Entrepreneurship Policies through a Gender Lens

Norway

By Lene Foss, UiT – The Arctic University of Norway and Jönköping University, Sweden

Background

Among others, public policy and access to financial capital are key elements of entrepreneurial ecosystems (Hechavarria and Ingram, 2014). Similarly, gender equality is an important determinant of entrepreneurial activity (Griffiths, Gundry and Kickul, 2013). In Norway, women are under-represented among entrepreneurs and business owners despite an increased policy focus on supporting women’s entrepreneurship in recent years.

Policy issue: Access to finance

The Royal Ministry of Children, Equality and Social Inclusion (2015-16) reports that one in four entrepreneurs are women; that men have greater access to capital than women – making it easier to start a business; and that there are fewer women than men entrepreneurs, executives and directors. In 2013, women comprised 37% of those establishing sole proprietorships, general partnerships (ANS) or general partnerships with shared liability (DA). Among those who established a limited company (AS) or public limited company (ASA), women accounted for only 20%. Sectors with the highest proportion of women entrepreneurs are health and social services, education, accommodation and food services.

There are several types of financing available to entrepreneurs in Norway, ranging from industrial development funds, private funds, bank loans, crowdsourcing and investors. Among the sources of public funding, the best known is Innovation Norway, which is listed as the government’s most important instrument for innovation and development. Innovation Norway manages public sector efforts to support entrepreneurship and has a strong focus on supporting women in business (Regjeringen, 2015-16). The ministry’s goal is that at least 40% of business-targeted funds reach women, but in 2014 only 35% of funds did so. However, in the three years prior to 2014, the proportion of business-targeted funds that reached women was around 40%.

Measures to promote better access to financial capital for women 2015

Gender differences in access to financial capital are viewed as an impediment to both enterprise growth and job creation. Economic agencies, industry associations, advocates and scholars have called for the provision of inclusive financing policies to strengthen entrepreneurial ecosystems as a means for addressing the perceived gaps between policy and practice (Brush et al., 2018).

In the national budget for 2015, Norwegian policy identified 17 measures to improve access to financial capital for entrepreneurs (Norwegian Ministry of Trade, Industry and Fisheries, 2016). While none of these measures is targeted directly at women, it was recommended that funding agencies pay greater attention to women entrepreneurs. The 17 measures are divided into two groups: six measures deal with strengthening the public supply of capital in the early start-up phase, and 11 deal with remedying entrepreneurs’ funding problems during the early start-up phase.

The government strengthened the public supply of early phase financial capital through the following six measures:

1. The nationwide start-up grant scheme of Innovation Norway was strengthened with an additional NOK 110 million (approximately EUR 10.1 million).

2. An additional NOK 100 million (approximately EUR 9.2 million) was proposed to Innovation Norway for entrepreneurship and restructuring measures to address challenges in the oil and gas industry.

3. Two new, national seed capital funds were established, each was allocated NOK 300 million (approximately EUR 27 million).

4. Investinor was allocated NOK 100 million (approximately EUR 9.2 million) to invest in small, scalable businesses.

5. Capital tax rates were reduced directly, as well as through an increase in basic deductions.

6. NOK 40 million (approximately EUR 3.7 million) was allocated to grants for pre-seed funds.

In order to address entrepreneurs’ funding problems in the early phase of their business, the Norwegian government implemented the following eleven measures:

1. Strengthened the pre-seed funding scheme in 2016 by NOK 100 million (approximately EUR 9.2 million), which is a measure intended to release private investment capital to young, innovative businesses located in an innovative environment.

2. Gradually established additional seed funds so that all regions are covered.

3. Strengthened the start-up scheme to NOK 350 million (approximately EUR 32.5 million) to promote growing businesses, and potentially increase funding for businesses by matching these funds with capital from private investors.

4. Strengthened the Skattefunn scheme, which provides the opportunity for small and medium-sized businesses to allow 20% of their project costs as a tax reduction.

5. Strengthened the environmental technology scheme to a total of NOK 464.5 million (approximately EUR 42.7 million).

6. Strengthened the User-driven Research based Innovation programme. This deals with innovation projects, with a high degree of R&D activities led by the industry itself. Each project has to contribute substantially to renewal and increased value creation for the firms participating in the project and for the industry in general, in that new knowledge and solutions are made available.

