External Funding and Firm Growth: Comparing Female- and Male-Controlled SMEs

Previous research suggests a lack of external funding opportunities might inhibit thegrowth of many small and medium enterprises (SMEs), particularly female-controlled SMEs.However, the existing empirical research on this issue is extremely limited. The aim of this study,therefore, is to gain a better understanding of the relationship between SME growth and externalfunding and, in particular, to determine if there are any significant differences between femaleandmale-controlled SMEs. The study is based on a large (2 367 SMEs) highly representativelongitudinal (four-year) database provided by the Australian Bureau of Statistics. The resultsindicate that female-controlled SMEs have relatively lower levels of external funding than theirmale counterparts, with the difference being greater in older compared to younger firms. Further,the analysis suggests that pecking order theory, rather than bank discrimination, might be theprimary cause of this difference. However, the results also indicate that the relatively lower levelsof external funding in female-controlled SMEs does not appear to be inhibiting their growth(relative to male-controlled SMEs). The results suggest that profitability is the most significantdeterminant of firm growth.