‘In the company of cheerful ladies’: whether female entrepreneurs are more productive?

Abstract

After over two decades, the debate on the female underperformance hypothesis remains not concluded. This study sheds some new light on the hypothesis by (i) showing that surrounding institutional forces play an important role in determining how female businesses perform and (ii) arguing that to understand gender differences (or lack of those) in performance, we need to look at productivity alongside profitability, revenues, and growth. Specifically, we posit that, in certain developing countries, female entrepreneurs devise specific strategies to cope with challenging institutional contexts. In such contexts, female entrepreneurs have less opportunity to realize economic rents compared to males, but they respond to these constraints by becoming more efficient in resource use through relying on female employment. Investigating a large set of longitudinal data from Vietnam, we find that female businesses are more productive than male businesses, and that this effect is stronger when female owner-managers employ more female employees, or even female employees only. However, we also find that these positive effects are weakened with increased corruption. This provides important implications for female entrepreneurs and policymakers in developing countries.