Entrepreneurial women must extend their networks beyond family

March 14, 2001

COLUMBUS, Ohio - Women who dream of being entrepreneurs need to expand their informal business discussion networks beyond family members, new research suggests.

A study of would-be entrepreneurs, conducted by Linda Renzulli and Howard Aldrich from the University of North Carolina and James Moody from Ohio State University, found that business people who had a higher proportion of family in their networks were less likely than others to actually start a business.

Business discussion networks are composed of the people that entrepreneurs go to for advice, knowledge and opportunities when they are thinking of starting a new business.

Compared to men, women in the study were more likely to have networks that included family, or networks with higher proportions of family members.

These results offer one explanation as to why women are only half as likely as men to start their own business, according to Aldrich. Moody explained that "family members are unlikely to provide you with information or leads you don't already have."

The study was published in a recent issue of the journal Social Forces.

Aldrich designed the study specifically to examine sex differences in business practices. Earlier reports found that once women were in business, the way they networked did not differ from men. However, the most recent study found that women's close personal networks were different from men's, affecting their chances of becoming owners in the first place.

Renzulli noted that "Women may be limiting their chance at successfully starting their own business by not developing and maintaining more ties with associates outside their families."

Members of a network could help an entrepreneur find financing for a business, suggest trusted lawyers or accountants, or help identify books or other resources.

"Who you know is very important when starting a new business, and entrepreneurs need to know the right people to be successful," Aldrich said.

The researchers used data from the Research Triangle Entrepreneurial Development Study. The study included surveys of 353 people in Durham and Wake counties in North Carolina who were actively trying to start a new business or who were thinking about becoming business owners.

The respondents were first surveyed in 1990 and 1991. Follow-up interviews were conducted in 1992 to determine which members of the sample had actually begun a new business.

Those surveyed were asked "Please tell me the first five people with whom you feel especially willing or able to discuss your ideas for a new business or your ideas about representing or running your current business." Those five people constituted a person's business discussion network.

The researchers wanted to identify any differences there might be between male and female entrepreneurs.

Results showed that 56 percent of the women mentioned a family member as part of their network, compared to only 40 percent of men.

Women's networks consisted of an average of 20 percent family members, compared to 14 percent for men.

Women probably have more family members in their networks than do men because women tend to have more family obligations in our society, Moody said. While family members might be helpful in running a business, they are less helpful in getting it started, he said.

"Family might provide good day-to-day support in running a business, but in terms of getting a business started - getting creditors and a business plan and an advertising program - your daughter-in-law is probably not the person who is going to be most helpful," Moody said.

The study also found that the more heterogeneous a person's network - the more variety in the background of network members - the more likely the respondent would start a new business. A heterogeneous network was one where the members come from different parts of the person's life: family, friends, coworkers, business associates, consultants, and fellow group or association members.

"If you have a network with people from many different backgrounds, you can get many different perspectives," Moody said. "If everyone you know has a similar background, then talking to one of them is like talking to all of them."

While women in the study tended to have more family members in the network than men, women and men tended to have similar levels of heterogeneity in their networks. "Once you account for family in the business network and the general heterogeneity of the network, being a woman has no detrimental effect on the odds of starting a new business," Renzulli said.

The best thing women can do if they want to increase their chance of success at starting a new business is to make sure to develop a diverse network, Moody said.

"Find people who can teach you something new," Moody said. "Meet people from different areas, with different jobs - the more differences you can get in your network, the better it is for you."
-end-
Written by Jeff Grabmeier, (614) 292-8457; Grabmeier.1@osu.edu

Ohio State University

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