What Makes Women Entrepreneurs?

India currently faces a massive challenge of slowdown in growth and high levels of unemployment among youth, especially among the educated urban population. The formal labour market in India is saturated, unable to absorb the ever-increasing number of the labour force. Therefore, the role of small-medium enterprises in creating employment opportunities is vital for economic prosperity and social stability. Entrepreneurship is a crucial mode for utilizing youth power and generating employment that will in turn contribute to the economy’s growth and development, especially for those who aspire to be owners and employers rather than employees. Understanding the motivation and constraints faced by entrepreneurs is critical for designing and formulating appropriate policy initiatives. Encouragement of the ‘enterprise spirit’ or ‘animal spirit’ among young people is a precondition for success in employment, growth, competitiveness and innovation.

I base this brief talk[1] on our book, with my co-authors[2] titled ‘Women Entrepreneurship in the Indian Middle Class’[3], which should be out in print soon. What was the motivation for writing a book? My research interest is in the fortune of small enterprises, including the micro enterprises in the informal sector. The Global Entrepreneurship Monitor (GEM) measured the level of entrepreneurship across countries. In 2013 entrepreneurship level in India was ranked one of the lowest in the world.  Compared to its peers, with similar level of development, India ranked below average on job growth expectations, innovation and internationalization. In fact, India ranked far below Sub-Saharan Africa in terms of innovative orientation. This was a motivation for the book and also my consistent belief that improving size, scale, technology and productivity in small and micro enterprises will boost not just growth, but also the living standards in India.

Literature on mainstream entrepreneurship emerged in the 1930s and primarily focused on the male entrepreneur. The late 1970s witnessed the emergence of an explicit sub-domain of women entrepreneurship. Initial research on entrepreneurship assumed that the motivation of male and female entrepreneurs were similar.

Economists attribute the term entrepreneur and entrepreneurial spirit to Joseph Schumpeter. In Schumpeter’s (1934) theory of economic development, the key role of innovation by entrepreneurs is acknowledged as the driver of the dynamic and consistent process of economic change. In Schumpeter’s theory, economic development progresses through business cycles (Schumpeter, 1934). The term ‘creative destruction’ attributed to him, implies that old technologies give way to the new through innovation and this process drives growth of the economy. Innovative entrepreneurs are the key and drive the process of economic growth. In an uncertain economic situation, the entrepreneur is a risk taker and is motivated by the joy of creation, the will to conquer and the desire to be commercially successful.

Schumpeter (1934) defined an entrepreneur as a person who is willing and able to convert a new idea or invention to a successful innovation. According to Schumpeter, the essence of entrepreneurship is the discovery of new economic opportunities. An entrepreneur achieves success by introducing a completely new product or service thereby starting the creative destruction of the existing equilibrium that exists in the market. Broadly, entrepreneurs are classified into: Innovation entrepreneurs, Arbitrage entrepreneurs and Need Based entrepreneurs. According to Schumpeter, only innovation entrepreneurs are real entrepreneurs as they create a disequilibrium force.

We argue in our book that there could be other reasons for entrepreneurship, especially among women. According to Kirzner (1997), the Arbitrage entrepreneur is an individual who can identify opportunities and make profit from the existing scenario, not necessarily an innovation. Such a person makes profit through arbitrage opportunities that exist either within the market or among different markets. The third type of entrepreneurship, Need Based entrepreneur, arises due to the economic constraints existing in the society. Need Based entrepreneurship is most prevalent in the developing countries, and are the small and micro enterprises that are of interest to us. The profile of the need based entrepreneur is very different as compared to other entrepreneurs mainly because of the reason for choosing entrepreneurship. Entrepreneurship is a necessity.

A key take away from the literature on women entrepreneurship was that “entrepreneurship can result from necessity as well as opportunity and women entrepreneurs pursue goals beyond economic gains”. Women’s decision to become an entrepreneur can be precipitated by both push and pull factors. It is not just ‘profit’ and attaining ‘scale’ that motivates a women entrepreneur.

