Why Are There More Male Entrepreneurs Than Female Ones? by [email protected]

Ethan Mollick on the Gender Gap in Entrepreneurship

When it comes to thinking up new ideas upon which to found a business, and having the skills to turn a startup into a success, men and women begin on a level playing field. But in practice, men still heavily outnumber women in the high-risk world of entrepreneurship and venture-capital backed startups. Which leads to the obvious question: Why?

The answer, says Wharton management professor Ethan Mollick, is multifaceted, but at its core can be traced to a few fairly simple points of personality and gender tendency on the one hand, and the broadly human tendency for birds of a proverbial feather to flock together on the other. In an interview on the [email protected] on Wharton Business Radio on SiriusXM channel 111, Mollick spoke about a recent research paper that he coauthored with Venkat Kuppuswamy from the University of North Carolina — titled, “Humility and Hubris: Gender Differences in Serial Founding Rates” — and how not just women, but many disadvantaged groups, can overcome impediments to success. (Listen to the podcast at the top of this page.)

An edited transcript of the conversation appears below.

[email protected]: Ethan, please explain your research to us.

Ethan Mollick: If you look overall at the chance of someone starting a company, it turns out that gender is a really strong predictor of whether or not they will become an entrepreneur. Women are less likely to be entrepreneurs than men, and this has been a big puzzle, because women are as innovative [as men and] companies run by women are as successful. So why aren’t women launching companies at the same rate?

That’s the puzzle that we were trying to solve with this research. What we did first was think about why people start companies. There’s actually a lot of research on this, and it shows that overall, entrepreneurship is kind of like buying a lottery ticket. You’ve heard the statistic that something like half of companies fail? It’s a little over that over a five-year period of time.

Most people who play the entrepreneurship game lose. So in order to be an entrepreneur, you have to be overconfident. You have to believe that you’re better than everyone around you.

In fact, overconfidence is the biggest psychological predictor of whether or not you’re going to become an entrepreneur. Having misplaced confidence in yourself and thinking you can win when other people always lose is a strong predictor of entrepreneurship. We call this kind of overconfidence classic, Greek-style hubris — the idea of unfounded self-confidence.

“Overconfidence is the biggest psychological predictor of whether or not you’re going to become an entrepreneur.”

We were thinking about this hubris result — this was work I was doing with Venkat Kuppuswamy at the University of North Carolina — and we realized that there is actually another set of research on gender that has found something across cultures and across ages called the “male hubris, female humility” effect. What it says is that women have lower levels of hubris than men — they’re less likely to be overconfident.

They’re especially less likely to make what we call the fundamental attribution error — in this case, holding the belief that when things go right, it’s all because of your genius, and when things go wrong, it’s because of luck or outside forces.

Men are much more prone to the fundamental attribution error. They’re much more likely than women to believe that their success is because of their own doing and failure is someone else’s fault. Women actually have a more accurate judgment of risk in this particular way.

On the other hand, it’s called the male hubris, female humility effect. Men have more hubris. Women, in addition to having a lower hubris, also have higher levels of humility. Humility means that in the face of actual success, you’re less likely to attribute it to yourself and you’re less likely to take advantage of it.

[email protected]: Right.

Mollick: So we thought: If entrepreneurship is based in part on hubris, maybe this male hubris, female humility effect actually shows us something about why women are less likely to do start-ups. And there are a lot of reasons. There’s the fact that women tend to have a lower preference for start-ups. There are issues that we can discuss later of ongoing misogyny and social barriers to female entrepreneurship.

But even given all of that, women still seem less likely [to launch statups], so we thought maybe this was the reason. Then, we also looked at crowdfunding, which is interesting because we can watch a lot of people fail, succeed and try at things in this very transparent way.

In this case, what we did was looked at people who had succeeded or failed the first time they tried to raise money on Kickstarter. The people who succeeded in raising money were those who had a goal and raised more than that goal. If they were trying to raise $10,000 to produce a new kind of coffee cup, they raised $10,000 or $11,000 or $15,000. We also looked at people who failed — who tried to raise $10,000 to make a new coffee cup, but they raised zero dollars or $5,000. What we figured was that everybody is justified in trying entrepreneurship the first time, because you don’t know how good you are.

But whether you fail or succeed the first time, you’ve now learned something about your own ability to become an entrepreneur. The people who failed now have new information that they may not be so great at this, and the more they fail, the more it’s an indicator they didn’t do a great job.

People who failed, but raised $9,000 out of the $10,000 — great. People who raised zero dollars out of $10,000 should be learning the lesson that they’re doing something wrong.

[email protected]: When you think about crowdfunding and the ideas on crowdfunding sites, people are investing in the idea. They’re not really investing in the person, at least at the outset.

Mollick: Exactly. So what’s nice is gender shouldn’t have a role in this….

What we defined as hubris is trying to start a company, trying a second attempt at crowdfunding, when you failed by a lot the first time around. We defined humility as not trying again when you’ve had a big success. So, say I’ve raised $15,000 with a goal of $10,000: I should be more likely to try again; that tells me I’m very good at this. If I raised zero dollars out of $10,000, it tells me I’m bad at this.

“People who failed, but raised $9,000 out of the $10,000 — great. People who raised zero dollars out of $10,000 should be learning the lesson that they’re doing something wrong.”

[email protected]: Time to try something else.

Mollick: Exactly. And we found evidence of this effect. As people failed by larger and larger amounts, disproportionately, women more than men were discouraged from trying again. Now that’s a very rational outcome, right? Because you’ve learned something.

[email protected]: Right.

Mollick: Men were much more likely to try — but also, on the other end, they succeeded by larger and larger amounts. Women — again, increasingly disproportionately — were less likely to try again than

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