The scale-up challenge for women entrepreneurs

The scale-up challenge for women entrepreneurs

What role does gender play in the process by which firms grow and achieve scale-up status? We set out to understand how growth experiences differ for men and women entrepreneurs.
The scale-up challenge for women entrepreneurs
Steve Denney
Research Collaborator + Ph.D, Munk School of Global Affairs and Public Policy
Viet Vu
Senior Economist
March 18, 2021
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ver the past 80 years, women’s economic empowerment has been one of the largest forces shaping Canada’s economy. As always, progress on this front has been non-linear. The pace of change occurs more rapidly in some domains than it does elsewhere. Entrepreneurship is one such area where significant gaps continue to exist, and while many have studied how gender ownership and gender-based experiences affect start-ups or business more generally, comparatively few examine the role gender plays in the process by which firms grow at a high-growth rate and achieve scale-up status. As part of the broader Women Entrepreneurship Strategy, an Innovation, Science, and Economic Development (ISED) initiative to close the gender gap in entrepreneurship, Scale the Gap: Exploring Gender Ownership and Growth Experiences for Canadian Firms focuses on filling a critical knowledge gap. A quantitative methods paper, this research compliments the qualitative work recently published, Growing their own way: High-growth women entrepreneurs in Canada.

When we discuss rapidly growing firms—or scale-ups—we are talking about firms that have survived the start-up and early growth stages of a firm life cycle. They are market-tested, established firms who are highly unlikely to fail (compared to start-ups, who are much more likely to fail). In this report, we use the OECD-Eurostat definition of a scale-up, defined as high-growth firms with growth in employment or revenue by 20% annually (on average) for 3 consecutive years. Research indicates that, compared to non-scale-ups, these firms contribute most to employment growth, have higher productivity, are more likely to invest in R&D and export.

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But more than economic impact, with scale-ups we are talking about firms with more sophisticated management structures and leadership teams. In growing quickly and finding their market fit and product niche, these firms have experienced rapid shifts in the way they operate, thus changing the role of any single entrepreneur. Because of this administrative transformation, we ask in this report whether gender ownership structure of firms affects firm performance, including the likelihood of becoming a scale-up.

Using the Survey of Growth and Financing of Small and Medium Enterprises, a representative survey of SMEs conducted by Statistics Canada, we find that 1 in 5 scale-ups in Canada were women-owned, corresponding to the share of firms overall owned by women. It is perhaps not surprising then that the share of a firm owned by women is not correlated with the chance of that firm being a scale-up when we use a more sophisticated tool. However, this fact masks the deeper inequity that lies beneath.

"Firms with women ownership that face regulatory challenges or labour-related challenges while growing are less likely to be able to overcome such challenges to attain scale-up status."

While employment scale-ups owned by men employed 38 people on average, an employment scale-up owned by women only employed 35 employees. Results were even more drastic when it comes to revenue scale-ups, where men-owned scale-ups recorded 20% higher revenue (or $1.2 million) compared to women-owned revenue scale-ups. Further, the higher the share of women owners, the smaller the firms tend to be generally – having considered the different industries men and women-owned firms tended to be in.

When we dig deeper into specific challenges these firms encountered while growing, we observe yet further gaps between firms owned by men and women. For example, when compared with men, firms with women ownership that face regulatory challenges or labour-related challenges while growing are less likely to be able to overcome such challenges to attain scale-up status. Curiously, however, we did not detect a statistically significant difference between the rate at which men and women-owned firms were able to overcome financing challenges to grow.

Canada will face significant challenges recovering from a pandemic-induced recession. We simply cannot afford to let good firms that can make significant economic contributions to Canada remain lower growth firms, simply because they are owned by women. Identifying these unique challenges that women-owned firms face in their journey growth is the first step to ensure all such barriers facing them could be removed. The findings in this report will inform both public discourse and policymaking regarding scale-ups and initiatives that seek to encourage and support women entrepreneurship.

For media enquiries, please contact Lianne George, Director of Strategic Communications at the Brookfield Institute for Innovation + Entrepreneurship.

Steve Denney
Research Collaborator + Ph.D, Munk School of Global Affairs and Public Policy
Viet Vu
Senior Economist
March 18, 2021
Print Page

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