A founding penalty: evidence from an audit study on gender, entrepreneurship, and future employment

Kacperczyk, O and Younkin, P (2022) A founding penalty: evidence from an audit study on gender, entrepreneurship, and future employment. Organization Science, 33 (2). pp. 716-745. ISSN 1047-7039

Abstract

Whereas much research has focused on the benefits of an entrepreneurial career, less attention has been devoted to understanding its costs. In particular, studies have left unanswered the question of how employers evaluate ex-founders at the point of hire. We propose that employers penalize job candidates with a history of entrepreneurship because they believe them to be less competent and worse fits than comparable candidates without founding experience. However, we also argue that this penalty is mitigated for women. Because women are often perceived as illegitimate founders, employers do not treat their entrepreneurial efforts as revealing unwanted attributes and are correspondingly more likely to hire them than male ex-founders. We find evidence in support of these claims with data from a resume-based audit and an experimental survey of Marketing and HR professionals. Our results show that employers evaluate ex-founders negatively, perceiving them as less fit and less competent prospective employees. However, we also find that this penalty does not attach for female ex-founders because future employers do not associate them with the same entrepreneurial attributes that reduce hiring chances.