Bridging the Divide: How Technology is Empowering Female-Managed Businesses

A recent World Bank report reveals that technology adoption is pivotal in reducing the productivity gap between male- and female-managed firms. Despite similar levels of technology adoption for general business functions, female-managed firms lag in sector-specific technologies. Barriers like limited access to finance and lower managerial quality contribute to this gap. The report calls for targeted policies to support female-managed businesses in overcoming these challenges.

In a rapidly evolving global economy, technology has emerged as a powerful catalyst for business success and growth. However, a recent World Bank report titled "The Role of Technology in Reducing the Gender Gap in Productivity" reveals that despite the widespread adoption of technology, a significant productivity gap persists between male- and female-managed firms. This comprehensive study, authored by Xavier Cirera, Marcio Cruz, Antonio Martins-Neto, Kyung Min Lee, and Caroline Nogueira, delves into the nuances of this disparity and offers insights into how technology can help bridge the gap.

The Current Landscape of Female Management and Firm Performance

Historically, numerous studies have explored the differences in performance between male and female-managed businesses, but these studies have often yielded inconclusive results. Some suggest a negative relationship between female leadership and firm performance, while others observe a positive or even non-significant impact. These varied findings may be attributed to the inability to control for other mediating factors such as firms' assets, labor market practices, and access to credit, where women often face higher interest rates and lower loan approval rates compared to men. Additionally, gendered social norms can further hinder women's productivity and business growth.

A critical mediating factor in this context is technology. Extensive literature shows a positive relationship between technology adoption and firm productivity and growth. However, less is known about how female managers influence technology adoption and how these differences affect firm performance. This research aims to fill this gap by leveraging data from the Firm-level Adoption of Technology (FAT) survey conducted in 11 countries, including both developing and developed economies.

Technology Adoption and Its Impact on Productivity

The research reveals a significant productivity gap between male and female-managed establishments, with productivity estimates ranging from 24 to 66 percent. Interestingly, while female-managed firms are just as likely to adopt the most advanced technologies for general business functions, they are less likely to adopt advanced technologies for sector-specific business functions. This gap in technology adoption is particularly pronounced in sectors such as food processing and wearing apparel.

Despite this, the study finds that technology adoption positively correlates with firm performance, and female-managed businesses tend to benefit more from advanced technologies. This suggests that while female-managed firms may start at a disadvantage, they can catch up and even surpass male-managed firms as their level of technology sophistication increases. For instance, firms that intensively use sophisticated technologies, such as enterprise resource planning (ERP) systems, see a more significant reduction in the productivity gap.

Policy Implications and Recommendations

The study's findings offer several important insights for policymakers. First, policies aimed at reducing the gender gap in technology adoption, particularly for sector-specific business functions, could enhance firm productivity and competitiveness. This could involve targeted initiatives to support female-managed businesses in accessing and adopting more sophisticated technologies, including efforts to address systemic barriers such as information asymmetries, skills gaps, and financial constraints.

Moreover, the study highlights the importance of technology in shaping the relationship between female management and firm performance. Promoting technology adoption could effectively reduce the gender gap in firm performance, suggesting that public policies should incentivize the adoption of improved managerial practices and offer technology upgrading programs that incorporate gender components. Such initiatives can ensure women have equal access to technology and benefit from its use accordingly.

The Role of Female Managers in Technology Adoption

The upper-echelon theory suggests that the characteristics of top managers, such as their age, gender, education, and experience, can influence organizational outcomes. Female top managers (FTM) may have different characteristics, values, and preferences compared to their male counterparts, which can affect their decision-making regarding technology adoption. For instance, FTMs tend to exhibit more risk aversion and prioritize collaboration and communication, impacting their choices of technology adoption.

However, FTMs may also face disadvantages relative to their male counterparts in terms of access to information and financial resources. These factors can influence their decisions to adopt and use technologies in their businesses. The study's analysis shows that while FTMs are less likely to adopt advanced technologies, the returns to technology use are higher in female-managed businesses, helping to narrow the productivity gap.

Overcoming Barriers and Enhancing Technology Adoption

To address the gender gap in technology adoption and firm productivity, the study recommends several strategies. First, it suggests that public policies should focus on increasing women's participation in STEM and high-technology sectors, fostering digital literacy, and addressing social norms and stereotypes. Additionally, policies should incentivize the adoption of improved managerial practices and offer technology upgrading programs with gender components.

Furthermore, the availability of longitudinal information on firms' adoption of advanced technologies and changes in top managerial positions could help mitigate potential biases in gender gap estimates and improve understanding of this issue. Future research could consider different measures of firm performance, including innovation activities and other productivity measures, as well as different mediating factors.

Conclusion: Leveraging Technology for Gender Equality

The role of women in management positions is crucial for firm performance and economic growth. The findings of this study underscore the importance of technological sophistication in narrowing productivity differences between male and female-managed businesses. By promoting technology adoption and addressing systemic barriers, policymakers can enhance firm productivity and competitiveness, ultimately reducing the gender productivity gap.

In conclusion, technology has the potential to transform the landscape of female management and firm performance. By embracing technology and implementing targeted policies, we can create a more inclusive and equitable business environment that empowers women to reach their full potential and contributes to broader economic development.