Businesswomen in Germany and their performance by ethnicity

Abstract

PurposeThe purpose of this paper is to study the determinants of wages and the labor market success of two kinds of entrepreneurial women in Germany: self‐employed and salaried businesswomen, and investigate whether ethnicity is important in these challenging jobs.Design/methodology/approachUsing Lee's technique, the paper first estimates the probabilities of being in self‐employment, a salaried businesswoman, working in other non‐entrepreneurial jobs, and not working at all with a multinomial logit, and accordingly adjust the wage regressions for selection and heteroscedasticity. By employing data from the German Socio‐economic Panel one can differentiate among different types of self‐employment and business entrepreneurship, control for human capital and labor market structures, and estimate wages for native and immigrant women aged 20 to 65. The subject scope includes literature on entrepreneurship, self‐employment, gender‐edge, and immigrant earnings assimilation.FindingsSelf‐employment offers businesswomen a lucrative avenue with higher monetary rewards, albeit for a shorter spell. If salaried businesswomen went into self‐employment, they would receive considerably higher wages and for at least 30 years. However, if self‐employed businesswomen went into salaried jobs, their wages would decline. This suggests that it is the self‐employment sector that offers better opportunities and monetary success, but not many businesswomen go into it. In these two entrepreneurial outlets human capital, years‐since‐migration and ethnicity are not significant.Research limitations/implicationsFuture research should overcome the cross‐sectional limitation and take advantage of the panel aspect.Practical implicationsMany qualified, highly educated and talented women are not part of the labor market and the entrepreneurial world. Germany should encourage these women to work, as it needs skilled workers and a stronger entrepreneurial sector. Financial disparities still exist between West and East Germany.Originality/valueThe novelty comes from asserting that the entrepreneurial spirit can also exist in salaried jobs. The added value is the new empirical evidence on the importance of self‐employment in Germany, where women fare well and success does not depend on ethnicity.