The 16th Annual McGill International Entrepreneurship Conference: Researching New Frontiers

Sarfaraz, Mian, Karadeniz - Female Entrepreneurship, Internationalization, and Trade Liberalization: The Case of Iran, Pakistan, and Turkey

Leyla Sarfaraz*⁺, Sarfraz Mian^, Emine Esra Karadeniz^#

*Corresponding author

⁺Shiraz University

^ State University of New York at Oswego

^#Yeditepe University

Summary

This paper seeks to highlight two potentially important sources of wealth generation in developing countries: women entrepreneurship and free trade. The study conducts a macro-level cross-country comparison of female entrepreneurship and internationalization in Iran, Pakistan, and Turkey, the co-founders of the Economic Cooperation Organization (ECO). First, in order to give a better understanding of female entrepreneurship in the three economies, we study and compare the business environment and the socio-economic status of women in these countries. Then, we attempt to find a relationship between female entrepreneurship, internationalization and trade freedom. To that end, we compare the internationalization levels of female entrepreneurs in 54 countries, indexed by the Global Entrepreneurship Monitor (GEM), with the Free Trade Index of the same countries under study, calculated by The Heritage Foundation and The Wall Street Journal. We found that, as the countries move to a higher level of development, the average level of free trade increases. Also, the average level of female internationalization increases with the average level of free trade.

Women, constituting about half of the world population can play a crucial role in the economic growth and development as entrepreneurs. On the other hand, trade liberalization policies and openness to trade can facilitate internationalization and create new opportunities for both female and male business owners across their borders. So, the implementation of free trade policies together with a friendly environment for female entrepreneurship would encourage more women to seek international markets and hence increase the female contribution to the economic growth and development of their respective countries.

Considering the importance of women entrepreneurs as a valuable human capital and potential contributors to internationalization, and also the effect of trade liberalization on the economic growth, our attempt would be to shed some light on female entrepreneurship and the openness to trade in Iran, Pakistan, and Turkey. The three countries are the founding members of the Economic Cooperation Organization (ECO), established in 1985, to promote economic, technical, and cultural cooperation among the member states.

The article is structured as follow. In the first section of the paper, we use the following databases: “Ease of Doing Business” to compare the business environment in the three economies, the “Global Gender Report” as the basis for investigating the socio-economic status of women relative to men in the three countries, and the “Trade Freedom Index” to compare the degree of openness to trade in the Iran, Pakistan and Turkey mentioned economies. In the second part, we compare female internationalization indices of the Global Entrepreneurship Monitor (GEM) member countries with the free trade index of the same countries calculated by the Heritage Foundation and the Wall Street Journal. In our findings, it appears that as the countries move to a higher level of development, the average level of free trade increases, and also, the average level of female internationalization increases linearly with the average level of free trade.

A comparative study of women entrepreneurship, internationalization, and trade freedom in Iran, Pakistan, and Turkey may provide a better understanding of the strengths and weaknesses of the compared economies in terms of entrepreneurial environment for women, the extent of trade freedom, and internationality. This can also be a valuable resource for policy makers in each country to know the position of their economy in the related topics compared to the other two neighbor economies, their regional averages, and the world average.

Entrepreneurs in more free economies are in a better position in terms of having access to international markets than business owners in a relatively restricted economy. Although globalization has brought in new opportunities to numerous business owners across the world, the barriers to trade in more closed economies have prevented many domestic entrepreneurs from extending their business activities freely across borders.

In general, while Turkey holds an overall higher rank than the other two countries in the “ease of doing business”, it is less difficult for Iranian entrepreneurs to start a business than it is for their counterparts in the other two countries, and Pakistani entrepreneurs can get credit more easily than their counterparts in Iran and Turkey.

Our research shows that a gender gap exists and is significant in women entrepreneurial activities in Iran, Pakistan, and Turkey alike. This is however more significant in Pakistan where women are generally faced with numerous visible and invisible structural constraints and gender discrimination with respect to social as well as economic aspects is pronounced in some remote regions.

The rate of female entrepreneurial activity is Iran, Pakistan and Turkey is relatively low compared to both their male counterparts and the GEM average. According to GEM 2012 Report, the percentage of the adult female population (age 18-64) involved in Early Stage Entrepreneurial activity (TEA) is 6% in Iran, 1% in Pakistan, and 7% in Turkey.

To study the economic freedom condition in the three economies, we compare their Open Market scores including Trade Freedom, Investment Freedom, and Financial Freedom. In terms of trade liberalization, Iran has a lower economic freedom score than both Pakistan and Turkey indicating a restrictive trade policy in the country. Turkey, having a largely free-market economy, shows higher scores in terms of Trade Freedom, Investment Freedom and Financial Freedom than the compared economies. Pakistan earns higher score than Iran in all components of open markets.

Studying the average level of free trade and female internationalization in factor-driven, efficiency- driven, and innovative- driven economies shows that, as the countries move to a higher level of development, the level of free trade increases, and also, the level of female internationalization increases with the level of free trade.