Questioning Boundedly Rational Frameworks in Practice: The case of women entrepreneurs in Kumasi, Ghana

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Author Information : Arielle Badger Newman (Syracuse University)
Sharon Alvarez (University of Pittsburgh)

Year of Publication : Journal of Business Venturing, July 2022

Summary of Findings : This work addresses how the notion of rationality that models Western, male centric business concerns is not universal-- using the case study of informal entrepreneurs in Kumasi Ghana, we show how gender has been left out of the assumptions of boundedly rational models and the use of these models often advantage men at the expense of women.

Research Questions : What are the structural obstacles based on bounded rationality that are imposed on women's business decision-making? How do these obstacles constrain the potential of female entrepreneurs? And finally, what can be done to alleviate the structural constraints caused by an adherence to economic norms of male dominant bounded rationality?

What we know : This paper challenges the assumptions of bounded rationality to incorporate gender and to understand the ramifications of ignoring gender thus far. Our review of the relevant literature demonstrates that even though it permeates the very foundation of human society and meaning making, gender has been left out of boundedly rational models much to the detriment of women.

Novel Findings : The evidence showed that when considering business registration, what is most salient to entrepreneurs is the prevailing cultural expectations for men and women. In Ashanti society even when the business venture's level of trade could financially justify registration, gender roles drove business decisions. In the same marketplace, with the same laws, same economic costs, same tangible benefit of a once in a lifetime opportunity to get a stall, both men and women were asked the same essential question, do you plan to register your business? Men primarily replied that yes, indeed they were planning on registering and or in the process of doing so. Given the same constraints, the same costs, the same opportunities, women still said no. And this was completely rational given the traditional emphasis on female versus male roles and historical practices. The phenomenon in this case, formalization, is an outcome of structural sexism inherent in bounded rationality.

Implications for Society: Our data demonstrate an interesting conundrum—a simultaneous indigenous expectation for females to be successful entrepreneurs while structurally this same population has been marginalized and constrained by externally imposed models of economic bounded rationality. This tension between two very different expectations – traditional business practices that acknowledge the economic contributions of women compared to recommended and imposed business practices – leads to vastly different results for male and female entrepreneurial ventures in Kumasi.

Many economists do not acknowledge that economic theories are value laden in terms of the dominant male perspective. In order to understand the hidden values of economic theories, scholars need to be intentional when applying these theories or frameworks based on assumptions of bounded rationality. The first step is to examine how “value free” these theories really are. Scholars have long assumed that since economic theories provide satisfactory frameworks for the dominant Western male economic context, they automatically work in other contexts regardless of gender, culture, race, or sexuality. Until the assumptions made by economics are challenged one by one, the argument will be left unchallenged that the system is appropriate for all since the assumptions and frameworks are applied to all equally. The problem is the system was developed in a biased view based on a narrow set of circumstances and assumed to apply to all.

Full Citations : Arielle Badger Newman, Sharon Alvarez,
Questioning boundedly rational frameworks in practice: The case of women entrepreneurs in Kumasi, Ghana,
Journal of Business Venturing
Volume 37, Issue 4, July 2022, 106205, ISSN 0883-9026,https://doi.org/10.1016/j.jbusvent.2022.106205.

Arielle Newman
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