Poor and developing countries, have a significant proportion of self-employed workers and enterprises that are micro and small independent enterprises with small scale of operation. A significant proportion of the self-employed women in developing countries can be classified as necessity-driven entrepreneurs. The economist’s definition of an entrepreneur as risk-taking, innovators looking for an opportunity, or that of the psychologist as high achievers may not suit these women entrepreneurs. Unfortunately there is little policy focus on this dimension of necessity entrepreneurship. Polices addressed to them are generally poverty alleviation programmes and at best micro finance. There is hardly any emphasis on raising scale, improving technology and productivity of these micro enterprises.

In our study using secondary data on small enterprises using National Survey Organization data, we found that more than 30 percent of such women enterprises were growing, expanding. This led us to look for what helps growth to scale of such enterprises? Three important features helped these enterprises to grow. The use of internet by the enterprise, registration with any statutory authority and enterprises that received some form of government assistance, had higher odds of expanding. This showed the importance of government support for such micro and small enterprises to help expansion. The interesting result was that among these micro enterprises these were no gender differential in all the three positive drivers of expansion of the business. Thus being relatively small in scale and largely home-based did not inhibit the women owned enterprises from expanding, particularly when provided with support.

Entrepreneurship from the point of view of opportunity is expected to be fueled by a good institutional environment. That is, a good entrepreneurial ecosystem, good regulatory and legal systems, access to credit, encourages entrepreneurship. These are supply side phenomenon, which are crucial. However, certain demand side factors such as the behavioral traits of the women also lead to the choice of entrepreneurship.

In the book we studied three main behavioral traits of women, the entrepreneur’s preference for risk-taking, confidence or optimism regarding the business environment and non-pecuniary benefits like having a role model or mentor which helps reduce uncertainty. We found was that the male opportunity entrepreneurs in the top one third income decile were most likely to display traits of risk-taking. However, women entrepreneurs reported that they feared failure and were risk averse. But they still undertook entrepreneurship due to necessity, and 30 percent of them even expanded their enterprises. Confidence in oneself and the environment helped both male and female entrepreneurs in expanding their enterprise.

For women entrepreneurs the presence of a mentor was considered as a crucial factor that facilitated their decision to start a business and help it expand. However, as women have historically been a minority of the entrepreneurial population, they lack close role models who can mentor them through the process of creation and growth of an enterprise. Our results show that providing the facility of a role model or a mentor greatly facilitates women entrepreneurship and growth of enterprises.

Case Studies of Women Entrepreneurs

We also conducted 10 case studies of women entrepreneurs from eight diverse industry sectors, such as, manufacturing, healthcare, e-commerce, agribusiness, construction, specialty niche products (pet industry), travel and tourism. Our case studies revealed that many women started as small sole proprietors and then later grew their businesses by adopting the private limited legal form. This transition from a proprietorship firm to a private limited company helped them to scale up the business and target new markets.

Empowering Women through Innovative Business Models: (Based on Case Study by Vanita Yadav)

Transportation Company

The woman entrepreneur was born in New Delhi and spent her entire childhood in Delhi. Her late father was a freedom fighter and after India’s independence worked as a Trade Union leader. Her mother worked as a teacher and is now retired. 

The woman entrepreneur holds a postgraduate diploma in Rural Management from the Institute of Rural Management, Anand (IRMA) and a Masters degree in Social Development and Public Policy from London School of Economics. She was involved in grassroots level initiatives in India and Uganda and worked as a country director of Action Aid, Uganda from 1998-2003. During her international travels, she had seen women based cab services and she wondered why there were no cab services for women in Delhi, especially, with the growing number of crimes against women in the city.

