Perceived Trustworthiness Helps Women Entrepreneurs with Crowdfunding Backers
Psychology Perceived Trustworthiness Helps Women Entrepreneurs…
Published: May 21, 2018.
Released by Louisiana State University
Female entrepreneurs have been at a disadvantage when seeking financial backing from traditional sources, but new research shows that crowdfunding investors view them as more trustworthy, making female-led projects more likely to secure support through crowdfunding platforms.
The research was conducted by Michael Johnson, an assistant professor of management in the LSU E. J. Ourso College of Business; Regan Stevenson, assistant professor of management and entrepreneurship at Indiana University’s Kelley School of Business and Chaim Letwin, an assistant professor of management and entrepreneurship at Suffolk University in Boston. The trio authored “A woman’s place is in the … startup! Crowdfunder judgments, implicit bias and the stereotype content model,” which was recently published in the Journal of Business Venturing.
“Historically, funding from banks, private equity and venture capital is more likely to go to men because of the perception that business leaders should be masculine,” said Johnson. “In contrast, crowdfunding investors see female entrepreneurs as more trustworthy; this perception leads to higher overall investment in female-led ventures over male-led ventures. In this instance, gender bias works in their favor.”
The researchers analyzed three years of data from Kickstarter, a popular crowdfunding platform. They examined the entrepreneurs’ gender, the financial backing received and funding success in a sample of 416 projects. Women were more likely than men to have their ideas funded.
To determine why this was the case, the researchers conducted an experiment with 73 amateur investors in the eastern U.S. Results supported their view that perceptions about trustworthiness facilitate financial backing and implicit gender bias influenced a funders’ willingness to fund female entrepreneurs.
These findings are significant because earlier research found that female-led firms only receive 1.3 percent of venture capital financing. When they accept private funding, women are often asked to surrender a higher proportion of ownership. Empirical observations reveal a funding advantage for women in crowdfunding, a system where a “crowd” of amateur investors make small investments in new ventures.
“Previous research indicates that women should deemphasize feminine characteristics to increase the chance of receiving venture capital, that is bad advice when it comes to crowdfunding,” said Johnson. “Our findings point to crowdfunding as an opportunity for women to increase their odds of success and overcome the negative aspects of gender bias.”
Chinese French German Italian Japanese Korean Portuguese Russian Spanish