Exit decisions of women entrepreneurs in resource-constrained environments

Abstract

A better understanding of gender inequality in entrepreneurship due to institutional factors is critical to creating a fair and thriving entrepreneurial ecosystem. This study analyses the impact of legal egalitarianism and institutional quality on the exit decisions of around 80,000 entrepreneurs from 88 countries during 2014–2018. The main findings are as follows. First, in countries with high legal barriers to women’s economic participation, total exit rates and bankruptcy exit rates are higher for both male and female entrepreneurs. Second, low institutional quality is even more detrimental to female entrepreneurs, as it further reduces their chances of exiting voluntarily, in general, and exiting for personal reasons, in particular. Third, there is some evidence that in weak institutional environments the continuity of a business may depend on the gender of its former owner/manager. These findings suggest that policymakers should focus on revising or eliminating laws that discriminate against women. This would include changes to laws related to property rights, business ownership, flexible work schedules, affordable childcare, and parental leave policies. Policymakers should also focus on improving institutional frameworks by reducing bureaucratic obstacles, improving access to credit, enhancing governance, ensuring contract enforcement, and protecting property rights to create a stable environment for business growth and innovation. Addressing gender inequalities also requires challenging and transforming informal institutions that limit women's rights and opportunities. This involves raising awareness, promoting gender equality norms, empowering women economically and socially, and fostering an enabling environment for gender equality and women's empowerment.