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Do You See What I See?
Signaling Effects of
Gender and Firm
Kimberly A. Eddleston
Jamie J. Ladge
In this study, we examine whether female entrepreneurs are held to a different standard
than male entrepreneurs in obtaining ﬁnancing from banks. To test this idea, we draw from
the literature on signaling theory to propose that characteristics speciﬁc to the ﬁrm and the
entrepreneur act as a means to communicate (i.e., signal) the inherent quality of the venture
and thus impact the amount of capital the entrepreneur is able to obtain. We then explore
the moderating role of gender based on gender role congruity theory to argue that capital
providers reward the business characteristics of male and female entrepreneurs differently
to the disadvantage of women.
Over the last decade, women have made great strides in the ability to launch their
own ventures and obtain debt ﬁnancing. While early research on the ﬁnancing of women-
owned ventures suggested that female entrepreneurs face discrimination when seeking
capital (Brush, Carter, Greene, Gatewood, & Hart, 2001; Buttner & Rosen, 1988), more
recent studies suggest that gender differences in obtaining ﬁnancial capital are diminish-
ing. For example, after accounting for structural differences between men’s and women’s
Please send correspondence to: Jamie J. Ladge, tel.: 617-373-8176; e-mail: firstname.lastname@example.org, to Kimberly A.
Eddleston at K.email@example.com, to Cheryl Mitteness at firstname.lastname@example.org, and to Lakshmi
Balachandra at email@example.com.
© 2014 Baylor University
May, 2016 489
C2014 Baylor University
ventures, women were shown to be as likely to seek (Orser, Riding, & Manley, 2006) and
obtain debt (i.e., bank) ﬁnancing as men (Arenius & Autio, 2006; Becker-Blease & Sohl,
2007; Carter, Shaw, Lam, & Wilson, 2007; Haines, Orser, & Riding, 1999; Wilson,
Carter, Tagg, Shaw, & Lam, 2007). However, while female entrepreneurs’ access to debt
ﬁnancing appears to be on par with their male counterparts, Jennings and Brush (2013,
p. 23) recently concluded that more ﬁne-grained analyses suggest “evidence of a more
subtle, residual and ‘second order’ form of gender-based differential treatment.” Indeed,
several studies suggest that bank loan ofﬁcers are more likely to question the commitment
of female entrepreneurs and to employ different evaluative criteria for male and female
entrepreneurs to the detriment of women (Carter et al.; Constantinidis, Cornet, &
Asandei, 2006). Evidence suggests that female entrepreneurs are often charged higher
interest rates (Fraser, 2005; Wu & Chua, 2012) and need to share greater information
than male entrepreneurs to obtain ﬁnancing (Constantinidis et al.; Murphy, Kickul,
Barbosa, & Titus, 2007). Accordingly, an extra hurdle appears to exist that prevents
female entrepreneurs from obtaining the same levels of bank ﬁnancing as their male
Since access to capital is key to growing an entrepreneurial venture, and yet it is one
of an entrepreneur’s most challenging problems (Carter, Gartner, Shaver, & Gatewood,
2003; Neeley & Van Auken, 2010), understanding if gender biases exist is important.
Because the most common source of external ﬁnancing of women entrepreneurs’ ventures
is bank loans (Constantinidis et al., 2006), we focus on the loan amount male and female
entrepreneurs are able to obtain after taking into account structural differences between
their ventures. We draw from signaling theory (Spence, 1973) and its application to
entrepreneur ﬁnancing (Jain, Jayaraman, & Kini, 2008; Ozmel, Reuer, & Gulati, 2013;
Prasad, Bruton, & Vozikis, 2000) to propose that signals that reﬂect a venture’s viability
(Jain et al.; Ozmel et al.; Reuber & Fischer, 2005) and the entrepreneur’s commitment to
the business (Busenitz, Fiet, & Moesel, 2005; Prasad et al., 2000) may explain differences
in the amounts of bank ﬁnancing obtained by male and female entrepreneurs.
Signaling theory has been applied in the entrepreneurship literature to explore how
capital providers consider signals of underlying quality, such as viability and commit-
ment, to evaluate the potential of entrepreneurial ventures (Ozmel et al., 2013; Prasad
et al., 2000). Although the broader theory acknowledges that signals can be interpreted
differently by receivers in terms of strength and meaning (Park & Mezias, 2005), little
research has considered how the strength and meaning of signals vary depending on the
sender, and speciﬁcally, the gender of the sender. As such, we apply gender role congruity
theory (Eagly & Karau, 2002) to explore how gender affects the ﬁnancial capital entre-
preneurs obtain from signals of viability and commitment. Gender role congruity theory
highlights the difﬁculties women face in gaining legitimacy in traditionally masculine
ﬁelds and proposes that observers use different standards to evaluate the performance of
men and women in gendered contexts (Eagly & Karau). Accordingly, we argue that the
masculine domain of entrepreneurship (Ahl, 2006; Bruni, Gherardi, & Poggio, 2004;
Gupta, Turban, Wasti, & Sikdar, 2009) causes legitimacy challenges for women because
gender affects the degree to which women versus men beneﬁt from positive signals when
seeking bank ﬁnancing.
Our study makes several contributions to the entrepreneurship literature. First, by
integrating gender role congruity theory with signaling theory we demonstrate how the
beneﬁts accrued from signals of quality can vary depending on the gender of the sender.
Our results suggest that signals of viability and commitment by male and female entre-
preneurs appear to be rewarded differently by capital providers, often to the detriment of
women. As such, our research demonstrates the relevance of gender role congruity theory
2ENTREPRENEURSHIP THEORY and PRACTICE
490 ENTREPRENEURSHIP THEORY and PRACTICE
to entrepreneurship by revealing how signals of viability and commitment are not asso-
ciated with the same levels of bank ﬁnancing for men and women. Second, we contribute
to signaling theory by extending its predictions to bank ﬁnancing and demonstrating the
important role that the gender of the sender plays in determining if signals of viability and
commitment reap ﬁnancial rewards. Finally, we contribute to research on women entre-
preneurs by showing that gender biases still exist in regards to bank ﬁnancing. However,
while our results suggest that women entrepreneurs may have difﬁculties communicating
the underlying quality of their ventures to capital providers, unexpectedly, we also ﬁnd
that some signals of viability and commitment do not advantage men as much as the
literature would predict.
We begin by reviewing the literature on entrepreneur ﬁnancing. This is followed by
the presentation of our main effect hypotheses, which focus on common factors capital
providers consider when offering loans to entrepreneurs. We then turn to the primary focus
of our paper—the moderating effect of gender. After the methodology and results are
presented, we turn to discuss the ﬁndings of our study.
Financing an Entrepreneurial Venture
Financing a new venture is known to be a primary challenge in entrepreneurship
(Ebben & Johnson, 2006). While there are several ways entrepreneurs can ﬁnance their
ventures, most often they draw on personal resources ﬁrst, followed by ﬁnancing
from family and friends, and then debt and equity capital (Berger & Udell, 2003).
