Cap-table data

How do binding wage constraints reshape ownership allocation in startups, and what are the consequences for workforce outcomes? Using population-wide administrative data on Finnish startups (2006–2022), we study how mandated wage floors affect employee equity and worker mobility. We exploit staggered introductions and removals of collective bargaining agreement extensions that impose binding wage floors on previously uncovered firms, generating plausibly exogenous variation in wages and equity compensation. Extensions reduce individual employee equity stakes by 10–11%. Instrumental variables estimates show that a 10% increase in employee equity reduces one-year exit by 2.5–3% and increases internal advancement by 10–12%, with weaker effects in high-technology industries.

Paper

Although gender disparities in pay have been extensively studied in mature firms, less attention has been devoted to gender disparities in startups. We propose that startup employment amplifies gender disparities in pay relative to mature, established firms. More specifically, we argue that women earn lower returns to startup employment than men, primarily due to disparities in a less transparent form of compensation: equity pay. Using matched employer–employee Finnish registry data between 2006 and 2019, we find empirical support for our predictions. To probe the mechanisms, we exploit an exogenous shock: an increase in ownership transparency. Consistent with our predictions, we find that gender disparities in equity pay within startups decline following an increase in ownership transparency, lending support to opacity being the key mechanism driving gender disparities in equity pay. Finally, this effect of transparency is most pronounced for women (a) joining male-founded startups; (b) with no previous startup experience. Overall, our study offers novel evidence for gender differences in returns to startup employment and the underlying mechanisms driving these disparities.

Paper available upon request.

Prior research documents systematic earnings penalties among startup joiners relative to comparable workers in established firms. At the same time, startup employment is associated with rare but extraordinary wealth creation. We examine who captures this upside and through what organizational mechanism. Using linked Finnish employer–employee and ownership data from 2006 to 2022, we show that equity ownership is the primary channel through which startup employment generates long-run gains. Those gains are concentrated in mid-stage startups, where equity holders realize substantially higher long-run earnings than both non-equity joiners and observationally similar employees in incumbent firms. Non-equity joiners, by contrast, bear the wage penalty without the upside. The findings reframe the startup wage penalty as a question about the allocation of ownership rather than about wages, and identify the stage at which that allocation pays.

Paper available upon request.