The Impact of Gender Differences in Gained Resources From Social Networks On Microenterprise Performance

Background and Purposes One of the important strategies for U.S. Microenterprise Development Programs (MDPs) is to improve female participants’ social capital for microenterprise start-up and maintenance by providing mentoring, networking services, and referrals to specialized business professionals (Langowitz & Sharpe, 2006). However, from the perspective of evidence-based practice, social capital building strategies for women in U.S. MDPs need to be based on rigorous evidence from empirical research. Although there are a few empirical research that investigates the relationship between gender and resources embedded in social networks (Beggs, 1997; McPherson & Smith-Lovin, 1982), a dearth of research has examined the relationship between gender, resources gained from social networks, and microenterprise performance. This research investigates what types of gained resources from social networks mediate the relationship between gender and microenterprise performance.

Method This study uses the Panel Study of Entrepreneurial Dynamic (PSED), Wave II (2005-2011), which includes total 1,214 cases. PSED is a longitudinal national database that provides information on the characteristics and activities of individuals involved in the process of starting businesses (Reynolds & Carter, 2002). This study will sample the microenterprise cases that the numbers of employees are less than five (n=508). Independent variable was gender. Resources gained from social networks were potential mediating variables, and were measured as a variable with 8 categories: financial resources (1), making introductions (2), providing advice (3), providing training (4), physical resources (5), business services (6), personal services (7), all of the above (8). Dependent variables were microenterprise performance and measured by business start-up, growth in profitability, and business survival. This analysis employed the structural equation modeling. This study measured the total effect of gender (X1, Wave 1) on the microenterprise performance variables at the wave 6 (Y6, Wave 6). Then, this study measured the overall indirect effects of X1 on Y6 through resources gained from social networks (Mi, 1<Mi<6), which were measured between wave 1 and 6 in order to estimate the degree to which M mediates the X-Y relation over the entire interval from Wave1 to Wave 6. Then, this study controlled for all measures of Mi (1<Mi<6) in order to estimate the overall direct effect.

Results Preliminary results suggested that women had significantly lower growth and survival rate compared to men. Women were also significantly less likely to receive financial and physical resources and business services, and these gained resources were positively associated with all three measures of microenterprise performances. When all measures of gained resources from social networks were controlled, the links between gender and microenterprise performance was significantly reduced. These results suggest that gaining resources from their social networks might mediate the relationship between gender and growth in profitability and business survival.

Implications This research indicates that U.S. MDPs should provide female participants with more social networks connected to financial and physical resources and business services. In addition, this research asks government to supply funds and resources for U.S.MDPs to develop gender specific social capital intervention programs for women in order to improve female participants’ microenterprise success.