New Study Reveals Motherhood’s Toll On Women Entrepreneurs

Women are less likely than men to start new businesses, and when they do, their businesses are less likely to thrive. New research points to a major factor driving this disparity: childbirth. The study reveals that becoming a mother significantly reduces the likelihood of women starting a business. For those already running companies, motherhood leads to declines in profits and jeopardizes long-term survival. These findings also highlight the importance of reliable childcare in narrowing the gender gap and fostering success.

The new study was completed by Valentina Rutigliano, a postdoc at the Vancouver School of Economics and posted on the Social Science Research Network. To conduct the research, Rutigliano used the Canadian Employer-Employee Dynamics Dataset, an employer-employee dataset derived from tax files containing demographic information about workers and detailed balance sheet information on employers. She focused on analyzing the creation and operation of incorporated businesses.

Rutigliano discovered that women are 42% less likely to start a business during a year they give birth. Although the effect lessens over time, it never fully returns to pre-birth levels, meaning women who have children remain permanently less likely to start a business.

Rutigliano then analyzed businesses started by women and found that, in the five years following childbirth, female-led companies experienced an average decline of 21% in sales, 17% in assets, and 21% in profits compared to businesses run by women without children. “The effects extend beyond mere downsizing. These firms become less profitable: profit margins and return on assets decrease by 6% and 7%, respectively. Survival rates also dwindle, but the effect is quite modest. Over each year, there is an approximate 2.5% reduction in the likelihood of these firms remaining operational,” she writes in the paper.

What about fathers? Men don’t see the same decline in companies they started when they became fathers. “Men-led firms and women-led firms are on parallel trends up to the year of childbirth, but they sharply diverge in the year in which the first child is born as childbirth only has a moderate negative effect for men-led firms and instead lead to large, persistent, negative effects for women-led firms,” she writes. Her research concludes that children account for 47% of the gender gap in sales and 54% of profits in startup companies.

Rutigliano found that female-led firms of all ages are impacted by childbirth, but the impact is much more significant for new companies. “When you have a company that is more established, you might have a good management team that you’ve been able to select; you can delegate to a greater extent. But when you are at the beginning, these companies are really, really dependent on the founder. So if the founder is distracted, nobody else can take over,” Rutigliano explained to me.

Perhaps Rutigliano’s most compelling result highlights the crucial role family support, particularly from grandmothers, plays in the success of entrepreneurial mothers. By linking mothers to their parents using tax identifiers, the research uncovers how proximity to grandparents, especially grandmothers, can enhance a mother’s business performance, particularly after childbirth.

The findings reveal that mothers living near their parents experience better business outcomes after having a baby. A deeper analysis of the data shows a significant boost in business success when grandmothers retire—a shift not mirrored when grandfathers retire. This suggests that grandmothers’ caregiving role is a key factor.

Retired grandmothers make an even more significant difference for entrepreneurial moms in places where formal childcare options are scarce. Their support highlights how family-provided childcare can step in when external services are limited. “It would bridge about 50% of the gap if all women lived close to their own parents,” Rutigliano says. In the United States, it has been estimated that 20% of working mothers with children under five years of age use grandparents as their primary childcare providers.

Of course, it’s not just entrepreneurs who feel the impact of motherhood on their careers—mothers face unique challenges in many professions. In general, moms with younger children are far less likely to be part of the workforce than fathers or women without kids. In 2023, only 69% of mothers with kids under 6 were active in the labor force, a stark contrast to 95% of fathers with children in the same age group.

Children also impact women’s savings and retirement. A new Pew survey found that households led by unmarried women without children had a median wealth of $87,200 in 2022, similar to those led by unmarried men. However, for unmarried women with children, the median wealth dropped sharply to $10,700. According to a report by the TIAA Instituteparental leave and time out of the workforce could result in 22% less in retirement compared to a peer who did not have workforce interruptions.

Motherhood presents challenges that can make it harder for women to thrive in many businesses, including entrepreneurship. While it’s easy to interpret these findings as a reason to avoid investing in or hiring mothers, this perspective misses the bigger picture. What mothers need to succeed is access to childcare and opportunity. These are essential to leveling the playing field. Policies and systems that support women as they balance business and family are the key to unlocking mothers’ full entrepreneurial and professional potential.