Debt ﬁnancing refers to interest-carrying loans that are offered primarily by banks. Equity
ﬁnancing describes investments that involve shares in the ﬁrm in exchange for capital.
In entrepreneurship, equity ﬁnancing usually refers to ﬁnancing obtained from venture
capitalists or “angel investors” (Berger & Udell). Most entrepreneurial ventures rely on
debt ﬁnancing because they do not meet the strict criteria required by equity investors such
as venture capitalists or angel investors. Additionally, many entrepreneurs do not want
to give up control and shares of their ventures, which would be required with equity
ﬁnancing (Winton & Yerramilli, 2008). Given the scarcity of venture capital and other
equity investment channels for new businesses, and the known disparity between
men- and women-owned businesses in the venture capital arena (e.g., Becker-Blease &
Sohl, 2007; Bosse & Taylor, 2012), we focus this study on bank ﬁnancing, which is the
most common source of external ﬁnancing women entrepreneurs receive (Constantinidis
et al., 2006).
There are common criteria that banks use to assess entrepreneurial ventures for
loans—their assets, ability to pay back loans, and the venture’s track record (Coleman,
2002; Coleman & Robb, 2009; Haynes, Rowe, Walker, & Hong, 2000). While these
criteria are often highlighted, some research maintains that there are differences in bank
loan outcomes for male and female entrepreneurs. For example, research indicates that
female entrepreneurs are charged higher interest rates (Fraser, 2005; Wu & Chua, 2012)
and tend to receive smaller loan amounts than their male counterparts (Verheul & Thurik,
2001; Zimmerman, Treichel, & Scott, 2006). Research also suggests that in comparison
with male entrepreneurs, female entrepreneurs are more likely to expect to be rejected by
banks (Carter, Shaw, Wilson, & Lam, 2006) and to perceive bankers as having a negative
view of female entrepreneurs’ creditability (Hill, Leitch, & Harrison, 2006). Given these
research ﬁndings, we combine the range of learning from studies conducted on women
and entrepreneurial ﬁnancing to develop our hypotheses on signaling and bank ﬁnancing
May, 2016 491
Signaling Theory and Entrepreneur Financing
Signaling theory is concerned with reducing information asymmetry by one party in
their evaluation of the quality of another party (Connelly, Certo, Ireland, & Reutzel, 2011;
Spence, 2002). “Quality refers to the underlying, unobservable ability of the signaler to
fulﬁll the needs and demands of an outsider observing the signal” (Connelly et al., p. 43).
For the signal to be meaningful to the sender, it “must be costly to obtain and correlated
with the underlying characteristics that are relevant to the decision maker” (Kirsch,
Goldfarb, & Gera, 2009, p. 489). For example, Spence (1973) explains that employers do
not fully know the quality of a job applicant and therefore use higher education as a signal
of quality since lower quality candidates would ﬁnd it costly to obtain a degree because
they could not withstand the rigors of higher education. Thus, signals reduce the infor-
mation asymmetry for individuals outside the organization, including external investors
(Certo, 2003; Deeds, DeCarolis, & Coombs, 1997) because signals communicate the
inherent quality of a venture (Arthurs, Busenitz, Hoskisson, & Johnson, 2009; Busenitz
et al., 2005).
While most signaling models focus on quality as the distinguishing characteristic,
quality can be interpreted in many ways (Connelly et al., 2011).1In the entrepreneurship
literature, scholars have applied signaling theory to argue that capital providers assess
the underlying quality of entrepreneurial ventures by looking for signals that reﬂect the
viability of the venture (Jain et al., 2008; Reuber & Fischer, 2005) and the commitment of
the entrepreneur (Busenitz et al., 2005; Prasad et al., 2000). Viability signals reﬂect the
stability, health, and future prospects of a venture (Jain et al.; Ozmel et al., 2013). Com-
mitment signals reﬂect personal investment in the venture and an entrepreneur’s determi-
nation to overcome obstacles (Busenitz et al.; Prasad et al.). When seeking ﬁnancial
capital, these signals, which are embedded in the actions and past behaviors of entrepre-
neurs, are believed to create trust and credibility more effectively than word or verbal
promises to capital providers (Busenitz et al.).
While previous entrepreneurship research has applied signaling theory to investigate
signals that attract venture capital or angel investors (Busenitz et al., 2005; Prasad et al.,
2000) and to predict initial public offering (IPO) performance (Bruton, Chahine, &
Filatotchev, 2009; Certo, 2003; Jain et al., 2008), little research has considered their effect
on bank loans (Murphy et al., 2007). However, bank loan decisions include more than the
application of objective, bank operating procedures. They include a subjective informal
process, often described as a “gut reaction” that is framed by the capital provider’s beliefs
and values (Wilson et al., 2007). Thus, in line with signaling theory, signals can be
interpreted differently by receivers in terms of their strength and meaning (Park & Mezias,
2005). Because the full set of information required to evaluate the quality of an entrepre-
neurial venture is never at hand, capital providers utilize signals to assess the asymmetry
between what they know and what they need to know before granting a loan. In turn, those
entrepreneurs who are able to signal the underlying quality of their ventures to capital
providers should be able to procure resources for their businesses (Busenitz et al.).
In this study, we identify characteristics of the venture and the entrepreneur that have
been linked to new venture success and the procurement of bank loans and therefore
represent potential decision cues for capital providers. Given the importance of signaling
viability to attract ﬁnancing, we consider the age of the ﬁrm (e.g., Baum, Calabrese, &
Silverman, 2000; Haines et al., 1999), size of the ﬁrm (e.g., Aldrich & Auster, 1986;
Haines et al.), and past ﬁnancial performance (e.g., Haines et al.; Wiklund & Shepherd,
1. Please see Connelly et al. (2011) for a complete review.
4ENTREPRENEURSHIP THEORY and PRACTICE
492 ENTREPRENEURSHIP THEORY and PRACTICE
2003). Further, in line with research on commitment signals, we investigate the entrepre-
neur’s personal investment in the venture (Busenitz et al., 2005; Prasad et al., 2000) as
well as the entrepreneur’s investment of time in the venture (Wilson et al., 2007). After
exploring how signals of viability and commitment predict the size of bank loans, we then
seek to extend signaling theory by proposing that receivers may interpret signals differ-
ently depending on the gender of the sender.
Signaling Viability by Overcoming Liabilities of Newness and Smallness
Signaling theory highlights the need for entrepreneurs to signal the viability of their
new venture to capital providers (Busenitz et al., 2005; Connelly et al., 2011). Liabilities
of newness and smallness raise questions regarding the new venture’s legitimacy and,
particularly, its long-term viability (Zimmerman & Zietz, 2002). Business start-ups face
liability of newness due to their age (Stinchcombe, 1965), and by extension liability of
smallness due to their size (Aldrich & Auster, 1986), that impact the amount of funding
entrepreneurs are able to obtain (Cassar, 2004). Newness and smallness offer capital
providers insight into the perceived uncertainty regarding a venture. For example, new
and/or small ﬁrms often lack the market recognition, economies of scale, and strategic
partners that more established ﬁrms utilize to secure key resources (BarNir, Gallaugher, &
Auger, 2003). In contrast, larger, more mature businesses are perceived as a lower risk for
ﬁnancing (Heidrick & Nicol, 2002).
