Scaling startups risk increasing gender gaps, study finds

Rapidly scaling startups often make rushed hiring choices that disadvantage women, a recent study has found.

The findings draw on more than 31,000 new ventures founded in Sweden between 2004 and 2018.

Researchers at the Stockholm School of Economics report that in male-led startups, scaling reduces the odds of hiring a woman by about 18 per cent, and the odds of appointing a woman to a managerial post by 22 per cent.

Mohamed Genedy is co-author and postdoctoral fellow at the House of Innovation, Stockholm School of Economics.

Genedy  said: “During those moments of rapid growth, even well-intentioned leaders can fall back on familiar stereotypes when assessing who they believe is best suited for the role.”

The patterns emerge even in Sweden, regarded as a highly gender-equal national context.

Founders with human resources-related education counteract these challenges.

In ventures led by founders with HR training, the odds of hiring a woman increase by more than 30 per cent, and the odds of appointing a woman to a managerial role increase by 14 per cent for the same level of growth.

Genedy said: “When founders have experience with structured hiring practices, the gender gaps shrink, and in some cases even reverse.

“This shows that getting the basics of HR right early on really pays off.

“When things start moving fast, founders with HR knowledge are less likely to rely on biased instincts and more likely to hire from a broader talent pool.”

Prior experience in companies with established HR practices also helps, though to a lesser degree.

It raises the likelihood of hiring women as ventures scale, but does not significantly affect managerial appointments.

The study additionally shows these patterns are not driven by founder gender alone.

Even solo female-led ventures display similar tendencies when growing rapidly, though to a somewhat lesser degree.

In female-dominated industries, rapid growth increases the hiring of women for regular roles but still reduces the likelihood that women are appointed to managerial positions.

“When scaling accelerates, cognitive bias kicks in for everyone. Female founders are not immune to these patterns,” said Genedy.