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Exploring gender bias in deal making for female entrepreneurs

| Updated: December 30, 2020 21:57:01

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Exploring gender bias in deal making for female entrepreneurs

It's a laudable fact that women representation has progressed significantly in the fields of education, health and politics, but it is equally as alarming as there has not been much achievement in empowering women economically (Jayachandran 2015, Heintz 2018). While a growing amount of work delves into the participation of women in the labour market in regards to women's access to paid work and over and under-representation of women in certain jobs (Klasen 2019, Mahmud and Bidisha 2018, Raihan and Bidisha 2018), there has been little to no emphasis on women's under-representation in entrepreneurial activities  (Raghuvanshi et al. 2017).

Although some academic works do look into the inaccessibility of credit market or the lack of property rights faced by women (Agarwal 1984, Chapelle 2012, Raghuvanshi et al. 2017), adequate information is not available on whether state actors are biased against women when it comes to entrepreneurship. Many of the existing works suggest that there is a personalised relationship between the state and businesses, which do not abide by the little defined rule there is (Hallward-Driemer and Pritchett 2015, Pritchett, Sen and Werker 2017). This sheer lack of formal relationship makes room for not only an off-the-books alliance between individual investors and those in power but also other illegal activities like bribery, bureaucratic lobbying etc. (Kar et al. 2019). Therefore, it's safe to assume that, given the socio-economic position of women in developing countries, women are faced with bias in deal making due to their gender. This is a clear disadvantage for female entrepreneurs in comparison to their male counterparts.

In such a scenario, the study titled "Is there a gender bias in deal making? Evidence from firm-level cross-country analysis" investigates the firm-level data collected in the World Bank's Enterprise Surveys (ES) from around 135 countries to find any presence of gender bias in business deal making. The study includes 25,038 firms in the analysis of operating licences (OL) and  11,972 firms in the case of construction permits (CP).

The ES survey enquired the firms about the gender of ownership in two successive steps: (i) if any of the owners of the firm were female; and (ii) given that there was a female owner, the firm was asked about the exact portion of female ownership. The econometric analysis of the study used a simple OLS regression and considered only those firms female-owned whose ownership was at least 20 per cent female. 

A study by Raghuvanshi et al. in 2017 found that the biggest challenges faced by female entrepreneurs are the lack of experience, education and training opportunities, spatial mobility and absence of institutional support.  Moreover, firms owned by women were found to be less attractive to private investors compared to their male counterparts (Gicheva and Link 2013). Political connections often play an under-the-table role in getting the favourable contracts, and it is well acknowledged that women are more disadvantaged than men in accessing the right political connection (Fisman 2001, Chekir and Diwan 2014, Diwan, Keefer, and Schiffbauer 2015). As mentioned earlier, women are widely discriminated against in the credit and product markets, which makes it more probable that government officials may have a gender bias against women entrepreneurs in the issuance of operating licences and construction permits, and would be more willing to favour men than women  (Kar et al. 2019). Therefore, it is plausible to hypothesise that the female entrepreneurs are more likely to face longer delays than male entrepreneurs in obtaining operating licences and construction permits.

The study finds that, irrespective of region or ownership, it takes 27 days on average for a firm to obtain an operating licence, and in most countries of the dataset, no significant difference is noticed between male-owned and female-owned firms in obtaining OL licences and construction permits. But in several African and Central Asian countries, male-owned firms were found to require more time than female-owned firms in obtaining the operating licences. In a number of Asian countries, though, female owners were found to face additional obstacles to obtaining OLs. In the case of obtaining construction permits, although it was difficult to form a pattern, females were found to face additional hurdles in several African countries. On average, it takes 71 days for a firm to obtain a CP across the countries.

Although the econometric analysis in the study indicates a clear gender bias in deal making, the bias is mostly in favour of female owners. The analysis revealed that firms with a significant portion of female ownership tend to require less time in obtaining both operating licences and construction permits.

A discernible pattern of bias emerged while analysing data from several specific regions.  In Eastern and Central Asian countries, female-owned firms were found to require less time to obtain both OL and CP. But the opposite is true in African countries.

On the other hand, in South Asia, East Asia and the Pacific, female-owned firms were found to require relatively more time to obtain an operating licence. But the results are not statistically significant in this case. Surprisingly but similarly, in high-income OECD countries, female-owned firms, on an average, were found to require more time to obtain a construction permit. The situation is the same as the OECD countries in the Middle East and North Africa (MENA) region.

It is important to understand the obstacles faced by women entrepreneurs in developing countries as the participation level of women in entrepreneurial activities is significantly low. The study suggests enacting country-specific policies that are favourable in dealing with the constraints that women entrepreneurs face in obtaining business-related documents. While the analysis takes into account only the time required to obtain certain key business documents, it is crucial to remember that countries may differ in terms of the process of deal making, the requirement of supplementary documents, the fulfilment of additional conditions etc.

[The article provides a summary of the key findings of the Working Paper titled "Is there a gender bias in deal making? Evidence from firm-level cross-country analysis" published by Effective States and Inclusive Development Research Centre (ESID)]

Sayema Haque Bidisha is a professor at the Department of Economics, University of Dhaka, Bangladesh.

[email protected]

Kunal Sen is the Director of UNU-WIDER, Helsinki, Finland, and a professor of development economics at the Global

Development Institute, University of Manchester.

[email protected]


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