Female entrepreneurs and productivity around the world: Rule of law, network, culture, and gender equality

Abstract

• There are more female-led firms in areas with better legal structures, more equal gender norms, and individualistic cultures. • Productivity disadvantage for female-led firms exists in manufacturing but not in service firms, and in small firms. • The disadvantage for female-led firms increases with personal networks, competition, and individualistic culture. • More gender equal environments and a lower burden of chores/care duties on women mitigate the female disadvantage. • Women-led firms do not have static efficiency disadvantage; their dynamic disadvantage drops under more gender equality. We use worldwide firm-level data to study how women-led firms differ from male-led firms in productivity, and investigate potential explanations for these differences. Women-led firms are more prevalent in countries with better rule of law, gender equality, and stronger individualistic culture, and in small firms and services industries. Relative to men-led firms, women-led ones have lower levels and growth of labor productivity, but similar levels of total factor productivity. The disadvantage is mainly in manufacturing firms, nonexistent in service firms, and only in small firms. Furthermore, the disadvantage in performance for women-led firms is smaller for countries with higher gender equality and lower burdens of household chores and domestic care for women. Finally, it is smaller where there is less emphasis on personal networks, less competition from informal firms, and the culture is more collective. The study does not find that the female leader disadvantage is amplified in corrupt environments.