Why Are Women Less Likely To Become Entrepreneurs Than Men?

Transcript

DAVID GREENE, HOST:

If you look at entrepreneurs around the world, there is an inescapable fact. They are overwhelmingly men, and researchers have been trying to figure out why. Our colleague, Steve Inskeep, spoke with NPR social science correspondent Shankar Vedantam.

STEVE INSKEEP, HOST:

Hi, Shankar.

SHANKAR VEDANTAM, BYLINE: Hi, Steve.

INSKEEP: So why in 2015 would there be so many more male entrepreneurs?

VEDANTAM: Well, let me tell you about the experiment that these researchers ran. This is Venkat Kuppuswamy at the University of North Carolina and Ethan Mollick at the Wharton School at the University of Pennsylvania. They recently decided to take a look at one aspect of becoming an entrepreneur. They looked at 90,000 entrepreneurial projects launched on the crowdfunding website, Kickstarter.

INSKEEP: Oh, this is a great idea because this is like people going out, seeking funding, and there's an electronic record of how well they did.

VEDANTAM: That's exactly right. And what you see on Kickstarter is you have these would-be entrepreneurs. Some of them might ask for $10,000, and they actually get $10,000, and they can start their projects. Now others ask for $10,000, and they only get $100. So some projects succeed, some fail, and some fail spectacularly. Kuppuswamy told me that the researchers examined how likely people were to launch a second project when the first one failed, and he told me they wanted to tell the difference between entrepreneurs who were optimistic and entrepreneurs who were overconfident.

VENKAT KUPPUSWAMY: We were able to distinguish between optimism and overconfidence. So people who failed by $10 versus people who failed by $2,000 should be a lot different. You are significantly overconfident if you failed by, you know, $10,000 versus 50.

VEDANTAM: What the researchers find, Steve, is that men are much more likely to be overconfident that women. In other words, when a female entrepreneur fails to reach her Kickstarter goal, she is likely to tell herself, OK, this is probably not for me. When a guy fails, he's much more likely to say, it was just a blip. Let me try again.

INSKEEP: Wait a minute. Overconfidence is supposed to be a bad thing. But you're telling me that it works in favor of men?

VEDANTAM: It's very complicated, Steve, and here's why. 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 the thing is it isn't always clear what's going to work. So men fail more often than women reaching their goal, 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, they get funded, and they succeed. There's a second part of the research that's actually the sadder part of the research, Steve. 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.

INSKEEP: Sure.

VEDANTAM: 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. Here's Kuppuswamy again.

KUPPUSWAMY: On both sides of that coin, you have women who have less hubris, and you have women who have more humility. On both ends as a result, women may be just less likely to found businesses, compared to men.

VEDANTAM: The researchers find, Steve, that if women who fail had the same overconfidence as men, the number of second projects they launch would jump by a third. If women who succeeded were less humble, the number of projects they launch would jump by 16 percent.

INSKEEP: Wow, I want to underline the distinction you're making. It seems obvious that confidence is a good thing. But you're pointing to research finding that unrealistic overconfidence is a good thing, and that perhaps it would be better if more women tried to be like men and acted like arrogant jerks.

VEDANTAM: (Laughter).

INSKEEP: Is that it?

VEDANTAM: Well, it's kind of hard to tell people that they need to be less rational and more arrogant, Steve. So really, I think between the question of telling women to be more arrogant or telling them to be less humble, it might make more sense to work on the humility side of the equation. What the study is really saying is that female entrepreneurs who succeed ought to take that as a vote of confidence and think about starting new projects. But I think, Steve, we might also need to look beyond the choices that individuals are making. Social scientists who've examined similar gender disparities in other contexts have often found that differences in behavior are often rooted in differences in the social incentives that men and women receive.

INSKEEP: Social incentives?

VEDANTAM: That's right. So for example, there's been a lot of work showing that women are less likely to negotiate for better salaries than men, but there's been research that shows this is partly because women who negotiate for better salaries are perceived differently than men. They're seen as more pushy...

INSKEEP: Yeah.

VEDANTAM: ...Whereas men are seen as more ambitious. So I think you can think about similar double standards operating here. The research, I think, is clearly pointing to the idea that women ought to be leaning in to take more chances. But I think this larger body of research is also suggesting we need to create the social conditions where women find it as easy as men do to lean in.

INSKEEP: Shankar, thanks very much.

VEDANTAM: Thanks, Steve.

INSKEEP: NPR's Shankar Vedantam - you can find him on Twitter @hiddenbrain. You can also follow this program on Twitter @morningedition, @nprinskeep, @nprgreene, and @nprmontagne. Transcript provided by NPR, Copyright NPR.