Female support of other women has been put forth as a remedy to the gender gap across many domains. Yet the potential costs associated with gender homophily are not well understood. The authors propose that homophily aggravates negative gender bias in evaluation.
Focusing on the context of entrepreneurship, the authors theorize that future investors will discount a female entrepreneur’s competence as the key factor in an early-stage investment decision, when the investment comes from a female investor. Consequently, female-backed female entrepreneurs may struggle to raise additional funds from new investors.
In a field study of venture-backed startups, the authors find that firms with female founders who received funding from female rather than male VCs are two times less likely to raise additional financing. The authors find no equivalent investor gender effect for male-founded firms. In an experimental study, the authors find that pitches by female-backed female entrepreneurs receive lower evaluations compared with all other pitches, and that this is driven by perceptions of entrepreneur competence.
The authors' findings suggest that well-intentioned calls for women to invest in women not only place an undue burden on female investors, but may also undermine the long-term success of female entrepreneurs.
Faculty
Associate Professor of Organisational Behaviour