Decades of entrepreneurship research has depicted women CEOs as poorer performers, citing statistics that female-led businesses have slower growth rates and lower profits. Many experts criticize this interpretation—arguing that growth and profits are narrow, masculinized, and short-sighted definitions of success—but it’s hard to dismiss their importance. Yet, despite the abundance of research comparing the performance of male- and female-led small- and medium-sized enterprises (SMEs), it is still not clear whether men’s and women’s leadership styles explain disparities.
Recently, however, research suggests that women may have advantages in family firms. Family businesses seem much friendlier to female leadership; up to 55% have at least one woman on their board, and 70% are considering a woman for their next CEO. The current reasoning for this disparity harkens that criticism of strategic timelines: women CEOs perform better at companies with longer-term goals. But, a new study published in the Strategic Entrepreneurship Journal, suggests that the difference in women’s success as business leaders at family-owned businesses has more to do with business culture and gender bias.
The study, authored by Remedios Hernández-Linares, María Concepcion Lopez-Fernández, Kimberly A. Eddleston, and Franz Kellermanns, dug into how CEOs foster entrepreneurship, a masculinized business behavior, within their businesses. They conducted regression analysis on survey data measuring entrepreneurial orientation and learning orientation at 322 Spanish small businesses (a mix of family firms and nonfamily firms), with 20% women-CEO representation across the group.
Why is Entrepreneurial Orientation so Important to Small Businesses?
It’s commonly held that the competitiveness of today’s business environment makes having an entrepreneurial orientation a key driver of business success. Entrepreneurship is particularly important at SMEs and family businesses, which stereotypically become attached to tradition and outdated processes and often experience low growth.
The authors therefore studied CEOs’ ability to foster entrepreneurship because it encompasses strategic decision-making activities aimed to increase new product development, innovation, and firm growth. They asked CEOs to rank their business’s performance on five entrepreneurial traits: risk-taking, innovation, proactiveness, competitiveness, and autonomy.
How Does Learning Orientation Make a Business More Entrepreneurial?
To be entrepreneurial, a business needs to convert new business knowledge into tactics, strategy, and employee behavior. CEOs need to ensure that employees are learning from their peers, customer and supplier feedback, and through experimentation, problem-solving, and mistakes.
The authors theorized that entrepreneurship in employees grows out of a business culture that values learning. To test their theory, they measured three key aspects of learning orientation to see how closely they integrated with entrepreneurship:
Commitment to learning: the attitude a firm holds toward learning and its ability to promote a learning culture.
Shared vision: the extent to which a firm develops and holds a sense of collective direction and purpose that guides its learning.
Open-mindedness: the willingness of the organization to proactively question long-held routines, assumptions, and beliefs and to accept new ideas.
The analysis found that across family and nonfamily businesses, irrespective of the CEO’s sex, all aspects of learning orientation were positively related to entrepreneurship. However, there were marked differences based on CEO gender and whether the organization was a family business.
How Does Female Leadership Impact a Business’ Entrepreneurial Orientation?
Leaders influence their employees’ behaviors via modeling and vicarious reinforcement. Leaders who are more credible and legitimate are more effective role models. Because entrepreneurship is depicted as a masculine endeavor, women entrepreneurs are often perceived as less legitimate, and female leaders may struggle to channel their firms’ learning toward entrepreneurship.
Interestingly, the study’s analysis showed no direct effect of CEO gender on entrepreneurial orientation. It was not male or female leadership that predicted an entrepreneurial orientation, but whether the male or female CEO was leading a family or nonfamily business.
“Women leaders at family firms better leverage their business’s commitment to learning and open-mindedness to support entrepreneurship than women and men leaders at nonfamily firms,” Eddleston said.
Why Is Female Leadership More Effective at Family Businesses?
That’s the major crux of the study. The authors posit that family firms tend to focus on being inclusive and supportive of internal stakeholders and that their emphasis on family and community couches female leadership in feminized values like relationship-building and values dissemination.
“Women have a cultural advantage when leading family businesses,” Kellermanns said. “Gender stereotypes and the characterization of entrepreneurship as masculine may hamper female CEOs’ ability to exert their leadership. However, those biases seem to exert a lower influence in family firms, where female CEOs show a greater ability to transform learning into greater entrepreneurial orientation.”
“With leadership often seen as a masculine endeavor, the perceived incongruity between female gender roles and leadership roles can lead to prejudice and bias against female leaders,” Lopez-Fernández added.
The study gives greater context to decades of conflicting research that demonstrates a multitude of business benefits associated with female leadership but also slower performance. The key may lie in culture—women can create more impact at businesses that emphasize more traditionally feminine values like inclusivity and collaboration; characteristics that are commonly valued in family businesses