WOMEN IN INTERNATIONAL BUSINESS:
AN EXPLORATORY STUDY OF CHICAGO MINORITY ENTREPRENEURS DOING BUSINESS IN SOUTH AFRICA
Louis O. Osuji, Ph.D
College of Business, Chicago State University
Chicago, IL 60628
773-995-3954
Fax:773-995-2256
and
Mmuta A. Chukwuanu, Ph.D.
Division of Business and Economics, Allen University
Columbia, SC 29204
803 765 6006
Fax: 803 376
ABSTRACT
The growth of women owned businesses have recently attracted attention of researchers and educators. This study considered factors that contribute to Chicago women entrepreneurs doing business in South Africa. This study analyzed type of business, and factors that could determine willingness of entrepreneurs to internationalize. Statistics show average age of 47 years, 86% have more than high school diploma, and a startup capital of $12,000.00. About 62% started business to fulfill dream, 24% wanted independence. 60% showed interest in doing business in South Africa. Sample size notwithstanding, study outcome has policy implications for business owners getting involved in international business.
Keywords:
Exploratory study, women, entrepreneurs, international business, minority.
INTRODUCTION
Business opportunities and challenges brought about by globalization in the 21st century make it almost imperative for any nation that wants to maintain its competitive advantage to expand the scope and sphere of its business people. As rapid technological changes take place in industrialized nations, they bring along some contemporary economic, commercial and entrepreneurial issues that impact less developed countries. One of such issues is the emergence of women entrepreneurs, which may help to form the cornerstone in some economies including that of the United States of America. While the role and significant contribution of micro-enterprises and entrepreneurship in the US economy have been well documented in the literature, the extent of female involvement has not been exposed. Yet women-owned businesses according to the US Small Business Administration (SBA 2002) contribute more than $2.38 trillion annually in revenue to the economy and have been growing at an astronomical rate (14 percent between 1997 and 2002).
Evidence indicates that women-owned businesses are not only growing, there is diversification into non-traditional industries. The greatest growth areas according to Peacock (2001) are seen in construction (36%); agricultural services (27%); transportation, communications and public utilities (24%) and finance, insurance and real estate (14%). According to National Women’s Business Council (2004), there are 10.6 million U.S. businesses in which women are equal or majority owners. Crossing national boundaries to sell products and services should be part of the transformation that is taking place in international arena and female business owners should take advantage of trade liberalization, regional economic integrations, and increasing connectedness with customers to widen their scope of operation.
The relevance of small businesses, regardless of gender ownership, could be appreciated in terms of their contribution to a country’s economy. Small and medium-sized enterprises (SMEs) significantly contribute to job creation, help to stabilize, and fend for the family by providing for their needs. In developing countries with high unemployment percentage, this sub-sector is expected to play very major role in both job creation and economic growth.
Justification for engaging in international business stems from such factors as, trade liberalization currently being aggressively pursued by many countries including the US, and the phenomenal growth in number of women-owned businesses in the country. According to Heather Tomasetti, (2004) women should consider exporting in order to increase sales and profits, enhance competitiveness, and long-term security. International business has been espoused partly because exporting firms are 9 percent less likely to shut down than comparable non-exporting firms. Moreover, small companies are known to have found that their competitive advantage lies in uniqueness of their product/service that may be in high demand overseas. It is also recognized that from 1992 to 2001, small and medium-sized firms that were involved in exports increased 105 percent, from 112,854 firms to 231,420 firms (Tomasetti, 2004). The case for doing business in South Africa is buttressed by the fact that the country’s economy characterized as emerging, has the U. S as one of its major trading partners. Identifying more small and medium-sized enterprises from that country is likely to expand the operating bases of the identified business people.
The main purpose of this paper is to document factors that favor those female business owners who would like to internationalize their business with their counterparts in South Africa; document the nature/type of business; educational level of the participants and factors that could relate to their desire to do business overseas. The study will also highlight where possible, those constraints and problems that inhibit women business owners from engaging in international business, their policy implications, and make recommendations. By so doing, the study will contribute to the growing literature on women entrepreneurs and international business.
