Determinants of economic success for women entrepreneurs: an analysis across racial lines

Journal of the Academy of Business and Economics, Jan, 2004 by Andrea E. Smith-Hunter, William Engelhardt

ABSTRACT

The topic of economic success is central in both the scholarly and real-world discussions of women as entrepreneurs, yet few studies have examined determinants of economic success for women entrepreneurs across differing racial lines. This paper seeks to address the oversight by analyzing data from a nationally recognized database system--Dun and Bradstreet--to determine the role that race and other factors play in impacting the economic success of women entrepreneurs.

Our analysis focuses specifically on the relationship between sales volume (the dependent variable) and number of employees, industry type, race, geographic location and number of years (five independent variables). We suspect, based on previous research, that there will be a relationship between sales volume and. the number of employees and the number of years in business and the type of industry will each be positive. We also posit, based on the current literature, that while these independent variables will explain some of the dependent variable, they will not be the only determinants.

1. INTRODUCTION

The literature on women entrepreneurship is multidisciplinary and thus is characterized by diverse theoretical perspectives and empirical findings (e.g., Catalyst Guide, 1998; Christopher, 1998; DeLollis, 1997; Goldenberg and Kline, 1999; Renzulli, Aldrich and Moody, 2000). The primary thrust of much of the recent work on women entrepreneurship has focused on what affects their economic success (Moore and Buttner, 1997; Smith-Hunter, 2003; Inman, 2000). These studies have substantially added to the knowledge about women business enterprises among those segments of the population that historically have been understudied in the entrepreneurial sector. Namely, women entrepreneurs and in the case of Inman (2000) and Smith-Hunter, (2003), women entrepreneurs across racial lines. However, all have failed to assess economic success of women business owners across racial lines, using significant sample sizes for each racial stratum.

This paper seeks to answer a number of questions about the success of women business owners using a total sample size of 1,896 women, representing nine states across the United States. It takes a modest, but important step towards assessing the factors leading to economic success for women business owners. Specifically, the paper will analyze factors impacting the economic success of women across racial lines using the statistical tool of regression analysis. The factors to be looked at include: number of years in business, number of employees, geographic location, race and type of industry. The level of sales volume defines economic success in this study. We draw on previous literature of women business owners, women small business owners and women home-based business owners to frame our analyses.

2. LITERATURE AND DISCUSSION OF PROPOSED RESEARCH

The explosion of women entering the field of business ownership in the last two decades has produced a parallel effect on the women entrepreneurship literature. Some studies have gone the logical route, providing comparative analyses of men versus women (Fabowale, Orser and Riding, 1995; Cromie, 1987; Watkins and Watkins, 1986; Humphreys and McClung, 1981). Others have focused exclusively on women, attempting to flush out the various dimensions and provide us with a richer picture of the woman entrepreneur (Moore and Buttner, 1997; Bowen and Hisrich, 1986; Cromie and Hayes, 1988; Devine, 1994a; Devine, 1994b). While a few have delved into the area of women entrepreneurs who locate their businesses in the home (Priestnitz, 1989; Jurik, 1998; Waldrop, 1994; Heck, Winter and Stafford, 1992; Furry, 1992).

Other studies of women's entrepreneurship focus exclusively on women, analyzing, among other things, the reasons why women leave the mainstream labor market to pursue business ownership (Moore and Buttner, 1997; Tang, 1995; Shabbir and Di Gregorio, 1996). Most of these are studies of white women; relatively few directly compare white and minority women, and those that do are frequently constrained by data limitations. DeCarlo and Lyons (1979) were among the first researchers to comparatively analyze white and minority women business owners. Examining such characteristics as age, education, entrepreneurial experiences, and marital status, they found that minority women entrepreneurs tended to be more financially disadvantaged than their white peers. The minority women, on the average, were older; less educated, started their businesses at a later age, and were less likely to be married (DeCarlo and Lyons, 1979). However, these women also had a greater number of entrepreneurial experiences prior to starting their businesses, a finding that implies that they had a high level of persistence in the face of their relative disadvantages.

More recently, Inman (2000) compared white and minority women who owned service-oriented businesses, such as hair salons, travel agencies, and law firms. Inman (2000) discovered that minority women business owners were more likely to have been motivated to start their businesses by their more limited options in the mainstream labor market. Furthermore, she found that when minority women started their business, they had fewer financial options and greater difficulty in obtaining the resources needed to pursue their entrepreneurial goals than did their white counterparts (Inman, 2000).