Students frequently ask Peter Younkin, assistant professor of management at the Lundquist College of Business, if they should take a safe-bet job at a company like Amazon or pursue their dream of starting their own business. Younkin wondered if there were any data or scientific studies to answer that question.
“As a society, we spend money training people to be entrepreneurs and founders,” Younkin said. “If it turns out doing that is career suicide, we should warn them, or at least let them know ‘This is a great idea, try this, but the costs could be really high.’”
Along with his colleague Olenka Kacperczyk, associate professor of strategy and entrepreneurship at the London Business School, Younkin set out to study if there are any implicit or explicit biases held by hiring professionals when presented with the resume of a former startup founder. The early data is surprising.
The research can be found in “Detours Or Dead-Ends? The Effect of Entrepreneurship on the Future Employment of Women,” a working paper currently under review.
For the purposes of the research, Younkin and Kacperczyk put a strictly economic lens on the question. They were curious if founders stood to lose money, or if they held a competitive disadvantage, when applying for jobs in the likely event their startup failed.
To answer this question, the authors tried what’s called an audit study. They generated fictitious resumes for job candidates in the fields of marketing, accounting, and finance. The fake resumes were then used to apply for real jobs.
“It’s a very common method—considered the cleanest way to test some labor market questions,” Younkin explained.
Each resume was for a 27-year-old college graduate who had worked for a few years at a large company. Each person had been promoted once. After that, each candidate decided to go work at a mid-sized firm or start their own company, and after two-years, they decided to apply for a new job.
The researchers shuffled the gender of each applicant, as well as which applicant was the founder of a startup and which one wasn’t. All the fictitious job candidates were white, and for the purposes of the research, a startup was defined as a scalable business concept with employees. In every case, a company received the resume of one founder and one non-founder.
“The first overall finding was that founders get called back at a much lower rate than non-founders. That was almost entirely driven by a gender difference. Male founders were severely penalized. Female founders were very marginally penalized,” Younkin said.
That finding was consistent with prior research that shows entrepreneurship is viewed from a very gendered perspective. People tend to think of founders as men.
“Human resources executives are worried about organizational fit,” Younkin said. “They’re also worried the reason you’re applying is your company didn’t work out—an indication that you’re not really skilled.”
In a follow up study to validate the findings in the first study, Younkin and Kacperczyk employed a research firm to gather a panel of 300 human resources executives.
“We gave them two candidates to look at. We asked, ‘what would you think of this applicant overall?’ From that second study, we got some really strong evidence,” Younkin said.
Again, Younkin and Kacperczyk found hiring professionals are worried about hiring ex-founders, especially if they’re men. But, this was not the case for resumes of ex-founders that happened to be female.
“Women, because they’re not ‘seen’ as founders, the penalties don’t attach,” Younkin said. “They’ll be just fine in an organization.”
There’s more research to be done, and Younkin realizes this effect doesn’t hold true across all industries. In information technology and computers, for example, demand is so high that no real founder-bias exists regardless of gender. Younkin also wants to account for race in future research.
But for now, he is a little bit closer to answering the question “what should I do with my life? Take a steady job, or follow my dream of starting my own company?”
“I talk to a lot of founders. Founders tend be a very confident group of people. Every single one of them said, ‘Nobody wants to hire a founder. I would never hire a founder,’” he said.
March 2021 Update: This paper, now forthcoming in the journal Organization Science, has been retitled as “A Founding Penalty: Evidence from an Audit Study on Gender, Entrepreneurship, and Future Employment.” It was also highlighted in the March/April issue of Harvard Business Review.