managerial performance and business success: gender
TRANSCRIPT
08.07' סדרת ניירות לדיון מס
Managerial Performance and Business Success: Gender
Differences in Canadian and Israeli Entrepreneurs
By
Dafna Kariv Dafna Kariv The College of Management, Academic Studies, School of Business Administration, 7 Rabin Blvd., P.O.B 25073, Rishon Le-Zion, Israel 75190 March 2008 ______________________________________________________________________
The research was supported by the Research Unit at The School of Business Administration, The College of Management, Academic Studies.
Entrepreneurship, managerial performance and business success 1
Managerial Performance and Business Success:
Gender Differences in Canadian and Israeli Entrepreneurs
Kariv, D.1
1The School of Business Administration, the College of Management, Rishon Lezion, Israel
Contact details
Dafna Kariv, Ph.D.
The School of Business Administration, the College of Management,
9 Yitzhak Rabin Boulevard, Rishon Lezion 75190, Israel
Tel: +972-3-9634281
E-mail: [email protected] ; [email protected]
Entrepreneurship, managerial performance and business success 2
Abstract
The purpose of this paper is to assess the role of managerial performance in the success of
men-owned businesses (MOB) and women-owned businesses (WOB) for Canadian and
Israeli entrepreneurs. A process-oriented approach, a relatively overlooked perspective in
this field, was used for this assessment. The methodology used was based on two national
samples from Canada and Israel (n=235) which included mostly members of a private
business networking organization. Questionnaires were distributed to the respondents; only
entrepreneurs with at least one employee were included. Findings: Multilevel analyses
revealed that gender is significantly associated with some managerial functions, but except for
the business longevity—it is not directly associated with measures of business success;
nationality is associated with two measures of business success: turnover and growth. Women
entrepreneurs, both Canadian and Israeli, ranked significantly higher in some functions of
their managerial performance compared to their male counterparts. This study's main
implications are in deciphering the major role of managerial performance and nationality and
the relatively marginal effect of gender in business success measures, implying that the
gender gap in successful entrepreneurial businesses is decreasing. These findings can become
foundations for better understanding broader entrepreneurship questions and practice-based
researched endeavors. This paper's main contribution is in the identified need for developing
training and education programs for entrepreneurs in the areas of managerial skills and
practices; as well as in opening future avenues for cross-national assessments of a process-
oriented perspective in these areas.
Research paper
Key words: entrepreneurship, gender, cross-national, managerial performance, business success
Entrepreneurship, managerial performance and business success 3
Introduction
The development of businesses has been said to proceed through stages that parallel those of
human development, and much as in human development, each stage presents new challenges
to be met and dealt with (Reynolds, Storey & Westhead, 1994). According to this view, which
takes a process-oriented perspective (Aldrich, 1999; Aldrich & Langton, 1998; Elder, Johnson
& Crosnoe, 2003; Moen, 1998; Moen & Minor, 1998), the owner's entrepreneurial
characteristics, such as innovation, creativity, and risk-taking, are required mainly in the first
stages of venture creation, as he/she turns innovative ideas into an active business. Once the
business begins to function and succeed, however, the nature of the firm's needs change, and
the owner is expected to engage in different managerial tasks, such as supervising staff,
establishing strategic goals, or establishing effective networks. Furthermore, business success,
at least at the micro level dimension of analysis, depends on the ability of firms to adapt
internal structures and processes to available opportunities and external constraints (Pfeffer &
Salancik, 1978), and such adaptations depend on the actions of the firm's leader, (e.g.
Barringer & Jones, 2004; Chen & Barnes, 2006; Miller, Madsen & Cameron, 2006), the
entrepreneur. Choosing and utilizing the appropriate managerial performance is thus critical
in assuring the success of entrepreneurial businesses. Literature about how businesses need to
operate for achieving success disclosed robust works on business survival, growth in sales and
profitability as well as in growth in size of the firm (Bates, 1990; Cliff, 1998; Hall, 1992;
Kalleberg & Leicht, 1991; Sharfman & Dean, 1991) . Although a comprehensive review has
been done on business success measures, relatively few studies have explored the
relationships between managerial performance and business success in the entrepreneurial
realm.
The success of entrepreneurial businesses is multifaceted, taking on different forms
(Lussier & Pfeiffer, 2000; Shane & Venkataraman, 2000; Stevenson & Gumpert, 1985).
Entrepreneurship, managerial performance and business success 4
However, one major finding that repeatedly emerges from studies on entrepreneurship is that
women-owned businesses and men-owned businesses (WOB and MOB, respectively) differ
in some success measures (e.g., Alsos, Isaksen & Ljunggren, 2006; Bhide, 1999, 2000;
Birley, 1989; Boden & Nucci, 2000; Grilo & Irigoyen, 2006). With the exception of a few
recent studies showing no gender differences among entrepreneurial businesses in some
success measures (e.g., Johnsen & McMahon, 2005; Menzies, Dichon & Gasse, 2004), most
studies revealed differences in business longevity (Low & MacMillan, 1988; Pugh, Hickson,
Hinings, & Turner, 1968), rates of sales (Bhide, 2000; Cassar, 2004; Covin, Green & Selvin,
2006; Covin & Selvin, 1991), and rates of growth (number of employees), (Bhide, 1999,
2000; Flamholtz & Randle, 2000; Greiner, 1998; Watson, 2006) among others. Variations in
success across gender-based businesses has traditionally been explained either by the
resource-based view (e.g., Barney, 1991, 2001; Bird & Brush, 2002; Boden & Nucci, 2000;
Brush, Carter, Gatewood, Greene, & Hart, 2004; Conner & Prahalad, 1996; Cooper & Goby,
1999; DeTienne & Chandler, 2007; Fasci & Valdez, 1998; Loscocco, Robinson, Hall &
Allen, 1991; Marlow & Patton, 2005), i.e., owners' human capital, motivations to start a
business, their choices of industry, among others (Jones & Raydel, 2002; Kirchoff, 1994); or
by the output-oriented perspectives, in terms of the business's results, e.g., sales turnover and
profitability; growth; longevity, and more (Alsos, et al., 2006; Boden & Nucci, 2000; Fielden,
Davidson, Dawe & Makin, 2003; Grilo & Irigoyen, 2006). A literature search that addresses
the differential success of MOB and WOB in such measures however reveals that there are
only a few studies of substance that deepen the exploration to a process-oriented perspective
in explaining MOB and WOB's success in these measures (Baron, 1998; Greene, Hart,
Gatewood, Brush & Carter, 2003; Verheul & Thurik, 2001). While the theoretical importance
of sustaining the firm's competitive advantage has catapulted this issue to the forefront of
agendas for both output-oriented and resource-based approaches (Barney, 1991, 2001); the
Entrepreneurship, managerial performance and business success 5
process-oriented approach – referring to both the theoretical and practical role of gender
performance in sustaining a competitive advantage - continues to lag behind (Zahra, 2007).
As such, issues such as managerial performance carried out by men and women are pushed to
the rear of research in entrepreneurship.
A process-oriented approach
Guided by the literature on life course theory, the process-oriented point of view (Aldrich,
1999; Aldrich & Langton, 1998; Moen & Minor, 1998) refers primarily to actions and
activities of leading entrepreneurs (Low & MacMillan, 1988; Ucbasaran, Westhead & Wright,
2001; Zahra, 2007) along the entrepreneurial process or life course of their businesses - from
exploration to exploitation (Shane & Venkataraman, 2000), focusing on the connection
between entrepreneurs' actions and their organizational development. This view treats the
business outcomes (i.e., survival, financial performance, and growth) as the results of the
business processes (Aldrich, 1999), in the context of the environment and organizational
processes (Carsrud, Olm, & Eddy, 1986; Gartner, 1989). Recently, there have been calls in
research for a shift in focus, from the traits and motivations of entrepreneurs to performance
and behavior (Gartner, 2001; Ucbasaran et al., 2001; Zahra, 2007). One such performance
would be entrepreneurs' managerial performance.
Taking a process-oriented perspective means emphasizing performance, which can be
relatively easily adjusted and modified to the firm's needs. Explaining MOB and WOB's
success measures through the owner's human capital, for example, means addressing existing
facts, some of them unchangeable, i.e., past experience in entrepreneurship or management, or
attainment of academic education in entrepreneurship – thus assuming that only a limited
number of individuals with unique initial human resources will achieve success for their
Entrepreneurship, managerial performance and business success 6
businesses. By taking a process-oriented view, implications on how to achieve better results
in their businesses are applicable, and should promote a narrowing of the gender gap in
entrepreneurial businesses' success.
