Stereotypes about entrepreneurs not supported by performance data

In a new study, researchers at Luleå University of Technology have observed that venture capitalists adopt markedly different stereotypical notions of female and male entrepreneurs during their decision-making processes. But these notions are not supported by venture performance data from annual reports.

– We have made a unique study that compares the venture performance data of the entrepreneurs that the venture capitalists evaluated. Our results show that the assumptions of female and male entreprenurs have no basis in reality, says Malin Malmström, Professor of Entrepreneurship and Innovation at Luleå University of Technology.

The new study from Luleå University of Technology, "VC stereotypes about men and women are not supported by performance data ", is published in Harvard Business Review.

Gender in assessments of applications

Malin Malmström and her colleagues Joakim Wincent, Aija Voitkane and Jeaneth Johansson have used interview data to study how eleven venture capitalists from two Swedish government organizations used notions of gender in their assessments of applications by 126 entrepreneurs (43% women and 57% men).

The researchers have identified four gender-stereotypical notions that reveal major differences in how the venture capitalists evaluate a venture’s potential based on the entrepreneur’s gender:

• Assumption 1: Women are cautious and risk-averse, whereas men are ambitious and risk-taking.
• Assumption 2: Women are reluctant to grow their businesses, whereas men are willing to do so.
• Assumption 3: Women do not have resources to engage in high growth, whereas men do.
• Assumption 4: Women’s ventures underperform, whereas men’s ventures perform well.

Luleå University of Technology's researchers collected objective performance data from accounting reports for the corresponding 126 ventures to statistically analyze relevant performance indicators and accounting information.

"No statistically significant differences"

– Our results show no statistically significant differences between women and men who applied for finance. Key figures reflect a company's activities, achievements, ventures and activities, and there is thus no evidence that men's companies perform better and achieve better results than women's, says Malin Malmström.

Previous research at Luleå University of Technology about how public Swedish financiers perceive men and women seeking capital have shown that female entrepreneurs on average received 25 percent of their demanded capital, while men gained more than half.

– This kind of assumptions we have identified has consequences. The fact that you are a woman seeking capital activates a mindset from the outset; about what the application means and what the financiers think there is for potential to get a return. It is very important to look beyond these stereotypical performances, says Malin Malmström.

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