The Influence of The Great Recession on Gender Bias in Entrepreneurial Investment

This article draws on an analysis of panel data from the Kaufman Firm Survey to investigate how the Great Recession affected gender gaps in entrepreneurial access to financing, net of individual and firm-level characteristics. We find that female-led firms were significantly more likely than male-led firms to encounter difficulty in acquiring funding when the small-business lending market contracted in 2009 and 2010. We assess the consistency of our results with three different theories of bias or discrimination, concluding that our findings are most consistent with predictions based on sociological and social psychological theories of gender bias. In particular, our analyses show that the disparity in access to credit arose in part because female-led ventures with low credit scores encountered a significantly larger penalty than did similar male-led ventures during these years, a finding which indicates that the recession led to the application of double standards that disadvantaged women. These findings shed light on the mechanisms that generate a gender disadvantage for female entrepreneurs and, more broadly, highlight how the relevance of ascribed status characteristics (e.g., gender) may vary systematically with macroeconomic conditions.