The Impact of Risk Aversion and Culture for Young Entrepreneurs

The founder scene is still dominated by men in many countries. Consequently, the question arises: What obstacles prevent women from starting a venture? There are various present explanations, like the expected risk aversion of women. But to get the bigger picture, it is worthwhile to examine how cultural norms have an impact on risk aversion and how these translate into entrepreneurial action. In a new study, recently published in the entrepreneurship journal Small Business Economics, Dr. Daniela Gimenez from the Chair of Corporate Sustainability at TUM School of Management in Freising, and her co-authors determine that socially supportive cultures help reduce the risk aversion of women, facilitating them starting a venture.

The findings indicate that there is a gender difference in the relationship between risk aversion and progress in the venturing process, even though the researchers did not hypothesize any gender differences. In addition, the findings show that socially supportive cultures would decrease the negative relationship between risk-taking behavior and progress in the venturing process for female nascent entrepreneurs. This result supports the idea that, in socially supportive cultures, the impact of culture on risk is different from that in performance-based cultures. Interestingly, the findings did not show a significant moderating relationship of performance-based culture between risk and progress in the venturing process for both female and male entrepreneurs.

Dr. Daniela Gimenez, Chair of Corporate Sustainability at TUM School of Management in Freising

“We address the confluence of risk aversion and country-level culture, and their impact on progress in the venturing process, through a gendered lens”, explains Dr. Gimenez. “Our study demonstrates that country-level cultural norms moderate the relationship between risk and start-up activities and that this relationship has a gendered dimension.” Limitations notwithstanding, this study adds to the growing research emphasizing the importance of both gender and contextual variables when studying entrepreneurship.

The findings indicate that not only does progress in the venturing process have a gendered component, but also that this is influenced by country-level contextual variables, such as culture. For public policy makers in performance-based cultures (such as Germany and Switzerland), programs and incentives that provide women nascent entrepreneurs with help with access to resources, may help to moderate the risk of engaging in the new venture start-up process. For public policy makers in socially supportive cultures (such as Italy and Spain), it is important to continue policies that support women’s networking as the findings clearly indicate that women’s risk aversion is less in cultures that are rich in social capital.

What do the results mean for female founders? “For young nascent women entrepreneurs in performance-based cultures, the findings suggest the need to seek out critical relationships to help offset the lack of a supportive environment”, says Gimenez. “In contrast, for young nascent women entrepreneurs in socially supportive cultures, the support received by greater access to social capital and other resources can help to mitigate risk aversion, leading to greater progress in the venturing process.”

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