Additionally, the process-oriented view emphasizes the role of environment and the
external relationships on the owner's performance and the business processes (Street &
Cameron, 2007); asserting that environments' influences on entrepreneurial businesses or on
entrepreneurs, i.e., men versus women, vary across cultures (Mirom, Erez & Naveh, 2004),
thus should be addressed accordingly. Statistical assessments suggest that the number of
people involved in entrepreneurship is about 73 million, about 30 million of whom are
women1. Considering the importance of entrepreneurship to nations' economies, and the
growing numbers of entrepreneurs, particularly women entrepreneurs, it is surprising that
little has been written on gender and the success measures of entrepreneur-owned businesses
in the context of their environments (Greene et al., 2003). The assumption that there is a
single, 'universal' environment that affects entrepreneurial businesses' success means ignoring
environmental or contextual effects (Aldrich, 1999; Shane, 2003; Shane & Venkatamaran,
2000); yet, only a very limited number of studies have addressed comparative cross-cultural
perspectives of gender and success measure of new businesses (e.g., Cameron &Quinn, 1988;
Street & Cameron, 2007). Comparisons across nations of the relationships between
managerial performance and success measures of MOB and WOB thus seem warranted.
The shortcomings in the afore-described research were the impetus for a comparative cross-
cultural exploration of MOB and WOB's success measures, i.e., longevity, sales turnover and
growth in business size through a process-oriented perspective, i.e., owners' managerial
performance.
1 GEM, 2004, 2005, at: http://www3.babson.edu/CWL/upload/GEMWomensReport_Mar82005.pdf These numbers apply to the 34 countries participating in the GEM project. .
Entrepreneurship, managerial performance and business success 7
Theoretical Background
Managerial behaviors and gender in the entrepreneurial context The management
practices of business owners have been repeatedly found to be positively associated with
business success (Barney, 1991, 2001; Zahra,). But in the emerging literature on management
and entrepreneurial business there is a relatively limited number of studies addressing
comparative cultural assessments, whether of gender (Brush, 1992; Merrett & Gruidl, 2000;
McGregor & Tweed, 2002); or across countries (Kolvereid, Shane & Westhead, 1993;
Mueller, 2004; Smith, Dugan & Trompenaars, 1997). Moreover, there is a much smaller body
of existing research on women entrepreneurs relative to that on men entrepreneurs, especially
with respect to managerial performance (Chaganti & Parasuraman, 1996; Sonfield, Lussier,
Corman, & McKinney, 2001). This may be the result of the difficulty in determining
managerial performance, as this is a multifaceted, diverse concept that encompasses several
managerial aspects, such as managing people, setting goals, stimulating creativity and
innovation, establishing networks, and more (Whetton & Cameron, 2005).
In this study managerial performance is defined as management know-how, which is
assumed to reflect management-specific skills and knowledge, without regard to the kind of
business. Several managerial functions will be included to represent the management
performance of entrepreneurs; i.e., managing innovation, people-orientation in managing
employees, leading change, and others. Previous studies on entrepreneurship have shown that
men and women differ in their managerial skills and performance (Gundry & Welsch, 2001;
Lerner, Brush & Hisrich, 1997; Morris, Miyasaki, Watters & Coombes, 2006; Naffziger,
1995; Perry, 2002), but most of those studies did not adequately address the
multidimensionality of managerial performance but rather treated 'management' as an
Entrepreneurship, managerial performance and business success 8
inclusive, one-dimensional concept (Dumas 2001; Fischer, 1992; Morris, et al., 2006; Sadler-
Smith, Hampson, Chaston, & Badger, 2003; Rosa, Carter & Hamilton, 1996). Some studies
examined a few functions of managerial performance, e.g., decision-making, risk-taking or
leading change, but investigated them separately, thereby overlooking the holistic dimension
of managerial performance in entrepreneurial businesses. Most of these studies have shown
that women entrepreneurs are less successful in turning their managerial performance into
successful and profitable enterprises (Carter, Williams, & Reynolds, 1997; Du Reitz &
Henrekson, 2000); however, the explanations for these gender-based relationships are mixed.
Some studies tend to portray women as being at a disadvantage in certain critical managerial
behaviors, i.e., in exhibiting financial performance; less likely than men entrepreneurs to use
lines of credit, bank loans or supplier credit; among others (Carter & Rosa, 1998; Carter, et
al., 1997; Powell & Ansic, 1997; Sonfield, et al., 2001), some other studies point to lack of
skills such as self-confidence to lead change in their businesses, to set goals or to generate
alternative solutions in order to make adequate decisions or to overcome the problems they
face, especially in risky situations (Johnson & Powell, 1994; Zinkhan & Karande, 1991).
Overall, these shortcomings are suggested to be the cause of gender gaps in the development
of their businesses. On the other hand recent studies provide empirical evidence that men and
women do not perform differently in managing their entrepreneurial businesses and that their
managerial performance and attitudes correspond in many aspects (Chaganti & Parasuraman,
1996; Menzies, et al., 2004; Orser & Riding, 2004; Watson, 2002); while a third group of
studies addresses the advantages women have in specific functions in management. The body
of studies focusing on the managerial performance for which women are at an advantage
compared to men includes managerial functions related to people; women more than men
focus on their teams' development, empower their subordinates and encourage their workers'
achievements and perseverance (Bruni, Gherardi & Poggio, 2004; Brush & Hisrich, 2000;
Entrepreneurship, managerial performance and business success 9
Brush, et al., 2004; Gundry, Ben-Yoseph & Posig, 2002). Other studies report that women
entrepreneurs spend more time in networking, more engaged in conducting market research
and typically demonstrate advantages in strategic planning, leading change (Greve & Salaff,
2003; Lerner, et al., 1997; Lerner & Almor, 2002; Morris, et al., 2006; Walker & Webster,
2006) and innovation (e.g., Hisrich & Brush, 1984; Goldsmith, Stith & White, 1987;
Goldsmith, Freiden & Eastman, 1995 Sexton & Bowman-Upton 1990).
The research on male entrepreneurship, which is more comprehensive than the research on
female entrepreneurship, depicts men as initially having a more advantageous position in the
general management of their new firms, in managing sales (Du Rietz & Henrekson, 2000),
and in being more oriented to their businesses' financial goals ( Carter & Rosa, 1998;
Coleman, 2002; Orhan, 2001; Tullous, 2002). They are more likely to emphasize
customization or cost efficiency (Chaganti & Parasuraman, 1996), and are in a better position
to manage networking more effectively (Aldrich, 1989), even though women entrepreneurs
are more involved in networking in quantitative terms (Greve & Salaff, 2003).
In each of these cases, women are considered to perform their managerial role differently
from men, and this leads their businesses to a different course of development and success
(Watson, 2002; Watson & Robinson, 2003). However, none of these studies provide
satisfactory explanations for why WOB are less successful in some measures than MOB; do
women entrepreneurs form a unique culture ((Hofstede, 2001; O’Reilly, Chatman &
Caldwell, 1991) differentiated that the culture of men entrepreneurs? One would expect such
explanations in view of the burgeoning studies showing more gender similarities than
differences in management, or that several aspects of women’s managerial performance
surpass either in quality or magnitude, that of men .
Entrepreneurship, managerial performance and business success 10
Entrepreneurial success and gender Although there is robust theory on entrepreneurial
success and gender (e.g., Alsos, et al., 2006; Birley, 1989; Boden & Nucci, 2000; Chaganti &
Parasuraman, 1996; Grilo & Irigoyen, 2006; Kjeldsen & Nielsen, 2004), studies on this
relationship and managerial performance are scarce. With the exception of a study by
Kalleberg and Leicht (1991), we could not locate any recent studies addressing the multiple
indicators of managerial performance and success measures of MOB and WOB.
Entrepreneurial success is complex and difficult to measure (Shane & Venkataraman, 2000)
and this could explain the dearth of research in this area; moreover, the measurement of
'business success' draws from different approaches (e.g., Sexton & Bowman-Upton, 1990),
with each approach introducing different limitations in terms of evaluation, validity,
reliability, availability, accuracy, etc. Of the existing studies on entrepreneurial success and
gender, some findings show gender-related differences in sales, financial assets, profitability
(Chaganti & Parasuraman, 1996; Kjeldsen & Nielsen, 2004); survival (Cooper, Gimeno-
Gascon, & Woo, 1994; Robb, 2002; Srinivasan, Woo, & Cooper, 1994); and growth in size
measured by number of employees (Bhide, 1999, 2000; Flamholtz & Randle, 2000; Greiner,
1998; Watson, 2006), where WOB are found to be less successful than MOB. Some other
studies found no gender-related differences in success measures, i.e., longevity, turnover, and
growth, among active entrepreneurial businesses (Fagenson, 1993; Kalleberg & Leicht, 1991;
Menzies, et al., 2004; Sonfield, et al., 2001; Verheul, Risseeuw & Bartelse, 2002; Verheul &
Thurik, 2001; Watson, 2002).
