Abstract

This paper addresses the unexplained phenomenon of gender differences in entrepreneurial decision-making, particularly in business sectors involving innovation and risk. Although the topics of risk attitudes and uncertainty have been studied comprehensively from a gender perspective, research that combines different forms of uncertainty and links them with women’s entrepreneurial decision-making has not been done to the best of our knowledge. This paper provides a theoretical framework involving models on risk, ambiguity, perceptions of risk as in cumulative prospect theory, and asymmetric information. It unifies and connects these models through specific assumptions on utility functions in the presence of uncertainty and uses bias discount factors to denote how strongly biases devalue outcomes. Conclusions from the models indicate that a range of external factors—such as race and access to education and social networks—may interact with the internal behavioral biases of an entrepreneur, such as overconfidence, risk appetite, altruism, and trust in others. By detailing and analyzing theoretical gender-type differences and their effects on entrepreneurial decision-making, we find that traditional one-dimensional gender policies are not sufficient to address complex gender issues. Rather, we suggest a more multi-dimensional and holistic policy approach that combines traditional gender policies and policies for long-term sustainability, encouraging firms to be more socially and environmentally conscious, and demanding less “greedy works” as Nobel laureate Professor Goldin also argued. It aims to create a new business eco-system that is more feminine-friendly and balanced, considering gender-type differences and incentive biases to address the current worldwide gender disparities in entrepreneurship.