More than 252 million of the world's entrepreneurs are women, according to the Global Entrepreneurship Monitor's (GEM) 2018/2019 Women's Entrepreneurship Report. Perhaps inspired by these women who have taken on the business world, an average of almost 18 percent of women globally said they too aspired to start a new business within the next three years.

For many of these women to achieve their goal of setting up shop, obtaining financing will be a key determinant of their success—money which Assistant Professor of Finance and Economics Jason (HyunJun) Na, PhD and Associate Professor of Entrepreneurship Murat Erogul, PhD say can be difficult to come by for women entrepreneurs.

Dr. Na and Dr. Erogul’s study, “A Global Review of Female Entrepreneurial Finance,” recently published in the International Journal of Globalisation and Small Business, aims to create a global understanding of the current situation of external entrepreneurial funding and its impact in practice for entrepreneurs, specifically women entrepreneurs. This research emerged from the pairing of Dr. Na’s interest in small business financing and Dr. Erogul’s interest in women’s entrepreneurship.

“There is a lack of research reviewing entrepreneurial funding globally,” Dr. Erogul said. “We aimed to design a study that would be useful for entrepreneurs, policy makers and our students.”

He adds that their findings provide implications to help improve entrepreneurial ecosystems in which policy makers—hopefully in concert with entrepreneurs themselves—can develop practices that facilitate entrepreneur financing decisions and activities.

Their research found that women entrepreneurs encounter difficulties in raising external financing across the globe, which is amplified when businesses are in the area of new technologies or new products. Because women entrepreneurs have more disadvantages related to raising external funds, they are more dependent on informal investments from family, friends or other personal relations in their business.

The study separated global economic data into three categories. Factor-driven economies, such as the Philippines, India and Iran, are dominated by agriculture and extraction businesses with a heavy reliance on unskilled labor and natural resources. Efficiency-driven economies, like Peru, South Africa, Poland and China, have more competitive markets with more efficient production processes and production quality. Innovation-driven economies, such as the United States, Spain, South Korea and Israel, feature more knowledge-intensive businesses and an expanded service sector.

Among their findings, Dr. Na and Dr. Erogul found that the gender gap in business and financing widens as the country’s economic situation increases from factor-driven, to efficiency, to innovation economies. While the average financing difference between men and women in factor-driven and economy-driven economies is $2,078.98 and $34,791.08, respectively, this financing gap grows to $84,059.81 in innovation-driven countries.

Women entrepreneurs in innovation-driven economies are also more risk-averse—a result which Dr. Na said can be attributed to a high rate of fear of failure.

Regardless of the country’s economic category, male entrepreneurs have more funding to start their businesses, suggesting that male owners are less likely to face disadvantages in borrowing external investments than their female counterparts.

Dr. Na and Dr. Erogul said this research shows a need for top-down policies globally to help female entrepreneurs with their financing needs, but they also cite a need for bottom-up change at the family and community level.

“We think that pursuing higher-level education can improve the current situation for women entrepreneurs,” said Dr. Na. “Particularly in less developed economies, financiers—banks or investors—are more likely to invest in men because they tend to believe that they are better educated.”

Though economies vary and the reasons for the unequal state of entrepreneurial financing might differ, one thing remains clear—the quarter of a billion women entrepreneurs around the world have faced barriers men have not, and they have overcome them.

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