According to Watson (2002), this conflicting evidence may be explained by the fact that all of
these studies fail to relate input to output, this relation being essential to adequately assessing
performance and success. His results, derived from research conducted on a large sample of
men and women business owners in Australia, showed no difference in men's and women's
business performance when measured by return on equity (ROE) and return on assets (ROA),
Entrepreneurship, managerial performance and business success 11
after taking into account industry and age of the business. Similar results were found when
risk measures were included in the analysis (Watson & Robisnon, 2003). However, a recent
study conducted by Johnsen and MacMahon (2005) with the same sample concluded that
there were no statistically significant differences between the success of MOB and WOB,
even in terms of business growth. The scarcity of recent studies addressing these issues (e.g.,
Menzies, et al., 2004; Du Rietz & Henrekson, 2000) can be attributed either to the complexity
of defining entrepreneurship success or the different ways in which each gender defines
business success (Van Auken, Rittenburgm, Doran & Hsieh, 1994). For example, women
entrepreneurs perceive business success as being in control of the business processes, building
ongoing relationships with clients, doing something fulfilling and achieving goals, while men
describe success in terms of achieving goals and financial profitability (Moore & Buttner,
1997; Romano, 1994). The documented differences in motivations to entrepreneurship
(Hughes, 2006) can explain these divergences in the perception of business success. If women
choose entrepreneurship to balance family and work, for example, the measure of success
might not be stated in terms of financial profitability.
The measures chosen to be included in this study and representing business success are
longevity, turnover from sale and increase in size as measured by the number of employees.
Business longevity – Age and size variables consistently exhibit significant relationships with
the firm’s success (Low & MacMillan, 1988; Pugh, et al., 1968). From the process-oriented
perspective the relationships between business longevity and entrepreneurs' managerial
performance is twofold. Taking the organizational change perspective, managerial
performance represents the internal processes that develop over the course of the firm's life,
among other existing routines (e.g., Bates, 1990; Baum, 1996 ; Hannan & Freeman, 1984);
Entrepreneurship, managerial performance and business success 12
thus entrepreneurs’ managerial performance evolves and is shaped through the business'
resources, needs and constraints. As such, not only does the existing managerial performance
in a business enhance the business' success over time, but in fact, a firm lacking effective
management may die (Watson, 1995). A different aspect of this theory suggests that age of
the business – longevity - means a loss of agility and responsiveness over time; thus while the
pressures imposed on the business increase with age and size of the business, new
opportunities are missed, and current dangers are not avoided (Barron, West & Hannan,
1994). It may suggest that such rigidity induces entrepreneurs' managerial performance to
become fixed and this in turn may reduce the likelihood of making any changes in order to
ascertain an adaptation between the business and the external pressures it encounters (Barron,
et al., 1994; Baum, 1996). Some findings show that business growth decreases with the firm’s
age (Jovanovic, 1982); thus from this aspect over the years the owner's managerial
performance may turn into a potential hindrance to the success of his or her business.
Some functions of managerial performance such as goal setting (e.g., Noel & Latham, 2006),
innovation and adaptation of new technology (Gagnon, Sicotte & Posada, 2006; Sinetar,
1985) are considered to positively affect business longevity. Again, the effect of gender on
this relationship between managerial performance and business success has been
insufficiently investigated.
Turnover from Sales - this measure is usually assessed against the benefits from alternative
courses of action (Shane & Venkataraman, 2000).Consistent with opportunity cost arguments,
entrepreneurs with relatively higher levels of managerial performance – whether as a result of
their managerial experience, education and training in management, or their personal traits -
are likely to pursue entrepreneurial activities with potentially larger returns (Bhide, 2000;
Cassar, 2004; Covin, et al., 2006; Covin & Selvin, 1991).
Entrepreneurship, managerial performance and business success 13
Both managing innovation, R&D and change (Chakrabarti, 1990; Deeds & Rothaermel,
2003), and networking (Anand & Khanna, 2000; Duysters, de Man & Wildeman, 1999;
Walter, Auer & Ritter, 2006) are found to stimulate sales.
Business Growth - Based on both the process-oriented perspective and the resource-based
view, the entrepreneur's managerial performance (i.e., capabilities, personal abilities) are
associated with business growth, (Barney, 1991, 2001), i.e., number of employees. Employees
are a critical resource in the achievement and maintenance of any growth (Bhide, 1999;
Flamholtz & Randle, 2000; Greiner, 1972, 1998; Watson, 2006), thus effective management
of their employees enhances entrepreneurs' business success.
Studies show that the most important managerial functions for achieving growth in number of
employees relate to effectively managing people in terms of empowerment, feedback,
personal development and rewarding the employees. (e.g., Landau & Leventhal, 1976;
Weitzman & Kruse, 1990; Zenger, 1992).
Cross-cultural management performance
In the last decade, a number of empirical studies have suggested that differences among the
genders in managerial performance can be explained by cultural factors, such as nationality.
Managerial performance has been found to differ across nationalities, both in terms of
perceptions of what determines managerial performance and in terms of management
practices (Atuahene-Gima & Ko, 2001; Neelankavil, Mathur & Zhang, 2000; Steensma,
Marino, Weaver & Dickson, 2000). Some studies have found that nationality has a greater
impact than gender in terms of contextual influences and thus suggest that nationality, to
some degree, moderates gender differences among entrepreneurs (Kolvereid, et al., 1993;
Mueller, 2004; Smith, et al., 1997). Neither the prevalence nor the substance of entrepreneurs'
Entrepreneurship, managerial performance and business success 14
managerial performance is uniform across countries (Shane, 1992; Smith et al., 1997; Mueller
& Thomas, 2001). Innovativeness, managing subordinates, authority imposed within the firm,
decision-making processes, conflict resolution (Lam, Chen & Schaubroeck, 2002; Shane,
1993; Tinsley & Brett, 2001), among others, have been found to differ across countries
(Thomas & Mueller, 2001). However, despite these findings, cross-cultural assessments of
entrepreneurs' managerial performance and its effect on their business' success have been
insufficiently investigated in the research on entrepreneurship, and the exploration of these
multinational relationships in the context of gender has been neglected for many years. A
large-scale, cross-cultural study including different countries was conducted by Williams and
Best and published in a book in 1982, and then in 1990. However, in these times of rapid
change, especially in the era of budding international entrepreneurship, research from a cross-
national perspective should be the standard rather than the exception.
The relationships between managerial performance, gender, and nationality in the context
of entrepreneurship led to two key research questions concerning the prospects for women
entrepreneurs in turning their management performance into successful businesses; these
questions regards again the inquiries about cultures (Hofstede, 2001; O’Reilly, et al, 1991).
First, is there a 'universal' pattern, i.e., culture of gender differences such that specific
functions of managerial performance are more prevalent among women entrepreneurs than
among men entrepreneurs, regardless of their nationality? Some studies strongly suggest the
existence of common, gender-related patterns across cultures (Hofestede, 2001; Williams &
Best, 1990; Zinkhan & Karande, 1991). The second question addresses nationality-related
behaviors, raising inquiries into whether there are functions of managerial performance that
are prevalent among entrepreneurs of one nationality more than of another, i.e., culture,
regardless of their gender. For example2, in a multinational study conducted by Smith, Dugan,
2 A different inclusive study conducted by United Nations Economic Commission for Europe Geneva and New York, 2004, provided empirical evidences that the situation of women entrepreneurs differs from country to
Entrepreneurship, managerial performance and business success 15
and Trompenaars (1997), it was found that across countries, men consistently exhibit higher
"entrepreneurial traits", than women; but when controlled for nationality, the 'modernity' of
the country moderated the gender effect on these traits.
Although the above cited researchers addressed gender and entrepreneurship from a
multinational perspective, not one of these studies included managerial performance in their
theoretical models.
Why Canada vis-à-vis Israel?
