Risk tolerance, gender, and entrepreneurship: The Palestinian case

• Author: Shaker Sarsour,Yousef S. Daoud,Sanaa Kamal,Ruba Shanti
• Date: 01 August 2020
• DOI: http://doi.org/10.1111/rode.12634
• Published date: 01 August 2020

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wileyonlinelibrary.com/journal/rode Rev Dev Econ. 2020;24:766–789.

© 2019 John Wiley & Sons Ltd

DOI: 10.1111/rode.12634

SPECIAL SYMPOSIUM: PROMOTING YOUTH AND FEMALE

ENTREPRENEURSHIP IN DEVELOPING COUNTRIES

Risk tolerance, gender, and entrepreneurship: The

Palestinian case

Yousef S.Daoud1

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ShakerSarsour2

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RubaShanti3

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SanaaKamal4

1Birzeit University, Birzeit, Palestine

2Palestine Monetary Authority, Ramallah,

Palestine

3World Food Program, Jerusalem, Palestine

4Hadara, Ramallah, Palestine

Correspondence

Yousef S. Daoud, Birzeit University,

Birzeit, Palestine.

Email:ydaoud@birzeit.edu

Funding information

Partnership for Economic Policy;

Department for International Development

of the United Kingdom

Abstract

This paper analyzes the inter-relationships between en-

trepreneurial propensity, fear of failure (FoF), and gender

in Palestine, using the Global Entrepreneurship Monitor

(GEM) adult population survey (APS) data for 2009, 2010,

and 2012, and it is the first that addresses Gender, fear of

failure, and entrepreneurship for Palestine. The paper ex-

tends the analysis of the endogeneity issue of FoF by using

the conditional mixed process (CMP), which improves the

efficiency of the estimates. The results show that the fear of

failure negatively affects entrepreneurial status, while skill

perception does the opposite. It is also found that fear of fail-

ure is higher among women, although this result is not stable

over time. Using the CMP specification, we find that gender

and fear of failure both reduce the predicted probability of

entrepreneurship consistently over time. The only variable

that consistently predicts fear of failure and is significant is

skill perception, which has a negative impact. Policy impli-

cations of this research point to the importance of reducing

the gender gap in entrepreneurship. In particular, there is a

need to improve their skill perception in order to encourage

more females to be entrepreneurs. Networking, vocational

education and media coverage of success stories are among

the tools that could potentially achieve this result.

KEYWORDS

entrepreneurship, gender, Palestine, risk tolerance

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DAOUD et Al.

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INTRODUCTION

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Context of the study

Entrepreneurship provides opportunities for many to achieve a higher standard of living and/or an

employment that is not otherwise available. The availability of the adult population survey (APS), for

many countries for many years, provided researchers worldwide an opportunity to study the deter-

minants of entrepreneurship and the characteristics of entrepreneurs. In Palestine, job creation is an

especially acute problem; low female participation rates, oversized public employment, large budget

deficits, and a weak private sector that is forcefully integrated with the Israeli economy—all point

to the need of strengthening the idea of job creation and entrepreneurship. Political instability in

Palestine may be a contributing factor to risk intolerance. This article aims at analyzing risk tolerance

among Palestinian men and women and its potential impact on entrepreneurial activity rates along

gender lines.

Although there is a large body of literature on entrepreneurship, fear of failure (FoF), and gender

dimensions in developed countries, the literature on Palestine was virtually nonexistent, until 2009,

when Palestine became a member of the Global Entrepreneurship Research Association (GERA).

Since then descriptive analyses were done in the various Global Entrepreneurship Monitor (GEM)

reports.1

This will be the first academic article to address the gender dimension of FoF and total ear-

ly-stage activity rates using the Palestinian data.

1.2

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Research questions and objectives

The majority of studies on gender differences in risk attitudes find that women are more risk averse

than men; some found that in certain situations these claims are exaggerated (Nelson, 2016; Filippin,

2016).2

One of the common findings in the literature is that there is a gender gap in activity rates in

favor of men; for the Palestinian 2012 data, male rates are almost twice those of women. It is also

found that FoF is higher among women, which may lead to the inference that FoF is responsible for

the lower activity rates among women.3

Koellinger, Minniti, and Schade (2013) report that skill per-

ception, FoF, and social networks explain a substantial part of the gender gap in activity rates between

men and women. They control for endogeneity of FoF by applying instrumental variables using busi-

ness discontinuation, and knowing someone who has started a business in the past 6 months, as instru-

ments. Agier and Szafarz (2013) indicate that autonomy, risk taking, readiness for change, endurance,

lack of emotionalism and low need for support, and bank loan officers rated women as significantly

less likely successful entrepreneurs compared to men. Croson and Gneezy (2009) point that in situ-

ations where “competitiveness” is involved, women are found to be more risk averse than men. This

hypothesis was tested by Bönte and Piegeler (2013) who found that gender differences in risk attitudes

contribute to the gender gap in latent and nascent entrepreneurship. A third study by Sepulveda and

Bonilla (2010) was one of the few studies that addressed what factors affect FoF; they ran a probit

model and found that age, skill perception, gender, business discontinuation, and, to a lesser degree,

education—all affect FoF. This article addresses the same issues but contributes to the literature by

dividing the sample once along gender lines and uses conditional mixed process (CMP) modeling

JEL CLASSIFICATION

L26; J16; D81; O53; O57