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Why We Should Encourage Women Entrepreneurs To Lean Into Failure

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Women entrepreneurs are afraid of failing before they've even started, and it's having a negative impact on everyone.

If you’re thinking about starting a business, chances are you’ve heard many different versions of the following: Depending on how you interpret failure, your business has between a 50 to 90% likelihood of going under.

If you’re a female entrepreneur, the path of entrepreneurship is even more daunting. Women are still catching up in the entrepreneurial world. A 2014 study by the Kauffman Foundation highlights that the women-owned businesses account for about one-third of businesses in the United States. When looking at high-growth firms, female founders usually comprise less than 10 percent of any given sample. And such trends are even more pronounced on a global level.

Research contributes this gender gap to a number of factors, including a lack of female mentors and networks, and the greater difficulty women face in accessing capital than men. Studies have found that there is also a difference in the way that men and women view failure—a difference that could be one of the earliest drivers of the gender gap in entrepreneurship.

In its 2014 annual survey, the Global Entrepreneurship Monitor (GEM) found that while most early-stage entrepreneurial activity is taken on by men, there is little notable difference between the genders in individual attributes that define potential entrepreneurs. Indeed, GEM studies have consistently found that women and men have similar levels of perceived opportunities (40% for women versus 45% for men) and perceived capabilities (46% for women versus 59% for men) in entrepreneurship. The only real difference between men and women respondents arose when examining one of the psychological factors of starting a business: fear of failure.

The GEM 2014 Women’s Report, released last week in honor of Women’s Entrepreneurship Day, women expressed a higher presence of fear of failure than their male peers. The study found that women are more risk averse than men when it comes to entrepreneurial behavior. In the overall sample, 41% of women who perceived opportunities would not start a business due to fear of failure, compared to 34% of men.

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This is especially concerning given that fear of failure can be a strong inhibitor for any individual looking to turn his or her entrepreneurial dreams into realities. Such fear is especially salient for women, who already face a slew of cultural, societal, and economic barriers in starting businesses, even in innovation-driven economies—contributing to the persisting gender gap. Across societies, women are less active in early stage businesses than men, with the gender gap being wider in pre-dominantly-developed geographies.

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So why is it that even in more developed economies—where the social and cultural constraints around female-founding are less pronounced than in developing ones—that women still have a greater fear of failure? The answer could lie with the individual, below the social and cultural constraints on female entrepreneurs often discussed.

A recent analysis of gender difference in founding rates contributes the difference to the “male hubris-female humility effect.” Authors Venkat Kuppuswamy (UNC) and Ethan Mollick (Wharton) provide compelling research to show that decreased hubris lowers the likelihood that women faced with low-quality founding opportunities will engage as compared to their male counterparts. Simultaneously, increased humility among women leads them to take on fewer founding attempts than men, even when opportunity quality is high.

The “male hubris-female humility effect” continues even when you look at entrepreneurs considering their second ventures. As NPR Social Science Correspondent Shankar Vedantam explains, “If you fail the first time, it’s actually a strong predictor that you’re going to fail the second time. So women who opt out are in some ways making a rational decision…but because men are so overconfident, they try again and again and again. And, in fact, they try so often that at some point something sticks…”

Speaking to Kuppuswamy and Mollick’s research, Vedantam adds: “The researchers find that when the first projects of these entrepreneurs succeed, men are much more likely to take that as a vote of confidence and say, look, the market thinks I’m a genius. Let me launch a second project. Women are much more likely to say, I just got lucky, or I had lots of friends. In other words, they’re much more likely to be humble.”

Perhaps most striking of all is the negative impact that the “male hubris-female humility effect” has on women—and society—as a whole. Kuppuswamy and Mollick estimated more than a 20 percent increase in female-led ventures in their study “if women were as immodest and overconfident as men.” Even conservatively extrapolating from this study makes it clear that by not encouraging women to take on more risk, we are leaving large amounts of value on the table.

 

Global Impact of Closing the Gender Gap

In the end, it is in everyone’s best interests close the gender gap in entrepreneurship by encouraging women to tackle their fear of failure and pursue their ventures. The potential economic impact of reaching gender parity in entrepreneurship and business overall is clear, and its very big—potentially leading to trillions of dollars in global growth. We only stand to benefit as a society in which women are more confident in their entrepreneurial potential. Because more women entrepreneurs means more entrepreneurs overall, which will mean more businesses, added jobs, and greater economic growth. Where’s the fear in that?

9 thoughts on “Why We Should Encourage Women Entrepreneurs To Lean Into Failure

  1. Great post Lynn! My main question after reading it is: how do we encourage more and more women to become entrepreneurs? Obviously, we need to actively support women entrepreneurs, for instance by giving them better access to mentors and capital, which should make them feel more confident as they will have more resources at hand. I guess we also need to inspire girls and expose them to entrepreneurship early, through organizations like Girls Who Code. Finally, showcasing the stories of great women entrepreneurs – talking about both their successes and failures – is probably a powerful way to demystify entrepreneurship for women and change the status quo.

    1. Sarah, I think your solutions are a great place to start. I think any way we can work to make girls and women feel that the level of “risk” they have are taking on as entrepreneurs is the same level as that of their male peers will help us make serious strides toward closing the gender gap. In developed economies, I think another way is to get more female investors into the picture as well. I also think encouraging female politicians and female academicians, as well as female business leaders, can help inspire youth. In developing countries, many of the changes need to happen at the institutional level–such as changing laws around property ownership and inheritance–as well as ensuring girls stay in school longer, delay age of marriage, have access to family planning, etc.