While several significant similarities have been noted in the entrepreneurial trends of the
Canadian and Israeli advanced economies at the aggregate level, i.e., the output-oriented level
of analysis, there seem to be major differences in government support of entrepreneurial
initiatives and in the higher education programs in entrepreneurship between these nations
that may play a significant role in determining, at least in part, entrepreneurs' managerial
performance.
Canada- Canada is ranked as having one of the world’s most entrepreneurial economies.
Entrepreneurship is opportunity-driven, with an average of 8.8 to 9.5% of the adult population
engaged in entrepreneurial activities in the years 2003 to 2006. In demographic terms, twice
as many men as women are involved in the start-up or early growth period of a new business
or firm, but the average annual growth rate of self-employed women and/or women
entrepreneurs is more than double that of men (GEM 2002,3 4 2004, 2005, Royal Bank of
Canada, Government of Canada5). The entrepreneurial market in Canada is relatively stable;
country and depends on progress in the process of building a market economy. Available, series: entrepreneurship and SMEs access to financing and ICT for women entrepreneurs in the UNECE region - challenges and good practices, http://www.unece.org/oes/gender/documents/Overview.pdf 3 GEM 2002; Canadian Report, 2002, Riverin, N. 4 GEM 2005; Report on High-Expectation Entrepreneurship, 2005 by Erkko Autio. 5 Canada Business for Entrepreneurs, at: http://www.cbsc.org/
Entrepreneurship, managerial performance and business success 16
in the first quarter of 2006, Canada’s business bankruptcies dropped by 10.9 percent over the
same period in 2005 (Industry Canada, 20066).
The Canadian government has affirmed that entrepreneurial ventures form the strategic
backbone of the economy. In order to turn knowledge and innovation into successful
operations, many institutions - governmental, private, academic, educational - are committed
specifically to helping entrepreneurs realize their full potential,7 and a very large number of
entrepreneurial educational and training programs are available (Menzies, 2004).
Israel- In the year 2000, the GEM ranked Israel third in the world in entrepreneurial
activity. Investors are attracted by Israel's highly educated and trained workforce and by its
concentrations of technology parks and technology incubators. Israel is highly ranked as an
entrepreneurial economy, yet it is also characterized as a 'restless' economy, with very high
annual rates of business closures (Sharabani, 2004; Eden, Horesh, Almor & Kariv, 2005). The
results of several studies show that in terms of infrastructure and drive for high technology
innovation, Israel is similar to Silicon Valley (Dana, Korot & Tovstiga, 2005; Nijkamp,
Guldemond & Teelen 2004) and that most of its high-tech companies are relatively successful
in terms of sales (Mirom, et al., 2004; van Beuzekom & Arundel, 20068), though
comparatively small in size9. However, due to insufficient encouragement and commitment of
resources from government (Phan & Foo, 2004), Israel's high-tech entrepreneurship has not
reached its potential level of success. Entrepreneurship in Israel is three times more
opportunity-driven than necessity-driven. In terms of demographics, as in Canada, there are
twice as many men as women involved in the start-up or early growth period of a new
business or firm. The Israeli entrepreneurial market is characterized by intensive networking
6 Small Business Quarterly, 8(2), August, 2006, at: http://strategis.gc.ca/SMEquarterly 7 See, Industrial Research Assistance Program http://irap-pari.nrc-cnrc.gc.ca/main_e.html; Canadian Federation of Independent Business http://www.cfib.ca/default_E.asp?l=E. 8 OECD BIOTECHNOLOGY STATISTICS – 2006, By Brigitte van Beuzekom and Anthony Arundel, at: http://www.oecd.org/dataoecd/51/59/36760212.pdf
Entrepreneurship, managerial performance and business success 17
(Haour, 2004; Shoham, Baruchson-Arbib & Gouri-Oren, 2006). However Israel has fewer
and less-developed entrepreneurship education and training programs than most other
industrialized economies (Berry, 2005; Eden, et al., 2005).
Attitudes towards entrepreneurship are positive in both Canada and Israel. However, the
main contextual differences between the two countries, insofar as the themes of the present
study are concerned, appear in government support, the higher education programs for
entrepreneurs and other programs supporting entrepreneurs. In Canada, these are at very high
levels,10 while Israel has not succeeded, as has Canada, in establishing specific institutions,
governmental or other, which are devoted to the promotion of entrepreneurship or the training
of entrepreneurs (Eden, et al., 2005).
Research Model and Methodology
Based on the extant literature, a conceptual model (Fig. 1) was created to guide the empirical
research. In the model, business longevity; turnover (sales); and growth in number of
employees represent functions of the business' success; and these success measures are
posited to be a function of the entrepreneurs’ managerial performance. Nationality, Canadian
and Israeli, and gender are mediating variables; and characteristics of the business and the
entrepreneur are included as control variables in the model.11 This proposed model should
enable an exploration of the unique relations between each function of the owners' managerial
performance and MOB and WOB success measures among Canadian and Israeli
entrepreneurs.
9 Israel venture capital association 2001: IVA 2001 yearbook: a survey of vc and private equity capital in Israel , edited and published by THCG GIZA Israel. 10 Government of Canada, Western Economic Diversification Canada, at: http://www.wd.gc.ca/
11 Although business success is also undoubtedly affected by nationality, this relationship was not dealt with in this study since our focus was on process rather than output.
Entrepreneurship, managerial performance and business success 18
Managerial performance in five distinct management functions is included. These are:
managing innovation, managing employees through a people orientation as opposed to task-
orientation12 (Blake & Mouton, 1963), leading change, goal-setting, and networking (Whetten
& Cameron, 2005).
-----------------------------------------
Please insert Figure 1 around here
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Research Hypotheses and Questions
As shown in the above literature review, women entrepreneurs are at a greater advantage than
men in some functions of managerial performance, i.e., functions related to a people
orientation, engagement in networking, and managing strategic planning and leading change,
whereas men are more financially- and goal- oriented than women. It has been shown that the
Canadian institutional support systems are far more developed than the Israeli, and this might
affect the entrepreneurs’ acquisition and development of the relevant managerial functions,
which are usually studied theoretically and applied practically in institutions and/or courses
devoted to entrepreneurship.
Since the relationships between managerial performance and nationality have been
insufficiently explored in entrepreneurship, the first hypothesis compares the relationships of
gender and managerial performance between the two nations.
H1. Women entrepreneurs will rank higher than men in managing people, leading
change and networking. Men will rank higher than women in managing by setting
12 E.g., Task-related characteristics include among others, being driven to excel, accepting of responsibility, having initiative, and being results-oriented – in order to achieve the organization's goals in productive, efficient and effective ways. As such, task-oriented leaders or leading entrepreneurs engage in spelling out the duties and responsibilities to their employees, clarifying roles and task requirements, including telling people what to do, how to do it, etc., mostly in one-way communication. People-orientation is considering employees' needs as most relevant, encouraging two-way communication and helping to build confidence and motivation on the part of the employees; stimulating employees intellectually by empowerment them, providing feedbacks and arousing them to develop new ways to think about problems.
Entrepreneurship, managerial performance and business success 19
goals. Canadians - men and women will rank higher than their Israeli counterparts
across each one of the included functions of managerial performance.
The effects of managerial performance on some success measures of MOB and WOB have
been insufficiently addressed in previous research. The extant literature revealed positive
relationships between managerial functions related to innovation, business longevity
(Gagnon, et al., 2006; Sinetar, 1985) and turnover from sales (Chakrabarti, 1990; Deeds &
Rothaermel, 2003); and that a greater focus on leading change (Chakrabarti, 1990; Deeds &
Rothaermel, 2003) also stimulated business turnover from sales. Management by goal setting
was found to relate to the higher levels of business longevity (e.g., Noel & Latham, 2006);
and the growth in size of the business has been found to strongly relate to a people-orientation
in managing and leading the staff (e.g., Landau & Leventhal, 1976; Weitzman & Kruse, 1990;
Zenger, 1992). These relationships however, have insufficiently been explored in the context
of gender differences.
On the other hand, the literature provided some insights into the gender differences in some
functions of their managerial performance; but there is still a lack of research into the
association of these relationship and MOB and WOB success measures.
For example, the literature reveals that women entrepreneurs are at an advantage relative to
men in managing their staff through a people-orientation (Brush, et al., 2004; Gundry, et al.,
2002); and compared to men entrepreneurs they are at an advantageous position in strategic
planning and change (Greve & Salaff, 2003; Lerner, et al., 1997; Lerner & Almor, 2002;
Morris, et al., 2006; Walker & Webster, 2006).
