In September 2011, the United States Small Business Administration (SBA) released a report, “Developments in Women-Owned Business, 1997-2007”, which found that in 2007, the share of U.S. firms with 51 percent or more ownership by women had grown to nearly 29 percent. While it is a significant improvement compared to less than 5 percent in 1972, there remains a large gap between female-owned and male-owned businesses.

According to the report, women’s share of business receipts (including gross receipts, sales, commissions, and income from trades and businesses, as reported on annual business income tax returns) is significantly smaller than their share of the number of businesses, and a lower proportion of women than men business owners operate larger businesses. In 2007, men owned over 51% of all U.S. firms, while women owned almost 29%; another 17% were equally owned. However, female-owned businesses accounted for less than 4% of all business receipts, while male-owned businesses accounted for over 28%. (Publicly held firms accounted for only 3% of all 2007 U.S. firms, yet had almost 64% of all business receipts.)

Additionally, female-owned businesses are much less likely to have employees than are businesses owned by men. Compared with other groups, women-owned firms had the lowest share of employer businesses and more than 88 percent of them were non-employer firms in 2007. More than 5 million employer firms in the United States employed over 118 million people in 2007; publicly held firms were responsible for 51.7% of the total. Of the remainder, 35% were employed in firms owned by men, 6.9% in equally owned firms, and only 6.4% in women-owned firms.

There are some indications that the entrepreneurship gender gap might become narrower overtime. Women’s share of total U.S. firms increased from 26 percent in 1997 to almost 29 percent in 2007, while men’s share dropped from 55 percent to 51 percent. In certain industrial sectors, one gender or the other predominates: men own more businesses in carpentry, flooring, and miscellaneous special trade contracting, while women owners predominate in beauty shops and child day care.

However, other factors suggest that the entrepreneurship gender gap may widen even more, mostly due to lower preferences among women to become self-employed compared to men. A study published in February 2011, “Explaining Preferences and Actual Involvement in Self-Employment: Gender and the Entrepreneurial Personality”, which surveyed entrepreneurship patterns in the United States as well as Europe, found that women are less likely than men to believe that the economic climate is favorable for starting up a business and that they are more likely to believe that there are administrative complexities. In addition, the study finds that women are less risk-tolerant than men, and thus prefer wage employment to self-employment, since the former is perceived as less risky. Finally, the study finds that both men and women are much more likely to start a business when at least one of their parents is self-employed.

Another SBA study, released in 2009, “Self-Employed Women and Time Use”, finds that self-employed women allocate their work and non-work time differently than wage-and-salary women and men. On average, women spent less time on work and work-related activities than men, and self-employed women spent less time on work than wage-and-salary women. Self-employed women spent the most time in primary and secondary child care activities. Another finding is that high-earning women are more likely to enter self-employment than middle- or low-earning women. Additionally, self-employment entry rates are lowest among African-American and foreign-born women compared to men. Women with more advanced degrees are more likely to enter self-employment, especially those in the financial industries, education and health sectors, and other service categories.

These studies suggest that, in order to close the entrepreneurship gender gap, there need to be policies aimed at encouraging women to become entrepreneurs, including educating women about coping with different types of risks involved in starting a business, as well as programs that enhance work-life balance or facilitate secondary child care opportunities, and, more generally, policies to offset racial disparities in self-employment and increase human capital through the accumulation of education.

Attorneys at I.S. Law Firm are dedicated to promoting women- and minority-owned small businesses, which includes offering discounts to female and minority entrepreneurs. Please contact us for a consultation today: (703) 527-1779 or via e-mail: law@islawfirm.com.