Non-competes inhibit women entrepreneurs, high-growth startups

The Biden administration issued an executive order on Friday asking the Federal Trade Commission to look into regulating employee non-compete agreements, which restrain workers from using their expertise and limits future opportunities. 

Matt Marx, professor of entrepreneurship at Cornell University, is an expert on non-compete agreements. In new research forthcoming in Organization Science, he found that non-competes contribute to the “gender gap” in entrepreneurship.

Marx says:

“Most startups fail. Non-competes raise the risk of failure because it’s harder to hire workers with industry expertise. Examining all workers in 26 states from 1991-2014, I found that women are 15% less likely than men to found startups in states with stricter non-compete policies. Worse, it is high-growth startups that don’t get founded.

“Why does that matter? Because high-growth startups are the engine of job creation and innovation in the economy. But women are markedly under-represented among venture-backed startups (<10%). My study shows that non-competes contribute to that gender gap.”