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And the Children Shall Lead: Gender Diversity and Performance in Venture Capital

Author

Listed:
  • Paul A. Gompers

    (Harvard Business School, Finance Unit)

  • Sophie Q. Wang

    (Harvard University)

Abstract
With an overall lack of gender and ethnic diversity in the innovation sector documented in Gompers and Wang (2017), we ask the natural next question: Does increased diversity lead to better firm performances? In this paper, we attempt to answer this question using a unique dataset of the gender of venture capital partners' children. First, we find strong evidence that parenting more daughters leads to an increased propensity to hire female partners by venture capital firms. Second, using an instrumental variable set-up, we also show that improved gender diversity, induced by parenting more daughters, improves deal and fund performances. These effects concentrate overwhelmingly on the daughters of senior partners than junior partners. Taken together, our findings have profound implications on how the capital markets could function better with improved diversity.

Suggested Citation

  • Paul A. Gompers & Sophie Q. Wang, 2017. "And the Children Shall Lead: Gender Diversity and Performance in Venture Capital," Harvard Business School Working Papers 17-103, Harvard Business School.
    • Handle: RePEc:hbs:wpaper:17-103
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    References listed on IDEAS

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    Cited by:

    1. Dimitris Christopoulos & Stefan Koeppl & Monika Köppl-Turyna, 2022. "Syndication networks and company survival: evidence from European venture capital deals," Venture Capital, Taylor & Francis Journals, vol. 24(2), pages 105-135, April.
    2. Margareta Ilie & Constantin Ilie, 2024. "Reasons Why Female Students Do Not Start a Business? A Brief Analysis," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 26-32.
    3. Thomas Hellmann & Ilona Mostipan & Nir Vulkan, 2019. "Be Careful What You Ask For: Fundraising Strategies in Equity Crowdfunding," NBER Working Papers 26275, National Bureau of Economic Research, Inc.
    4. Pavlova, Elitsa & Gvetadze, Salome, 2023. "Female access to finance: A survey of literature," EIF Working Paper Series 2022/87, European Investment Fund (EIF).
    5. Arceo-Gomez, Eva O. & Campos-Vazquez, Raymundo M., 2022. "Gender Bias in Evaluation Processes," Economics of Education Review, Elsevier, vol. 89(C).
    6. Cao, Ruiqing & Koning, Rembrand & Nanda, Ramana, 2020. "Biased sampling of early users and the direction of startup innovation," SocArXiv g6wjn, Center for Open Science.
    7. Batabyal, Amitrajeet A. & Yoo, Seung Jick, 2022. "Tax policy and interregional competition for mobile venture capital by the creative class," The North American Journal of Economics and Finance, Elsevier, vol. 61(C).
    8. Josh Lerner & Ramana Nanda, 2020. "Venture Capital's Role in Financing Innovation: What We Know and How Much We Still Need to Learn," Journal of Economic Perspectives, American Economic Association, vol. 34(3), pages 237-261, Summer.
    9. Antoniou, Constantinos & Cuculiza, Carina & Kumar, Alok & Yang, Lizhengbo, 2024. "It takes two to tango: Spousal risk preferences and CEO risk-taking behavior," Journal of Corporate Finance, Elsevier, vol. 86(C).
    10. Homroy, Swarnodeep & Mukherjee, Shibashish, 2021. "The role of employer learning and regulatory interventions in mitigating executive gender pay gap," Journal of Corporate Finance, Elsevier, vol. 71(C).
    11. Martin Kenney & Donald Patton & Siri Terjesen, 2024. "Gender diversity at entrepreneurial firm IPOs: responding to changing societal norms," Small Business Economics, Springer, vol. 63(3), pages 897-915, October.
    12. Xu, Xixiong & Lin, Cuiliang & Wang, Maochuan, 2024. "Does parenting daughters increase corporate cash dividends? Evidence from Chinese family firms," Journal of Behavioral and Experimental Finance, Elsevier, vol. 41(C).
    13. Lins, Karl V. & Roth, Lukas & Servaes, Henri & Tamayo, Ane, 2024. "Sexism, culture, and firm value: evidence from the Harvey Weinstein scandal and the #MeToo movement," LSE Research Online Documents on Economics 122737, London School of Economics and Political Science, LSE Library.
    14. Xu, Lei & Ou, Amy Y. & Park, Haemin Dennis & Jiang, Han, 2024. "Breaking barriers or maintaining status quo? Female representation in decision-making group of venture capital firms and the funding of woman-led businesses," Journal of Business Venturing, Elsevier, vol. 39(1).
    15. Ewens, Michael & Townsend, Richard R., 2020. "Are early stage investors biased against women?," Journal of Financial Economics, Elsevier, vol. 135(3), pages 653-677.
    16. Dewald, Frederick P. & Fan, Zaifeng, 2022. "How different are minority managers from White managers in the mutual fund industry?," Economics Letters, Elsevier, vol. 221(C).
    17. Du, Qianqian & Hellmann, Thomas, 2024. "Getting tired of your friends: The dynamics of venture capital relationships," Journal of Financial Intermediation, Elsevier, vol. 58(C).
    18. Amitabh Chandra & Cirrus Foroughi & Lauren Mostrom, 2020. "Venture Capital-Led Entrepreneurship in Health Care," NBER Chapters, in: The Role of Innovation and Entrepreneurship in Economic Growth, pages 475-498, National Bureau of Economic Research, Inc.
    19. Ewens, Michael, 2022. "Race and Gender in Entrepreneurial Finance," SocArXiv djf8z, Center for Open Science.
    20. Fabrice Hervé & Sylvain Marsat, 2024. "Like daughter, like father: Female socialization and green equity investment," Post-Print hal-04717594, HAL.

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    More about this item

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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