In line with signaling theory, Reuber and Fischer (2005) explained how a young
venture’s lack of a track record leads outsiders to question its viability. Young ventures
have little production experience and often operate with immature and unreﬁned activities
that cause outsiders to have concerns about their viability. Further, young ﬁrms are seen
as highly uncertain because their lack of operating history provides little information for
capital providers to assess their future performance potential (Daily, Certo, & Dalton,
2005; Reuber & Fischer).
In addition to the liability of newness, venture size is an important signal of quality
since it communicates the viability of the business and its ability to grow (Bell, Moore, &
Filatotchev, 2012; Busenitz et al., 2005). For example, regarding IPOs, research has found
that larger ﬁrms tend to attract more prestigious investment bankers since their expected
returns are seen as more certain than those of smaller ﬁrms (Carter, Dark, & Singh, 1998;
Daily et al., 2005). Similarly, research on bank loans has stressed the importance of
communicating business stability and size to lenders (Wilson et al., 2007). Firms that have
a small number of employees are less likely than larger ﬁrms to be proﬁtable and survive
(Kalleberg & Leicht, 1991), and therefore face greater difﬁculties in raising ﬁnancial
capital (Aldrich & Auster, 1986).
Accordingly, ﬁrm age and size can be seen as signals of viability that represent a
venture’s ability to overcome liabilities of newness and smallness. By reaching a threshold
of maturity and size, entrepreneurs are able to communicate the viability of their ventures
to capital providers. Entrepreneurial ventures that overcome liabilities of newness and
smallness gain legitimacy in the eyes of observers that thereby leads them to acquire key
resources including ﬁnancial capital (Tornikoski & Newbert, 2007; Zimmerman & Zietz,
2002). Therefore, we expect that entrepreneurial ventures that are older and larger will
receive greater amounts of bank ﬁnancing than younger and smaller ventures. Stated
Hypothesis 1: Firm age, a signal of viability, is positively related to the amount of
bank ﬁnancing received.
May, 2016 493
Hypothesis 2: Firm size, a signal of viability, is positively related to the amount of
bank ﬁnancing received.
Signaling Viability Through Past Performance
A venture’s track record of performance is often considered by capital providers as
a sign of future viability (Jain et al., 2008; Reuber & Fischer, 2005). Measures of past
performance signal a venture’s viability by highlighting the business’s credibility and
growing value (Bruns, Holland, Shepherd, & Wiklund, 2008; Covin & Slevin, 1997).
Drawing from signaling theory, Jain et al. argued that past performance provides legiti-
macy for entrepreneurial ventures and signals their ability to remain economically viable.
For example, capital providers look at a business’s past performance to determine if it has
the capacity to pay back a particular loan amount (Wilson et al., 2007). It has been argued
that entrepreneurial ventures need to signal their past earnings to secure ﬁnancing
(Busenitz et al., 2005) because a strong past performance tends to indicate strong future
performance and therefore can be used to signal a venture’s viability, especially when a
business lacks other forms of information to express quality (Dimov, Shepherd, &
Sutcliffe, 2007). Therefore, signaling theory predicts that strong past performance will be
associated with higher funding amounts.
Hypothesis 3: Past performance, a signal of viability, is positively related to the
amount of funding received.
Signaling Commitment Through Investment of Personal Capital and Time
Due to the high uncertainty associated with investing in new ventures, capital pro-
viders seek commitment signals from entrepreneurs (Barney, Busenitz, Fiet, & Moesel,
1989). Signaling theory explains how entrepreneurs’ commitment signals help capital
providers more accurately evaluate which new ventures to fund (Prasad et al., 2000) since
they demonstrate an entrepreneur’s determination in overcoming obstacles to achieve new
venture success (Busenitz et al., 2005). In particular, the personal dedication of time and
money reﬂects an entrepreneur’s commitment to the venture and intent to make it succeed
(Busenitz et al.).
Regarding personal capital, signaling theory suggests that larger investments by an
entrepreneur signal to investors the ﬁnancial potential of the venture in the eyes of the
entrepreneur (Busenitz et al., 2005). Research examining managerial stock ownership
indicates that greater ownership signals stronger bonds with the ﬁrm and greater optimism
for the venture’s future performance (Goranova, Alessandri, Brandes, & Dharwadkar,
2007). Additionally, research on IPOs suggests that higher top management ownership
signals conﬁdence and commitment to the venture to investors (Jain et al., 2008). From
a signaling theory perspective, greater personal capital investment serves as a credible
signal since owners have access to more information about the venture than observers
(Connelly et al., 2011). While research on public ﬁrms typically examines boards’and top
managers’ investment in stock ownership (i.e., Goranova et al.; Jain et al.), entrepreneur-
ship research tends to focus on an entrepreneur’s wealth invested since most entrepreneurs
have limited funds to invest in their venture (Busenitz et al.; Prasad et al., 2000). There-
fore, we expect an entrepreneur’s personal investment in the business to be positively
related to the amount of bank ﬁnancing received.
Additionally, entrepreneurs can signal their commitment to the venture through the
investment of time that they devote to the business (i.e., hours devoted to the business per
6ENTREPRENEURSHIP THEORY and PRACTICE
494 ENTREPRENEURSHIP THEORY and PRACTICE
week). Through the devotion of time, entrepreneurs communicate their determination to
make their business succeed (Cassar & Friedman, 2009). Although heavy investment
of time and money could signal escalation of commitment (McCarthy, Schoorman, &
Cooper, 1993), these investments also make an entrepreneur’s goals more aligned with those
of capital providers (Forbes, Korsgaard, & Sapienza, 2010). Further, an underinvestment is
likely to act as a negative signal that communicates expectation for poor future performance
(Busenitz et al., 2005). Indeed, research suggests that entrepreneurs who signal commitment
to their business by making personal sacriﬁces are more likely to acquire resources that
improve their business’ success (Zott & Huy, 2007). Therefore, entrepreneurs who signal
greater commitment to their ventures through personal investments of time and money will
receive larger amounts of ﬁnancial capital than those who do not.
Hypothesis 4: Founder investment of time (hours devoted to the business), a signal of
ﬁrm commitment, is positively related to the amount of funding received.
Hypothesis 5: Founder investment of personal capital, a signal of ﬁrm commitment, is
positively related to the amount of funding received.
