Int Entrep Manag J (2009) 5:341–344 DOI 10.1007/s11365-007-0067-7

Women entrepreneurs across racial lines: issues of human capital, financial capital and network structures Andrea E. Smith-Hunter, New Horizons in Entrepreneurship, Cheltenham; Edward Elgar, 2006 Francisco J. Santos

Published online: 16 November 2007 # Springer Science + Business Media, LLC 2007

In recent years, research on “women entrepreneurs” has emerged as a topic of fast development in the field of entrepreneurship. The publication of a high number of new works, both theoretical and empirical, is becoming common among scholars of different countries. Obviously, one of the main reasons which explains this research trend is the improvements of women’s inroad into the world of work in general, and entrepreneurship in particular. After a long time during which women mainly had a role in our societies as housewives, the birth of fewer children and the “Women‘s Movement” have influenced the labour market to treat women as equals to their male counterparts. This has promoted an important cultural change in the global economy, but especially, in the developed western countries. Nevertheless, the persistence of discriminatory practices in the global marketplace against women is working at the same time as an added, but not less important, motivation which influences the publication of different research about women entrepreneurs. If women were firstly discriminated when they started to enter the labour market as employees, now they also find other difficulties when they try to do businesses as self-employees or employers. This social resistance to change has boosted many researchers, especially women, to find out the real situation of women entrepreneurs in an attempt to propose solutions to their problems. Taking into account these different motivations, a new book has just been published, written by Andrea E. Smith-Hunter and edited by Edward Elgar. Its title is “Women Entrepreneurs Across Racial Lines: Issues of Human Capital, Financial Capital and Network Structures”. As its author says, the most important contribution of this book regarding other books about women entrepreneurs is “to increase the number of studies that focus on the issues of women entrepreneurs across racial

F. J. Santos (*) University of Sevilla, Sevilla, Spain e-mail: [email protected]

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lines, identifying their differences and similarities”. According to my personal opinion, I think that the objective is quite opportune because, if women entrepreneurs are facing important barriers to develop their activities, this is even more the case in women from the developed western countries who belong to minority ethnic groups. Those minority groups have experiencing an important increase in recent years, both in the United States and Western Europe, because of the economic migrations which are being boosted by the situation of extreme poverty in the Third World. When these poor people arrive to the developed countries, they find a lot of problems integrating themselves. The cultural gap, the educational level and the family situation of migrants play against their possibilities of finding a job with a good salary in order to survive. Evidently, although some of the minority groups are in the second or third generation since they arrived in the western countries, their problems of integration haven’t disappeared. Thus, they find in the creation of firms a way of getting a good income level. In the Andrea E. Smith-Hunter’s book, the target population of the empirical analysis used for the research is women entrepreneurs in the United States. As is well known, this country is the western country which has received more migrant population throughout its history. In recent decades, the migration of LatinAmericans (Hispanics) has been especially high but we can not forget the great amount of people who are African-Americans (Blacks) and Asians and whose first generation reached the States during the 19th century and the first half of the 20th century. In spite of the progress on the civil rights’ movement, problems of discrimination still persist in the United States. Therefore, the high incorporation of women of different racial groups in entrepreneurial careers along with the inequality for minority women to develop their business like their white counterparts, justify the interest for this research. The book starts with a complete review of the literature on women entrepreneurs. Although the review considers works about different aspects related to women entrepreneurs, such as motivations, obstacles for the created firms, participations rates in different industries or demographic characteristics, the author makes a great effort to build a theoretical framework in which she highlights three main elements: human capital, financial capital and network structures of women entrepreneurs. According to Andrea Smith-Hunter, these elements determine the economic success of the business and, therefore, she proposes a model in which the different constructs of these three central elements appear. Nevertheless, a problematic question in this initial theoretical model is the lack of considerations of interrelations between the three elements, a point which emerges again later in the empirical analysis. Especially important is the interconnection between financial capital with the two other elements. In fact, the literature review carried out by the author shows the relevance of these connections because both the kind of human capital and network structure of women entrepreneurs always appear as the determining factors which condition the access of women entrepreneur to different kinds of financial capital. These same findings are habitually repeated in the literature on entrepreneurship, independently of whether the focus is on gender or not. In this sense, it would be more obvious to start the empirical analysis with the model proposed in the conclusions of the research because it takes into account those

