Institutional entrepreneurship and female empowerment: an emerging market perspective

by Professor Hans Hendrischke
CSC academic group: Enterprise Development

Hans is a Professor of Chinese Business and Management in the Discipline of International Business of the University of Sydney, Business School. His research areas are in Chinese Economic Institutions, Privatisation and SME sector in China, Chinese Local Governance and Chinese outward direct investment (ODI).

Research generally recognizes that entrepreneurship can empower women in otherwise male dominated societies, but whether there are specific forms of women entrepreneurship remains controversial. For this research project, supported by the Innovation & Entrepreneurship Research Group (IERG) of the University of Sydney, Business School, we start by asking if institutional entrepreneurship in China’s dynamic market environment provides an opportunity to women entrepreneurs that empower them more than their male counterparts, who traditionally dominate resource-based and industry-based entrepreneurship. Are women able to use the inherent flexibility of institutional entrepreneurship to create new corporate structures and realise social preferences and life style choices otherwise foreclosed to them? If empowerment can be linked to strong informal institutions and a transforming economy, such as China, will this work in other transition economies as well?

The discourse on empowerment originates from poverty alleviation and improving the economic and social situation of women. Empowerment requires agency and structures of opportunity. In the words of the World Bank team, empowerment is

a group’s or individual’s capacity to make effective choices, that is, to make choices and then to transform those choices into desired actions and outcomes. … [T]his capacity is primarily influenced by two sets of interrelated factors: agency and opportunity structure.

quote China in 2011 had 29 million women entrepreneurs, an increase from less than 20 million in 2000

China in 2011 had 29 million women entrepreneurs, an increase from less than 20 million in 2000, according to Cui Yu, head of department from the All-China Women’s Federation. Businesses owned by women accounted for around 20 per cent of businesses nationwide, slightly lower than the global average level of between 25 per cent and 33 per cent. National surveys of women entrepreneurs were conducted by China Entrepreneur Survey System between 1996 and 2001 in six rounds of surveys and five follow-up surveys. According to these surveys, 89 per cent of women entrepreneurs engaged in small and medium enterprises in the processing and manufacturing industry as well as service industry. More women entrepreneurs originate from East China than from Western China. While the average education level of women entrepreneurs was lower than that of their male counterparts, women were more willing to take off-job training and more of them had foreign languages and computer skills. Finally, Chinese women seem to have a higher tendency to succeed in businesses. Compared with their male counterpart, a higher proportion of the enterprises owned by women reported profits.

For women entrepreneurs, simultaneously meeting traditional resource-based and industry-based entrepreneurial responsibilities and family demands can be difficult, leaving them in situations where they have to make fundamental personal and social choices that men do not face. This is consistent with recent findings that increased flexibility through entrepreneurship appears to be a fallacy. Business demands and related stress inevitably encroach on home life. After investing time and resources in accessing material, human, and social resources, women are left with less capacity to compete.

This background affects both the nature and the extent of women entrepreneurship. In particular, it is an incentive for women entrepreneurs to venture into new areas of business and create new markets through institutional entrepreneurship, rather than having to commit to the traditional male dominated resource and industry oriented entrepreneurship. Barriers to entry motivate women entrepreneurs to build their own networks of suppliers and distributors, but also to develop alternative forms of organisation and competitive advantage in self-organized industrial clusters. One example is the closely knit groups of women offering alternative forms of finance to emerging private enterprises. Overall, the primary purpose of this type of institutional entrepreneurship is to maximise flexibility for entrepreneurship and less to legitimate change in an existing order.

hans article photo

In the context of China, institutions, particularly informal institutions, significantly influence the nature of women entrepreneurship. Women entrepreneurs make use of the predominance of informal institutions in two significant ways: firstly, “embeddedness” in flexible institutions, makes women more motivated and determined to succeed in business. And secondly, women entrepreneurs are bold enough to experiment and modify existing institutions to establish business activities to fit their purposes. Consequently, growth of business does not necessarily mean the traditional way of growing a small company to a large one in several stages by expanding the organisational structure. Rather, it may mean recombining existing entrepreneurial activities, finding institutional voids, and devising institutional innovations which give the entrepreneur more personal freedom. We observed Chinese women entrepreneurs for whom personal development was more important than the sheer growth of their enterprises, who at the same time insisted on profitability and a work-life balance. Success in achieving this would bring additional social recognition.

Two examples of female business owners may illustrate these points. The first women entrepreneur became self-employed after finishing an apprenticeship in her hometown in the country side near Hangzhou. Through a series of setbacks and business failures, she gradually established a network of contacts and then set up two different shops which gave her a balance between a hands-on role in her tea house, a supervisory role in her clothes shop and her life style as an independent urban middle class woman. The second women entrepreneur grew out of a family business she had helped to establish. She defined herself as a professional entrepreneur, but her challenge was to find a highly profitable enterprise that would give her the financial means to establish a family without affecting her personal desire to work limited hours and maintain a high degree of personal freedom. She realised this by creating a new market for energy recycling through skilful use of government incentives. Both women see their enterprises as serving their lifestyle choices and as a way of realising their social preferences, which are at odds with conventional expectations. Both are located in the Yangtze River Delta where private entrepreneurship is encouraged and recognised for its contribution to social progress. Both chose to become entrepreneurs because they wanted their life to be different.

From their experience, we see that institutional entrepreneurship generally appears in three forms: first, through experimentation and modification, women can proactively combine existing entrepreneurial activities and search for more flexible and profitable opportunities. Second, a common problem faced by many developing countries is the presence of institutional voids. Female entrepreneurs can fill these institutional voids by negotiating rules, resources, and discourses with formal and informal circuits of power, contributing to the emergence of alternative forms of governance. Third, women entrepreneurs can devise institutional innovations that enable them to decouple their businesses from the established economic order and start up and grow small private firms.

quote In a hospitable market environment women are motivated to make use of institutional innovation and institutional entrepreneurship rather than following the more established paths of resources or firm based entrepreneurship where men tend to dominate.

The two examples can only illustrate in outline the argument that women who are motivated by the desire to take control of their destinies need to experiment and to modify existing institutions to establish business activities which suit their personal preferences. Women who choose unconventional career paths and invent alternative enterprise structures face entrepreneurial and social risks. In a hospitable market environment women are motivated to make use of institutional innovation and institutional entrepreneurship rather than following the more established paths of resources or firm based entrepreneurship where men tend to dominate. These narratives show that for these two women entrepreneurs, interaction with their environment was based less on their acceptance of established practices than on proactive changes their institutional environment to suit their personal preferences.

Does this experience apply to other societies and economies? Women entrepreneurs in emerging institutional environments have an additional choice in their social and lifestyle preferences when they adapt their activities and strategies to the opportunities and constraints presented by formal and informal institutions. Our cases show that women entrepreneurs in emerging institutional environments face more fundamental professional and lifestyle choices than their male counterparts, as men tend to follow established paths of entrepreneurship and count on a supportive family environment as part of professional success. Women entrepreneurs, in contrast, face a real choice between family and work or between a high profile public role and a conventional lifestyle. Institutional entrepreneurship is one of the few options for women to realise these preferences as long as the institutional environment supports entrepreneurial activity.