The Gender of Money: How Gender Structures the Market for Entrepreneurial Capital
40 Pages Posted: 22 Apr 2019 Last revised: 23 Jul 2019
Date Written: July 23, 2019
There is a significant gender gap in the allocation of investment capital to entrepreneurs, but it is unclear what drives this pattern and findings to date have been mixed. Using a unique dataset that lets me observe the matching process between entrepreneur and investor, and includes failed as well as successful matches, I explore how individual preferences and biases combine to skew the distribution of resources between male and female entrepreneurs. I find that, in my setting, women are no less likely than men to receive an investment offer or conclude a financing deal. However, women are far more likely to be funded by female, rather than male, investors. This stems from the combined effects of investor and entrepreneur preferences for partners of the same gender, as well as shared expectations that women are best placed to invest in female-typed businesses. My results point to gender homophily as a contributing mechanism to the gender gap in financing, and highlight how gendered expectations of fit can lead to market segregation.
Keywords: Gender, Economy, Organization of Markets, Entrepreneurship, Venture Capital, Discrimination
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