Challenges and solutions for women-led firms on the web

2 November 2018
  • Findings from firm-level surveys do not point to major differences between genders in participation in e-commerce or in the severity of regulatory challenges facing men- or women-led companies.
  • There is an important research agenda ahead to understand how women-led firms perform as online sellers and online exporters and importers, and whether and which types of women-led firms grow faster, create more jobs, and reduce poverty among their employees and communities than firms that do not sell online.

 

Promoting women’s economic opportunities has become a major global development tenet, one that permeates the United Nations 2030 Sustainable Development Goals. It has also become common, even fashionable, to promote women in international trade and e-commerce.

Insights from several surveys with over 7,000 developing country firms and findings from a random sample of 779 small, medium, and large firms in nine economies in Africa, South Asia, and Southeast suggest – after controlling for variables that typically shape firms’ performance – that there are no meaningful differences between women- and men-led firms in their use of e-commerce, export performance, or growth, or in the severity of regulatory challenges facing companies. This may suggest that getting women into business and into selling online may help level the playing field between women- and men-led firms, and underscores the urgency to help women form formal businesses, digitise, and get online.

Focus on women in trade is positive for three reasons.

First, while there are some studies on the impact of trade liberalisation by gender, there is rather little data on how women-led firms do in international trade. Second, since women are becoming more prominent in many economies as employees, employers, business owners, consumers, and investors, it is useful to know about their choices and constraints. Third, women’s economic empowerment helps optimise a society’s productive resources, expand the tax base, and improve economic growth, households’ welfare, and intergenerational wealth transfer. Thus, again, it is useful to know more about what women do, prefer, and what challenges they face, including in trade.

Firm-level surveys are an excellent means to get at each of these issues. While the surveys I run and analyse are not specifically aimed at understanding women – they are intended to build towards a global database and country-specific index on constraints to e-commerce – they offer some very useful insights on gender.

  • Given the growing attention on women in trade and development policy circles, one might expect to find enormous differences in the performance and barriers facing women-led firms versus men-led firms in trade or e-commerce that justify this attention. To date, in several surveys of firms in Africa, Asia, and Latin America, a striking finding is how similar the online sales, export, and growth performance of women-led firms is when compared to that of men-led firms of similar size category and country, and how similarly men and women business leaders rate their barriers to e-commerce. I have not found any major differences between genders in participation in e-commerce or in the severity of regulatory challenges facing companies, after controlling for firm size and country. This, along with some other early evidence, suggests that women may do better online than offline as business leaders.
  • Differences in firms’ performance and experience of challenges can be found where they have always been in trade: between firms of different size and between countries at different levels of development. Smaller firms, whether run by men or by women, are uniformly less likely to export and are more hampered in e-commerce and cross-border trade than large firms, whether run by men or by women, and firms in least developed countries are more hampered than firms in emerging markets. These findings are extraordinarily consistent across regions.
  • Women-led firms are not found to be consistently smaller than men-led firms, the distribution across size categories is very similar across women and men-led firms that have online sales activity. However, another extremely consistent finding is that the share of women-led firms of all firms that have online sales activity is still small – in some economies as low as 10 percent of all firms – and reflects the share of women-led firms in the overall economy. If it is the case that women do no worse or maybe better than men in running formal businesses and selling online, it seems critical to promote policies and programmes that enable women to formalise their businesses and access technology, finance, knowledge, and business networks.
  • If the policy objective is to alleviate challenges to cross-border e-commerce among small firms run by women and that sell online, five areas stand out across countries and regions as requiring improvements for small businesses, whether run by women or men: customs procedures for e-commerce imports and exports; online intellectual property and copyright rules; legal liability for online sellers and platforms supporting them; and data privacy and localisation rules.
  • Policymakers should also focus on two other leading constraints facing women-led (and men-led) small firms in developing economies, logistics costs and access to finance, including trade finance. Of course, these areas can be improved through regulatory reforms (such as liberalising logistics services or passing equity crowdfunding laws), but they can also be remedied with specific programmes, public-private partnerships, and tax incentives.
  • Potential solutions to the challenges identified through firm-level surveys include: simplifying and digitising business registrations and regulatory and tax filings; securing and facilitating trade and revenue collection by using blockchain and predictive analytics that separate licit form illicit shipments efficiently; adopting digital regulations and programmes that encourage innovation, fuel the flow of data, promote secure online identities, and accelerate firms’ and consumer’s access to secure, interoperable, digitised payments; and making the financial services ecosystem much more agile and responsive to small business needs through promotion of FinTech, open banking practices that enhance flows between banks and financial services, equity crowdfunding that enables investors and companies looking for capital to connect at scale.

There is also an important research agenda: in general, samples of women-led firms are small and generalisable findings remain scarce. There is a great deal of work ahead to understand how women-led firms perform as online sellers and online exporters and importers, and whether and which types of women-led firms – or any firms for that matter – grow faster, create more jobs, and reduce poverty among their employees and communities than firms that do not sell online.

In addition, donors and policymakers need to be careful when interpreting data on gender differences, and not read too much into descriptive statistics when assessing these differences. Before deciding that women face higher hurdles or that women-led firms do better or worse than men-led firms, it is imperative to control for the many other variables that shape firms’ performance, engagement in e-commerce, export participation, job creation and growth.

Gender (of the chief executive or management team) may be one of the factors that makes a difference, but it is hardly the only one, and probably seldom the main one, and may not matter at all, particularly in certain market segments.

 

This article is derived from the paper Women-led Firms on the Web: Challenges and Solutions authored by Kati Suominen and commissioned by ICTSD.

 Kati Suominen is Founder and CEO, Nextrade Group, LLC.