You are here


Executive Summary: Structural Differences in Women's and Men's Social Networks

Research has shown that social networks are vital to the healthy development and growth of a women's entrepreneurial endeavor. While there is a lot of discussion on women's social networks and their ability to identify key members of their network (mentor, sponsor, etc.) - there is little research on the differences in effectiveness of men's and women's social networks.

From previous NWBC research we know two things: 1) there is a disparity in the amount and source of financial capital that men and women use and specifically differences in the use of outsider capital (that is, capital from sources other than entrepreneurs friends or family). And 2) social networks are important because they enable the movement of financial, human and intellectual capital, as well as facilitate information exchange, but the usage and efficacy of those networks vary depending on gender and are impacted by the quality and quantity of those involved.

As such, we commissioned this research to shed light on the structural differences in the entrepreneurial networks of male and female entrepreneurs and to what extent these differences influence the development and success of female entrepreneurs. Specifically, it examines the role that social networks play in facilitating the success of women entrepreneurs who start a new business. Additionally, it examines the effects of gender differences on business outcomes and funding opportunities with respect to an individual's social network.

Key Terms:

  • A social network: a group of individuals (such as family, friends, mentors, employees, coworkers, service providers and others) connected by interpersonal relationships.
  • Networking: the ability to leverage this network to access potential partners, new ideas, resources, support and advice throughout the business life cycle. A robust and effective social network allows an entrepreneur to respond effectively to challenges or opportunities increasing the likelihood of success for a business.
  • Primary owner:  The lead owner of the business; the survey respondent.
    • Women-owned:  Gender of the survey respondent was used. If the primary owner was female, the firm was classified as “woman-owned.”
    • Men-owned:  If the primary owner was male, the firm was classified as “man-owned.”
    • Women-led/Man-led: This was determined by the answer to the question “Which of the owners would be considered in charge of day to day operations of the new business?” Responses were matched with the gender of the owner.
  • Secondary owner:  Individual with an equity stake in the business that is not the primary owner
  • Founding Helper:  Individual that does not have an equity stake in the business, but made a distinctive one-time contribution to founding the business. In the PSED data, this role is called “key non-owner”.
  • Ongoing Helper:  Individual that does not have an equity stake in the business, but plays an ongoing significant support role. In the PSED data, this role is called “helper”.
  • Entrepreneurial expectancy:  The belief that one’s efforts will yield desired business goals.
  • Social capital: A network of relationships; in this study measured by industry experience, startup experience, education, and work experience of owners and key contributors
  • Social network intensity (SNI): A numeric measurement of the social capital of those individuals involved in the firm’s founding. This number captures the size of the network and the usefulness or quality of those people contributing to the entrepreneur’s start up efforts.

 

Methodology:

  • This analysis used the Panel Study of Entrepreneurial Dynamics (PSED), one of the most widely used sets of survey data related to entrepreneurial efforts. The project collected data on the process of business formation based on nationally representative samples of nascent entrepreneurs. The dataset used in this study began in 2005-2006, followed by six yearly interviews. The information obtained includes data on nascent entrepreneurs, the activities undertaken during the start-up process, and the characteristics of start-up efforts that become new firms.
  • The study uses the entrepreneurial expectancy theory, which examines the decision-making process that entrepreneurs use when determining whether they will commit to starting new businesses. The researchers constructed a "social network intensity” variable, which is a composite measure showing the quality of the social networks. The team then used logistic regression analysis to explore relationships between components of social networks and business outcomes. Below is a graphic representation of the entrepreneurial expectancy model.

 

Key Findings:

Key Similarities between Men-Owned and Women-Owned Businesses

Primary owner social capital is the key driver of entrepreneurial expectancy for both WOBs and MOBs. In other words, the people with whom an entrepreneur surrounds herself are the most important determinants of her belief in her own capacity to reach her goals. For WOBs, the average social capital score was 5.17 while for MOBs the average social capital score was 5.62. Meaning, WOBs have lower primary owner social capital than MOBs.  But the effect of primary owner social capital on entrepreneurial expectancy is greater for WOBs than MOBs.  

Male and female entrepreneurs choose similar secondary owners as their business partners. The secondary owner social capital score was 2.46 for WOBs and 2.40 for MOBs. Since the difference is not significant, this shows that entrepreneurs may not seek additional owners to fill experience or educational voids, but may draw on other components of their networks for this purpose.

Ongoing helper social capital positively affects entrepreneurial expectancy for both WOBs and MOBs. There is no difference in the social capital of ongoing helpers between WOBs and MOBs as both average scores are 0.86. This suggests that the men’s and women’s networks have equal utility.