The next two hypotheses address the deficiencies described, and based on these streams of
research, attempt to investigate how managerial performance of each gender group affects
Entrepreneurship, managerial performance and business success 20
MOB and WOB success measures. These hypotheses delve into the 'gender' culture, thus do
not include nationality in their exploration.
H2 hypothesizes these relationships among women entrepreneurs and H3 – among men
entrepreneurs.
H2. Women entrepreneurs: higher levels of management through a people-orientation will be
positively related to higher levels of growth in business' size; and higher levels of managing
by leading change will be positively related to turnover from sales.
Men entrepreneurs are found to be in a more advantageous position in managing sales (Du
Rietz & Henrekson, 2000); being more oriented to their businesses goals (Chaganti &
Parasuraman, 1996; Tullous, 2002; Orhan, 2001), and to network more effectively than
women entrepreneurs (Aldrich, 1989).
H3. Men entrepreneurs: higher levels of management through goal setting will be positively
related to longevity; and higher levels of management through networking will be positively
related to higher levels of turnover from sales.
Finally, following the findings showing that nationality has been found to affect business
success measures and even to moderate the effect of gender on business success measures
(Kolvereid, et al., 1993; Mueller, 2004; Smith, et al., 1997) and based on the process-oriented
view discussed earlier, the fourth hypothesis attempts to decipher the roles of gender and
nationality in the business success measures; more specifically which 'culture' is most
predominant in determining MOB and WOB success – gender or nationality. This hypothesis
is based on studies showing that the relationship between managerial performance and
business success is pertinent (Carter, et al., 1997; Du Reitz & Henrekson, 2000); as well as
on the findings suggesting that Canadian entrepreneurial businesses survive longer and are
relatively larger in size; while Israeli entrepreneurial businesses are relatively successful in
Entrepreneurship, managerial performance and business success 21
their financial indicators, but face more bankruptcies and are relatively smaller. Taken
together the last hypothesis proposes:
H4. The business success measures will be affected primarily by entrepreneurs'
managerial performance. Managing by goal setting and innovation will positively affect
business longevity, managing innovation and networking will positively affect turnover
from sales, and managing by a people-orientation will be positively related to growth in
size. Gender will insignificantly affect business success, and nationality will
significantly affect business success – being Canadian will be related to longevity and
growth in size; being Israeli to turnover in sales.
Research design and methods
Sampling procedure: Two national samples were collected, and these included only
entrepreneurs with at least one employee. The Canadian sample consisted of 115
entrepreneurs and the Israeli sample consisted of 120 entrepreneurs.
Data collection – Israel and Canada: In order to ensure the validity and reliability of the
cross-national assessment, the same two-stage sampling procedure was followed in Canada
and in Israel. As a first step, the principal investigators of this study attended several weekly
meetings of entrepreneurs, who are members of an international organization,13 where the
purpose of the study was explained. The study's questionnaires were distributed at these
meetings, and the completed forms were collected at the end of the same meetings. From the
Israeli chapters of this organization, 76 completed questionnaires were collected, an
approximately 90% return rate. In order to enlarge the sample, the respondents were asked to
provide referrals of entrepreneurs who are not members of this organization. In the second
13 Business Networking International (BNI), a private marketing company specializing in word-of-mouth referral marketing. Members represent the major businesses, trades and professions in the community. Presently, there are over 4,100 BNI chapters operating in 26 countries and over 81,000 members worldwide (at: http://www.bni.com/)
Entrepreneurship, managerial performance and business success 22
stage, the research investigators contacted these entrepreneurs by telephone and sent the
questionnaires by e-mail or delivered them in person to those willing to participate. In Israel,
44 completed questionnaires were gathered through this procedure, an approximately 43%
return rate. In Canada (Montreal and Toronto areas), 65 completed questionnaires were
collected from members of the organization, and 50 from non-members, in the same two-
stage procedure. The average response rates in Canada from both members and referrals was
about 37%.
T-tests of gender, age, and educational level showed no significant differences in any of
these parameters between members and non-members of this company, in either country.
Sample profiles
Canada: The sample consisted of 115 respondents, all entrepreneurs, 73 (63.5%) men and
42 (36.5%) women. The mean business longevity for MOB was 9.8 years and for WOB, 6.1
years. Of the respondents, 47.1% reported having one employee, 22.1%, two employees,
10.6%, three employees, and the rest, 20.2%, more than four to thirty employees. Most of the
respondents reported having an academic education, with 40 of them (34.8%) having attained
a first degree and 29 (25%) having obtained a professional, non-academic education. The
average age of the male respondents was 46 years and that of the women, 42 years.
Israel: The Israeli sample consisted of 120 respondents, all entrepreneurs, 69 (57.5%) men
and 51 (42.5%) women. The mean business longevity was 10.5 years for MOB and 4.96 years
for WOB. Thirty-three respondents (27.5%) had one employee, 10 (8.3%) employed two
persons, 16 (13.3%) had three employees, 12 (10%) had four employees, and the rest reported
having more, with one entrepreneur reporting 50 employees. The average age of the male
respondents was 39 years and that of the women, 35 years.
Entrepreneurship, managerial performance and business success 23
All of the respondents, in both Canada and Israel, own businesses in the service and
commercial sectors; there were no owners of businesses in the low- or mid- tech industry nor
from the manufacturing sector. Since the distribution of the businesses' occupations was very
large, the business sector was separated into professional versus non-professional businesses
for computations (Longenecker, 2006).
Questionnaires
The research questionnaire was in three parts. (1) Business measures derived from objective
data, i.e., the products/services provided by the company, the age of the business, number of
full-time employees, full-time employee turnover rates in the preceding year, gross earnings
and change from the preceding year (Kalleberg & Leicht, 1991). For this study, the variables
included as success measures were: business longevity (age); growth in turnover from sales
from the preceding year and growth in the number of employees. (2) A self-assessment form
of managerial behavior, modified for entrepreneurs from the Personal Assessment of
Management Skills (PAMS) (Whetten & Cameron, 2005), intended to assess the functions
required for effective management. From the original 85-statement PAMS questionnaire, 50
statements deemed most relevant to entrepreneurial management, all based on the
entrepreneurial literature, were selected for this study. The respondents were asked to rate
their actual perceived managerial performance according to a 4-point rating scale (1- strongly
disagree ----5- strongly agree); (3) Entrepreneurs' personal characteristics: age, educational
attainment, and measures of previous self-employment experience.
THEORETICAL AND OPERATIONAL DEFINITIONS
Dependent variable
Business success - The dependent variable is based on the respondents' self-reports
referring to three success indicators: (a) business longevity (Bates, 1990; Orser & Riding,
Entrepreneurship, managerial performance and business success 24
2004; Robb, 2002); respondents addressed the question – "How old is your business (in
years)?"; (b) changes in the turnover from their businesses' sales. Building upon prior research
in entrepreneurship, one predominant indicator of a business's financial performance focuses
on sales or growth in sales (e.g., Kalleberg & Leicht, 1991; Fischer et al., 1993; Rosa et al.,
1996; Fasci & Valdez, 1998; DuRietz & Henrekson, 2000). Business turnover was measured
by the owners' responses14 to the question: " Please specify what is the change (in %) of your
business revenues (sales) from its start up point till today? "; (c) growth in the business size,
assessed through the current number of employees compared to the number of employees at
start-up, indicating the growth, stability or reduction in the number of employees over time.
