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American women start their own businesses because they have no other choice

AP Photo/M. Spencer Green
When US companies don't offer family-friendly policies, women strike out on their own.

Call it a calculated risk: Camilla Ley Valentin, the mother of two little girls, earned three times her husband’s salary when she decided six years ago to leave her corporate job in Denmark to start her own business. It was also the start of the Danish financial crisis.

But neither financial nor familial factors deterred her. “I had the confidence that the business would succeed,” Valentin recalls.

As it turned out, Valentin’s company, Queue-It—which provides websites with software to deal with heavy user traffic—has been a big success. But Valentin had another advantage in taking the leap into entrepreneurship: Denmark would have provided her with a robust social-safety net should her endeavor have failed.

That’s not something women in the US can count on. Yet they still create businesses at a higher share than most Nordic countries.

Women in the US tend to start businesses not to become the next Steve Jobs, but as a fallback employment strategy.

The primary reason that US women start businesses tends to be to tailor work to their family needs, according to a new study by sociologist Sarah Thébaud of the University of California, Santa Barbara. While Danish women can more easily meld both work and family regardless of their profession, American women turn to entrepreneurship to gain control over their work schedules and locations. In other words, women in the US tend to start businesses not to become the next Steve Jobs, but as a fallback employment strategy.

That’s not necessarily a good thing. While the US has a greater proportion of women entrepreneurs than many other countries, far fewer of their enterprises prioritize growth. This limits the businesses’ ability to create new jobs and generate higher incomes.

Thébaud’s study, published in November’s Administrative Science Quarterly, examines gender inequalities in entrepreneurship across the industrialized world. She analyzed survey data from 24 countries—including the US—between 2001 and 2008.

Women in countries with generous amounts of paid family leave tend to start bigger businesses.

Thébaud found that in countries where governments mandate generous amounts of paid family leave, women who start businesses tend to build larger, higher-impact, and more scalable enterprises. They employ more workers and express bigger ambitions for product, service, and growth. Theirs is a “lean in” entrepreneurship, rather than a “fall back” business.

It’s not just family-friendly federal policies that make a difference. Corporate culture can influence entrepreneurs, too. Valentin explains that, in Denmark, women are able to work fewer hours and more flexibly than they might be able to in the United States. Rush hour there is between 3:00 and 4:30 p.m. as parents make a mass exodus from their offices.

In Denmark, rush hour is between 3:00 and 4:30 p.m. as parents make a mass exodus from their offices.

All this suggests that when countries enact policies to support workers with caregiving responsibilities, what remains is a “select group of women entrepreneurs motivated by a desire to build larger, more innovative organizations that will have a more substantial impact on the economy and job growth,” according to Thébaud.

Meanwhile, women who start small businesses in the US don’t always want them to stay that way. “There are many female entrepreneurs in the US who would like to grow their businesses to create jobs,” says Nell Derick Debevoise, who is herself an entrepreneur as the CEO and founder of consulting and training firm Inspiring Capital. “But there are significant obstacles to them even having this aspiration, much less realizing it.”

Opening a small business because it reflects your dreams and desires is laudable. But many women in the US do so not because they so strongly want to, but out of an absence of any real choice. Unfortunately, this fallback plan also makes them vulnerable, given the risks of failure and the limited financial resources that many women have to help their business grow. So they decide to stay small and play it safe. What all this suggests is that having a social safety net in place doesn’t make business owners complacent–it actually makes them more ambitious.

