Solal, I. and Snellman, K. (2019) Women don’t mean business? Gender penalty in board composition. Organization Science. https://pubsonline.informs.org/doi/abs/10.1287/orsc.2019.1301
Abstract: We examine investor responses to board diversity and highlight a previously unexplored mechanism to explain negative market reactions to senior female appointments. Drawing on signaling theory, we propose that an increase in board diversity leads investors to update their beliefs about firm preferences. Specifically, we argue that a gender-diverse board is interpreted as revealing a preference for diversity, and a weaker commitment to shareholder value. Consequently, firms with more female directors will be penalized. We test our argument using 14 years of panel data on U.S. public firms. We find that firms that increase board diversity suffer a decrease in market value, and that this effect is amplified for firms that have received higher ratings for their diversity practices across the organization. These results suggest that observers respond to the presence of female leaders not simply on their own merit, but as broader cues of firm preferences, and that firms may counteract any potential signaling effect through careful framing.
Selected working papers
Solal, I. The gender of money: How gender structures the market for entrepreneurial capital. INSEAD Working Paper No. 2019/23/OBH. Runner-up for OMT Best Student Paper Award, 2019. (revise and resubmit).
Abstract: There is a significant gender gap in the allocation of investment capital to entrepreneurs, but it is unclear what drives this pattern and findings to date have been mixed. Using a unique dataset that lets me observe the matching process between entrepreneur and investor, and includes failed as well as successful matches, I explore how individual preferences and biases combine to skew the distribution of resources between male and female entrepreneurs. I find that, in my setting, women are no less likely than men to receive an investment offer or conclude a financing deal. However, women are far more likely to be funded by female, rather than male, investors. This stems from the combined effects of investor and entrepreneur preferences for partners of the same gender, as well as shared expectations that women are best placed to invest in female-typed businesses. My results point to gender homophily as a contributing mechanism to the gender gap in financing, and highlight how gendered expectations of fit can lead to market segregation.
Snellman, K.* and Solal, I.* Does investor gender matter for the success of female entrepreneurs? The signaling effect of gender homophily in entrepreneurial finance (under review)
Abstract: One proposed solution to closing the gender gap in venture capital is to encourage female investors to invest in female entrepreneurs. We examine the effect of investor gender on venture outcomes for male-founded and female-founded firms, using longitudinal data on venture-backed firms in the United States and employing different sets of matched samples to account for unobserved differences in venture and investor quality. We find that female-founded firms backed only by female investors are two times less likely to raise additional capital compared to those whose first-round investors include male venture capitalists. We find no equivalent effect for male-founded firms. We propose that this results from audiences interpreting women’s endorsements of other women as motivated by gender. Consequently, the prior investment leads to a competence discount, rather than a signal of quality. We validate this explanation in an experimental setting and show that a female-female investment relationship produces a competence discount for female entrepreneurs, leading to lower evaluations of quality for female, but not male entrepreneurs.
Hafenbrack, A., LaPalme, M., and Solal, I. Meditating away a guilty conscience: The impact of mindfulness on guilt and reparations. (revise and resubmit)
Abstract: Mindfulness has been shown to have a number of beneficial effects, including dampening negative emotions and emotional reactivity, as well as decreasing the incidence of antisocial behavior. However, mindfulness may also have unintended negative consequences if it is cultivated when individuals are experiencing a functional form of negative affect. We argue here that a state of mindfulness can interfere with the affective processes necessary to motivate reparation in guilt-eliciting situations. In four experiments, we find that mindfulness reduces state guilt and weakens the normally strong association between guilt-eliciting situations (especially having unintentionally harmed other people) and prosocial reparative behaviors. Implications for theory and management practice are discussed.
Snellman, K., Dahlander, L., Askin, N., and Solal, I. Collaboration experience predicts funding success for intellectually diverse teams (under review)
Abstract: Collaboration is increasingly the norm in scientific endeavors, with scholars hoping to harness creative potential by bringing together diverse perspectives. Yet, while the research published by teams that bridge different disciplines tends to be more highly cited, scholars who work in diverse teams are typically less productive. Using data on accepted and rejected grant applications submitted by 3,950 scientific teams from a major American research university, we show that intellectual diversity within the team is associated with a higher likelihood of a grant application being rejected. We also show that teams with prior collaboration experience can overcome this penalty and that, over time, persistence may increase the team’s chances of success. This suggests that collaboration in diverse teams is difficult and only experienced teams are able to capture the benefits of diversity.
Solal, I. and Snellman, K. The B-team: Team Prototypes and their Consequences for the Success of Gender-Diverse Teams (under review)
Abstract: Teams are increasingly encouraged to diversify by bringing in more women and members of underrepresented minorities. Yet studies on the relationship between performance and demographic diversity have yielded mixed findings, and diverse teams often struggle when competing for scarce resources. Extending insights from the professional prototypes literature to teams, we propose a theory to explain why gender-diverse teams may incur a selection penalty. We argue that when quality is uncertain and decision-makers are selecting on potential for exceptional performance, they are more likely to fall back on culturally dominant schemas or prototypes. Thus, when existing models of team success are overwhelmingly male, the presence of women on the team may make the team less successful, not because this drives down objective performance, but because the team is no longer perceived as conforming to the ideal type. We test our theory using data from a university entrepreneurial pitch competition, and find that while teams with female participants receive similar evaluations for their business idea and are no less likely to place second, they are six times less likely to win the competition compared to all-male teams. Implications for diversity and inclusion in organizations are discussed.
*authors contributed equally
Why women (and firms) lose out when we celebrate diversity. WIPsociology.org. January 9, 2020.
Why Investors React Negatively to Companies that Put Women on Their Boards. HBR.org. November 25, 2019.
‘Pink Silos’ in Start-up Funding and How to Avoid Them. INSEAD Knowledge. September 25, 2019.