The Structural Shortcomings of Startup Employment
While job creation is one of the main reasons why policymakers seek to promote entrepreneurship, practically no research has looked at the quality of startup jobs. In two papers, we begin to explore the issue.
In the first paper, with Olav Sorenson, Michael Dahl, and Diane Burton (OS 2021), we use Danish registry data to evaluate the attractiveness of startup jobs for individuals. Startup employees earn 17% less over the next decade than those hired by established firms. Half of this differential reflects that startups hire employees with less human capital. But when we use matching to compare individuals with identical characteristics, we still find a long-term economic penalty from startup employment driven by two factors: startup jobs are uncertain and can lead to costly spells of unemployment and job mobility becomes constrained. And yet, startup work is increasingly popular among high-skilled employees, raising questions about how they understand and experience the risks, benefits, and costs of joining a startup.
In the second, inductive study with Matt Regele, Nazanin Eftekhari, and Max Groberg (SMJ 2025), we analyze the organizational and structural factors behind the observed penalty. The paper reveals that individuals recognize that startup jobs represent higher risks but believe that this will only affect their short-term earnings and be offset by autonomy, learning, and professional advancement. These expectations are rarely met, because venture capital-backed entrepreneurship pushes for fast growth and de-diversification to seek “home runs.” This creates environments that amplify uncertainty, impair learning, and place individuals in idiosyncratic and fast-changing jobs with limited opportunities to develop marketable human capital. The need to recruit skilled workers leads founders and investors to withhold information from employees and perpetuate unrealistic narratives, which, ironically, employees then uphold.
Together, the papers demonstrate how the structures that investors and founders establish to manage the uncertainty of entrepreneurship result in unexpectedly disadvantaged career trajectories for startup employees, with clear implications for entrepreneurship theory, policy, and practice.