Gender and Financing Entrepreneurial Ventures
A “vicious cycle” exists between female entrepreneurs’ access to bank ﬁnancing and
growth: While their venture’s small size and low growth impede their ability to obtain
bank ﬁnancing, a lack of bank ﬁnancing, in turn, limits their growth (Constantinidis et al.,
2006). Many scholars believe that female businesses tend to underperform in comparison
with those owned by men because of undercapitalization (i.e., Carter & Williams, 2003;
Jennings & Brush, 2013; Marlow & Patton, 2005; Orser et al., 2006). The growth and
performance of a business is directly tied to an entrepreneur’s ability to access uninter-
rupted ﬂows of critical resources such as ﬁnancial capital (Leitch & Hill, 2006). Although
research has recently shown that male and female entrepreneurs have similar access to
debt ﬁnancing (i.e., Arenius & Autio, 2006; Becker-Blease & Sohl, 2007; Carter et al.,
2007; Orser et al.; Wilson et al., 2007), there appears to be discrepancy in regards to the
amount of capital raised by male versus female entrepreneurs (Verheul & Thurik, 2001;
Zimmerman et al., 2006). Further, research indicates that banks appear to apply lending
standards in a subjective manner to the detriment of women (Carter et al.; Orser & Foster,
1994). In explaining women entrepreneurs’ struggle to obtain ﬁnancing, Marlow and
Patton (2005, p. 718) noted that a “normative male model of entrepreneurial achievement”
exists which, “by design, disadvantages women.”
Studies have found that despite similar efforts to seek a variety of external funding
(Brush, Carter, Greene, Gatewood, & Hart, 2006; Orser et al., 2006), women experience
greater difﬁculty obtaining funding relative to their male counterparts (Verheul &
Thurik, 2001). Although some studies show that discrepancies in funding between male-
and female-owned ventures are due to women’s reluctance to seek ﬁnancing (Fairlie &
Robb, 2009; Marlow & Patton, 2005; Morris, Miyasaki, Watters, & Coombes, 2006), or
differences in business size and sector (Arenius & Autio, 2006; Orser et al.; Riding &
Swift, 1990), others have uncovered apparent discriminatory practices by bank loan
ofﬁcers toward women entrepreneurs (Buttner & Rosen, 1988; Fay & Williams, 1993;
Riding & Swift). For example, Carter et al.’s (2007) experimental and qualitative study
revealed that loan ofﬁcers employ some different evaluative criteria for male and female
entrepreneurs. Studies suggest that the legitimacy and credibility of women entrepre-
neurs’ ventures are often questioned, which creates an extra hurdle that women
May, 2016 495
entrepreneurs need to clear before they can obtain ﬁnancing (Brush, Carter, Gatewood,
Greene, & Hart, 2004; Constantinidis et al., 2006; Murphy et al., 2007). Below, we draw
insights from gender role congruity theory (Eagly & Karau, 2002) to explain how gender
shapes the entrepreneurial context to affect the amount of bank ﬁnancing obtained by
men and women.
The Moderating Role of Entrepreneur Gender
Gender role congruity theory captures the (1) attitudes about the appropriate social
roles of men and women, and the (2) gender stereotypes that reﬂect the beliefs about
the characteristics, attributes, and behaviors of men and women (Eagly & Karau, 2002;
Powell & Butterﬁeld, 2003; Powell, Butterﬁeld, & Parent, 2002). The theory includes
descriptive norms, which are consensual expectations about how men and women actually
behave, and injunctive norms, which are the consensual expectations about how men and
women should behave (Eagly & Karau). While descriptive norms reﬂect stereotypes of
men and women, injunctive norms add a prescriptive element.
Gender stereotypes are pervasive cognitive shortcuts that inﬂuence how observers
process information about men and women due to prescriptive descriptions as to how they
should behave (Eagly & Karau, 2002; Heilman, 2001). Traditional gender roles assign
men the “breadwinner” role and emphasize leadership, while they assign women the
“caretaker” role and emphasize family and relationships (Powell & Eddleston, 2013;
Wood & Eagly, 2010).As a result, men are expected to thrive in roles that are more agentic
and task oriented, while women are expected to thrive in roles that are more communal
and relationship oriented (Eagly, 1987). Further, gender stereotypes contain status beliefs
that associate higher status and competence to men versus women, particularly in contexts
perceived as masculine (Ridgeway, 2001, 2012, 2014; Ridgeway & Correll, 2004).
Although women’s rights and roles have evolved and progressed over the last decades,
with an increasing number of women around the globe starting their own businesses
(Powell, 2011), stereotypes of males and females have remained relatively stable across
cultures and time (Wood & Eagly).
Gender role congruity theory explains how gender stereotypes evoke different stan-
dards for attributing performance to ability for men and women (Eagly & Karau, 2002;
Ridgeway & Correll, 2004). Gender stereotypes comprise the genetic code of the gender
system since they embody the cultural rules and norms that guide how individuals
perceive and enact gender differences (Ridgeway, 2001). In turn, it is the social context
that provides the “arena” in which these rules and norms are brought to bear on the
behavior and evaluations of men and women (Ridgeway & Correll, p. 514). In social
contexts that are gender-typed as masculine or feminine, gender becomes salient and
therefore affects how a woman, compared with a similar man, is perceived and evalu-
ated (Ridgeway, 2012, 2014; Ridgeway & Correll). Gender role congruity theory
explains how women often are perceived less favorably than men when holding posi-
tions of power and leadership due to perceived incongruity between traditional gender
norms and leadership role expectations (Carli & Eagly, 2011; Eagly & Carli, 2007;
Eagly & Chin, 2010; Eagly & Karau). The coupling of being a member of a stereotyped
social group with an incongruent social role creates an inconsistency in the perceiver’s
mind that negatively affects the evaluation of the group member. For example, studies
investigating gender stereotypes have shown that archetypical managers (Powell &
Butterﬁeld, 2003; Powell et al., 2002) and entrepreneurs (Gupta et al., 2009) are inher-
ently portrayed as more masculine than feminine, a portrayal that creates a barrier for
8ENTREPRENEURSHIP THEORY and PRACTICE
496 ENTREPRENEURSHIP THEORY and PRACTICE
Entrepreneurship has traditionally been seen as a male preserve (Ahl, 2006; Bruni
et al., 2004). Collins and Moore (1964, p. 5) ﬁrst explained, “However we may feel about
the entrepreneur, he emerges as essentially more masculine than feminine.” Research has
recognized how most entrepreneurial role models are men (Bird & Brush, 2002; Gupta
et al., 2009) and how men tend to hold positions of higher power, status, and authority
than women (Powell, 2011). There is an abundance of research that supports the gender
stereotype that men are seen as more effective leaders (Powell & Butterﬁeld, 1989, 2003;
Powell et al., 2002) and the belief of “think manager—think male” (Schein & Mueller,
1992; Schein, Mueller, Lituchy, & Liu, 1996). Further, research shows that men tend to
own larger, more proﬁtable, faster growing businesses than women (Brush et al., 2006;
Cliff, 1998), which contributes to the stereotype of “think successful entrepreneur—think
male.” In accordance with gender role congruity theory, these observations and beliefs are
likely to propagate the entrepreneurial stereotype as male. As a result, because the rules,
norms, and general practices in the ﬁnancial capital community are dominated by mas-
culine values, women are left seemingly mismatched with entrepreneurial ideals (Greene,
Brush, Hart, & Saparito, 2001).