  2. Lynn – Love the post! A great book on this broader topic is Valerie Young’s The Secret Thoughts of Successful Women: Why Capable People Suffer from the Impostor Syndrome and How to Thrive in Spite of It. http://www.amazon.com/The-Secret-Thoughts-Successful-Women/dp/0307452719

    For those not familiar, Imposter Syndrome sounds a bit like this: “It’s only because they like me. I was in the right place at the right time. I just work harder than the others. I don’t deserve this. It’s just a matter of time before I am found out. Someone must have made a terrible mistake.” Historically, the thought was women overwhelmingly suffered from Imposter Syndrome compared to their male counterparts, but as it turns out, author Valerie Young is finding that now enrollment for her workshops on the topic tends to be split 50/50 male/female. Regardless of who it affects, her book provides some very tactical ways to overcome what could be considered crippling immodesty and humility. I totally agree that we need to aim to close the gender gap in entrepreneurship and maybe instilling some of these practices is a place to start.

    1. Amazing, thanks for sharing!

  3. I wonder how much of the “male hubris-female humility effect” is reinforced by societal norms beyond ourselves. E.g., studies that show that women politicians who people perceive as seeking power are penalized by voters, but male politicians are not (http://psp.sagepub.com/content/36/7/923). Similarly, female CEOs who talk more are considered less competent and less capable leaders, but male CEOs are not (http://asq.sagepub.com/content/early/2012/02/28/0001839212439994.full.pdf). In this light, until these forces change it may be actually very rational, though unfair, that women would choose to be overly humble, as they are penalized for showing confidence.

    1. Amelia, you’re right on point, and this wasn’t something I had space to touch on in my post. But the reality is just what you say: that it is just socially less acceptable for women to be overconfident than it is for men. And that truth holds across sectors, industries, geographies, etc.

      I think, though, that a large part of this stereotyping can be overcome by women supporting one another in reaching the same confidence level as men. Through support systems, networks, mentors, and more I think we can start to break down many of these gender norms that have been long imposed and reinforced. Even if only the female population committed to holding men and women to the same standards, we would have 50% of the population on board! And there are many men, especially in our generation, who are encouraging women to knock down these barriers as well. The reality is that we have the majority of the population on our side. So now’s the time for us to grab our start-up lives by the horns and run with them!

  4. Lynn, this is a great post that we should pay attention to! I have previously done a research in school about female entrepreneurs innate advantages over their male counterparts in running a business, and found that women actually do have some endowed qualities, for example, maternity (raising a company like a baby), sensuality, intuition, multitask, communication skills, relationship building, patience and consistency.

    However, just as you described, even though female entrepreneurship is rising, there are still many obstacles exist for them to overcome: 1)access to appropriate levels of capital support due to the stereotyping and preconceptions of women by the public. ‘Whether women entrepreneurs apply to an institutional financier (a bank, a finance agency), a friend, a relative or even her spouse, they are likely to come up against the assumption that “women can’t handle money”’. 2), concern of the problem of combining work and family. If the woman spends long hours at work, their families will be less likely to have children or plan their arrivals carefully. 3) lack of networks of information, advice and appropriate contacts when necessary. Although women have the talent in cultivating strong and lasting relationships, they are often excluded from many formal and informal organizational networks due to gender bias and the ‘established male-dominated system of customers, suppliers and creditors’.

    I think as women, we ourselves need to be aware of the common barriers for us, and fight against them by building strong support and network ourselves.

  5. Lynn, thanks so much for sharing. It’s a super important topic and one that I thoroughly enjoyed learning more about (and think we should be talking more about in this class).

    One thing that came to mind as you discussed the male “hubris-female humility effect” was with respect to the difference between confidence in launching a business vs. humility in running it. When I reflect on the most impressive and admirable founders I’ve met, they are incredibly humble. Founders like Mick Mountz (Kiva Systems) and others come across like very simple, warm, approachable, and humble in how they conduct themselves. However, they had the confidence to pursue a vision. In short, I am wrestling with the idea that hubris (or extreme confidence) and humility are mutually exclusive. And if humility is such a compelling attribute of a CEO, that can’t be the only driver behind the gender gap we see. In any event, I’d love to learn more, so please let me know what else I can read to get caught up to speed on the topic!

  6. Lynn – Thank you for your post! As I read your post, I thought about a male guest’s advise to our PM 101 class: ‘Fake it till you make it,’ which I think is telling of how men and women perceive the entrepreneurial challenges they undertake. If we buy Amy Cuddy’s Ted Talk “Fake it till you become it/Your Body Language Shapes Who You Are,” the ‘fake it till you make/become it’ mentality changes your psychology, behavior, and perception of yourself in a way that enables the individual to succeed. To my surprise, many of the male guests in our various classes have accelerated their businesses by exaggerating their capabilities and/or selling a product that doesn’t yet exist, a proposal that not one of the female protaganists have proposed. Just like Amy Cuddy was able to start a movement in how people (mostly women) perceive themselves by adjusting their body language, I wonder how many more women entrepreneurs and successes we would have in society if we trained women with entrepreneurial aspirations to ‘fake it till they make it.’ I agree that this run contrary to our societal norms, but nevertheless, it would be an interesting experiment to run.

    If anyone is interested in Amy Cuddy’s Ted Talk, here it is: https://www.ted.com/talks/amy_cuddy_your_body_language_shapes_who_you_are?language=en

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