How barriers faced by female entrepreneurs impact us all and stifle the global economy

Gaurav Chiplunkar, a professor at the University of Virginia Darden School of Business shares his views on how barriers faced by female entrepreneurs in developing countries harm the entire economy and what business leaders and policymakers can do about it

Published: May 10, 2021 01:12:04 PM IST
Updated: May 10, 2021 01:16:46 PM IST

Image: Shutterstock

The glass ceiling exists around the world. From the U.S. to India, women work harder to get a foot in the door, a seat at the table or a place at the top of established businesses. But what about women who want to start their own businesses? Professor Gaurav Chiplunkar discusses in this Ideas to Action podcast with the Batten Institute’s Sean Carr, the barriers they face might be even greater. To examine the challenge, Chiplunkar shared his new research on the barriers faced by female entrepreneurs in developing countries, how their challenges harm the entire economy, and what business leaders and policymakers can do about it.
 

Gaurav Chiplunkar: The only significant advantage where women are significantly advantaged over men is in hiring women workers because women are more likely to work for women bosses. So direct policy linkages coming out of this is, if you want more women to work, support more women entrepreneurs.

Sean Carr: The proverbial glass ceiling is global. From the US to India, women work harder to get a foot in the door, a seat at the table or a place at the top of established businesses. But what about women who want to start their own businesses? As it turns out, the barriers they face might be even greater. Gaurav Chiplunkar at the University of Virginia Darden School of Business studies frictions in the labor market and how policy reforms and technology can solve them. He joins us today to discuss new research on the barriers faced by female entrepreneurs in developing countries, how their challenges harm the entire economy and what we can do about it. I'm Sean Carr and welcome to Darden Ideas to Action. Gaurav, thank you so much for joining us on today's edition of Darden Ideas to Action. We're still doing it remotely, but you're in the studio. That's nice to see and hear. Great to have you today.

We're interested in talking about one strand of your research today, but it's a significant one. We've published some work recently on the barriers that female entrepreneurs face, particularly in India. And you've been looking to expand that research. Tell me, let's start at the high level. What are the big questions you're trying to answer through that work?

Gaurav Chiplunkar: We looked at the data and one striking feature from the data was that only about less than a quarter of the businesses worldwide are owned by women. And so that was a really striking feature. Why is it that women don't start businesses? And then the other followup question to that is why does it matter? Should we care about this? I mean, apart from just, obviously, an equality standpoint or a social standpoint from the economic lens as well, does it matter for development? Does it matter for economic growth? One direct way in which why this matters is because women firms are more likely to employ women as employees. So for example, on average, if a farm is owned by a man, 25% of their employees are women. On the other hand, that's over 40% if the firm is owned by a woman. So that's the first feature. So women employ more women. That's interesting.

The second is that if you look at the glass ceiling type of questions, what you see is that the probability that a woman is a top manager in a man-owned firm is only about 6%. Whereas if you look at women being a top manager in a female-owned firm, that's over 50%. So there's also this other pattern of just employment opportunities within the firm being more "equal".

Sean Carr: Let's start with the barriers. The patterns you describe about women ownership and entrepreneurship and women in the workplace. Why do you think some of these patterns are persisting?
Gaurav Chiplunkar:
The stark feature we find is that women firms tend to hire more women employees. And so then in that sense, can we say something about not only is it harder for me to hire a worker, but is it harder for me to hire specific types of workers, such as male workers versus female workers? In many social contexts, men don't want to work for women boss, for example, right? So it's much harder for women to hire men as compared to hiring women, for example. So the data can really be very informative in terms of trying to tease out this pattern.

Sean Carr: On this first wave of work, where you focused on India, what are some insights you've started to glean?
Gaurav Chiplunkar:
I think the Indian case is in many ways specific to India and the context, but in many ways, also more general to a lot of features that we observe in emerging economies. Specifically in the Indian case, female labor force participation is really low, even for the standards of economic development that India is at right now, female labor force participation, for example, is hovering around 20 to 25% over the last couple of decades. And so what we basically find is that women on average face almost two times the fixed costs as compared to men when they want to start up a business. It's almost twice more expensive for a woman to start it as compared to a man. Similar thing with registration costs. Registering with the government or formalizing your business is just much more expensive for women than it is for men.

And then finally, on the hiring stuff, what we find is that women businesses on average are smaller because they have much more difficulty hiring people to work for them. So on average, you find that women run much smaller businesses than men. One of the reasons for that is that they just face what we are calling a barrier in hiring people. The only significant advantage where women are significantly advantaged over men is in hiring women workers because women are more likely to work for women bosses as opposed to men working for women bosses, for example. And so in the Indian case, that's particularly important given the low female labor force participation. This is a great way from, so direct policy linkages coming out of this is, if you want more women to work, support more women entrepreneurs, get them to start more businesses, help, see what are the constraints that they are facing.

