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NZ's Women Entrepreneurship Rate Could Be Better

Although New Zealand has the highest women’s entrepreneurship rate in developed world, the entrepreneurial gender gap is still severe despite improvements.

Despite an improvement over 2003, New Zealand women suffer a 30 percent deficit compared to the numbers of male entrepreneurs, according to a cross-national study of 34 countries. The Global Entrepreneurship Monitor (GEM) report on women’s entrepreneurial activity was released today by The Center for Women’s Leadership at Babson College (USA) and Unitec New Zealand’s GEM project.

Unitec is the New Zealand partner of the GEM consortium and it assisted the Center for Women’s Leadership in the study.

The GEM 2004 Report on Women and Entrepreneurship provides an in-depth global look at women’s entrepreneurship and highlights the important role that women play in developing and developed economies.
”Our research emphasises the critical role that New Zealand women have in new venture creation and provides insights to inform policies focused on increasing and extending the scope and reach of their entrepreneurial activities,” said Prue Cruickshank, leader of the GEM New Zealand women’s team. “These findings support our goal of understanding, featuring and supporting the entrepreneurial efforts of women worldwide.”

Key findings in 2004

In 2004, GEM estimated that about 73 million people are involved in starting a new business in the 34 countries that participated in the study. Of those, about 30 million are women. The average level of female total entrepreneurial activity (TEA) rate varied from 39.1 per cent of the adult population in a turbulent Third World country such as Peru to only 1.2 per cent in unentrepreneurial Japan.

At 12.1 per cent of the adult population, New Zealand had the highest women’s entrepreneurship rate in the developed world in 2004 (see table and figure). Yet the male rate of 17.2 per cent is much higher (New Zealand overall is 14.7 per cent). Nonetheless, the women's rate improved from its 2003 rate of 9.9 per cent.

In every country in our study, men are more entrepreneurially active than women. In New Zealand, women have only 70 percent of the male rate (see table and figure).

The United States (89 per cent) and Portugal (93 per cent) greatly exceed that rate and are near to achieving entrepreneurial parity between men and women.

GEM identifies two motivations for entrepreneurial activity. Overall, “opportunity” is the dominant motivation for women’s entrepreneurship, similar to men. Nonetheless, many more women than men must start businesses out of “necessity”.

In a middle income country such as New Zealand, the peak years to become involved in entrepreneurial activities for women are ages 25-34. Yet young New Zealand women are hugely under-represented compared to males. Only 30% of the youngest entrepreneurs are women. This rises to 41% by age 34 but only approaches parity later in life (see figure “Gender by Age Category”).

In New Zealand, entrepreneurship and education are highly correlated amongst women.

As in the case of men, and regardless of per capita income, the largest majority of New Zealand women involved in starting a new business hold other jobs.

Regardless of per capita income, a strong positive and significant correlation exists between knowing other entrepreneurs and a woman’s involvement with starting a new business.

“Our results suggest that employed New Zealand women who have been exposed to entrepreneurship in school and who know other entrepreneurs are the most likely to start a new business,” said Unitec Professor Howard Frederick. “We also found that a woman’s perception of environmental opportunities, as well as confidence in her own capabilities, are powerful predictors of her entrepreneurial behaviour.”

The GEM report shows that across all countries, a strong positive and significant correlation exists between opportunity recognition and a woman’s likelihood of starting a new business. Women who perceived the existence of business opportunities were more likely to make the decision to start a new business.

Additionally, across all countries, a strong positive and significant correlation exists between a woman’s belief of having the knowledge, skills and experience required to start a new business and her likelihood of starting one. Conversely, a strong negative and significant correlation exists between fear of failure and a woman’s likelihood of starting a new business.

What are the lessons for New Zealand?

“New Zealand needs to sustain innovation rates and that means encouraging the involvement of more women in entrepreneurship,” Professor Frederick said. “If New Zealand women entrepreneurs could match their male counterparts and reach levels seen in the United States and Portugal, we could accelerate our innovation and growth rates.”

“Areas of importance for policy makers include promoting entrepreneurial education at all levels and encouraging more women to pursue technical degrees and to commercialise their ideas. It’s outrageous that if you google the Ministry of Education for the words ‘entrepreneur’ or ‘entrepreneurship’, you get zero matches!” said Professor Frederick.

Other Findings

Women are more sensitive than men to conditions in the business environment. Subjective assessments about the availability of opportunities, the ability to exploit them, and the possibility of failing in doing so are all crucial factors in a woman’s decision to start a new business.

The majority of businesses started by women employed less start-up capital as compared to men, used known technology and targeted existing markets. This suggests that women entrepreneurs may take a more conservative approach to business formation, perhaps because of their higher involvement in necessity driven entrepreneurship.

On average, businesses started by men used more capital than those started by women (USD 65,010 vs. USD 33,201 respectively).

Women tend to have slower early growth trajectories. The vast majority of women involved in starting a new business expect to create five or fewer additional jobs within a five-year period.

In low and middle income countries, only 1% of women’s new businesses qualify as having high employment potential. The percentage increases to only 1.6 in high income countries.

Further, women entrepreneurs tend to start businesses with known technology and in established markets.

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