Consequently, when women choose to enter the male preserve of entrepreneurship
(Ahl, 2006), they are perceived as less legitimate and credible in the eyes of capital
providers (Greene et al., 2001; Murphy et al., 2007). A so-called “cupcake stigma” exists
for women entrepreneurs that leads them to be seen as less serious and committed to
entrepreneurship since their businesses tend to be gendered in nature (e.g., selling cup-
cakes) and stereotyped as having low prospects for growth or proﬁts (Cliff, 1998; Gupta
et al., 2009; Morris et al., 2006). Gender stereotypes compel capital providers to view a
woman’s business as a hobby, part time, or an extension of their homemaker role, thereby
leading them to view women as less attractive investments (Arenius & Autio, 2006;
Loscocco & Smith-Hunter, 2004). Further, research on banks’ lending criteria shows that
lending ofﬁcers are more likely to focus on male entrepreneurs’ personal characteristics
and their businesses’ ﬁnancial history, while in contrast, they focus on women entrepre-
neurs’ level of research about the business (Carter et al., 2007). Additionally, whereas
lending ofﬁcers commonly discussed the requested loan size of women entrepreneurs,
they did not consider this for the men (Carter et al.). These ﬁndings suggest that capital
providers are more likely to question the venture’s viability and the entrepreneur’s
commitment for female than male entrepreneurs. Accordingly, it appears that regardless of
the actual performance of female-owned businesses, gender stereotypes lead female
entrepreneurs to be perceived differently than male entrepreneurs (Brush et al., 2004;
Jennings & Brush, 2013; Murphy et al., 2007). Therefore, female entrepreneurs may face
greater difﬁculties in signaling the quality of their ventures to capital providers.
Gender role congruity theory explains how individuals selectively attend to informa-
tion that conﬁrms, rather than disconﬁrms, gender stereotypes (Eagly & Karau, 2002).
Gender stereotypes act as schemas that inﬂuence how individuals interpret and make
sense of the social world (Fiske, 1998). While often not conscious, gender stereotypes bias
judgments of men and women and evoke different standards and expectations for their
performance (Correll, 2004; Foschi, 1989). As a result, a double standard for assessing the
competence of men and women results (Foschi, 2000). For women, because strong
performance is inconsistent with stereotyped expectations of entrepreneurship, their per-
formance is more likely to be critically scrutinized and not seen as indicative of their
ability. In contrast, the performance of men is less likely to be scrutinized since a strong
performance is consistent with gendered expectations. As such, men are judged by a more
lenient standard than women, and women must display a higher level of ability to be
perceived as competent in a masculine setting (Ridgeway, 2001). Referred to as the
May, 2016 497
“legitimacy argument,” when women occupy nontraditional roles, their legitimacy and
credibility are questioned, which thereby leads to their comparative devaluation with
men and impedes their success (Ridgeway). Applied to the ﬁnancing of men’s and
women’s ventures, this suggests that the perceived incongruity between the female gender
role and entrepreneurship leads to the signals from women’s ventures being perceived less
favorably than those of men. Indeed, a woman entrepreneur interviewed in Constantinidis
et al.’s (2006, p. 147) study explained that, “It is a matter of credibility . . . a woman has
to expend more energy than a man to convince the banker.”
Therefore, since capital providers must make lending decisions without access to
complete information and under uncertain conditions, they may be especially vulnerable
to the inﬂuence of gender stereotypes (Gupta et al., 2009). Indeed, the concept of “signal
ﬁt” explains that when a signal is not consistent with expectations, the signal is likely to
be ignored or rejected since it is seen as lacking credibility and usefulness for the decision
(Connelly et al., 2011). Combined with the predictions of gender role congruity theory,
this suggests that gender stereotypes will impact how observers interpret the signals of
male and female entrepreneurs, and particularly the value they place on signals of venture
viability and entrepreneur commitment. We therefore argue that women entrepreneurs
will receive less capital than male entrepreneurs for the display of positive business
Hypothesis 6: The gender of the entrepreneur moderates the relationship between
business characteristics that signal viability and commitment and the amount of
funding received such that men will receive greater amounts of bank ﬁnancing than
women for the display of positive business characteristics.
Because the purpose of our study was to examine differences in the bank ﬁnancing
received by male and female entrepreneurs, we sought to collect data from approximately
equal numbers of men and women who had founded their own businesses. However, since
the majority of entrepreneurs are male (Kepler & Shane, 2007), we utilized the Center for
Women and Enterprise (CWE) to assist in the gathering of survey data from female
entrepreneurs. CWE is “a non-proﬁt organization dedicated to helping women start and
grow their own businesses” (CWE, 2011). Although not all participants in CWE programs
are female, only about 20–30% of their participants are male. Therefore, we also surveyed
entrepreneurs who were associated with a university-based entrepreneurship program
located in the same city as CWE. The university population was expected to be predomi-
We mailed surveys to 300 entrepreneurs in the university population and to 900
entrepreneurs in the CWE population. The population for CWE included all entrepreneurs
on their mailing list, most of which had participated in a workshop or program within the
last 5 years. The majority of CWE workshops and programs are open to the public, and
some are free of charge. The university population included entrepreneurs who had been
actively involved in a free entrepreneurship program within the last 3 years. Only full-time
businesses (those with entrepreneurs who devoted 30 or more hours per week to the
business) were included in the ﬁnal sample, which led to 27 entrepreneurs from the CWE
population and ﬁve entrepreneurs from the university population being excluded from
the study. For the university population, 67 (22%) usable surveys were returned, and for
10 ENTREPRENEURSHIP THEORY and PRACTICE
498 ENTREPRENEURSHIP THEORY and PRACTICE
the CWE population, 134 (15%) usable surveys were returned. Overall, 33% of the sample
of entrepreneurs was from the university population (31% female), and the remaining
67% of the sample was from the CWE population (87% female). Thus, the ﬁnal sample
utilized to test our hypotheses consisted of 201 entrepreneurs.
In order to determine if data from the two populations could be combined to test the
hypotheses, univariate analysis of variance tests were conducted controlling for gender.
When controlling for gender, there were no signiﬁcant differences between entrepreneurs
sampled from the CWE or university populations for the following variables: age
(M =45), race (Caucasian 85%, AfricanAmerican 9%, AsianAmerican 2%, Hispanic 2%,
Other 2%), marital status (single 27%, married 57%, separated 2%, divorced 13%,
widowed 1%), education (M =2.12), years in business (M =6.64), number of employees
(M =10.23), those who had received a loan within the past 3 years (48%), whether the
entrepreneur was currently seeking funding (27%), and the amount of funding being
sought (M =$291,915) (not signiﬁcant [n.s.] in all cases). Therefore, given the minimal
differences between the CWE and university samples when entrepreneur gender was
controlled, data from the two populations were combined to test our hypotheses.
