To succeed as entrepreneurs, women must extend networks beyond family members

Chapel Hill -- Women who dream of becoming entrepreneurs need to expand their informal business discussion networks beyond family members, new research suggests.

The study of would-be entrepreneurs in North Carolina's Research Triangle found that business people who had a higher proportion of family in their networks were less likely than others to start a business. Compared with men, women studied were more likely to have networks that included more family members.

The results offer one explanation of why women are only half as likely as men to start their own businesses, according to Dr. Howard E. Aldrich, Kenan professor of sociology at the University of North Carolina at Chapel Hill, who designed the study to examine sex differences in business practices.

"Once women were in business, their networking behavior did not differ much from men's," Aldrich said. "However, our newest work showed that women's close personal networks were different from men's, affecting their chances of becoming owners in the first place."

Along with Aldrich, graduate student Linda Renzulli of UNC and Dr. James Moody, assistant professor of sociology at Ohio State University, conducted the study, which is described this winter in the journal Social Forces.

Business discussion networks are composed of the people entrepreneurs contact for advice, knowledge and opportunities when the former are thinking of starting new businesses, the three said. Family members are unlikely to give entrepreneurs information or leads they don't already have.

"Women may be limiting their chance of successfully starting their own business by not developing and maintaining more ties with associates outside their families," Renzulli said.

Such network members can help entrepreneurs find financing, suggest trusted lawyers or accountants and help identify books and other resources.

"Who you know is very important when starting a new business, and entrepreneurs need to know the right people to be successful," Moody said.

Researchers used data from the Research Triangle Entrepreneurial Development Study. Their investigation included surveys of 353 people in Durham and Wake counties who were trying to start a new business or who were thinking of becoming business owners.

Respondents were first surveyed in 1990 and 1991. Follow-up interviews were conducted in 1992 to determine who had begun new businesses. They were asked, "Please tell me the first five people with whom you feel especially willing or able to discuss your ideas for a new business or your ideas about representing or running your current business." The five chiefly constituted a person's business discussion network.

Researchers wanted to identify differences between male and female entrepreneurs. Results showed that 56 percent of women mentioned a family member as part of their network, compared to only 40 percent of men. Women's networks consisted of an average of 20 percent family members, compared to 14 percent for men.

Women probably have more family members in their networks than do men because women tend to have more family obligations in society, the three said. While family members might be helpful in running a business, they are less helpful in getting it started.

"Family might provide good day-to-day support in running a business, but in terms of getting creditors and a business plan and an advertising program, your daughter-in-law is probably not the person who is going to be most helpful," Moody said.

The study also found that the more heterogeneous a person's network - the more variety in the background of network members - the more likely the respondent would start a new business. A heterogeneous network was one where the members come from different parts of the person's life: family, friends, coworkers, business associates, consultants and fellow group or association members.

"If you have a network with people from many different backgrounds, you can get many different perspectives," Moody said. "If everyone you know has a similar background, than talking to one of them is like talking to all of them."

While women in the study tended to have more family members in the network than men, women and men tended to have similar levels of heterogeneity in their networks.

"Once you account for family in the business network and the general heterogeneity of the network, being a woman has no detrimental effect on the odds of starting a new business," Renzulli said. The best thing women can do if they want to increase their chance of success at starting a new business is to develop a diverse network, Moody said.

Note: Aldrich and Renzulli can be reached at 919-962-1007, Moody at 614-292-1722.

UNC News Services