The total number of people within a network (network number) does not vary between WOBs and MOBs.  For WOBs, the average network number is 3.44; for MOBs, the average network number is 3.66.  Since there is no statistical difference, this suggests that entrepreneurs do not necessarily need to network more, but need to network more strategically with individuals more aligned with their entrepreneurial goals and that can compensate for skill or experience gaps. Further, the only significant difference in the number of people within an entrepreneur’s network exists for team ownership, where MOBs have more owners than WOBs, on average.

 

Key Differences between Men-Owned and Women-Owned Businesses

WOBs were more likely to receive introductions from secondary owners and ongoing helpers than MOBs and less likely to receive introductions from founding helpers when compared to MOBs. Secondary owner introductions for WOBs were higher than MOBs with 88.6% compared to 84% for MOBs. Ongoing helper introductions for WOBs were also higher than MOBs with 12.3% while MOBs were 7.4%, as shown in Table 1.  

WOBs were less likely to receive financial assistance from secondary owners. They were more likely to receive financial assistance from ongoing helpers and founding helpers as compared to MOBs. In regards to secondary owners, 39.6% of WOBs received financial assistance while 44.4% of MOBs did.

WOBs were more likely to receive business services from secondary owners, but less likely to receive business services from ongoing helpers and founding helpers, as compared to MOBs. In regards to secondary owners, 65.3% of WOBs received business services while 57.8% of MOBs did.

WOBs were more likely to seek advice from founding helpers than MOBs, but less likely to seek advice from ongoing helpers. WOBs sought advice from founding helpers at a rate of 42.3% compared to 38.1% of MOBs. Moreover, 51% of WOBs sought advice from ongoing helpers compared to 54.8% of MOBs.

Founding helper social capital positively affects WOB entrepreneurial expectancy, but does not affect MOB entrepreneurial expectancy.  WOBs’ founding helper social capital score on average is 1.17 while for MOB is 1.00. WOBs work with founding helpers with higher levels of social capital than MOBs.  It can be concluded that WOBs lacking in experience or social capital otherwise may use non-owners in place of additional, equity stakeholders. This is in line with research that has shown that control and autonomy are important motivations for many women business owners to found their firms, and so may be more averse to raising money via the sale of equity stakes.

Men Business Owners have a greater entrepreneurial expectancy than Women Business Owners. Entrepreneurial expectancy positively affects the propensity to start a firm, which in turn positively affects desired outcomes for the business. This is consistent with the literature, which notes that men tend to have more confidence in their abilities, despite the lack of an actual ability gender gap. MOBs ranked “increased status,” “financial gain,” and “personal goals” higher than WOBs as a desired outcome for their business. WOBs only ranked “increased autonomy” as higher than MOBs as a desired outcome for starting their businesses. There was no difference by gender in the average ranking of the “realizing a vision” desired outcome.  

Policy Implications:

From this research, NWBC has identified several policy implications that it will take into account as it creates policy recommendations for 2016.

Entrepreneurs:

  • Consider seeking gender diverse social networks by leveraging your strongest and most advantageous relationships regardless of gender. Male and female networks offer various opinions, abilities, skills, and resources and can help female entrepreneurs by increasing the strength and depth of their social network.
  • Explore the concept of a social network “mentor” that cuts across functional disciplines/challenges. Focus on mentorship to assist nascent female entrepreneurs and the assessment of skills to identify gaps.
  • Increase your participation in gender diverse accelerator-type programs. Women may cluster in women-only spaces and use women-exclusive programs, which can have many advantages. However, it is beneficial to have gender diversity among one’s advisors and mixed-gender programs can develop connections to existing power and financial networks.

 

Support Organizations:

  • Include strategic content on the importance and opportunity of strategic network analysis in your training and counseling curricula.
  • Foster peer mentoring and mentoring as a means to strengthen women entrepreneur’s social networks, with an emphasis on nascent female entrepreneurs.  These mentoring programs will benefit from a gender-diverse mentor pool.

FYI – The NWBC will develop a toolkit, based on this and other research, that will allow women entrepreneurs to:  

  • classify each component of their social network by function and skillset (i.e. which issues an individual may help to address),
  • describe the strength of each component of their network,
  • identify gaps in their network in addressing entrepreneurial challenges,
  • explore secondary/tertiary relationships that may prove beneficial to fill identified gaps
  • & understand the dichotomy between building a stronger network and effectively leveraging the network currently in place.