Dependent Variables. The amount of business ﬁnancing recently procured from bank
loans was assessed by asking respondents the amount of monetary funds received from
bank loans within the last 3 years (Berger & Udell, 2003).2
Independent Variables. Number of employees was measured by asking respondents how
many people are employed by the ﬁrm full time. Age of business was assessed by asking
respondents to report how many years their business has been in operation. Hours devoted
to the business was captured by asking respondents to report the hours they devote to the
business in a typical work week. Personal investment in the business was captured by
asking respondents how much start-up capital they personally invested during the ﬁrst year
of the business. Finally, past performance was assessed with multiple indicators of business
success, thereby capturing richer information than single indicators of performance (Birley
& Westhead, 1990; Wiklund, Patzelt, & Shepherd, 2009). In line with recent calls for
entrepreneurship performance measures to consider how small businesses compare with
competing businesses in their industry (Wiklund et al.), respondents were asked to rate their
business’s past performance from the last 3 years on a 7-point scale (1 =much worse than
competitors, 4 =about the same as competitors, 7 =much better than competitors) on
growth in sales, growth in market share, growth in number of employees, growth in
proﬁtability, ability to fund growth from proﬁts, return on equity, return on total assets, and
proﬁt margin on sales. These eight items were averaged to yield a past performance score,
with higher values indicating stronger performance (α=.95). A similar measure of entre-
preneurial performance has been used by Ling and Kellermanns (2010), Eddleston and
Powell (2008), and Powell and Eddleston (2013). Further, Ling and Kellermanns showed
that self-reported measures of business performance compared with competitors demon-
strate convergent validity with actual sales growth for privately held businesses.
2. While we also asked respondents to report the amount of venture capital invested in their businesses, this
source of funding was not included in our analyses since only ﬁve respondents had received venture capital.
Three women ($20,000; $25,000; $250,000) and two men ($1,000,000; $1,100,000) in our sample reported
having received venture capital.
May, 2016 499
Moderator Variable. Whether the entrepreneur was male or female was coded as
0=male and 1 =female.
Control Variables. We controlled for four characteristics of entrepreneurs and their
ﬁrms that may have inﬂuenced the relationships examined. Because entrepreneurs’
family structure and human capital may inﬂuence their business and personal outcomes
(Baron, 2002; Jennings & McDougald, 2007), marital status (married/unmarried) and
education (highest level attained) were controlled. Because the type of industry in
which a ﬁrm operates tends to vary based on the gender of the owner, with women
concentrated in retail and service industries, and men concentrated in construction and
manufacturing (Anna, Chandler, Jansen, & Mero, 2000; Madill, Haines, & Riding,
2005), and additionally, retail and service businesses tend to require less external
ﬁnancing (Constantinidis et al., 2006; Orser et al., 2006), we controlled for whether the
ﬁrm operated in manufacturing/construction versus service/retail sectors. Industry was
coded as 0 =retail and service, and 1 =manufacturing and construction. Finally, we
controlled for home-based business location since such businesses tend to require less
bank ﬁnancing and are more likely to be associated with female than male entrepre-
neurs (Madill et al.; Orser et al.; Wilson et al., 2007). This was coded 1 =home-based
location and 2 =independent location.
Table 1 reports means, standard deviations, and correlations for the unstandardized
variables. Table 2 reports the results of the moderated hierarchical ordinary least squares
regression analysis that was conducted to test the hypotheses. For the regression, control
variables were entered into the model ﬁrst, followed by the independent variables in
model two, the moderator variable (gender) in model three, and ﬁnally the two-way
interaction terms to create a full model in model four (Cohen & Cohen, 1983). In order to
facilitate the interpretation of our moderation results, we plotted the signiﬁcant interaction
effects (Aiken & West, 1991).
Regarding main effects, three main effects were found to be signiﬁcant. Number of
employees (β=.42, p<.001) and past performance (β=.16, p<.05) were shown to be
positively related to the loan amount received from banks. However, hours devoted to the
business was found to be negatively related to the amount of bank ﬁnancing (β=−.13,
p<.10). Gender was not shown to be signiﬁcantly directly related to the amount of bank
ﬁnancing after taking into account the control and independent variables.
Now, turning to the moderation results and the key focus of our study, four hypo-
thesized interaction effects were found to predict bank ﬁnancing. The addition of
the interaction effects signiﬁcantly contributed to the model (ΔR2=.09, p<.001). The
signiﬁcant interaction effects presented in Table 2 were plotted in Figures 1 through 4 to
facilitate their interpretation.
Results demonstrated that as the number of employees increased, so did the amount
of bank ﬁnancing for both males and females. However, the slope is steeper for males,
indicating that males received more bank ﬁnancing for overcoming the liability of small-
ness than females (β=−.14, p<.05). High past performance signiﬁcantly increased the
amount of bank ﬁnancing men received (β=−.42, p<.001), but did little to increase
the amount of bank ﬁnancing received by women. The age of the business (β=.26,
p<.05) also did little to contribute to the amount of bank ﬁnancing received by women,
although the results did show that older ﬁrms owned by women received more bank
12 ENTREPRENEURSHIP THEORY and PRACTICE
500 ENTREPRENEURSHIP THEORY and PRACTICE
Men Women Total sample Total sample
1 234 5678910Mean Mean Mean Standard deviation
1. Industry .45 .18 .27 .44
2. Home based 1.67 1.55 1.59 .49 −.07
3. Education 3.70 3.96 3.88 1.23 −.21** −.05
4. Marital status .71 .52 .58 .49 .04 .25*** .05
5. Employees 23.83 3.88 10.23 48.62 .01 .13†−.20** .12*
6. Age of business 8.05 5.98 6.64 5.73 .06 .14* −.08 .19*** .19**
7. Hours devoted 51.05 44.03 46.26 19.62 .10†.20** .07 .13* .12* .14*
8. Past performance 4.34 3.84 4.00 1.14 .10†.15* −.13* .12* .06 .17** .21***
9. Personal investment $100,903 $31,005 $53,261 $116,625 .06 .22*** .02 .04 .04 .06 .14* .11†
10. Gender .68 .47 −.29*** −.11†.10†−.19** −.19** −.17** −.17** −.21** −.28***
11. Bank ﬁnancing $537,743 $37,126 $196,526 $1,444,105 .12* .11†−.12* .11†.41*** .02 −.03 .16* .00 −.16*
†p<.10; * p<.05; ** p<.01; *** p<.001
May, 2016 501
ﬁnancing than older ﬁrms owned by men. Unexpectedly, we found that newer male-owned
ﬁrms received the greatest amount of bank ﬁnancing, which was signiﬁcantly more than
the amount received by newer female-owned ﬁrms. As such, “newness” did not appear to
be a liability for male-owned businesses. Finally, hours devoted to the business was found
to signiﬁcantly moderate the relationship between gender and bank ﬁnancing (β=.32,
p<.001). Contrary to our hypothesis, we found that hours devoted to the business was
negatively related to the amount of bank ﬁnancing received by male entrepreneurs,
although it did little to affect the amount of bank ﬁnancing received by female entrepre-
neurs. Our results are more fully discussed below.