THEORETICAL CONSIDERATION AND LITERATURE REVIEW
The literature is full of how entrepreneurs and entrepreneurship could be categorized or classified.
Entrepreneurship when viewed as a process as suggested by VanderWerf (1993), Herron & Sapienza (1992) and Gartner (1995), could follow many paths that include potential, intending, and actual entrepreneurs all of which could be distinguished. In other studies, Westhead & Wright (1998), Wright, Westhead & Sohl, (1998), Delmar & Davidsson (2000) entrepreneurs are identified among others as nascent (individuals considering setting up a new business), novice (individuals with no prior business ownership experience as a business founder, an inheritor, or a purchaser of a business), or portfolio (individuals who have retained their original business and later on inherited, established, or purchased another business). Carland, Hoy, Boulton and Carland (1984) came up with two different types of small business owner-managers namely, entrepreneurs and small business owners. According to Carland et al. (1984), an entrepreneur mobilizes resources for the main purpose of making profit and growth, and applies strategic management practices, while the small business owner or micro entrepreneur operates a business to enhance personal goals and produce income for the family. Stewart et al (2003) likened this type of owner-manager to Filley & Aldag’s (1978), and Dunkelberg & Cooper’s (1982) craftsman entrepreneur.
In this paper, small businesses and micro-entrepreneurs are used interchangeably to mean according to
Hodgetts and Kuratko (2001), “businesses that are independently owned and operated, are not dominant in their field, and usually do not engage in many new or innovative practices”.
Female Entrepreneurship: An overview
Personal profile of women entrepreneurs as studied by Lee-Gosselin and Grise (1990), Burdette (1990), Deng, Hassan and Jivan (1995), Maysami and Goby (1999) indicated that women entrepreneurs from Canadan, America, Asia, Singapore are between the ages of 30 and 51 and are married with children. In the same study, most of the women have at least 10 years schooling, while 35 percent have bachelors or master’s degrees. In Australia, more than 25 percent of the female business owners interviewed by Breen, Calvert, and Oliver (1995) had a university degree with 18.2 percent having higher degree.
Birley (1989); Dumas (2001); Brush (1992); Greene et al (1999); Robinson (2001); Stevenson (1986); Scherer, Brodzinski, and Wiebe (1990) have provided information on women entrepreneurship, ranging from educational and work background to obstacles encountered in starting their own business. Some of the studies also focused on such areas as motivation, perception of career efficiency, comparative earnings levels, management practices and desire to succeed. Hisrich and Brush (1983) first described the American female entrepreneur while Dyer (1994) writes about different roles that a female business owner might play as a result of changes in her family, business and family life. This stems from the fact that even though women have ventured into entrepreneurship, their initial primary responsibility at home is still there before their new career choice. Prior to that, studies have focused on the extent to which the cost of childcare would diminish the likelihood of females participating in the labor force (Blau and Robins 1989; Presser and Baldwin 1980). Other studies on women-owned businesses include those of Goffee and Scase (1983), Humphreys and McClung (1981), Pellegrino and Reece (1982), and Schwartz (1976).
Comparative Studies
It is interesting to point out studies that compared the performance of male- and female-owned businesses. In an early study conducted by Kallenberg and Leicht (1991), they found no difference in earnings between businesses headed by men and women. However, Fischer, Reuber, & Dyke, (1993) are of the opinion that small and medium enterprises (SMEs) run by women exhibited poor performance because of discrimination by lenders, and other systematic factors such as business education and experience that deprive women of the much required resources to operate. Corroborating this view. Fasci and Valdez (1998) showed that male-owned accounting firms generated average gross revenue of $156,573 contrasted to an average of $80,152 for female-owned firms. In terms of profit ratio, female owned firms had higher ratios (48%) than male-owned accounting firms with 42%. Fischer et al, (1993) suggest that men and women are inherently different by nature and that these differences do not imply that women will be less effective in business than men. Rather, they may adopt different management style that may or may not be as effective as those approaches adopted by men. However, Watson’s (2003) study after controlling for industry, age of business, and the number of days a business operated, found no significant differences between male- and female-controlled businesses with respect to total income to total assets, the return on assets (ROA), or the return on equity (ROE). When control variables are removed, there is evidence to suggest that female-controlled businesses outperform male-controlled businesses. Results also showed that male and female entrepreneurs who have previously worked in the business of their interest have a higher chance of success because they have a better understanding of how such a business operates.
