Increasing the number of women entrepreneurs would grow the world economy by $5 trillion

An article published by the Boston Consulting Group (BCG) states that, if there were the same number of women and men entrepreneurs, the world’s GDP could grow by approximately 3% to 6%, which would represent between 2.500 and 5.000 billion dollars to the international economy. However, women entrepreneurs still need the support of various groups to realize their power, for example, venture capital firms, non-profit organizations and large companies. In addition, a sometimes overlooked difficulty needs to be addressed: the lack of networks to guide and provide real support to women entrepreneurs.

THE GENDER GAP IN ENTREPRENEURSHIP

To better understand the inequalities between men and women in entrepreneurship and to know how much progress is being made towards equality, BCG analyzed data on women’s entrepreneurship from the Global Entrepreneurship Monitor (GEM), both at the regional level and in each country. This analysis yielded the following results:

  • In all regions, the percentage of working-age men starting a business exceeds the corresponding percentage of working-age women by 4-6 percentage points.
  • Four countries (Vietnam, Mexico, Indonesia and the Philippines) are the exception to the above rule: more women than men started new businesses in 2016.
  • In 50% of the 100 countries studied, the gender gap in entrepreneurship is narrowing, with Turkey, South Korea and Slovakia leading the way.
  • However, in 40% of the countries, the gender gap is widening, particularly in Switzerland, Uruguay and South Africa.
    Although inequalities in entrepreneurial activity occur in a fairly homogeneous pattern in most countries, differences in the rate of long-term business success are more pronounced. For example, in the Middle East and North Africa, a company founded by a woman is 50% less likely to continue operating after three and a half years compared to a company created by a man. In Latin America, the “survival” rate of businesses founded by women is 11 percentage points lower. In all regions except North America, female-led businesses have lower “survival” rates than male-led businesses.

Although inequalities in entrepreneurial activity occur in a fairly homogeneous pattern in most countries, differences in the rate of long-term business success are more pronounced. For example, in the Middle East and North Africa, a company founded by a woman is 50% less likely to continue operating after three and a half years compared to a company created by a man. In Latin America, the “survival” rate of businesses founded by women is 11 percentage points lower. In all regions except North America, female-led businesses have lower “survival” rates than male-led businesses.

NETWORKS POWER

What can countries do to ensure that women-led businesses survive and thrive?

Inequalities in access to financial support largely determine the gender gap, especially for women starting new businesses. According to BCG’s analysis of 2018 data from MassChallenge (a US-based global network of accelerators), the average investment in companies founded or co-founded by women was $935,000, less than half of the $2.1 million invested on average in companies founded by men. This disparity exists despite the fact that new companies founded or co-founded by women actually performed better over time and generated 10% more cumulative income over a five-year period: $730,000 compared to $662,000.

Obviously, access to start-up capital is not the only problem. Women entrepreneurs must also correct the deficit in the “survival” and growth rates of their businesses, that is, counteract the tendency to stagnate over time.

The study shows that, while there are many reasons for these deficits (including differences in access to human and social capital and ongoing economic resources), a key factor is women’s relatively limited access to strong support networks. In low- and middle-income countries, for example, the increased availability and use of entrepreneurial networks is related to the narrowing of the gender gap in the “survival” rate of enterprises. Being able to connect with other women entrepreneurs encourages women to set higher expectations for their businesses, focus on growth and integrate innovation.

In Nigeria, the Cherie Blair Foundation for Women, supported by the ExxonMobil Foundation, conducted a pilot project called Road to Women’s Business Growth, which helped women business owners to improve their business skills and access financial institutions and new markets. An independent evaluation of this programme revealed that some of the greatest benefits came from the professional networks it facilitated. As one entrepreneur explained, “if you have difficulties and need contacts, just say so and your ‘sisters’ will come to your aid. That’s why we’re like a ‘sisterhood’ of entrepreneurs. The economic performance of women-led businesses also improved, with average profit growing by 31%.
In BCG’s experience, the best networks are based on three principles: intention, inclusion and interaction.

  • Intention. We must start by defining the purpose of the network. Networks should be much more than an address book. What can women gain by joining the network? Will they gain access to human, economic and social capital? How can the network help women achieve tangible goals
  • Inclusion. The next step is to choose participants carefully. The best networks have a dedicated founder, intense participatory activity and a diverse participant base, with new female entrepreneurs and other business owners already established in the market. Ideally, the participants should have different cultural roots.
  • Interaction. Finally, the network needs to be structured to facilitate both formal and informal interactions. Formal training and education sessions should be organized, but informal interactions among participants are also crucial to build trust and ensure that the network continues to make sense over time. Online platforms can be essential for success in this area.

It is no exaggeration to say that women’s entrepreneurship has the power to change the world. And the benefits go far beyond increasing global GDP. Addressing gender inequalities in entrepreneurship and boosting the growth of women’s businesses will allow new ideas, services and products to be introduced into markets. And ultimately, these forces can redefine the future.

The phenomenon of women entrepreneurs is a growing worldwide and Spain is one of the countries in Europe with the highest rate of female entrepreneurship. María López, Partner at Boston Consulting Group, which leads the Women@BCG initiative in Iberia, points out that “in Spain the number of women entrepreneurs has grown, and they are no longer limited to creating their own start-ups, but are also investing in new businesses in all sectors, breaking gender stereotypes in that sense as well” “new projects and initiatives led by women are transforming not only the entrepreneurial ecosystem and the corporate environment, but also the way of working”.

Access the BCG press release thought this link

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