Survey Shows Gender Gap in US Entrepreneurial Activity Post-Recession

Recent findings released by the US Census Bureau on the state of entrepreneurship could be of great interest given the steady popularity of the startup life among MBA applicants and students. The inaugural Annual Survey of Entrepreneurs (ASE) offers insight into the demographics of business owners in the US, based on a sample of 290,000 firms from which data was collected in 2014 through a partnership with the Kauffman Foundation and Minority Business Development Agency.

Along with insights into the gender, veteran and minority status of business owners, as well as firm earnings, size and location, the survey also demarcates the number of years enterprises have been running. It therefore offers a handy snapshot of the makeup of startupsin the US.

US entrepreneurial activity bouncing back post-recession, but more so for men

Inferring from the survey sample, out of the total of 5.4 million firms that make up the entrepreneurship sector in the US, 10% were sole proprietorships (no employees), 82.5% were owned by those defined as holding nonminority status and the majority of firms have fewer than ten employees (78.5%).

The survey also shows that 8.9% of firms are startups (defined as being in operation for less than two years). This indicates an active rate of new business creation, reversing a downward trend from the previous few years and, more specifically, post-recession. A separate study, conducted by the Kauffman Foundation in 2015, confirmed this trend by showing that new entrepreneurial businesses were opening up at a rate of 0.31% per month in 2014, which translates to more than half a million new entrepreneurs each month during the year. However, the participation of women (or lack thereof) in this is of particular note.  

Startup activity in the US by gender and ethnicity

A dynamic sector in the US in terms of job creation and innovation, startups are said to account for about 20% of US job creation, with high-growth startups accounting for almost 50%. These numbers suggest that entrepreneurship is likely to touch many MBA graduates seeking employment in the US in some way, whether they choose to work for an existing entrepreneurial company or become a business owner themselves. 

For starters, according to the ASE’s data, the typical entrepreneur is a male of nonminority status, with more than 80% of surveyed business owners either being male or of nonminority status. That being said, when the data is split by gender, a larger proportion of businesses owned by women are startups (10.8%) than are owned by men (8.7%) – pointing to the higher likelihood that a business owned by a woman will be a startup than is true among male business owners.

US Entrepreneurs: How long have US firms been in business?

Gender gap alert: Firms three times more likely to be owned by a male entrepreneur

Startup activity, in particular, has in recent history become increasingly male-dominated, with tech an arguable culprit, as fewer women pursue IT and seem to find technology less appealing than men. However, the ASE results show that this is true for entrepreneurship of any kind – tech-related or not.

According to ASE statistics, only 19.4% of all employer firms are owned by women only (with another 15% are equally owned by women and men). Correlating to this is a gender gap that persists on the earnings front as well, with women-owned employer firm receipts totaling US$1.3 trillion – a mere 4% of total earnings coming from all entrepreneurial businesses.  However, a previous analysis by the Kauffman Foundation shows that average revenue of women-owned firms is on the rise, offering some consolation in this respect.  

Opportunity Entrepreneurship Share (three-year moving average) by Gender (1998-2014)

Source: 2015 Kaufmann Index: Startup Activity

The Kaufmann Foundation also provides information into the proportion of entrepreneurs in the US who have started a new business out of ‘opportunity’ as opposed to ‘necessity’ – this ‘opportunity share’ of entrepreneurs is something it holds up as indicative of the health of US economy. While women have historically had a higher opportunity share than men, once the US came out of the recession, the rate of opportunity share for men has increased – and to a far sharper degree - than for women. This means that fewer women now are starting businesses due to an envisioned opportunity than before (following a period of say, employment, rather than due to reasons of necessity, such as unemployment).

On the whole, the ASE data suggests that women are contributing less than their male counterparts to entrepreneurial activity in the US, even in recent years. However, the number of female applicants in North America has outnumbered male applicants since 2014. Given that starting a business is a popularly cited reason among all MBA applicants for pursuing the degree, according to the annual QS Applicant Survey, perhaps women with MBAs will soon make a mark in startup activity and tilt the scales towards closing the gender gap?

Interest in Entrepreneurship and Gender of MBA Applicants