Drawing from signaling theory, we proposed that banks may partly base loan amount
decisions on an entrepreneur’s business characteristics, particularly focusing on those
factors that signal quality by demonstrating viability and commitment to the venture.
Unlike the vast majority of research that has focused on the debt versus equity composi-
tion of capital raised by entrepreneurs (i.e., Cassar, 2004; Chaganti, DeCarolis, & Deeds,
1995; Verheul & Thurik, 2001) or potential differences in male and female entrepreneurs’
Multiple Regression Analysis: Dependent Variable: Financing from Banks
Variables Model 1 Model 2 Model 3 Model 4
Step 1: Controls and main effects
Marital status .08 .05 .04 .06
Education −.10 .01 .02 .07
Industry (manufacturing) .11 .13* .12†.14*
Home-based business .09 .07 .07 .09
Number of employees .42*** .41*** .48***
Age of business −.09 −.10 −.29**
Hours devoted to business −.13†−.13* −.39**
Past performance .16* .15* .51***
Personal investment −.03 −.05 −.08
Step 2: Moderator
Gender −.06 −.01
Step 3: Interaction effects
Gender ×number of employees −.14*
Gender ×age of business .26*
Gender ×hours devoted to business .32**
Gender ×past performance −.42***
Gender ×personal investment .02
R2.04 .22 .23 .32
Adjusted R2.02 .19 .19 .26
ΔR2.18*** .00 .09***
F 2.18†6.10*** 5.54*** 5.79***
n=201, †p<.10; * p<.05; ** p<.01; *** p<.001
Regression coefﬁcients are reported as betas.
14 ENTREPRENEURSHIP THEORY and PRACTICE
502 ENTREPRENEURSHIP THEORY and PRACTICE
access to bank ﬁnancing (i.e., Arenius & Autio, 2006; Orser et al., 2006; Wilson et al.,
2007), we examined the amount of capital entrepreneurs were able to obtain from banks.
We did not include other sources of funding such as venture capital because only ﬁve of
our respondents had obtained this kind of funding. We also opted to not include capital
provided by friends and family because the conditions with which family/friends may be
Moderating Effect of Gender on Relationship Between Number of Employees
and Bank Financing
Low Number of Employees High Number of Employees
Moderating Effect of Gender on Relationship Between Past Firm Performance
and Bank Financing
Low Past Performance High Past Performance
May, 2016 503
willing to support the venture tend to be subjective in that they may support the entre-
preneur with longer payback periods, various terms, or even forms of ﬁnancing, whereas
for a bank, it is a structured decision.3We later suggest that future research should apply
3. We thank an anonymous reviewer for this point.
Moderating Effect of Gender on Relationship Between Business Age and Bank
Low Business Age High Business Age
Moderating Effect of Gender on Relationship Between Hours Spent on
Business and Bank Financing
Low Hours on Business High Hours on Business
16 ENTREPRENEURSHIP THEORY and PRACTICE
504 ENTREPRENEURSHIP THEORY and PRACTICE
our framework to other entrepreneurial ﬁnancing contexts, such as venture capital and
angel investing, to determine if the effect of gender on the rewards from quality signals is
pervasive in entrepreneurial ﬁnance.
Our ﬁndings revealed that after taking into account multiple controls, the gender of
the entrepreneur did not directly affect the amount of ﬁnancing received from banks. This
ﬁnding adds to other research investigating the link between gender and bank ﬁnancing
(i.e., Arenius & Autio, 2006; Orser et al., 2006; Wilson et al., 2007) that reports no
evidence of gender discrimination in regards to access to bank loans when controls that
tend to vary between male and female entrepreneurs are taken into account. However,
several main effects were found to predict the bank loan amount procured by entrepre-
neurs including number of employees, past performance, and number of hours devoted to
the business. Yet, while number of employees and past performance were found to be
positively related to the bank loan amount, as predicted, interestingly, hours devoted to the
business was negatively related to the bank loan amount. While the entrepreneurship
literature has discussed the importance of entrepreneurs investing time into their business
(i.e., Cassar & Friedman, 2009; Wilson et al.), our results suggest that to bankers, a greater
number of hours devoted to the business may signal something other than commitment,
perhaps communicating that an entrepreneur is inefﬁcient or ill-suited to run the business
(e.g., “in over his/her head”). Since all of the entrepreneurs in our study devoted at least
30 hours per week to their venture, spending signiﬁcantly more time working in the
business could also be a sign of escalation of commitment, a problem particularly preva-
lent among founders (McCarthy et al., 1993). Future studies should investigate this
Turning to our results regarding the moderation effect of gender, our study provides
ample support to our contention that banks reward signals of quality among male and
female entrepreneurial ventures differently. We found four signiﬁcant gender moderation
effects suggesting that gender plays an important role in how signals of quality are
interpreted, and thus rewarded, by banks. As predicted, we found that male entrepreneurs
are given more funding than female entrepreneurs on the basis of number of employees
and past performance. Despite showing a strong track record of past performance, women
entrepreneurs appear to procure less bank ﬁnancing than their male counterparts. Indeed,
high past performance was a strong positive signal for men but the relationship dampened
for women. Additionally, women were not funded as well as men on the basis of having
a high number of employees, suggesting that large venture size is a positive signal of
viability for men but less so for women. These ﬁndings could explain why other research
focusing solely on access to bank ﬁnancing has not found gender differences; the effect of
gender is more subtle and covert. Certainly, more research is needed to investigate such
gender biases to understand why the apparent viability and success of women-owned
businesses are not rewarded to the same extent as they are for men by bank ﬁnanciers.
Similarly, our ﬁndings for business age and hours devoted to the business indicate that
female entrepreneurs are not signiﬁcantly rewarded for these signals of viability and
commitment. Neither of these factors strongly contributed to the bank loan amounts
procured by women. However, although these factors did play a role in the bank loan
amounts obtained by men, the relationships were not as predicted. Similar to our main
effect ﬁnding, a higher number of hours devoted to the business hurt a male entrepreneur’s
bank loan amount. This result was much stronger for men than for women. Perhaps men
who devote a signiﬁcantly high number of hours to their venture are perceived as owning
a struggling business or as being incompetent and ineffective as entrepreneurs. Drawing
from signaling theory, future researchers should investigate how banks (and other capital
providers) interpret this business characteristic and in particular, how men may face
May, 2016 505
gender bias as well from certain signals. This unexpected ﬁnding demonstrates the
applicability of signaling theory to the entrepreneur ﬁnancing literature and the impor-
tance of understanding how business characteristics may be differentially rewarded based
on the sender. Our ﬁndings suggest that the gender of the sender plays an important role
in determining how signals of entrepreneurial viability and commitment are compensated
by capital providers.
