Women-Owned Businesses: Growing but Still Far too Rare

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Women-Owned Businesses: Growing but Still Far too Rare

By Susan Green, IWPR Affiliated Researcher

 

Women-owned businesses and innovation – what do the data show?

In a new analysis, IWPR looks in depth at the status of female entrepreneurs who own businesses with employees.  Some of the results are promising for women entrepreneurs. For example,

  • The number of women-owned businesses has grown at nearly four times the rate of men-owned firms over the past 20 years.
  • The number of businesses owned by women of color grew at especially high rates compared to the growth of businesses owned by White women.
  • And women-owned businesses are typically at least as active as men-owned firms in improving product performance, enhancing usability of a good or service, and offering new products or services, among other activities.

Despite these positive findings, the report documents continuing gender gaps among business owners.

  • Women own only 20.8 percent of employer firms (compared with 65.6 percent of firms owned by men).
  • Women of color own only 24.7 percent of all women-owned businesses (compared with 74.9 percent that are solely owned by white women), reflecting stark under-representation among Black and Hispanic women.  Black women were 13.1 percent of women working nationally in 2015, but just 3.5 percent of women business owners. Hispanic women made up 15.13 percent of the national population of employed women, but 7.0 percent of women business owners in 2015.
  • Women-owned firms have less access to capital and earn less than half the revenues of companies owned by men.

Women’s rates of intellectual property ownership are also lagging behind. Women-owned businesses with employees are just half as likely as men-owned firms to hold a patent. This disparity is consistent with a recent IWPR finding that, in 2010, just 8 percent of patents granted in the U.S. listed a woman as the first inventor, and only 18.8 percent named one or more women as members of the inventing team.

At the business ownership level, the gap reflects the fact that women-owned firms are less concentrated in the industries with the highest shares of patents and other forms of intellectual property. IP-intensive industries include ‘information,’ ‘management of companies and enterprises,’ ‘manufacturing,’ and ‘educational services.’ Women entrepreneurs are less common than their male counterparts in these industries.  By contrast, women business owners are more concentrated in industries with low levels of IP, including ‘health care and social assistance,’ among others.

STEM and the gender IP gap – are they connected?

Women remain dramatically underrepresented in science, technology, engineering, and math (STEM) fields, not only as employees, but as business owners.  According to the National Women’s Business Council, industries that employ a higher-than-average share of STEM workers include ‘professional, scientific, and technical services,’ ‘information,’ and ‘manufacturing.’ In these industries, men-owned businesses outnumber women-owned companies by over three to one; men own 68 percent of employer firms, while just 20.6 percent are owned by their female counterparts.  The disparity is especially striking when it comes to women of color, whose businesses are concentrated in service industries and underrepresented in STEM-related fields.

In an important analysis, however, IWPR examined whether women’s under-representation in STEM fields is correlated with women’s lower likelihood of holding patents and other intellectual property.  The analysis suggests that additional factors are likely to be contributing to women’s disproportionately low share of IP holdings.  Levelling the IP playing field between genders seems likely to require more than increasing the share of women choosing STEM occupations.

How can women-owned firms expand innovative practices?

In a second report, IWPR profiles seven diverse programs designed to address the innovation gender gap in ways going beyond a focus on getting more women into STEM.  The programs are in institutions and organizations including universities, government agencies, and nonprofit organizations; target different women who have a wide array of experience; and tailor their activities to meet the needs of their participants.  The activities sponsored include helping women obtain funding, find mentors, and receive individual guidance.  Notably, the programs also seek to change the patenting and innovation culture, by educating broader communities on the benefits of increased diversity in these areas.  Further study will be needed to assess the long-term impacts of these promising approaches.