© Nina Rosenbusch – Friedrich-Schiller-University Jena Human Capital, Gender, and Entrepreneurial Success: Empirical Evidence from China and Germany Nina Rosenbusch, Friedrich-Schiller-University Jena, Germany Andreas Rauch, RSM Erasmus University, The Netherlands Simon C. Parker, University of Western Ontario, Canada Jens M. Unger, University of Giessen, Germany World Bank Conference Female Entrepreneurship: Constraints and Opportunities 2 June, 2009

© Nina Rosenbusch – Friedrich-Schiller-University Jena Introduction and Research Questions Research Questions: (1)Do gender differences in human capital depend on the cultural context ? (2)Do male- and female-owned firms benefit from the same or different sets of human capital-related factors? (3)Does the gender effect on the relationship between human capital and business performance depend on the cultural context? Importance of female entrepreneurship for job creation and economic growth Gender gap has narrowed, but rate of female entrepreneurship is still low in many countries Gender differences exist with respect to venture creation, growth aspirations and venture performance Shortage of resources is a prominent explanation for gender gaps Role expectations can lead to gender differences in human capital Because role expectations vary between cultures gender effects may depend on the cultural context

© Nina Rosenbusch – Friedrich-Schiller-University Jena Some Facts about China and Germany (1/3) Female Labor Force Participation – An International Comparison RankCountryFemale Labor Force Participation Rate (2005) 1Burundi92.81 % 2Tanzania88.24 % … 15China75.79 % … 34United States70.07 % … 43Germany67.36 % (West and East) … 77Japan60.45 %

© Nina Rosenbusch – Friedrich-Schiller-University Jena West GermanyEast Germany Female Labor Force Participation Rate72 %62 % Female Part Time Employment Ratio42 %23 % Managerial Position Ratio (Men)20.3 %14.4 % Managerial Position Ration (Women)10.5 %12.2 % Womens Wages Relative to Mens75 %94 % Womens Share in Self-Employment (businesses with at least 1 employee)22 %30 % Source: Bundesministerium für Familie, Senioren, Frauen und Jugend Some Facts about China and Germany (2/3) Gender Issues in Germany – Differences between West and East

© Nina Rosenbusch – Friedrich-Schiller-University Jena Communist leaders of the PRC considered women as an important economic resource Idea of the Cultural Revolution ( ): Whatever a man can do, a woman can do (Turner, 2006) High participation rates of women in the labor force Reform of the educational system decreased gender discrimination in education Economic reforms partially reversed prior efforts to decrease discrimination against women - gender wage gap is rising - significant differences between urban and rural areas - discrimination severely affects less educated women Womens Commissions in state-owned enterprises help to prevent discrimination Emergence of a new female entrepreneur class (Oksoy, 1999): large increase in women entrepreneurship after 1996 (Qingqi, 2005) Example: Cheung Yan, entrepreneur and head of Nine Dragons Paper, has become the richest self-made woman in the world Some Facts about China and Germany (2/3) Gender Issues in China

© Nina Rosenbusch – Friedrich-Schiller-University Jena Hypothesis 1: Female entrepreneurs have a lower level of specific human capital than male entrepreneurs. Hypothesis 2: The gender difference in specific human capital is lower in China than in Germany. Previous studies have looked at gender differences in human capital, but have come to inconsistent conclusions. In many industrialized countries women are disadvantaged in the work, but not in the educational system. Gender differences should mainly refer to specific human capital. Different role expectancies could explain variations in research results. In cultures where women are expected to fulfill a domestic role gender differences with respect to human capital should be more severe than in cultures where women actively participate in the workforce. In such cultures, women have less opportunities to acquire human capital that is task- specific in the entrepreneurial context. In particular, their access to managerial experience is limited. Theoretical Background and Hypotheses (1/2) Gender Differences in Human Capital

© Nina Rosenbusch – Friedrich-Schiller-University Jena Unique resources are crucial for firm success Women are disadvantaged regarding the accumulation of financial resources necessary to start a business due to career interruptions A lack of financial capital can be partially compensated by human capital Women in entrepreneurial roles violate role expectations A high level of human capital increases their legitimacy and, thus, enhances their access to crucial resources Especially in environments with domestic role expectations for women female entrepreneurs benefit above average from human capital. Hypothesis 3: Female entrepreneurs benefit more from human capital than male entrepreneurs. Hypothesis 4: The gender effect on the human capital-performance relationship is lower in China than in Germany. Theoretical Background and Hypotheses (2/2) Relationship between Human Capital and Firm Performance

© Nina Rosenbusch – Friedrich-Schiller-University Jena Method Data Collection and Sample Structured Interviews and questionnaires with owners / managers of small businesses in Germany and China Lists of businesses were provided by local Chamber of Commerce 290 businesses in Germany, 298 businesses in China Share of female entrepreneurs in the sample: 19.0 % in Germany, 12.1 % in China 4 industries: Car and Machinery Components, Software, Hospitality, Building and Construction Measures Business Performance: Employment Growth between 2001 and 2003 General human capital: Number of years spent in education Specific human capital: number of years with industry experience previous managerial position Control variables: industry, firm age

© Nina Rosenbusch – Friedrich-Schiller-University Jena Results (1/3) Female EntrepreneursMale EntrepreneursZ-Valuep-Value MeanSDMeanSD Years in Education Industry Experience Managerial Experience Mean Differences in the Chinese Sub-Sample Mean Differences in the German Sub-Sample Female EntrepreneursMale EntrepreneursZ-Valuep-Value MeanSDMeanSD Years in Education Industry Experience Managerial Experience

© Nina Rosenbusch – Friedrich-Schiller-University Jena Results (2/3) Women-Owned BusinessesMen-Owned Businesses Software Industry **.095 Hospitality Industry Car and Machinery Components Industry *.307***.276*** Firm Age *** -.128** Years in Education Industry Experience -.609*** -.286*** Managerial Experience.348**-.005 F-Value Adjusted R² Significance of R² Change

© Nina Rosenbusch – Friedrich-Schiller-University Jena Results (3/3) Chinese BusinessesGerman Businesses Software Industry *** Hospitality Industry -.288** -.294** Car and Machinery Industry *.130* Firm Age Years in Education Industry Experience ***.298 Managerial Experience -.248*** ** Gender.205**.378* ** Years in Education x Gender Industry Experience x Gender *** Managerial Exp. x Gender *** F-Value Adjusted R² Significance of R² Change

© Nina Rosenbusch – Friedrich-Schiller-University Jena Conclusion Role expectancies shape gender gaps There are no gender differences in terms of education in China and Germany A gender difference exists regarding managerial experience in the German context, but not in China Women benefit more from managerial experience as one type of specific human capital than men, especially when role expectations in favor of a domestic role of women exist A limitation of the study is the focus on two countries only; future research in other cultural contexts could increase the generalizability of results Policy-makers should not exclusively focus on financial support, but also on providing an environment where women can gain task-specific experience which help them to start and run a business successfully