Set Up to Fail: Explaining When Women-Led Businesses Are More Likely to Fail

Abstract

Drawing on role congruity theory, we examine whether and when women-led ventures are more likely to fail than men-led ventures. We investigate the relationship between the gender of the leading entrepreneur and business failure and three important moderators of this relationship: whether the leadership assignment is consistent with merit, whether the venture operates in a female-dominated industry, and whether the venture is operated by a spousal team. Drawing on a unique, nationally representative data set of entrepreneurial firms sampled from the U.S. population in 2005 and followed yearly until 2011, we demonstrate that female entrepreneurs’ businesses are more likely to fail than those of their male counterparts. Regarding the moderating effects, our results show that female entrepreneurs’ businesses are more likely to fail when their merit-based competence is inferior to that of their cofounders. However, in the same scenario, male entrepreneurs are still able to lead their businesses successfully. We also find that women entrepreneurs’ disadvantages in leading new businesses are amplified in contexts that many have expected to be supportive of women, including in industries dominated by women and within spousal teams. Together, our results suggest that women’s disadvantages in leading their businesses may be perpetuated by gender beliefs that discount women’s leadership. Based on our findings, we discuss our contributions to theory and practice, and we offer implications for future research.

Entrepreneurial Teams, Gender, and New Venture Survival: Contexts and Institutions

“…A bold conjunction of this observed lower survival rate for single female founders is that unfavorable institutional conditions affect the chances of survival of this type of ventures. In line with earlier studies (Lechler, 2001;Yang & del Carmen Triana, 2017), we interpret these partial and mixed results as an overall gender effect (more than a demographic initial condition as in much past research). These results may suggest that research needs to comprehensively include social power as a theoretical perspective.…”

“…However, our results indicate that homogeneity is not a strong explanatory factor for performance in terms of survival. Our findings are in line with recent results (Yang & del Carmen Triana, 2017), questioning earlier models that claim an advantage from team homogeneity. Another explanation for our results can be that our samples of heterogeneous teams most likely include both spouse-and nonspouse teams.…”

“…Overall, the social structure of our data (Table 1) resembles other datasets on solo and team ventures (cf. Yang & del Carmen Triana, 2017), particularly concerning our own cohorts from the 2000s. For instance, nearly half of the new businesses were started by teams, and there is an overall dominance of males (which diminishes over time).…”

“…Earlier studies (Gueguen, 2013) have shown that even if the survival rate of the entrepreneurial team is significantly higher over 3 years, the higher survival rate is not this significant over longer time periods-even if this may be the case, we have been unable to study longer effects in the present article. Regardless of this, other large-sample analyses have questioned the advantages of start-up teams in relation to solo-founded ventures (Yang & del Carmen Triana, 2017); thus, past results are not entirely conclusive. Our results do, however, support the notion that founding teams increase ventures' survival prospects, and-as we use historical data-it appears to be a general and rather "timeless" phenomenon.…”

“…Disparity as a diversity construct is rare in empirical research on entrepreneurial teams as well as in theoretical interpretations of outcomes. However, there are exceptions (Hellerstedt, 2009;Yang & Aldrich, 2014;Yang & del Carmen Triana, 2017); for instance, Hellerstedt (2009) found that disparity (vertical diversity) in terms of differences in status was a promising theoretical perspective as it could explain much of her findings related to new venture team dynamics. Yang and Aldrich (2014) also found vertical diversity in terms of differences in gender stereotypes as a strong mechanism for explaining gender inequalities and the constraining of women's access to power positions in the entrepreneurial team.…”