7. Commissioned Innovation Norway to facilitate networks for business angels in order to strengthen their competence and investment ability.

8. Increased monitoring of EU efforts in the area of crowdfunding.

9. Committed to examining further reductions in the capital tax rate in future budgets.

10. Committed to examine a range of measures to strengthen the incentives for employee co- ownership, including shares and options for employees.

11. Reduced the delay between the approval and disbursement of grants from Innovation Norway faster.

While many steps have been taken to improve access to funds for women entrepreneurs, the vast majority of funds are delivered through gender neutral mainstream programmes.1 Furthermore, due to structural industrial adjustments (new industries are needed to replace oil and gas), the Norwegian government also seeks to increase access to business skills for entrepreneurs, notably by improving access to business advice and networks, further embedding entrepreneurship into the education system, strengthening support for the commercialisation of research, and improving the protection of intangible assets (Norwegian Ministry of Trade, Industry and Fisheries, 2016). Spillover effects between these actions are expected, making financial capital for women innovative entrepreneurs more readily available. Hence, there could be specific funding opportunities for women-led enterprises that seek to meet society’s “grand challenges”, including the ageing of the population, reducing carbon emissions and digitalisation.

Status for access to financial capital for women 2019

In the new action plan for women entrepreneurs from The Norwegian Ministry of Trade, Industry and Fisheries and The Norwegian Ministry of Culture (2019) neither the 17 measures from 2015 nor the results of those policies are mentioned. Consequently, it is hard to know the effect of the financial policies. In the section titled “Women have less access to capital” the plan refers to research on the effects of entrepreneurs’ own savings on the success of growth companies. In Norway savings have a stronger effect on men’s propensity to start a business compared to women (Berglann et al., 2011). Attracting investors is another important issue for women entrepreneurs, as research shows that women face larger problems than men in attracting investment capital (Alsos et al., 2006). The action plan mentions several reasons (p. 21): Women start businesses in industries with lower growth rates, which hampers the possibility of gaining access to capital. Another issue is that investors may choose to invest in entrepreneurs who are like them (gender, education and background). As both education and work experience in Norway are gendered, this may lead to male investors investing in male entrepreneurs. Finally, the action plan refers to an OECD report, which reveals that businesses with at least one woman receive significantly less capital than entrepreneurial teams with men only (Lassebie and Sakha, 2019). A study of women’s entrepreneurship (Grünfeld et al., 2019) concludes that Norway faces large and continuous differences between women’s and men’s entrepreneurship. Although there has been a small increase in the share of women entrepreneurs through the last 20 years, women’s gains have been slow. Further, women’s participation in entrepreneurship decreases with greater focus on growth, technology, scalability and financial risk. Thus, policies for greater access to capital for women entrepreneurs are needed to address the underrepresentation of women among entrepreneurs and innovators with considerable societal impact, i.e. employment, new innovations and social enterprises.

The action plan concludes with 12 measures (Norwegian Ministry of Trade, Industry and Fisheries and Norwegian Ministry of Culture, 2019):

• Measure 1: The government will map out how the instruments are distributed by gender and establish common standards so that the government can have an overview of how much support goes to women entrepreneurs.

• Measure 2: The government will get better statistics on start-ups, including a better overview of how start-ups are distributed by gender.

• Measure 3: The government will fund the Global Entrepreneurship Monitor for 2019.

• Measure 4: The government will consider whether other criteria can be used in addition to age for instruments that support young businesses.

• Measure 5: The government will present a report to the Storting on innovation in the public sector.

• Measure 6: The government will map entrepreneurship education and the need to possibly strengthen this within the health professional educations.

• Measure 7: The government will follow up on the White Paper on the Health Industries.

• Measure 8: Prioritise sectors and access to the public market.

• Measure 9: The government will consider measures that mobilise more growth-oriented women entrepreneurs

• Measure 10: Tax rules

• Measure 11: Sole proprietorships

• Measure 12: Social rights for the self-employed.

The government also decided to address the “policy instrument jungle” that exists for Norway’s business sector. Today there are 180 different arrangements which are administered by 14 different Ministries and 18 different national units. It is quite expensive for entrepreneurs to find the correct funding scheme they should apply to. Two out of five entrepreneurs need assistance to apply, and one in five pay for this assistance. The government aims for a new digital portal to be completed by the end of 2020.

