Gender Gap in Startup Recruiting: Evidence from Changes in Termination Costs

Women remain underrepresented not only as startup founders but also as nonfounding employees (“joiners”). Yet there is limited understanding of how to address this disparity. Whereas traditional explanations have emphasized individual employment preferences, we shift the focus to employers’ decision making. We propose that weaker employment protection—which reduces termination costs—increases women’s likelihood relative to men of being hired by startups rather than incumbent firms, as it enhances employers’ flexibility to experiment with traditionally overlooked candidates. We further hypothesize that this effect is less pronounced when information cues counteract stereotypical beliefs about women hires, such as when (a) women have experience as founders, or (b) the focal startup operates in an industry with a higher representation of female employees or female startup employees. Using Portuguese registry data on new hires from 2009 to 2013 and a regression discontinuity in time (RDiT) design, we provide empirical support for these predictions. Our study highlights gender disparities in hiring between startups and incumbent firms and shows that weaker employment protection can help reduce this gender gap. This paper was accepted by Toby Stuart, entrepreneurship and innovation. Funding: R. Conti gratefully acknowledges financial support from the CY Initiative. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.01491 .