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Gender differences in business performance: evidence from Kenya and South Africa

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Abstract

The study investigates the performance gap between female-owned enterprises (FOEs) and their male-owned (MOEs) peers, using data obtained from 1,522 firms included in the World Bank Enterprise Survey (WBES) on Kenya and South Africa. We find that FOEs underperform their MOE counterparts and that the performance differential in both countries is driven by the joint effect of gendered differences in endowments and returns on endowments. We also find that differences in returns on endowments contribute the largest gendered performance gap in both countries. Our findings not only corroborate the “female underperformance hypothesis”, but also point to the dominance of the social feminist theory in providing explanation for the observed gendered performance gap in both countries. The findings imply that efforts aimed at equalizing opportunities or removing structural barriers to women entrepreneurship would lead to reductions in the observed gendered performance gap; those targeted at resha** social structures would have even stronger impact in terms of cutting the performance differential, in both countries.

Plain English Summary

Notwithstanding the fact that African women’s participation rate in entrepreneurship is the highest in the world, systemic barriers and social structures continue to impede their performance both in Kenya and South Africa. We examine firm-level data drawn from Kenya and South Africa and report that female-owned enterprises underperform their male-owned counterparts and that the performance differential in both countries is driven by the joint effect of gendered differences in endowments and returns on endowments. We also find that differences in returns on endowments contribute the largest gendered gap in both countries. Our findings not only corroborate the “female underperformance hypothesis”, but also point to the dominance of the social feminist theory in providing explanation for the observed gendered performance gap in both countries. Efforts aimed at equalizing opportunities or removing structural barriers to women entrepreneurship would lead to reductions in the observed gendered performance gap; those targeted at resha** social structures would have even stronger impact in terms of cutting the performance differential, in both countries.

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Notes

  1. For more information on the firm-level surveys conducted by the World Bank, see https://www.enterprisesurveys.org/

  2. We use Nairobi as a proxy for urban location in Kenya. However, we use the Guateng province where Johannesburg, the wealthiest economic hub of South Africa, is located to proxy the location variable, primarily due to data unavailability of city-level business location information.

  3. Based on an anonymous referee’s suggestion, we conduct principal component (PCA) as well as factor analyses (FA) to reduce the specific obstacles into factors. In unreported results, we observe that both the PCA and FA yield similar results as those reported using specific obstacles.

  4. Following Bardasi et al. (2011), we compute the percentage change in total performance when we switch the dummy from MOE to WOE as follows: (a) for Kenya, 100 * [exp(β) − 1] = 100 * [exp(− 0.459) − 1] =  − 36.8%, and for South Africa, 100 * [exp(β) − 1] = 100 * [exp(− 0.638) − 1] =  − 47.2%. Conversely, we compute the percentage change in total performance when we switch the dummy from WOE to MOE as follows: (a) for Kenya, 100 * [exp(β) − 1] = 100 * [exp(0.459) − 1] = 58.2%, and (b) for South Africa, 100 * [exp(β) − 1] = 100 * [exp(0.638) − 1] = 89.3%.

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  1. Towson University, 8000 York Road, Towson, MD, USA

    Tesfaye T. Lemma

  2. University of the Witwatersrand, Johannesburg, South Africa

    Tendai Gwatidzo & Mthokozisi Mlilo

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Lemma, T., Gwatidzo, T. & Mlilo, M. Gender differences in business performance: evidence from Kenya and South Africa. Small Bus Econ 60, 591–614 (2023). https://doi.org/10.1007/s11187-022-00605-w

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