Conclusion and recommendations

The public policy for access to financial capital for entrepreneurs in Norway has intended to increase the availability for funding. Several measures were provided in the national budget of 2015- 2016, but none was specifically targeted towards women. An evaluation of these measures from the governmental plan was not published, and the government acknowledges that the statistics for women entrepreneurs are not satisfactory. Thus, one of the new measures in the 2019 plan is to enhance the statistics on women’s entrepreneurship. The government’s new action plan for 2019 has a stronger gender-oriented focus on financial capital, as policy makers recognise that women’s entrepreneurship has increased only slightly in the last 20 years. In response, more measures to provide easier access to financial capital for women are now being taken.

Recommendations for Norway

• Evaluate government policy measures for increasing women entrepreneurs’ access to financial capital.

• Introduce more detailed follow up of women entrepreneurs’ experiences with the new digital portal for 2020.

• Increase funding for women’s entrepreneurship growth in technology ventures, in enterprises with high scalability and those with financial risk.

References

Alsos, G. A., E. J. Isaksen and E. Ljunggren (2006), “New venture financing and subsequent business growth in men-and women-led businesses”, Entrepreneurship Theory and Practice https://journals.sagepub.com/doi/10.1111/j.1540-6520.2006.00141.x.

Bell, A., R. Chetty, X. Jaravel, N. Petkova and J. Van Reenen (2018), “Who Becomes an Inventor in America? The Importance of exposure to Innovation”, The Quarterly Journal of Economics, Vol.134, No. 2, pp. 647–713, https://doi.org/10.1093/qje/qjy028.

Berglann, H., E. R. Moen, K. Röed and J. F. Skogström (2011), “Entrepreneurship origins and returns”, Labour Economics, Vol. 18, pp. 180-193. https://www.sciencedirect.com/science/article/pii/S0927537110001041?via%3Dihub.

Brush, C., L. F. Edelman, T. Manolova and F. Welter (2018), “A gendered look at entrepreneurship ecosystems”, Small Business Economics, Vol. pp. 1-16, https://link.springer.com/content/pdf/10.1007/s11187-018-9992-9.pdf.

Områdegjennomgang av det näringsrettede virkemiddelapparatet. Helhetlig anbefaling om innretning og organisering av det näringsrettede virkemiddelapparatet (2019), “Review of the business-oriented policy instruments: Comprehensive recommendation on the design and organization of the business-oriented policy instruments”, Delloitte, https://www.regjeringen.no/contentassets/0f8355831ed346c38fba23362eaa59be/helhetlig-anbefaling-om-innretning-og-organisering-av-det-naringsrettede-virkemiddelapparatet.pdf.

Griffiths, M., L. Gundry and J.Kickul (2013), “The socio‐political, economic, and cultural determinants of social entrepreneurship activity”, Journal of Small Business and Enterprise Development, Vol. 20, No. 2, pp. 341-357, https://www.emerald.com/insight/content/doi/10.1108/14626001311326761/full/html.

Grünfeld, L., S. Hernes, V. Idland, H. Hvide and E. Olssön (2019), “Kvinnelig entreprenörskap i Norge: Utviklingstrekk, hindre og muligheter”, Menon Economics, Rapport no. 1, 2019. https://www.menon.no/wp-content/uploads/2019-01-Kvinnelig-entrepren%C3%B8rskap-i-Norge.pdf.

Hechavarria, D. M and A. Ingram (2014), “A review of the entrepreneurial ecosystem and the entrepreneurial society in the United States: An exploration with the Global Entrepreneurship Monitor dataset”, Journal of Business & Entrepreneurship, Vol 26-1. https://www.researchgate.net/profile/Thomas_Pittz/publication/268510441_A_Model_for_Experiential_Entrepreneurship_Education/links/54be890a0cf28ce312326bad/A-Model-for-Experiential-Entrepreneurship-Education.pdf#page=10.

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Norwegian Ministry of Trade, Industry and Fisheries and Norwegian Ministry of Culture (2019), “Action plan for female entrepreneurs”, https://www.regjeringen.no/globalassets/departementene/nfd/dokumenter/vedlegg/192578-handlingsplan-uu.pdf.

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Statistisk Sentralbyrå (SSB) (2018), Fakta om likestilling (Facts about gender equality), https://www.ssb.no/befolkning/faktaside/likestilling.

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