How raising a daughter can help you make money
Fathers of daughters are more supportive of gender equality
Adapted from a story by Elizabeth Winkler for The Washington Post.
The power of daughters extends to venture capitalism.
Venture capitalists who have daughters are more likely to hire female partners to their firm, according to a new study by Harvard researchers. In turn, greater gender diversity ended up improving firms’ financial performance.
The study’s findings are inline with previous research. Fathers of daughters are more supportive of gender equality than fathers of sons, and congressmen who have daughters vote more liberally on policies affecting women.
Venture capital is a particularly male-dominated industry: Only 10 percent of new hires are women, and three-quarters of firms have never had a senior female investor, according to the data.
Researchers found that if a senior partner had a daughter instead of a son, it increased the probability that they would hire a senior female investor by 24 percent.
Firms in which partners had more daughters than sons had a 3 percent higher probability of succeeding — measured by their startups going public or being acquired for more than the amount invested. For these firms, the rate of return for funds also increased 3 percent. (Researchers controlled for factors such as firm size and age.)
How does gender diversity lead to better results?
The most obvious explanation is that raising daughters reduces bias toward women, leading to more female hires, say researchers. Because the pool of female talent is relatively untapped, these hires may be of significantly higher quality than their male peers. They drive firms to generate higher returns.
It is also possible that firms’ improved performance is a result of having more diverse perspectives at the table to make investment decisions. Venture capital, like other industries, suffers from the “birds of a feather” phenomenon: Investors tend to collaborate with those who share the same gender, ethnicity, educational background and work history as themselves. Such collaboration has been shown to reduce financial performance.
Researchers think greater diversity diminishes the tendency toward groupthink and helps firms avoid costly investment mistakes. Women’s different networks may also attract a wider range of deals, increasing average deal quality.
Elizabeth Winkler is a freelance journalist who writes about economics and finance.
