derent approaches to the ssue o non-unqueness have been proposed n the lterature; see Oaxaca and Ranso (1994) and Slber and eber (1999) or surveys. Yet each o the approaches reles on adhoc assuptons o soe type, so we choose to report the two ost pronent cases. 35 (2.1% - 1.3%) 0.108 = 0.1% and (2.1% - 1.3%) 0.219 = 0.2%. 16
Relatve Iportance o Soco-Deographcs, Personalty, and a Base Eect A ore detaled decoposton provdes nsghts nto the relatve portance o socodeographcs personalty trats, and a base eect: (3) Y Y = 1 2 3 4 5 123 123 123 123 123 soco deographcs personalty 14444444 24444444 3 base personalty soco deographcs 14444444 24444444 3 characterstcs eect eect coecents eect As agan there are ultple counteractuals possble, our choce s otvated by econoc reasonng. Startng out ro woen, we rst ask what ther start-up rate would look lke they only had the sae soco-deographc characterstcs as en. Our rst hypothetcal person would thus exhbt the soco-deographcs o ales and personalty trats o eales, and behave lke a woan. Abusng, or splcaton, the notaton o equaton (2), the correspondng change n predcted start-up rates wrtes (4) = Y (,,,, ) Y (,,,, ) 1 0 0. Detals o the extended decoposton, ncludng the constructon o the addtonal counteractuals usng Mahalanobs dstance atchng, are gven n Appendx A.3. Table 5 dsplays the calculaton results. th a relatve contrbuton o -19%, derences n socodeographcs alone are n avor o hgher start-up rates aong woen. Put derently, woen had the sae huan captal endowent and related soco-deographc background as en, ther start-up propensty would have been even lower by 19%. I n addton, woen also had the sae sot personalty trats as en but stll behaved lke woen or gven characterstcs, ther start-up rate would addtonally change by (5) = Y (,,,, ) Y (,,,, ). 2 0 0 As t turns out, these personalty derences captured by trats such as need or acheveent, rsk averson, or deternaton contrbutes a consderable and sgncant proporton o 30% o the entre gender derence. How uch o the gender derence s explaned by unobserved characterstcs, then? Ths base eect s obtaned ro 3, where the addtonal counteractual would, or gven characterstcs, stll behave lke a woan but exhbt both observable characterstcs and unobservable characterstcs o en. Techncally speakng, the base eect captures derences n the estaton constants: (6) = Y (,,,, ) Y (,,,, ) 3 0 0. 17
Just as the derences n observable soco-deographcs, unobserved eects work towards reducng the gender gap. The estated contrbuton o -54% s not statstcally sgncant, though. Start-up rates would gan change ncreentally the pact o personalty trats equaled the eect exerted on en. The nvolved nal counteractual n 4 would thus be a person wth (observed and unobserved) characterstcs o en, who hypothetcally behaved lke a an regardng the eect o personalty trats, but stll behaved lke a woen or gven socodeographcs: (7) = Y (,,,, ) Y (,,,, ). 4 0 0 th a relatve contrbuton o 28%, ths derence n the eects o the ncluded personalty trats s o the sae sze as the correspondng characterstcs eect 2 and also explans about a quarter o the predcted gender gap. Increent 5 nally asks about the pact on the predcted start-up rate also the socodeographcs exerted the sae eects as on en: (8) = Y (,,,, ) Y (,,,, ). 5 0 0 Ths part o the derence turns out responsble or the largest proporton o the gender gap. Moreover, the estated contrbuton (115%) s even larger than the predcted gender gap tsel, ndcatng that the gap would be even hgher en and woen only dered n ther start-up behavor or gven soco-deographc characterstcs. Table 5 about here In a nutshell, gender derences n soco-deographcs alone would be n avor o hgher start-up rates aong woen, whle the dstrbuton o personalty trats s less avorable or busness start-ups aong woen and explans about one thrd o the entre gender derence. Derences n unobserved characterstcs agan work n the drecton o a lower gender derence. Yet both behavoral eects are n avor o the observed hgher start-up rate aong en. Most substantally, en opt or a start-up ore oten even gven dentcal endowents wth huan captal and related characterstcs. 4. Concludng Rearks As a stylzed act observed n any ndustral countres, woen start ewer busnesses than en. The gender gap n start-up rates shows n descrptve coparsons, but also reans ater controllng or a nuber o pact actors whch are relevant to the ndvdual start-up 18
decson. Our analyss based on unque large-scale ndvdual-level data ro the K Startup Montor or Gerany reveals that the gender gap s related to derences n hard socodeographc characterstcs such as age, educatonal attanent and proessonal status, regon o resdence and gratonal background, or household and aly envronent as well as to derent dstrbutons o sot personalty trats such as rsk averson, openness to change, persuasveness, and need or acheveent. More portantly, our approach assesses the relatve portance o derent blocks o startup deternants or explanng the gender gap n start-up ntensty. The lon s share o the observed gap s due to behavoral derences and unobserved dsslartes beyond derences n observable endowents. Ths ndng s broadly n lne wth those obtaned by Mnnt and ardone (2007) and agner (2007) who conclude that derences n huan captal are largely neglgble or explanng the gender gap. Takng a ore subtle vew when coparng the relatve portance o gender derences n soco-deographcs and n personalty trats, we nd that woen s personalty trats are less avorable to a start-up than en s, but ther huan captal endowent alone would even be n avor o a hgher start-up rate aong woen. The ndng that woen s personalty akes the less nclned to start-up a busness ay be judged postvely nsoar as entrepreneural overcondence (Craerer and Lovallo, 1999, Köllnger et al., 2007) or unrealstc opts (de Meza and Southey, 1996) are less prevalent aong eales, who thereore act ore cautously and possbly ore successully n the long run. On the other hand, the ndng s ndvdually and socally detrental woen s personalty prevents the ro undertakng prosng projects. Gven the results o our study, qualcatonal polces targeted towards hgher educatonal attanents o potental entrepreneurs alone do not suce to ncrease the nuber o eale busness starters and to close the gender gap. Supportng woen wth respect to personalty trats and perceptons relevant to the start-up decson would be at least as portant. Ths s clearly a challengng task. hether easures such as, or nstance, consultng actvtes or networks o successul eale entrepreneurs can acheve ths goal reans to be seen. 19