Independent variables Managerial performance – studies have shown that entrepreneurs
have a different set of attitudes about the nature of the management process and business in
general (Baum & Locke, 2004; Gasse, 1977). Based on Whetten and Cameron's (2005)
conclusive model and modified from their PAMS questionnaire on managerial performance,
five managerial functions are included in this study; respondents were asked to rank (1- very
rare ----5-very often) the extent each function characterizes their daily managerial
performance as leading entrepreneurs on the following functions; (a) innovation (Brockhaus
& Horwitz, 1986; Gasse, 1977, 1982; Smilor, 1997), e.g., "I strive to generate new ideas and
activities at work", "I make sure that divergent points of view are represented in every
complex problem-solving situation", "I invest more effort and take more initiatives than
expected"; (b) leading change (Filion, 1991; Lerner, et al., 1997; Lerner & Almor, 2002;
Morris, et al., 2006; Walker & Webster, 2006), e.g., "I work to close gaps between good and
great performance", "I know how to get people to commit to my vision of positive change", "I
express compassion toward employees who experience difficulty in adjusting to change"; (c)
14 Self-reports were chosen as data collection methodology due to entrepreneurs' tendency to avoid the presentation of objective data on their business' sales turnover or any other financial indicators; moreover there is an emerging stream of research in entrepreneurship providing substantial evidence supporting the validity of the
Entrepreneurship, managerial performance and business success 25
a people-orientation in managing the staff (Brush, et al., 2004; Gundry, et al., 2002)., e.g., "I
frequently give other people positive feedback", "I express gratitude frequently, and even for
small acts", "I avoid using threats or demands in order to impose my will on others", "I help
people feel competent in their work"; (d) goal-setting (Baum & Locke, 2000; Baum, Locke,
& Smith, 2001; Erez & Judge, 2001; Locke, 2001, Locke & Latham, 1990, 2002), e.g., "I set
financial goals based on my vision regarding my business", " I set financial goals and
encourage my workers to accomplish them", " I usually emphasize a higher goal associated
with the work"; (e) networking (Greve & Salaff, 2003; Lerner, et al., 1997), , e.g., " I pro-
actively meet different people in order to expand my networking", " I attend professional
conferences /seminars/forums for networking"
Control variables
Educational level and past managerial experience are known to affect future sales and
revenue (Cassar, 2004); and so id the effect of age, gender (e.g., Johnsen & McMahon, 2005;
Menzies, et al., 2004) and nationality (Atuahene-Gima & Ko, 2001; Neelankavil, et al., 2000;
Steensma, et al., 2000) on several measures of the business success. They were thus included
as control variables. Of the firm's characteristics, two dichotomous variables were included;
sole ownership (0) versus partnership (1) (e.g., O'Connor, Hamouda, McKeon, Henry &
Johnston, 2006); and professional (1) versus non-professional (0) businesses (Longenecker,
2006). The category 'professional businesses' refers to those whose main activities derive
from extensive academic and/or practical training, i.e., law firms, psychology and
psychology-related firms, businesses specializing in architecture, accounting, medicine,
organizational, management or financial counseling, and so on. The category 'non-
professional businesses' refers to those whose main occupation does not require such
academic knowledge and specialized training, i.e., craft- and art-related businesses, fashion,
self-reported measures, including financial indicators, due to the fact that they are anchored in objective criteria, and are thus reliable and valid (Brush & Wanderwerf, 1992; Chandler & Hanks, 1993).
Entrepreneurship, managerial performance and business success 26
Results
Table 1 summarizes the descriptive statistics and the intercorrelations between managerial
performance, the included measure of business and the control variables—personal and
business characteristics.
-----------------------------------------
Please insert Table 1 around here
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The estimates in Table 1 indicate positive and significant relationship for each one of the
business' success measures with different managerial functions; for example, longevity is
positively and significantly related to three managerial functions, namely, leading change, a
people orientation and setting goals; turnover from sales is positively and significantly related
to networking and growth in size is positively and significantly related to setting goals.
Gender is significantly related to longevity and growth in size, male entrepreneurs were
significantly related to both measures; and nationality is significantly related to turnover from
sales and growth in size, Canadians are significantly related to growth in size and Israelis - to
turnover from sales. Managerial functions are intercorealted but not to a multicolinearity
level.
The expected versus actual results for H1 to H3 are summarized in Table 2.
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PLEASE INSERT TABLE 2 HERE
----------------------------------------------------
To determine whether the functions of managerial performance are differentiated by gender
for each nation, as posited in H1, a two-step procedure was followed. First, to enable
Entrepreneurship, managerial performance and business success 27
classification of the included variables, thereby facilitating the detection of structures in the
relationships between the variables (Pedhazur & Schmelkin, 1991), a factor analysis15 was
executed for the 50 variables selected as measures of managerial performance. The results of
this analysis showed that by extracting factors with eigenvalues of 1.0 or higher, five factors,
explaining approximately 50% of the total variance, remained. Looking into the rotated
matrix, the factor with the highest loadings was associated with managing innovation
(Innovation) followed in descending order by factor associated with variables in managing
through a people-orientation (People), leading change (Change), goal setting (Goals), and
networking (Networking). The loadings were computed and the resultant factors were
employed in a one-way ANOVA to identify the gender differences in managerial
performance. The one-way ANOVA was chosen as it provides comparisons by gender of the
means of each factor of the managerial performance. ANOVA was measured separately for
Canadian and Israeli entrepreneurs.
The analysis indicated that women of both nations ranked higher scores than men in each
factor of the managerial performance, but significant differences between the genders emerge
only in managing innovation (F (1,81) = 3.852, p < 0.05*), (women: MEAN = 3.33, SD =
.500; men: MEAN = 3.10; SD = .438) for the Canadian sample; and in: managing innovation
(F (1,101) = 8.251, p < 0.01**), networking (F (1,101) = 3.900, p < 0.05*), and managing the
staff by a people orientation (F (1,101) = 4.100, p < 0.05*) for the Israeli sample. Means and
SDs for the Israeli sample respectively, were as follows: managing innovation—for men 3.01,
.484, and for women, 3.28, .405; networking—for men 3.19, .54 and for women, 3.40, .41;
and managing through a people-orientation— for men 3.19, .50 and for women, 3.41, .53. The
findings suggested that women entrepreneurs, both Canadian and Israeli emphasize more than
their male counterparts some managerial functions; while the expected relationships – of
15 The Principal Components method was chosen since it allows combining two or more variables, which could be correlated, into one factor, and the Varimax rotation was used to maximize the variance of the 'new' factors.
Entrepreneurship, managerial performance and business success 28
nationality or of men with some managerial functions emerge insignificant; hence partly
supporting the first hypothesis.
The expected versus actual results for H2 and H3 are summarized in Table 2. To explore
the second and third hypotheses, on the role of gender in the relationships between managerial
performance and business' success measures, a multivariate analysis (MANOVA) was
conducted in a custom model with interactions of gender with each managerial factor
separately. The dependent variables included were the three business' success measures
(longevity, changes in the turnover from their businesses' sale, and growth in business' size),
and the covariates were the five factors comprising managerial performance (i.e., innovation,
managing by a people orientation, leading change, setting goals and networking), gender
entered as a fixed factor. The overall multivariate test emerged significant for four variables,
gender (Wilks λ = .729, F (1,180) = 2.673, p < 0.05*), and three managerial functions,
managing by a people orientation (Wilks λ = .750, F (1,180) = 2.420, p < 0.05*), innovation
(Wilks λ = .599, F (1,180) =2.339, p < 0.05*) and establishing networking (Wilks λ = .683, F
(1,180) = 3.339, p < 0.05*). The interactions showed significance for gender with—
establishing networking (Wilks λ = .740, F (1,180) = 2.501, p < 0.05*), innovation (Wilks λ =
.712 F (1,180) = 2.00 5, p < 0.05*) and managing people (Wilks λ = .815 F (1,180) = 2.225, p
< 0.05*). The tests for between-subject effects showed that of the main effects (without
interactions) of gender on business' success measures, significance emerged for growth in
business' size (F (1, 180) = 6.713, p < 0.00**) and turnover from sales (F (1, 180) = 4.689, p
< 0.05*), indicating that in general, the genders differ in these measures. Regarding the
factors of the managerial performance, for networking, the mean for men (Mean = 2.912; SD
= .756; n = 100) was higher than that for women (Mean = 2.833; SD = .902; n = 80), while for
managing through a people orientation, and innovation the mean for women respectively
(Mean = 3.255; 3.100; SD = .491; .222; n = 80) were higher than that for men, respectively
Entrepreneurship, managerial performance and business success 29
(Mean = 3.148; 2.919; SD = .948; 1.114; n = 100). The interactions of gender with
networking (F (1,180) = 5.355, p < 0.05*) was significantly related to turnover in sales;
gender and innovation (F (1,180) =4.348, p < 0.05*) was significantly related to turnover
from sales; and managing the staff by a people orientation (F (1, 180) = 4.078, p < 0.05*) was
significantly related to growth in the business' size.
The findings for H2 and H3 emerged that for women managing by a people orientation was
significantly and positively related to growth in the business' size, and innovation was
positively and significantly related to turnover from sales, as expected; and that for men
networking was significantly and positively related to turnover from sales, again as expected.
However, the other expected relationships did not emerge significant, thus these findings only
partially support H2 and H3.
To further investigate the forth hypothesis that some functions of the managerial
performance will affect the business' success measures and that overall nationality would
appear more significant than gender in determining the business' success, three hierarchical
regression analyses were conducted for each of the business' success measures separately, i.e.,
longevity, changes in the turnover from their businesses' sale, and growth in business' size16.