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relationships and because it is, in fact, the model used as the frame in the rest of the research. The empirical analysis is designed following similar steps in other studies in the field of entrepreneurship. Given that there is not enough information in databases to create different quantitative and qualitative indicators about human capital, network structure, financial capital and the economic success of the business, it is necessary to do surveys in which a questionnaire is sent to a sample of entrepreneurs. In this research, the sample was provided by Dun and Bradstreet who are internationally known for providing sample frames on businesses. The data were obtained by the author of the research mailing the questionnaire to 1,000 potential participants. These participants were white women and minority women entrepreneurs, defined as Blacks, Hispanics, Native Americans and Asians. The final sample was composed of 139 white entrepreneurs and 124 minority women entrepreneurs. Due to the analysis studying women entrepreneurs both across racial lines in different states from the United States and across different activity sectors, results must not be generalized. Even so, the good design of the research helped the author reach some very interesting findings which are supported by the literature on women entrepreneurs. Among those findings, we could summarize the most interesting: &

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Regarding the “human capital” factor, results of the research show that white entrepreneurs have acquired more human capital skills than their minority counterparts and not only because of more years of formal education, but because of less pre-business experience in the form of seminars, programs, entrepreneurial experience and, of course, experience as employees in the labour market. Therefore, this “doubly disadvantaged” position of minority entrepreneurs (to be woman and not to be white) reduces their possibilities of access to financial capital and of succeeding in the firm’s growth. Secondly, regarding the “network structure” or “social capital” factor, results show women entrepreneurs have, in general, informal network links, such as friends and family. Nevertheless, it seems clearly demonstrated that minority entrepreneurs receive more support from these informal network links than their white counterparts. Moreover, when minority entrepreneurs receive the support from formal links, that support comes from social organizations, such as churches or women’s organizations, but not from professional organizations. Therefore, the author again finds a doubly-disadvantaged position of minority entrepreneurs. That weak position again doesn’t let them attain an easy access to different forms of financial capital. Thirdly, regarding the “financial capital” factor, results show that women entrepreneurs, in general, use informal sources of financial capital. Nevertheless, in the case of minority entrepreneurs, this use is even more acute. This is because, once again, the double discrimination against these women plays an important role when they try to accede to formal sources of financial capital, such as bank loans. The author, crossing data about human capital and network structure with data about different sources of financial capital, reaches the conclusion hypothesized from the literature review. That is to say, the kind of human capital and network structure influence the kind of financial capital used by women entrepreneur across racial lines.

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Nonetheless, Andrea E. Smith-Hunter tries to reinforce the findings reached in the analysis of data from the sample with information obtained from official databases and with the scanning of other findings in reports and different research done in the United States and the rest of the world. This is a task carried out with the intention of shedding more light about the situation of women entrepreneurs everywhere. In this sense, the comments related to findings of cross-cultural research are especially interesting because they suggest the influence of culture as another important factor in the economic success of the women-owned firms. The latter is true because, in fact, the discrimination practices are lower in some countries than others. For instance, the European Nordic countries scores in the highest positions of rankings regarding the absence of differences between men and women on income levels, educational levels and access to formal networks. Evidently, the culture in these countries is playing an important role in building an institutional structure which promotes a more equalitarian society and which lets women face the entrepreneurial career with more guarantees of success. On the other hand, there are many countries, especially underdeveloped countries, in which the culture constrains the decreasing of those differences among gender. If international reports say women-owned businesses are so important for world development, then something must be done to eliminate the discrimination practices. Evidently, as the author also points out, assistance to women entrepreneurs should cover areas such as human capital, network structures and financial capital. Moreover, due to the persistence of discriminatory practices that assistance would be needed not only at the start-up stage, but during the operational stages of the business and at the expansion stage. The book by Andrea E. Smith-Hunter is definitely a new and interesting contribution to the research on women entrepreneurs. It emphasizes the problems of discrimination which firms owned by women of different racial lines still face in the global marketplace. In my opinion, this work can be very useful for researchers in the field of entrepreneurship, financing institutions and government agencies. Even so, women entrepreneurs should be the group most interested in this book and others of this kind because by reading them they can be more aware of their challenges and opportunities.