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Female entrepreneurs face discrimination from their own employees

Once female entrepreneurs have survived the extra scrutiny from banks and investors caused by gender bias, they may have to cope with discrimination from their own employees. According to new CBS research, start-up employees are less willing to deliver an extra effort to a female founder.

Drawing of women at work: iIllustration of female entrepreneurs facing discrimination

Female entrepreneurs just have to fight harder. This is a fact that your daughter or sister might want to take into consideration before pitching a start-up idea to banks or hiring their first employee.

New research from Copenhagen Business School shows that female founders do not only risk discrimination from external stakeholders like banks and investors, they may also have to face discrimination from the people on their own payroll.

“Our research shows that start-up employees are simply less willing to deliver an extra effort to a company run by Amanda & Chloe than by Matthew & Joe,” states Vera Rocha, Associate Professor at Copenhagen Business School, who did the multi-method study published in Organization Science, in collaboration with colleagues from London Business School and University of Oregon.

"Even if you succeed in setting up a venture, the story of gender bias is not over. You may still get punished."

The gender barriers continue

The study adds new insight to the already plentiful research showing that female founders are subject to extra scrutiny from all sorts of stakeholders before they can set up a company.

“Many researchers have confirmed the extra barriers existing for women in the entrepreneurial process. Experiments, archival, and qualitative data suggest that gender bias exists in multiple phases of the process,” says Vera Rocha.

For example, she says, when entrepreneurs try to raise funding, prior research has found that investors ask very different questions to men and women. Investors tend to ask male entrepreneurs promotion-focused questions and female entrepreneurs prevention-focused questions. Naturally, these different approaches elicit different types of answers that may undermine the success of female entrepreneurs in raising higher amounts of funding, or any funding at all.

“Our new research shows that the barriers continue after founding. Even if you succeed in setting up a venture, the story of gender bias is not over. You may still get punished,” says Vera Rocha.

“The experimental evidence we get in our study suggests this will be the case even if the only difference between two companies is the gender of their founders. It shows that employees will make less effort for female than male employers.”

Same gender bias suspected in other settings

The new research is one of the latest findings documenting that gender bias is not just something that female entrepreneurs claim. It is real, and it has consequences. Gender bias means that stereotypical perceptions of men and women affect the assessment others make of them.

The researchers suspect the same kind of bias to happen in other settings where women have leadership positions. People may want to work less hard for female managers in companies or female professors in universities, says Vera Rocha.

“This is a problem because what we want, as a society, from the entrepreneurs and managers out there is the same performance regardless of their gender. And if women in leadership positions are discriminated by both external stakeholders and their own employees, we put them in a difficult situation to deliver the same results as men,” says Vera Rocha.

What can we do about it?

“For many years now, scholars and policymakers have been working on trying to change the mentality of people of what they expect an entrepreneur to look like. But we still have to work on this type of preconceptions,” says Very Rocha.

“Especially, we should create awareness of those potential biases among younger people. If we just target generations of people that are already experienced in the labour market, we might not come far. You know, for them it is more difficult to change their behaviour.”

FEW FEMALE ENTREPRENEURS

Women constitute half of the total European population, but less than a third of start-up founders are female. Women are the largest untapped entrepreneurial and leadership potential in Europe, according to the European Institute of Innovation and Technology. In Denmark, start-ups founded by females achieve 1.5 percent of the invested capital. 6.7 percent is invested in mixed gender teams. 91.7 percent is invested in all male companies, according to a report by Unconventional Ventures.

FEMALE ROLE MODELS CREATE SNOW-BALL EFFECT

Working in start-ups led by women increases the probability of female employees launching their own business in the future – compared to females working for a male founder. This is shown in a study based on Danish data, published in the Strategic Management Journal by researchers Vera Rocha and Mirjam van Praag at CBS and Vrije Universiteit Amsterdam. The study indicates that female entrepreneurs can be role models for their female employees and inspire them to become entrepreneurs as well. Helping women succeed as entrepreneurs can thus have a “snow-ball” effect in reducing the gender gap in founding rates as well as in getting more women into entrepreneurship.

Women pay 7 percent more for the same work

Based on Portuguese data covering nearly 59,000 start-ups and more than 243,000 employees over a ten-year period, the study finds that full-time employees contribute fewer regular hours and less overtime work to female founders. The gender gap concerning regular hours is relatively small (below 1%), but the average difference in extra hours worked in a month amounts to 7%.

"Especially, we should create awareness of those potential biases among younger people."

“All companies occasionally need their employees to work longer hours to not miss a deadline. The gender gap in delivered overtime means that female entrepreneurs would have to pay 7% more to get the same amount of work done. That is quite an extra cost,” says Very Rocha.

The Portuguese data delivered population-level evidence of an employee labour imbalance measured by numbers of hours provided to female and male founders. But these data could not tell if there is a difference in productivity between ventures run by women and men. Neither could it document a causal effect between founder gender and employee effort. It could merely report that there is a correlation between the gender of the founder and the number of work hours delivered.

Amanda & Chloe were offered less extra labour

To investigate the causal effect and potential impacts on performance, the researchers recruited 500 online workers in a randomised experiment on the mTurk platform, an online labur marketplace where it is possible to hire remote workers for specific tasks.

The workers were told that they would be working for a new tech start-up building a photo database. The start-up needed help with image coding and would pay $1 for 8-10 minutes of work. At the end of the paid session, the workers were asked if they were willing to code a few more photos without additional pay.

The experiment found that workers were more willing to offer extra labour to male than to female founders. 50% of the workers who thought that they worked for Matthew & Joe agreed to work extra for no additional pay, while only 40% of the workers hired by Amanda & Chloe were willing to do the same.

When asked for the reason for this, the workers answered that the tasks seemed more demanding or the request was perceived as unfair when coming from a woman.

What motivates, enables, and hinders successful women and immigrant entrepreneurship? These are the main questions to be answered by a new DKK 15.6M project at CBS’ Department of Strategy and Innovation funded by Carlsberg Foundation. Finding the answers for this question is vital for unleashing innovation, fostering inclusive labour markets, and empowering individuals to unlock their entrepreneurial potential and create value for society. The Principal Investigator of the project is José Mata, Professor and Mærsk Mc-Kinney Møller Endowed Chair of Entrepreneurship at CBS.

Vera Rocha is Associate Professor in Economics and Management of Innovation and Entrepreneurship at Copenhagen Business School. Her research is at the intersection of entrepreneurship, strategic human capital, and labour market inequality. She is the Principal Investigator of a large project funded by Carlsberg Foundation investigating multi-level pathways for integrating marginalised groups in the labour market and broader society.

Associate Professor in Economics and Management of Innovation and Entrepreneurship at Copenhagen Business School, Vera Roche

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Female entrepreneurs face discrimination from their own employees

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