10 Nov. 2014 | Comments (0)
There’s a ton of advice aiming to answer whether or not couples working together is a good idea, as more and more couples are choosing to open joint firms. It’s been estimated that 3 million of the 22 million U.S. small businesses in 2000 were couple-owned, and that number has likely gone up.
But to really answer this question, we have to ask: Why do couples choose to go into business together – and what are the benefits? New research from the Institute for the Study of Labor (IZA) looks into this. Using a sample of 1,069 Danish couples that established a joint enterprise between 2001 and 2010, the study revealed that couples often establish a business together because one spouse (usually the female) has limited outside opportunities in the labor market. And it found that starting a business together led to significant income gains for both spouses (but especially the female), both during the life of the business and post-dissolution. The research suggests that starting a business together is typically a sound investment of both spouses’ human capital, and it has the added benefit of reducing income inequality in the household.
To identify the labor market prospects of these entrepreneurs, the study looked at how much they made before starting their venture. The data shows that, on average, women in co-entrepreneurial couples earned 27% less beforehand than women in couples where each partner owned their own business, and 33% less than women in couples where only one partner was an entrepreneur.
This indicates that wives who choose to open a firm with their spouse come from a less advantageous labor market position and join the business because the opportunity cost is low. And the authors concluded that this decision wasn’t due to these couples being any more traditional than others. Since co-entrepreneurial wives see even higher income gains than their husbands (because they made significantly less pre-venture), the earnings difference between both spouses shrinks. The study also found that couples that open businesses together are no more or less happy than other couples (measured by usage of antidepressants or anxiety/insomnia medications), and they’re no more or less likely than their counterparts to separate, divorce, or have children.
Viewed through the lens of income, this research suggests that couple-founded companies have the potential to mitigate gender inequality. Unfortunately, previous studies reveal a different picture. A 2013 research paper out of UNC Chapel Hill found that gender inequality in the distribution of control was more likely to occur within spousal teams. According to the authors, “women have reduced chances to be in charge if they co-found new businesses with their husbands,” because certain expectations around gender-typical work (breadwinner v. homemaker) affect wives’ and husbands’ power positions – as do other family conditions like having children. So husbands are more likely to take the lead of new business, while wives end up in a subordinate role, and gender ideologies that shape their social roles and responsibilities at home reinforce these positions (a tension we’ve highlighted before in a case study).
Other research hints at differences between women who start businesses with their spouses and those who venture out on their own. Kathy Marshack, a clinical psychologist who studies entrepreneurial couples, pointed out that co-entrepreneurial wives often feel it’s their job to make their husbands “look good.” She often found that even if the wife is the founder of the business and her husband joins later, she may identify herself as a “co-owner” rather than the founder or president. “I found that the wives were not as independent as women who were in a career separate from their husbands,” Marshack said. “On a test of sex role orientation, they tended to score high on desirable feminine traits, whereas dual career wives scored high on desirable feminine traits and high on desirable masculine traits. The latter is what we tend to see with women who function as more independent professionals in the work world. They also have more egalitarian marriages than the copreneurial wives.”
While the IZA’s research points to higher incomes for co-entrepreneurial wives (and “cautiously” infers that spousal teams have productivity advantages), going into business with a spouse is bound to be challenging – and often comes with its own set of gender biases.
Families and couples working together has always been the norm, from family farms to mom-and-pops to Walmart. And there are plenty of couple-founded business success stories, e.g., Kate Spade and Flickr (before the founders split). But today, most of the challenge around erasing that work/home line stems from couples’ unclear working roles (a lack of “defined working roles” is apparently one reason why VCs may be reluctant to invest in a husband-wife start-up) and the need to also balance family responsibilities.
So should couples go into business together? There is no easy answer. Taken together, the research suggests that there are often real financial benefits to doing so, but that gender inequality often comes into play. It also provides advice for those thinking about taking the plunge: consider what your other career options are, and be sure to talk openly about how you plan to share responsibilities, at work and at home.
This blog first appeared on Harvard Business Review on 07/23/2014.
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