Assistant professor Zhenyu Liao has studied inequality in business and has found that women possess a certain edge in some scenarios.
Northeastern University assistant management and organizational development professor Zhenyu Liao’s research has shown that female entrepreneurs face disadvantages when it comes to getting venture funding.
But the latest paper from the Thomas E. Moore Faculty Fellow and his coauthors shows that female founders have a unique advantage when it comes to getting funding for social enterprises.
“We tend to have this understanding (of) gender inequality … that sometimes men have more benefits,” Liao said. “What we found here is women raise more significant amounts of money for their social entrepreneur efforts.”
The research, published in Organizational Behavior and Human Decision Processes, looked at archival data on social entrepreneur projects from crowdfunding sites like Kickstarter and Indiegogo. The researchers looked at the relationship between funding and the gender of the entrepreneur and found that women got a “significantly higher amount of funding,” Liao said.
But, Liao added, this data only shows the what and not the why, so the researchers conducted an experiment where they presented investors with potential investments to see which ones they would invest in.
“Ultimately, we found women tend to be perceived as having a higher pro-social motivation,” Liao said. “Those kinds of higher social motivations will translate it into stronger confidence among those investors that those women entrepreneurs are more likely to commit to those social goals in their social, entrepreneurial projects.”
The researchers look specifically at social enterprises and entrepreneurs because of the challenges they often face when balancing their mission with turning a profit. These are businesses that focus on addressing concerns around social justice issues like the environment or racial and gender inequality, Liao said.
“Whenever we talk about entrepreneur activities, people primarily focus on profits, on the financial success,” he added. “Social entrepreneurs actually have dual roles. They initially started with social welfare goals … (and) they want to make sure those social entrepreneur projects can function well, so they also have to maintain their financial stability.”
But often what happens is what Liao described as “mission drift” where these social enterprises lose sight of their original mission in order to achieve financial success, and studies show some of the goals of these social enterprises aren’t met in favor of financial goals, posing a problem for investors.“When investors are trying to make a decision, the huge concern for them is whether social entrepreneurs can continue to stay committed to those social goals,” Liao said. “Because sometimes when we grow, we face huge financial challenges … sometimes they just prioritize the financial goal.”
But this latest research shows that investors view women entrepreneurs as having more motivation to achieve these social goals and as less likely to prioritize them over financial achievements.
“Women entrepreneurs have some unique advantages in certain domains,” Liao said. “These can be really powerful. (I hope this paper) shines a hopeful light on this.”