Evaluating Gender Differences in the Effects of Ambiguity and Misperception on Entrepreneurship in Three Business Development Stages: A Panel Data Analysis

Grace C. Liu (grace@research2empower.org) and Willem Spanjers (w.spanjers@kingston.ac.uk)
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Grace C. Liu: Research to Empower, Syosset, New York, USA
Willem Spanjers: Kingston University London, UK; ICEA; Rimini Centre for Economic Analysis

Working Paper series from Rimini Centre for Economic Analysis

Abstract: This research focuses on the role of uncertainty in explaining gender disparities in entrepreneurship by testing a behavioral decision model. It examines how misperceptions and ambiguity affect men’s and women’s decisions on founding startups or maintaining established firms in developed and developing countries. It starts from the theoretical assumption that entrepreneurial decision-making follows the specific version of cumulative prospect theory. This model incorporates the Ellsberg paradox and the Allais paradox. Data from the Global Entrepreneurship Monitor in 46 countries/territories over 2013–2019 was used for a panel data econometric analysis using Generalized Least Squares (GLS) and fixed-effects models. After the panel data analysis, a binomial sign test and signed-rank tests were done to validate the theory on gender disparities in entrepreneurship. Findings indicate that there are clear gender differences in behavioral characteristics of entrepreneurs in the face of varying uncertainty levels according to three business development stages. During the startup stage, confidence in ability and confidence from knowing an entrepreneur is positively associated with entrepreneurial rates, whereas fearing the worst is negatively associated. Gender-bias discount factor progressively hinders women rather than men as the business develops, particularly for women in developing countries. During the established business stage, fearing the worst, confidence, and high reference points are positively associated, especially for women’s entrepreneurship. Due to a self-selection effect, once women can enter the scale-up stage, they are more likely than men to continue to the established business stage. This research concludes that effective policies should consider the specific needs of women and the barriers that women face when setting up and sustaining businesses. It underlines how women’s economic empowerment contributes to gender equality and broader societal advancement.

Date: 2024-08
New Economics Papers: this item is included in nep-ent, nep-sbm and nep-upt
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