Does Investor Gender Matter for the Success of Female Entrepreneurs? Gender Homophily and the Stigma of Incompetence in Entrepreneurial Finance

Kaisa Snellman and Isabelle Solal ()
Additional contact information
Isabelle Solal: ESSEC Business School, 95021 Cergy-Pontoise, France

Organization Science, 2023, vol. 34, issue 2, 680-699

Abstract: Female support of other women has been put forth as a remedy to the gender gap across many domains. Yet the potential costs associated with gender homophily are not well understood. We propose that homophily aggravates negative gender bias in evaluation. Focusing on the context of entrepreneurship, we theorize that future investors will discount a female entrepreneur’s competence as the key factor in an early-stage investment decision, when the investment comes from a female investor. Consequently, female-backed female entrepreneurs may struggle to raise additional funds from new investors. In a field study of venture-backed startups, we find that firms with female founders who received funding from female rather than male VCs are two times less likely to raise additional financing. We find no equivalent investor gender effect for male-founded firms. In an experimental study, we find that pitches by female-backed female entrepreneurs receive lower evaluations compared with all other pitches, and that this is driven by perceptions of entrepreneur competence. Our findings suggest that well-intentioned calls for women to invest in women not only place an undue burden on female investors, but may also undermine the long-term success of female entrepreneurs.

Keywords: entrepreneurship; gender inequality; homophily (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://dx.doi.org/10.1287/orsc.2022.1594 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ororsc:v:34:y:2023:i:2:p:680-699

Access Statistics for this article

More articles in Organization Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().