Sean Carr: Why would costs for women be higher?
Gaurav Chiplunkar:
There are lots of reasons. And there is actually a rich body of work that examine some of these specific channels that is researched that talks about social norms, for example, which is that in many of these societies, women stepping out of their house and going to work or selling out of their house to engage with the market in that sense is extremely hard, as opposed to men. There are behavioral things, as I was mentioning, which is that men don't like to work for women bosses. So there's some literature that talks about why don't women get promoted in the workplace as much and how subordinate men respond to a woman boss.

And then there is the technology standpoint, which is that I just don't know how to fill a form, for example. If I want to hire a worker, my husband can go and talk to his friends and figure out where to hire people from. I don't have that social network, right? So I'm sitting at home and I've never experienced this before. And so mostly my business tends to be sustenance than expansion. It's really hard sometimes to try and disentangle all of these threads and strands of these barriers, but there's hope. That's where we want to go with this.

Sean Carr: Your ambitions are quite grand. Tell us more about where this goes next.
Gaurav Chiplunkar:
We have a research project that now we are trying to build, which is taking into account more countries, including advanced economies, along with emerging economies. So we have countries like Brazil and Mexico, and then we have the US and Europe as well, along with India and Indonesia. From Africa, we have Nigeria, South Africa. So we have a mix of countries and we have data over time. So since 1960 up until about 2010. So a very broad swath of time as well.

In many of these emerging countries, cell phones have really revolutionized the way lots of things function, including labor markets, including how people look for jobs, how the information, the access to newer markets, the access to different knowledge. So there are lots of ways in which the internet has revolutionized how people deal in a lot of these contexts. And so we really want to test out whether we could use the advent of such technology to then understand whether some of these barriers could be mitigated for women. So now I don't need to step out of my house if I have Amazon and I could just sell my product on Amazon and someone can pick it up from a house and sell it, that's perfect. Given these, of course, you would want to live in an ideal world where these barriers wouldn't exist to begin with. That's where we're going with this, but in a more constrained society, whether some of these things could really help unleash this growth potential.

Sean Carr: I would imagine that this type of work would lend itself towards public policymaking.
Gaurav Chiplunkar:
There are a couple of ways in which this has direct policy linkages, because just looking at the data can just be so informative for public policy. So a good example was this observation that women hire more women. And so, if female labor force participation specifically is a problem, then supporting women entrepreneurs might be a good idea. What's going to really revolutionize Asia and Africa is every household getting a cell phone with 3G on it, because the first ownership of technology is most on cell phones or the laptops in many of these countries. That, again, has direct policy implications when you start to think about it from the lens of gender. There are gaps there.

So there is recent research that's trying to identify and show that even though a household might have a cell phone, it's not necessary that women in that household have access to that cell phone. So it might usually be the case that my husband owns it or my son owns it or something, and being the woman of the house don't have access to it. So there are interesting policy relevant things to understand not only access to certain technologies, but also the intra household usage of those technologies.

Sean Carr: I think this work also lends itself to insights that would guide what private companies do and how they operate and behave and engage in these societies.
Gaurav Chiplunkar:
Absolutely. In fact, couple of the projects that I'm working on are with private businesses, specifically with online job portals. Think about Monster jobs, but the Indian version of this. And then essentially, their problem was exactly this, which is that when we look at data from the jobs portal, they wanted to understand, can we use this to unpack a whole set of decisions that otherwise you would not see? So in the sense that, what do you usually observe in data is I was employed in job A six months later, I was unemployed a year later, I was again employed in job B. And so that's informative. I know what's going on, but what I don't observe is how many jobs did you apply for? Were there specific places that you've targeted? How many offers did you get? How many interviews did you get Who recruited you in the end? What was your comparison pool looking like in the application of the employer? So now all of these would be unpacked using job portals.

So from a research standpoint, it's very exciting, but also from the private business standpoint, their business model survives on having more and more job seekers come onto the platform, more and more employers willing to recruit from these platforms. It directly applies itself also to some of these private businesses.

Sean Carr: So how do you draw some of this work or all of it into what you teach?

Gaurav Chiplunkar: A classroom is a great setting to compare and contrast the Indian experience with their experiences from their home countries and we'll be teaching a class on female labor force participation in India. What I hope to get out of that discussion is really drawing some of these patterns out for students to appreciate and understand.

We were talking about digitization and people were just surprised to know that almost 80 to 100% of Indians own at least one cellphone. That for them was in a way bizarre. And we were talking about e-commerce and m-commerce, and they were like, "Wait, but doesn't India have agriculture? Isn't everyone just farming?" Which is true. Not trying to deny that, but there are different aspects of this given, again, some of the research that I do and I follow, that I would really like to get into this classroom discussion. And so with female labor force participation, we really want to have a cohesive discussion around some of the broader learnings apart from learning what's actually happening in India. 

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[This article has been reproduced with permission from University Of Virginia's Darden School Of Business. This piece originally appeared on Darden Ideas to Action.]

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