Women-led businesses more likely to adopt digital platforms during the pandemic

A World Bank survey has revealed that women-owned businesses adopted digital technology more readily than men-owned ones during the pandemic — and the smaller the business, the more this was true. At the same time, their investments in tech remained lower than those of men-owned enterprises. We dive into the data to understand why we should not get carried away by this short term upswing and why investments in closing the gender gap must continue.

What happened

The World Bank published a detailed survey-based study on the impacts of the COVID pandemic on women-owned enterprises. The paper finds that women-owned businesses adopted digital technology more readily than men-owned ones.

• The smaller the enterprise, the bigger the gender gap in immediate tech adoption in favor of women-owned enterprises. Especially within the microenterprise segment, women owners were more likely to increase their use of digital platforms.
• The difference was largest for retail businesses, suggesting that women owners used digital platforms to reach customers that they had engaged face-to-face before COVID-19 hit.
• In contrast, women-owned businesses were less likely to invest in digital equipment and software, although the difference was smaller than for tech adoption.

What we learned

The pandemic may have accelerated the use of inexpensive or free digital technologies by women-owned businesses, but this may not level gender divides in the long-run.

• The study is based on surveys, so it does not directly tell us about the reasons underlying the results. But the authors make a plausible case that digital platforms offer an accessible way for female business owners to work around mobility restrictions imposed by lockdowns.
• They also acknowledge that the results could be explained by a catch-up effect; since women business owners lagged in adoption before the pandemic, they were simply forced to increase their tech use when it was the only way to continue their business.
• The study also suggests that the gender gap may have remained the same or even widened for business functions that require more costly technology, like operations software for planning and supply chain management.

The bigger picture

The effects of the pandemic on small business digitalization are complex and uneven. While women-owned enterprises may have experienced a short-term digitalization boost, investments in closing the tech adoption gender gap must continue.

• As we reported in the previous Spotlight, COVID-19’s impact on small business digitalization is a mixed bag. A lot seems to depend on small businesses’ prior capabilities and location. For example, the Mastercard Economics Institute uses sales data to show that the pandemic led to a three-fold increase in the number of SMEs going online for the first time.
• Going forward, we have to combine quantitative and qualitative assessments of how the pandemic has affected the digital gender divide to understand both its extent and the exact mechanisms.

Small Business Spotlight is a roundup of recent trends and insights about small enterprise in the digital age, by Dr Nicolas Friederici