29 Nov 2011Working Paper Summaries

Local Industrial Structures and Female Entrepreneurship in India

by Ejaz Ghani, William R. Kerr and Stephen O'Connell

Despite its recent economic advances, India's gender balance for entrepreneurship remains among the lowest in the world. Improving this balance is an important step for India's achievement of greater economic growth and gender equality. This paper uses detailed micro-data on the unorganized manufacturing and services sectors of India in 2000-2005 to identify and quantify the importance of existing female business networks for promoting subsequent entrepreneurship among women at the district-industry-year level. Key concepts include:

Higher female ownership among incumbent businesses within a district-industry predicts a greater share of subsequent entrepreneurs will be female. Moreover, higher female ownership of local businesses in related industries—those sharing similar labor needs, industries related via input-output markets—predict greater relative female entry rates even after controlling for the focal district-industry's conditions.
Among broader district-level traits, better local infrastructure strongly connects with higher relative female entry in both manufacturing and services. Local education and the female literacy rate further matter for services entry.
Within manufacturing, female shares are highest and typically exceed 50 percent in industries related to chemicals and chemical products, tobacco products, and paper and paper products. At the opposite end, female shares of 2 percent or less are evident in industries related to computers, motor vehicles, fabricated metal products, and machinery and equipment.
Among services industries, female ownership shares exceed 30 percent in industries related to sanitation and education. Lowest rates are in industries related to research and development, water transport, and land transport.

Author Abstract

We analyze the spatial determinants of female entrepreneurship in India in the manufacturing and services sectors. We focus on the presence of incumbent female-owned businesses and their role in promoting higher subsequent female entrepreneurship relative to male entrepreneurship. We find evidence of agglomeration economies in both sectors, where higher female ownership among incumbent businesses within a district-industry predicts a greater share of subsequent entrepreneurs will be female. Moreover, higher female ownership of local businesses in related industries (e.g., those sharing similar labor needs, industries related via input-output markets) predict greater relative female entry rates even after controlling for the focal district-industry's conditions. The core patterns hold when using local industrial conditions in 1994 to instrument for incumbent conditions in 2000-2005. The results highlight that the traits of business owners in incumbent industrial structures influence the types of entrepreneurs supported. Keywords: Female, gender, entrepreneurship, agglomeration, cluster, business networks, development, India, South Asia.