Women Entrepreneurs Spur Economic Growth

Women entrepreneurs are key contributors to economic growth in low- and middle-income countries, particularly Latin America and the Caribbean, according to a new report from the Center for Women's Leadership at Babson College.

Data gathered for the Global Entrepreneurship Monitor report on women and entrepreneurs show that women who are employed and have built a social network of entrepreneurs are more likely to become entrepreneurs themselves.

It's a surprise that developing countries in Eastern Europe have low rates of women's entrepreneurship, closely resembling their highly developed European neighbors, while countries in Latin America and the Caribbean have rates of women's entrepreneurship two and three times higher, said the study's principal researcher, Babson Professor Elaine Allen, in an interview.

Regardless of gender or country group, employment matters to entrepreneurial activity. The likelihood of being involved in entrepreneurial activity is three to four times higher for women who are employed in a wage job compared to women who are not working, are retired, or are students.

Globally, the rate of male opportunities in entrepreneurship exceeds that of women, but there's no gender gap with respect to necessity entrepreneurs, who start a trade for survival. Allen defines a "necessity entrepreneur" as someone who embarks on entrepreneurship because they are not able to find sufficient income elsewhere.

The rate of female necessity entrepreneurship exceeds that of males in Latin America and the Caribbean, she said, adding that people in those regions have a "more international view and are likely to see entrepreneurs as a way out of poverty." She speculated that they may have a more global view because "they're somewhat indoctrinated by the United States."

She also noted that in Latin America and the Caribbean there isn't a lot of "red tape" to starting a business. According to the study's "red tape index," countries such as Israel and Sweden require a lot of government involvement in starting a business and so rank high in the red tape department. Allen added that the United States has a very low red tape ranking because "it's quite easy to start a business here" when compared to some countries.

Japan and Peru were the only countries in 2007 where women were more active than men in starting businesses.

The global entrepreneurship survey involves data from 200,000 individuals from 42 countries, representing 70 percent of the world's population, according to Allen.

By Sharon McLoone |  May 2, 2008; 10:28 AM ET Data Points
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