Business as a condition for export success
Export success has been linked to a number of factors that include controllable and uncontrollable ones. Firm size has been used as a determinant of success in international marketing and exporting. Most of these studies have mixed results. Some studies have found no relationship between firm sizes and export success (Bonaccorsi 1992; Bilkey and Tesar 1997; Cavusgil 1982; Czinkota and Johnson 1983, Moini 1995; and Moon and Lee 1990). However, studies conducted by Abdel-Malik 1974; Reid 1982; Christensen, De Rocha, and Gertner 1987; Kaynack and Kothari 1984; Lall and Kumar 1981; Tookey 1964), found a positive relationship, while (Cooper and Kleinschmidth 1985) found an inverse relationship. The contention here is that female entrepreneurs should not be discouraged from internationalizing their business more so as the results are mixed, and go to show that both small and big businesses could successfully engage in international business. If any thing, these studies should act as a motivating factor toward conducting business overseas.
METHODOLODY
The sample for the study consists of female business owners located in Cook County in the State of Illinois (the US component) and those from Durban, and the province of Kwa- Zulu Natal (KZN) in South Africa. Study instrument comprised questionnaires that were distributed to minority business owners identified in the city of Chicago through community-based organizations, and the national association of women business owners (NAWBO). Some of these organizations include Hispanic Chamber of Commerce, Asian Women organization, and Metropolitan Chamber of Commerce. Through these organizations, members were contacted for participation in the study. About 50 questionnaires were distributed to members engaged in the following business areas: Construction, Wholesale/Retail trade, Transportation, Communication, Agribusiness, Services, and Manufacturing and also those who have been in business for not less than five years. Women in the construction industry were included to identify the nature of business (if any) they would like to do in South Africa. For instance, they may choose to supply building materials, or get involved in real estate, or tourism.
Questionnaire design
Two sets of questionnaires were prepared, one for US, and the other for South African-based female business owners. The questionnaire for US female entrepreneurs contained 25 questions while that of South African female entrepreneurs had 17. The two sets of questionnaires have similar contents. Important information sought include type of business, year established, startup capital, annual business gross income and expenditure, consideration for engaging in international business, and the respondents’ educational level. Others include reasons for starting business, marital status, number and age of children. Full time business owners who have run their business for more than three years were given the questionnaire to complete. That means convenience sampling method was adopted since the sample size was not large enough to accommodate stratified or any other relevant sampling technique. Again participation in the study was very voluntary. About forty questionnaires were distributed to the participants out of whom 23 were returned for a response rate of 57 percent. For the purpose of this paper, only the US based respondents were used, as the data from South African entrepreneurs are yet to be analyzed.
Specification of variables
It is hypothesized that there is a positive relationship between annual business income, startup capital, annual business expenses (in the form of capital input), desire to operate internationally, age of business owner, level of education and marital status among others. In other words,
ABI = 0 + B1 X1 + B2X2 + B3 X3+4 X4 +5X5+6X6+ ei ………….(1)
It is postulated that annual business income (ABI) depends on the magnitude or size of the startup capital, age, education and marital status of the business owner. The size of startup capital or initial capitalization will significantly affect the operations of the enterprise and hence the annual income. Low capitalization is not likely to enable an entrepreneur perform at a level that will ensure successful business operation. Age and educational level of the entrepreneur are expected to be positively correlated to improved annual business income in the sense that the two variables, other things being equal, should instill caution and sense of discipline while conducting business. Role of marital status (MS) as a determinant of income will depend to a large extent on the supportive or otherwise none supportive role of the spouse depending on the magnitude of the human resource they may have. However, the sign is expected to be positive if a businesswoman’s husband has the knowledge and experience related to operating successful enterprise.
