REVISITING THE FEMALE UNDER-PERFORMANCE HYPOTHESIS
John Watson, The University of Western Australia
Principal Topic
Previous research has found that small and medium enterprises (SMEs) owned by women generally under-perform male owned SMEs on a variety of measures such as sales and profit. Liberal feminist theory suggests that the reason for this under-performance is the overt discrimination faced by women and/or because of other systematic factors that deprive women of important resources. In particular, the literature identifies differences relating to: industry; age of business; hours worked; human and financial capital availability; and motivations. However, previous studies have typically found that female owned SMEs still under-perform male owned SMEs, even after controlling for one or more of the confounding variables referred to above.
Method
This study uses a database developed from surveys of Australian businesses conducted by the Australian Federal Government. As a result, the data set available for analysis is highly representative of Australian SMEs and is based on very good response rates (typically over 90%). The data set includes information on nearly 5,000 SMEs across a maximum of four years. The data allows most of the potential confounding variables referred to in the literature (with the exception of differences in motivations) to be controlled for in an analysis of the relative performances of male and female controlled SMEs. Chi square tests, t tests and analysis of variance (ANOVA) are used to examine differences between the male and female controlled SMEs.
Results and Implications
Results showed that female controlled SMEs have significantly lower total income and profits than male controlled SMEs. Further, this difference persisted after controlling for a variety of systematic differences between the male and female controlled SMEs. However, when returns (outputs) were related to inputs (using total income to total assets, return on assets and return on equity to measure performance), the sex of the person in control of the business no longer had any explanatory power. In other words, the differences in the relative performances of male and female controlled enterprises reported by previous studies may not have been caused by the inability on the part of females to put resources to effective use. Rather, it would appear that females are just as effective in using resources, however, females (on average) use fewer resources per firm than do males.
CONTACT: John Watson, Department of Accounting & Finance, The University of Western Australia, 35 Stirling Highway, Crawley W.A. 6009, Australia; (T) +61 8 93802876; (F) +61 8 93801047; jwatson@ecel.uwa.edu.au
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