When women own more, companies’ priorities look different

It is not enough to know whether women are among the owners. The share of the company they own also appears to be significant. A study of companies in France, Italy, and Spain links women’s ownership share to growth, liquidity, and how companies describe their value creation.

Previous research has often compared companies run by women and those run by men, viewing lower growth as a poorer outcome. The researchers behind the new study ask a different question: Could the differences instead be linked to different strategic priorities?

In companies with multiple owners, ownership stakes are crucial. They determine not only who receives a share of the profits but also the extent of the formal decision-making power held by the various owners.

Less growth – a larger buffer

The study analyzes data spanning several years from more than 42,000 privately owned small and medium-sized enterprises with multiple owners. The larger the share of the company owned by women, the lower the sales growth. At the same time, liquidity tended to be higher.

In the researchers’ model, the estimated annual sales growth was 13 percent when women collectively owned about 26 percent of the company, compared with 9 percent when they owned about 56 percent. The researchers interpret the combination of lower growth and a larger liquidity buffer as a sign of less risky strategic choices. However, this is an interpretation of the companies’ results. The study does not directly measure the owners’ personal risk tolerance.

A difference is also evident on the companies’ websites. The higher the percentage of ownership by women, the more socially oriented—and less economically oriented—the language used on the websites. According to the researchers, this says something about how the companies communicate their priorities, but not about how much social value they actually create.

When the Majority Actually Matters

For certain outcomes, the distribution of power becomes particularly clear when women collectively own more than half of the company.

The correlation with lower sales growth is stronger when women hold a majority stake. For socially oriented language, the correlation is statistically significant among companies where women collectively control more than 50 percent of the shares, but not among companies where women are shareholders without a majority stake.

However, there is no simple 50-percent threshold. In terms of liquidity and the financial language used on the websites, there is no corresponding clear difference between companies where women are minority owners and those where they are majority owners. The study does not show that the company’s strategy itself changes direction when women go from owning 49 to 51 percent of the company.

Not better or worse

The researchers link the findings to previous research on average differences in the priorities of women and men. However, they did not measure such personal characteristics among the owners in the study.

They also highlight another possible explanation. Women entrepreneurs may face greater external barriers and have poorer access to resources. Lower growth, therefore, need not be solely the result of a voluntary choice to prioritize security over expansion. The study shows a correlation, not that companies experience lower growth or adopt a more socially oriented approach simply because women own a larger share of them. Furthermore, the findings apply to private companies in three European countries.

The researchers emphasize that companies may have different priorities. Within a group of owners, different goals are weighed against one another: expansion is weighed against security, and financial goals are weighed against social ones. In such cases, it may be too narrow an approach to simply ask who the owners are. It is at least as important to consider how much decision-making power they actually have.

About the article and the authors
The article Women own differently: How women’s decision-making authority shapes owner teams’ strategic choices in private firms (free to download) has been published in the academic journal Strategic Entrepreneurship Journal.

The authors are Jannis von Nitzsch and Miriam Bird, both at the Technical University of Munich, Germany.