Since the factors of managerial performance are predominant in this study's conceptualization,
rather than entering all the independent variables into the multiple regression equations at the
same time, I wanted to consider the influence of the these factors in isolation; thus, the factors
of managerial performance were entered in the first step, gender and nationality were entered
in the second step, and finally, the control variables— the owner's personal characteristics
(i.e., age, educational level and prior experience in management) and the business'
characteristics (sole ownership versus partnership and non-professional versus professional
businesses) were entered in the third step.
16 Only for growth in the business size an additional controlling variables was included – the business' age, due to the partial correlation between them.
Entrepreneurship, managerial performance and business success 30
LONGEVITY
It appears that the five included factors of managerial performance explained around 6%17
of the total variance in business longevity (step 1); the next step, with gender and nationality,
added a moderate contribution of around 4% to the total variance, meaning that these are
moderate predictors of the criterion variable; and the control variables entered in the third step
contributed an additional 18% to the total variance, the total variance as revealed by the R2 is
around 23.5%, a considerable result. Of the factors representing the managerial performance,
leading change and setting goals emerged positive and significant, as expected, but contrarily
to the hypothesis innovation appeared insignificant in affecting the business longevity. Again
in contrast to the expected relationships, gender appeared significant in predicting longevity,
namely business headed by men are older than businesses headed by women. Of the control
variables – the owner's age and past experience in management have both a positive and
significant effect on longevity.
TURNOVER FORM SALES
The factors of managerial performance explained around 5.5% of the total variance in
changes in business turnover from sales (step 1); gender and nationality contribution to the
total variance by adding around 2% to the total variance, again implying that both are
negligible predictors in determining the dependent variable; while the control variables
included in the third step appeared insignificant in determining the business' turnover from
sales.
The major contribution of the factors representing managerial performance emerged
positive and significant for innovation, leading change and managing by a people orientation;
17 The contribution of self-reports is usually relatively low (Gelman & Hill, 2006); thus the percentages revealed in this study are considerable.
Entrepreneurship, managerial performance and business success 31
and as predicted, gender appeared insignificant, and nationality appeared significant —
businesses headed by Israelis comparatively to those headed by Canadians had higher and
positive changes in turnover from sales.
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PLEASE INSERT TABLE 3 HERE
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GROWTH IN SIZE
The factors in the first step 1 explained around 6% of the total variance in the business'
growth in size; gender and nationality, added a contribution of around 3% to the total
variance, and the control again appeared insignificant as revealed from the results in the third
step; overall the included variables explained around 12% of the total variance. The factors
that emerged positive and significant are managing by a people orientation, as expected and
setting goals. Gender emerged insignificant and nationality emerged significant, Canadian
more that Israeli profited of a growth in size, as predicted. Although partially supporting the
hypothesized relationships in H4, most of the expected relationships and their directions
appeared as expected; overall the results of this study supported most of the hypothesized
relationships.
Conclusions
The relationship between gender and success in entrepreneurial businesses, an emerging
quest in entrepreneurship research, is still unresolved and unclear. The findings to date are
inconsistent and inconclusive, with some studies reporting differences between success
measures, i.e., longevity, changes in turnover from sales and growth in size for MOB and
WOB (e.g., Chaganti & Parasuraman, 1996; Greve, 1999; Kjeldsen & Nielsen, 2004; Robb,
2002; Srinivasan, et al., 1994), while others show similarities in some of these indicators
Entrepreneurship, managerial performance and business success 32
(Fagenson, 1993; Kalleberg & Leicht, 1991; Sonfield, et al., 2001; Verheul & Thurik, 2001).
In addition, most of the conclusions on business success are drawn from studies largely on
MOBs, rather than from comparative assessments of the different 'cultures' of men and
women entrepreneurs (Hofstede, 2001; O’Reilly, et al., 1991).
Additionally, it should also be noted that as global economies grow, 'local' observations of
business success measures seem limited. Nationality has been found to affect some measures
of business success (Kolvereid et al., 1993), and although cultural assessments of these topics
are imperative (Hofestede, 2001), they are notably lacking in the realm of entrepreneurship.
The present study addresses these gaps and attempts to explore the close and complementary
relationships between managerial performance and business success, using a process-oriented
perspective. Relatively few studies focus on the activities and actions within the business,
such as managerial performance, i.e., take a process-oriented perspective, which corresponds
to this study's basic conceptualization. Most studies on entrepreneurship and business success
measures favor either the resource-based view (e.g., Barney, 1991; Bird & Brush, 2002;
Boden & Nucci, 2000; Brush, et al., 2004; Loscocco, et al., 1991), associated with the owner's
human capital and personal characteristics, or the output-oriented approaches (Alsos, et al.,
2006; Boden & Nucci, 2000; Fielden, et al., 2003; Grilo & Irigoyen, 2006), which address
the differences and/or similarities in MOB and WOB's success measures, but typically do not
attempt to provide empirical explanations for these findings.
In this study the gender of the owner is postulated to play a marginal role in business
success; alternatively, some indirect effects, related to gender, may have a predominant role in
the businesses' success; as such, different managerial functions in which owners, men and
women, engage should affect the success of MOB and WOBs.
In Figure 1 the main variables investigated in this study are presented. The relationships of
gender and managerial performance among Canadian and Israeli entrepreneurs were first
Entrepreneurship, managerial performance and business success 33
compared. In partial accordance with the first hypothesis, women entrepreneurs, both
Canadian and Israeli, ranked significantly higher in some managerial functions compared to
their male counterparts; Canadian women entrepreneurs were found to rank higher in
managing innovation; Israeli women entrepreneurs were found to rank higher in managing
change, innovation and in managing the staff by a people orientation. These findings show
that each nation has a characteristic managerial performance, especially among women
entrepreneurs, and that no gendered managerial performance emerged. Simply put, in the
cases of both the Canadian and Israeli women entrepreneurs, these findings support previous
ones, for example, the finding on Canadian and Israeli women who rank higher than men in
managing innovation, correspond to those showing that women entrepreneurs emphasize
innovation (e.g., Hisrich & Brush, 1984; Goldsmith, et al, 1987; Goldsmith, et al., 1995
Sexton & Bowman-Upton 1990); and the findings that Israeli women are more focused than
men on managing their employees, again supports previous studies showing that women
entrepreneurs have the advantage in managerial performance oriented to people (Bruni, et al.,
2004; Brush et al., 2004; Gundry et al., 2002). However, the engagement of Israelis in some
functions that are less likely to be used by Canadian women entrepreneurs is surprising in
light of the supportive entrepreneurial environment in Canada18 (Manzies, 2004) compared to
Israel (Berry, 2004; Eden et al., 2005), and induced us to seek different explanations. Based
on Hefstede's model (2001) showing that national cultures stem from consistency in values,
and on the work of O’Reilly, Chatman, and Caldwell (1991) comparing the organizational
dimensions related to innovation, people-orientation and openness to change, a possible
explanation of these findings may be that entrepreneurs in the different nations, especially
women, hold a unique view on what 'management' entails or what is the best managerial
performance to use for their own businesses. These findings may also suggest that although
18 E.g., Industrial Research Assistance Program http://irap-pari.nrc-cnrc.gc.ca/main_e.html; Canadian Federation of Independent Business http://www.cfib.ca/default_E.asp?l=E
Entrepreneurship, managerial performance and business success 34
Canada and Israel may have different and unique ideas regarding management processes in
entrepreneurial businesses, there still is a general 'idea' or 'value' in both nations that prompts
women entrepreneurs to use some functions of managerial performance more frequently than
men. Intriguingly, this implies, contradicting some previous findings on women’s
disadvantaged position in some managerial functions (Powell & Ansic, 1997; Sonfield, et al.,
2001), that women entrepreneurs are as, if not more, pro-active and 'hands-on' in management
as their male counterparts.
Turning to the second and third hypotheses, on the role of gender in the relationships
between managerial performance and business success measures, the results revealed that a
higher managerial orientation of women towards people and innovation are positively related
to both growth in WOB's size and turnover (correspondingly); and in the case of men higher
levels of reported networking are related to MOB's turnover; suggesting not only that men and
women use different functions in their managerial performance, but that they also transform
these managerial functions into different advantages for their businesses. For example,
turnover from sales is stimulated by networking in MOB and by innovation in WOB. These
findings provide a breakthrough in our knowledge by revealing that although MOB and WOB
were found to demonstrate different success measures (Alsos, et al., 2006; Boden & Nucci,
2000; Grilo & Irigoyen, 2006); it is apparently not the gender of the owner, but rather the
managerial functions used by the owners, (used differently by men and women), which shape
the success of the business. Concurrently, the same business success measures develop, at
least in part, from different managerial performance in businesses headed by men or by
women. Yet, some expected relationship between managerial performance and MOB’s and
WOB's success failed to emerge as significant in this study. Future studies should therefore
re-assess these relationships in larger samples and across more nations.