Additionally, we found that newer, male-owned businesses received the greatest
amount of bank ﬁnancing. Older businesses (male-owned) may have received small bank
loans since they could ﬁnance their businesses gradually over time and thus may appear
to need less ﬁnancing, or they may be perceived as having less potential for high returns
given their mature age. These results counter previous arguments regarding the liability of
newness—but only for male entrepreneurs. Newer businesses owned by women appear to
struggle to receive bank loans, yet the loan amounts offered to more established female-
owned businesses only increased slightly. Thus, women who signaled their businesses’
longevity and viability through the age of the business did not gain as much funding from
banks. Future research should investigate why newer male-owned businesses appear to
procure the greatest bank ﬁnancing amounts. Gender role congruity theory may shed light
on how bank lenders perceive young businesses owned by men. The entrepreneurial
stereotype as male and associated with images of being a “conqueror of unexplored
territories” and a “cowboy of industry” may encourage lenders to be more willing to invest
and take a chance on newly formed male-owned businesses. As such, gender stereotypes
may lead newer male-owned businesses to be perceived as an opportunity while newer
female-owned businesses are perceived as a risk.
Taken together, these results have important implications for entrepreneurship
research and theory. Our study adds to the entrepreneurship literature by demonstrating
that while business characteristics that reﬂect signals of viability and commitment are
associated with bank ﬁnancing, gender alters the reward amounts received from these
signals. As such, our research demonstrates the gendered context of entrepreneurship
ﬁnancing and suggests that although women have made progress in gaining similar access
to bank ﬁnancing as men, gendered biases exist that prevent them from being equally
funded for signaling their business’s viability and commitment.
We contribute to theory in two speciﬁc ways. First, by drawing from the principles
of gender role congruity theory and signaling theory, we demonstrate how the beneﬁts
accrued from signals of viability and commitment can vary depending on the sender
communicating the signal and, speciﬁcally, the gender of the sender. As such, our study
contributes to signaling theory by revealing that capital providers appear to apply different
standards to male and female entrepreneurs seeking ﬁnancing. Second, our study shows
the applicability of gender role congruity theory to entrepreneurship by suggesting that
gender stereotypes inﬂuence the degree to which male and female entrepreneurs are
rewarded for their achievements. In line with this theory, our results indicate that female
entrepreneurs face hurdles in gaining legitimacy with capital providers that thereby limit
their ability to raise capital. Thus, while women entrepreneurs may not be overtly dis-
criminated against when seeking capital, it appears that covert and implicit biases exist
that create barriers for them. More research is needed to explore the nuances between
overt and covert forms of gender discrimination in entrepreneur ﬁnancing. Similar ﬁnd-
ings have been noted in studies of women in managerial and professional roles in which
they are turned down for job opportunities or promotions due to implicit gender biases of
the decision makers (e.g., Correll, Benard, & Paik, 2007; Ridgeway & Correll, 2004).
Before concluding, it is important to note the limitations of our study. First, because
this study was cross-sectional, cause-and-effect relationships should not be inferred;
18 ENTREPRENEURSHIP THEORY and PRACTICE
506 ENTREPRENEURSHIP THEORY and PRACTICE
analyses that were conducted cannot prove causation but merely support a set of
hypothesized paths. For example, greater funding could also lead to a larger ﬁrm size.
To minimize this concern, we used predictor variables that require the development over
time and are therefore historical in nature, such as the choice to use past performance
versus current sales or current performance. However, we recommend that future
research studies be conducted using longitudinal designs to increase our understanding
of the cross-sectional relationships we found in our study. Second, because the variables
were measured at the same time from the same source, common method variance could
interfere with our ﬁndings (Podsakoff & Organ, 1986). However, as noted by Spector
(2006), any indication of common method bias will not necessarily affect results or
Third, much like other comparable survey-based studies in the entrepreneurship
literature (e.g., Anna et al., 2000; DeTienne & Chandler, 2007; Eddleston & Powell,
2008), the small sample size may not be representative of a larger population of entre-
preneurs. Our study suffers from low response rates of 22% (university population) and
15% (CWE) for the two studies. However, Holbrook, Krosnick, and Pfent (2007) argued
that surveys with low response rates (between 5% and 54%) are minimally different from
samples with larger response rates with respect to sample representativeness. Further, the
low response rate from entrepreneurs has long been a recognized problem in the literature
(i.e., Bartholomew & Smith, 2006). Additionally, the generalizability of our study may be
limited since the entrepreneurs we surveyed were associated with entrepreneurship
centers. Therefore, future research should draw from larger populations of entrepreneurs
and aim for higher response rates in an effort to more broadly capture the dynamics
associated with this type of sample.
In this study, we focused on predicting the amount of bank ﬁnancing. Future research
should investigate whether our results hold when predicting the amount of equity ﬁnanc-
ing received. Since banks tend to focus on a ﬁrm’s stability and ability to repay a loan,
while equity investors focus on a venture’s potential for growth and high returns (Bruns
et al., 2008), different signals may be desired by debt versus equity providers, and signals
could communicate different information to debt versus equity providers. Further, differ-
ences may also exist among different equity providers, speciﬁcally, venture capitalists and
angel investors. For example, research has found that the importance of entrepreneurial
passion to the evaluation of a venture’s funding potential varies depending on the personal
characteristics of angel investors (Mitteness, Sudek, & Cardon, 2012). Future research
should therefore examine how characteristics of the capital provider impact the impor-
tance of entrepreneurial signals. Additionally, research should directly investigate how
capital providers of debt and equity evaluate and interpret entrepreneurial signals and, in
turn, decide the funding amounts to reward to entrepreneurs.
In conclusion, business characteristics alone do not predict the amount of bank
ﬁnancing received by entrepreneurial ventures. Rather, our results demonstrate that
gender plays an important role in predicting the degree to which business characteristics
that signal venture viability and entrepreneur commitment are rewarded with bank loans.
Despite the success of many women business owners, most still face an added hurdle on
the basis of their gender that prevents them from being rewarded for signals of venture
viability and entrepreneur commitment. Indeed, if women are systematically dis-
advantaged, the full potential of their businesses may never be realized. This study calls
attention to the need for ﬁnancial backers of all types to be made aware of any implicit
biases they may hold and to consider the role gender stereotypes play when evaluating
ventures. If not, they run the risk of overlooking the potential of a ﬁrm by focusing on
what they want to see and not on what they should be seeing.
May, 2016 507
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Kimberly A. Eddleston is a professor of entrepreneurship and innovation, D’Amore-McKim School of
Business, Northeastern University, 209 Hayden Hall, Boston, MA 02115-5000, USA.
Jamie J. Ladge is an associate professor of management and organizational development, D’Amore-McKim
School of Business, Northeastern University, 112 Hayden Hall, Boston, MA 02115, USA.
Cheryl Mitteness is an assistant professor of entrepreneurship and innovation, D’Amore-McKim School of
Business, Northeastern University, 209b Hayden Hall, Boston, MA 02115, USA.
Lakshmi Balachandra is an assistant professor in the Entrepreneurship Department, Babson College, Babson
Park, MA 02481, USA, Tel: 617-239-6446, firstname.lastname@example.org.
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