Does Gender Matter? Cognitive Biases and Entrepreneurial Funding

Abstract

Entrepreneurial funding plays a pivotal role in new venture growth, however, there is a significant disparity in funding based on gender. We argue that the disparity in funding can be explained by linking cognitive biases with gender-specific expectations in entrepreneurial settings. Using social cognition theory, we examine four cognitive biases: overconfidence, an illusion of control, the ability to generalize from small numbers, and an escalation of commitment. We propose that when male and female entrepreneurs demonstrate these biases, there is a direct relationship to the amount of funding they receive from investors and that this relationship differs based on gender. We conducted mixed methods studies using both content analysis and experiments. Our results suggest that cognitive biases do have differing effects on gender in the context of entrepreneurial funding amounts.