Employee Non-compete Agreements, Gender, and the Timing of Entrepreneurship

36 Pages Posted: 20 May 2018 Last revised: 11 Jan 2019

See all articles by Matt Marx

Matt Marx

Boston University - Questrom School of Business

Date Written: May 4, 2018

Abstract

I contribute to the literature on institutions, gender, and entrepreneurship by showing that macro-level institutional policies that do not explicitly target women disproportionately affect their ability to leverage prior professional experience in founding new ventures. Examining all workers in 24 U.S. states from 1990-2011, I find that women subject to tighter non-compete policy are 13% more likely to postpone founding rival businesses until their employers dissolve. Causality is established via a difference-in-differences model leveraging exogenous shifts in non-compete policy in three states. Regarding mechanisms, I review the gender split among 11,000 defendants in non-compete lawsuits since 2003, finding little evidence that firms target women with legal action. However, women face higher relative costs of potential litigation due both to lower cumulative earnings prior to founding entrepreneurs as well as a “re-entry” wage penalty after abandoning their startups and returning to paid employment.

Keywords: entrepreneurship, gender, non-competes

JEL Classification: L26, P48, J41, J16

Suggested Citation

Marx, Matt, Employee Non-compete Agreements, Gender, and the Timing of Entrepreneurship (May 4, 2018). Available at SSRN: https://ssrn.com/abstract=3173831 or http://dx.doi.org/10.2139/ssrn.3173831

Matt Marx (Contact Author)

Boston University - Questrom School of Business ( email )

595 Commonwealth Ave
Boston, MA 02466
United States

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