Entrepreneurship, managerial performance and business success 35
Finally, in the attempt to decipher the role of the different 'cultures' – gender or national –
in the relationship between managerial performance and business success, as proposed in the
fourth hypothesis, apart from its significant affect on longevity, gender appeared insignificant
in affecting business success measures, i.e., turnover from sales and increase in size, as
hypothesized. Building on the national statistics in Canada and Israel showing that
entrepreneurial businesses in Israel are relatively small but profitable (Eden, et al., 2005; van
Beuzekom & Arundel, 2006), the findings on the advantage of businesses headed by
Canadians in increase in size compared to those headed by Israelis, and of the businesses
headed by Israelis in their turnover from sales compared to those headed by Canadians, are
not surprising; though the statistical contribution of nationality was moderated for both
success measures.
Overall, this study's findings provide a breakthrough in our knowledge in raising the
premise that MOB and WOB's success measures are not directly related to the owner's
gender, but are more likely to be associated with the genders' use of specific managerial
functions and, apparently, to their ideas or values of how managerial functions assist them in
achieving success for their businesses. By providing evidence on the role of the internal and
operational processes, i.e., managerial performance, in shaping business success (Fagenson,
1993; Kalleberg & Leicht, 1991; Verheul, et al., 2002; Verheul & Thurik, 2001) these
findings reinforce the relevance of the process-oriented approach in the investigation of the
success of MOB and WOB.
The predominant role of managerial behaviors and nationality, and the relatively marginal
role of gender per se in business success measures, imply that the gender gap is decreasing in
some measures of business success.
These study findings also highlight avenues for future research through a process-oriented
perspective, and thus challenge the domination of the traditional line of studies that uses a
Entrepreneurship, managerial performance and business success 36
resource-based view or an output-oriented perspective on MOB and WOB's success measures.
A more robust measurement of MOB and WOB success measures is thus developed, and fills
gaps in our knowledge of MOB and WOB's success.
Implications and Limitations
The main implication of this study is in the area of training and higher education in
entrepreneurship. With the empowerment of women in small- and medium-size enterprises
(SMEs), gender-based assistance programs have provided training courses, but there has been
concern that women are being channeled into businesses that are smaller, under-capitalized
and labor-intensive, and that they are at a disadvantage in the relevant skills and behaviors
that could promote greater success. Several studies have argued that programs are needed that
focus on the skills and behaviors which could facilitate success and growth (Carter & Allen,
1997). However, since our findings show that 'gender' has limited relevance to business
success, the call for reconsidering the gender issue in education and training programs in
entrepreneurship should be evaluated. Offering such gender-related programs means
inculcating the gender issue in entrepreneurship, thus marginalizing women entrepreneurs
rather than moving them into the mainstream of the entrepreneurial economy. In their efforts
to promote and support local entrepreneurship, education programs in this area should focus
more on process-oriented perspectives, and should be more integrated, both conceptually and
in practice, with management programs, but adapted to the entrepreneurial realm in order to
acknowledge the role of management in the outputs of the entrepreneurial ventures. These
programs should be offered to active and potential entrepreneurs of both genders and should
focus on the acquisition and development of the managerial skills and behaviors relevant for
achieving the various goals of an entrepreneurial business.
Entrepreneurship, managerial performance and business success 37
The results of this study are subject to some limitations. First, the sample was gathered
through a non-random, convenient sampling procedure. Acknowledging the difficulties in
gathering random samples of entrepreneurs, and given that this study's sample is fairly large,
the value of understanding more about entrepreneurs' managerial behaviors and their role in
MOB and WOB success measures outweighs the technical limitation of using a non-random
sample. As the business world becomes more sophisticated and increasingly differentiated,
and as entrepreneurship abounds and SME competition becomes more aggressive,
management behaviors constitute an increasingly large and important component of
entrepreneurial business success.
This study addressed entrepreneurs only in the services and retail sectors; the
manufacturing and industrial sectors are not represented at all. This is due to the limitation
imposed by collecting a non-random sample and the inherent difficulties in gathering a
satisfactory number of women entrepreneurs in the manufacturing and industrial sectors,
where they are under-represented. Further investigations should address this limitation,
possibly by asking for assistance from government associations engaged in industry and
manufacturing, in order to amass a sufficient research sample from these sectors. Finally,
future research should sample entrepreneurs from different nations in order to enhance the
knowledge on the role of national culture in the success of MOBs and WOBs.
Entrepreneurship, managerial performance and business success 38
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Entrepreneurship, managerial performance and business success 49
Figure 1
The Research Model: Effects of managerial behaviors on business success—Canadian and
Israeli
Mediating variable
Control variables
Business success
a. Business survival (Longevity)
b. Turnover (Sales)
c. Growth in number of employees
NATIONALITY (Canada-Israel) GENDER
Management behavior
Innovation (Innovation)
Managing people (People)
Leading change (Change)
Goal setting (Goals)
Networking (Networking)
Firm's characteristics Sole ownership/Partnership Professional/Non-professional businesses Entrepreneur's personal attributes Educational level Past experience in management Age
Entrepreneurship, managerial performance and business success 50
Table 1
Means, standard deviations and correlations a,b Means SD 1 2 3 4 5 6
Managerial performance: (1-5)
Innovation 3.165 .469
Change 3.230 .514 .534**
People 3.283 .516 .643** .600**
Goal-Setting
3.213 .806 .210** .404** .271**
Networking 2.884 .805 .342** .210** .150 .220*
Bus. Age
8.302 10.943 .038 .260** .217* .247** .029
Turnover -sales (%)
115.247 232.727 .014 .041 .008 .026 .203* .010
Growth (in number of employees)
4.513 12.024 .055 .032 .064 .239* .003 .419*
Gender (1-women, 2-men)
.154 .148 .189* .028 -.047 .212*
Nationality (Canada-1; Israel-0)
.002 -.092 .018 .208*- .475* .014
aCorrelations greater ; than 0.15 indicate p < 0.05; bn = 235
Entrepreneurship, managerial performance and business success 51
Table 2
Summarized expected and actual results from examination of H1-H3
H1. Gender and managerial performance split by nationality
Managerial behavior Canada and Israel Women Men Women Men Expected Results-Canada Results-Israel Women Men Innovation High High High People High High Change High High Goals High Networking High
H2, H3. Managerial performance and gender by business' success
Managerial behavior Women Men Women Men Expected Results Innovation Turnover Turnover People Growth in size Growth in size Change Turnover Goals Longevity Networking Turnover Turnover
Entrepreneurship, managerial performance and business success
52
Table 3 Regression analyses for business success measures -by managerial performance, gender and
nationality and control variables—personal and business characteristics
Independent variables Block 1a,1 Block 2b,1 Block 3c,1 Block 1a,1 Block 2b,1 Block 3c,1
Longevity Turnover
A. Managerial performance
Innovation -.053 .214*
Change .235** .212*
People .021 .200*
Goal-Setting .212* .079
Networking .007 .029
B. Moderating Variables
Gender (1-women;2-men) .197* .017
Nationality (0-Israeli; 1-Canadian) .025 -.172*
c. Control variables
Age .454** .078
Educational level .006 .126
Past experience(management) .216* .100
Ownership (1-sole; 2-partnership) -.097 -.015
Professional (0-non prof.; 1- prof) .057 -.038
n =235; 1 Beta coefficients are displayed; *p < 0.05 ; **p < 0.01.
Longevity- aR2 = 0.061; adj. R2 = 0.035**; bR2 = 0.094; adj. R2 = 0.066; ∆R2 = 0.040*; cR2 = 0.275; adj. R2 = 0.235; ∆R2 = 0.181*.
Turnover- aR2 = 0.056; adj. R2 = 0.034**; bR2 = 0.079; adj. R2 = 0.050; ∆R2 = 0.024*; cR2 = 0.097; adj. R2 = 0.048; ∆R2 = 0.019.
Growth- aR2 = 0.063; adj. R2 = 0.060**; bR2 = 0.083; adj. R2 = 0.057; ∆R2 = 0.034*; cR2 = 0.111; adj. R2 = 0.063; ∆R2 =0.020.