The entrepreneur felt that a cab service ‘for women and by women’ was a great idea. It would enable her to meet two objectives with just one intervention. Firstly, her firm would be able to provide livelihoods to poor women who could become cab drivers. Secondly, it would offer a safe means of transportation to women travelers. She decided to launch the transportation company as a for profit social enterprise providing livelihood opportunities to poor and disenfranchised women. She also launched a partner firm and foundation to assist in training, development and women empowerment interventions with two of her friends. Once trained the women would be employed in the transportation company as cab drivers. She registered the transportation enterprise as a private limited company and the foundation as a Not-for-Profit firm /NGO in 2008. Both the firms work together in synergy. Her batchmates from IRMA and few Ashoka fellows acted as her mentors during the initial phases of the launch and helped shape her business idea.

Case Study – Producing Electricity from Garbage: (Based on Case Study by Vanita Yadav)

Company: Solid Waste Management

The woman entrepreneur was born in Parbhani, Maharashtra. She lost her father at a very young age of eight. Her mother brought up all the six children alone. Her mother worked as a teacher in a district education board school in a village in Maharashtra. She completed her school education in a village environment and later went to Aurangabad city to obtain a Bachelors degree in Science. After graduation, she did some social work for Rastriya Sevika Samiti at the district and taluka level.

The idea of launching the company started when she was working as a social worker in villages in Nanded district, Maharashtra. She saw that most of the local people were involved in agriculture and they were using chemical fertilizers in their fields. This was affecting the soil. She thought if vermicomposting units were installed in the village then the villagers would be able to process their agricultural waste in-house and also produce manure (compost) for their crops. She started by building a vermicomposting unit on her own terrace, she bought earthworms from the market, and then she gave the compost/manure that was produced on her terrace to the women in the close by (Nanded) village to test it in their fields. From vermicomposting she expanded to Biogas products, waste processing plants and waste management solutions for urban and rural areas. She calls herself as ‘the first Indian woman to produce electricity from garbage’.

I recount these stories as classic cases of women entrepreneurs visualizing an innovative enterprise with goals beyond economic gains. They are truly social entrepreneurs. Recently the transportation company was in the news for having got the permission to operate in the Delhi airport area. Both are innovators too, the transportation company’s innovation is in the organization of her business model and the solid waste company in innovating from vermicomposting to Biogas products. Education played an important role in the choice of their enterprises, The former’s orientation at the Institute of Rural Management and the latter’s in Science. Further, in these and other case studies we found that prior work experience helped women entrepreneurs gain knowledge of business operations and in building their enterprises.

Financially, most of the women entrepreneurs in our case studies used informal sources of finance, which was their own money or money borrowed from family or friends. Women entrepreneurs from the manufacturing or construction sectors, however, availed bank loans to buy machinery and set up their units. In two cases, women entrepreneurs sought funding from venture capitalists to scale their business. At the same time, two other women entrepreneurs shared that they preferred to stay away from the venture capitalist network due to the fear of losing control and the core essence of their business. 

Many of our women entrepreneurs revealed that there was a gender bias against women entrepreneurs in industry, society and government departments. Our study noted that there is a need to design ‘woman-friendly’ entrepreneurial ecosystems in India. The importance of a ‘social support network’, mentoring and role models, is a key factor to entrepreneurial success in the case of women entrepreneurs. Building this ecosystem and facilitating mentorship can play a key role in help creation of more women owned enterprises and their expansion. Overall, all cases recommended having faith in oneself, self-confidence, and pursuing the business idea with passion as the key to launching a venture successfully.

My plea is for both government and commerce and industry association to pay attention to the needs of the small micro enterprises run by women, to identify their potential for growth and provide the needed assistance such as improving technology and productivity and mentor-ship. This will create stronger women owned enterprises, help mitigate youth unemployment to some extent and promote growth in the economy.

[1] Chief Guest address at the Orientation Programme on ‘Women, Innovation, IP and Entrepreneurship’ organized by GUJCOST, DST, Government of Gujarat and Ahmedabad University, February 16, 2020

[2] Jeemol Unni, Vanita Yadav, Ravikiran Naik and Swati Dutta

[3] Orient Blackswan, Hyderabad, Forthcoming