Gender Diversity Can Breed Success

A Professor's Perspective On Current Events

HBS Professor Paul Gompers and his colleagues have conducted impactful research on the impact of gender diversity, or lack thereof, in the venture capital industry. Not surprisingly, they found that venture capital firms tend to have homogeneous management teams.

This article originally premiered on Professor Michael Roberto’s Blog

Most of the partners tend to be white men with liberal arts undergraduate degrees and MBAs.  A significant portion attended Harvard Business School.   The representation of women in the venture capital world has not increased much since 1990, according to Gompers’ research. He notes, “We really saw how powerful the force of ‘birds of a feather flocking together’ was. The more similar you are to someone, the more likely you are to work with them.”

The scholars discovered that, “Partners who came from the same school achieved an 11.5 percent lower success rate for acquisitions and IPOs; those who were ethnically homogeneous saw a success rate 26 to 32 percent lower.”

This article is part of our Professor’s Perspective series—a place for experts to share their views and opinions on current events.

To disentangle correlation from causation, Paul Gompers and Sophie Wang conducted another fascinating study.  They reviewed alumni data from universities that accounted for most of the venture capital partners in their sample. They discovered that partners with daughters tended to hire more women as partners in their firms. Then they examined venture capital fund performance, and they found a substantial advantage for funds with at least one woman serving as a partner.

According to HBS Working Knowledge, “While the median venture capital fund return is around 14 to 15 percent, funds with a female partner returned 16 to 17 percent. Moreover, having women as partners increased the percentage of successful startups supported by those firms—that either went public or sold for more than their total capital investment—from about 28 percent to about 31 percent.”

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