The second hypothesis is that doing business overseas (South Africa) depends on annual business income, age of business owner, level of education and marital status. Put in another way, international business operations by female entrepreneurs are a function of the above-mentioned variables. This is expressed thus:
DOI= AbX 1+ AoX2 + LEX3 + MsX4 + i………………………….. (2)
Where,
ABI = Annual business income, X1 = Start up capital (SC)
X2 = Annual business expenses (EBE),X3 = Desire to operate international business (DOI)
X4 =Age of business owner (ABO),X5= Level of education (LOE)
X6= Marital status (MS),Ei, ui = Error terms
RESULTS
Descriptive statistics of the sample are as follows. Age: 18.2% of the sample are 31- 40 years; 18.2 % are 41-50 years; 45.5% are 51-60, and 18.2% are 61 years and above. However, the average age of the respondents was 47 years, which is consistent with Burdette’s (1990) description of US female business owners to be mostly under 51 years.
Table 1 provides details of the questionnaire analysis with respect to such information as type of business, startup capital, annual business income/expenses, educational level and marital status. While some of the women entrepreneurs were in construction (9.1%), wholesale/retail 9.1%), the majority (54.5%), are in the service industry. The preponderance of female business owners in the service industry agrees with the findings of Teo (1996) about women in Singapore. Only 9 % had a startup capital of between $26,000 and $40,000) as more than 80% started with less than $10,000. The mean startup capital was about $12,000. This is understandable particularly as personal savings comprised more than 80 percent of startup capital in line with the observations of Deng, Hassan, and Jivan (1995) that sources of initial capital for female business owners include loans from family, relatives and friends and personal savings. It is interesting to observe that only one respondent (4.5%) received Small Business Administration (SBA) loan. While 68% grossed under $100,000 per annum, 27% grossed more than $750,000.00 annually with a mean of $341,000.00.
Table 1 Questionnaire Analysis
VariablePercent of RespondentsN= 22
Type of business:Construction 9.1
Wholesale/Retail 9.1
Transportation 4.5
Communication13.6
Agribusiness -
Manufacturing -
Services54.5
Other 9.2
Startup Capital:$10,000 and under86.4
$11 - $25000 4.5
$26 - $40,000 9.1
$50,000 and above -
Sources of Capital:Personal Savings81.8
Friend/Family13.6
SBA Loan 4.5
Ever considered doing business in South Africa?Yes63.6
No36.4
Age of business owner:Under 30 years -
31 – 40 years18.2
41 – 50 years18.2
51 –60 years45.5
61 years and above18.2
Educational background:High school diploma13.6
One to two years22.7
Bachelors22.7
Masters31.8
Other 9.1
The educational background of the respondents is very impressive and shows that only 14 percent have high school diploma as the rest have education higher than that; Masters 31.8%; Bachelors 22.7%; 1-2 years college 22.7%. The high educational attainment of these women is consistent with the findings of Breen et al (1995) on Australian business women, Teo (1996) about business women from Singapore, and the observation by Maysami and Goby (1999) “that female business owners are generally well educated”. More than 63% of the women answered yes to the question “Ever considered doing business in South Africa”? In other words, more than half of the respondents are interested in doing business in South Africa. When further asked about the time they would consider that, the majority expressed desire to know more about the mechanics of conducting international business or doing business overseas. Analysis of the questionnaire further revealed that 73% of them have never had any family member in business. Many started their own business for a variety of reasons that include achieving personal goals of being their own boss (being independent), and making extra money. Being laid off from work as a reason for starting business constituted less than 5%, to make extra money 4.8%, to fulfill my dream 62% and to be my own boss 23.8%. The major factors that motivate Chicago-based women business owners to start a business are fulfilling their sense of self-worth and the need for independence. The desire for success in the competitive business environment may help to explain why 77.3% of the women belong to professional organizations. It is very interesting to observe that form of business ownership ranges from limited liability company (LLC) to S-Corporation. The details are as follows: LLC and Franchise 4.8%, Sole Proprietorship 38.1% and S-Corporation 42.9%. The high percentage of sole proprietorship as the preferred form of business structure is consistent with the findings of Cuba, Decenzo, and Anish (1983), Hisrich and Brush (1983), Mescon, Stevens, and Vozikis (1983-84). As their businesses grow, Birley, Moss, and Sanders (1987) found that women were as likely as men to change to a corporate structure. Again the 43% of the women businesses assuming corporate structure is in line with that observation.