Strengthening access to human and physical capital

 Strengthening access to human and physical capital

Human capital is a key asset of entrepreneurs. It includes not only formal education, but also specific business skills such as management techniques, as well as the experience the entrepreneur brings to the business.

Education

Education is the most documented measure of human apital—and one where a gender gap has persisted for years.

First, men (gray and white) tend to be more educated than women (blue and black). Second, employers are more educated than self-employed entrepreneurs. Third, this is particularly true within gender (i.e., male employers are more educated than male self-employed entrepreneurs; female employers are more educated than female self-employed entrepreneurs), but often not across genders. Self-employed women are almost always the least educated among the four categories.

An individual’s level of education is strongly correlated with the success of the enterprise. Entrepreneurs with more education are more likely to earn higher profits and their enterprises to be more productive. And women and men benefit similarly from higher education.

In most countries in the region, women have less education than men, although the gap is closing with younger generations. Not controlling for the entrepreneur’s education can result in apparent gender gaps in performance. However, when comparing those with similar levels of education, there is no significant gender gap.

Managerial techniques Education is not the only measure of human capital that has been tested for and found to matter. There has been a particular interest in specific types of human capital, namely managerial techniques that should be associated with higher productivity. Recent research shows the importance of management techniques in improving firms’ performance across a range of developed and developing countries.10 Using a similar set of indicators in five sub-Saharan African countries, Hallward-Driemeier and Aterido’s analysis shows that the use of these techniques is relatively low in the region—but significantly correlated with higher productivity. Women were slightly less likely to use these techniques. But those who did benefitted from them to the same extent as men.

Prior labor market experience Another important human capital variable is experience.

Entrepreneurship-related experience may, in some cases,  be a bigger determinant of productivity than nonspecialized formal education. Because of the likely presence of learning by doing, heterogeneity in experience is important. This could be the result of a better understanding of the available opportunities in particular product lines (and, correspondingly, a better appreciation of relevant constraints and how to navigate them).

It also reflects the development of valuable contacts for finance and/or the accumulation of non-tangible but important management and production skills that can be learned only on the job.12 Gender is also likely to affect labor supply. The time demand for men and women at home vary, and this sometimes leads to different elasticities of labor supply. Consequently, both the duration and type of experience may differ by gender.

As in education, when it comes to the background of entrepreneurs, the difference between the formal and informal sectors is greater than the difference across gender. New entrepreneurs were far more likely to start an enterprise in the sector in which they had been employed prior to starting their business. Within a sector, the types of prior experience women had is far more similar to that of their male colleagues in that same sector than to women in other sectors.

However, there was some evidence of a gender gap in the informal sector. Female entrepreneurs in the informal sector were significantly more likely to have been unemployed and looking for a job in the months preceding their entry into entrepreneurship than male entrepreneurs in the informal sector (29 percent versus 21.6 percent). The percentage of men in the informal sector who used to be paid enterprise (both formal and informal) employees (50 percent) significantly exceeds the percentage of women in that category (39 percent).

 

Motivation

Are there differences between women and men in their motivation for being an entrepreneur? The desire for flexible hours or location is more often attributed to women. According to Hallward-Driemeier and Aterido’s study of five sub-Saharan countries, women were somewhat more likely than men to report “remaining in business” as their measure of success, while men were more likely to report “expansion” and “growing profits” as their goal. However, the overall patterns are far more similar throughout the whole population than the minor differences across genders. Just over half of women and of men alike reported various reasons associated with following an opportunity (e.g., the chance to earn additional income, an identified business opportunity, and so on) than push factors that indicate few alternative options.

Strikingly, responses associated with “necessity” entrepreneurs and “opportunity” entrepreneurs are equally divided by both sector and gender. And the distinction between necessity and opportunity entre -preneurs is not a good predictor of performance.

Family background One dimension of background that did have a significant gender dimension concerns whether the entrepreneur’s father was an entrepreneur. Entrepreneurship in the family is associated with having received mentoring and introductions to networks of business contacts, and has been found to be associated with higher rates of entrepreneurship and improved performance in other countries.16 However, the five-country study showed that the benefits of this family background are present for men but not for women.17 This underscores the importance of intangible dimensions of human capital that can matter. To the extent that women have not been as included in business networks in the past, this can make it all the harder for current female entrepreneurs to break into more profitable areas of entrepreneurship.

However, this is not static. The rising rates of successful women can serve as important role models and mentors for expanding opportunities for the next generation.

Access to assets and finance One dimension of potential constraints that gets particular attention as having a gender dimension, and affecting entry as well as performance, is access to finance.

Much of the literature on access to finance has found that women face greater obstacles than men.18 However, the gender gap often closes significantly when additional controls are included—that is, women may receive less finance because they are running a smaller firm and not because of their gender. Figure 12 shows that enterprise size rather than the gender of the entrepreneur is a better predictor of whether the enterprise receives bank financing. However, a bigger question is whether greater constraints to access to assets is itself an important

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