IMO MORSe Seminar - Olenka Kacperczyk "Discrimination and Entrepreneurship: Evidence from LGBT Rights Laws"

Institute of Management and Organisation

Date: / -


Abstract: This study revisits the well-established claim that reducing discrimination spurs entrepreneurial entry. We propose that the effect of antidiscrimination initiatives on entrepreneurial foundings depends crucially on whether discrimination originates on the demand side or the supply side of the entrepreneurial process. The universal benefits of antidiscrimination practices in the context of entrepreneurial entry are based on the study of demand-side discrimination, or when prospective entrepreneurs face discrimination by key resource providers for a new venture (i.e., investors, banks, prospective employers, and customers). Yet we hypothesize the opposite effect on the supply side, or when prospective entrepreneurs face discrimination in the current workplace. Using evidence from the enactment of LGBT antidiscrimination policies, we show that initiatives to reduce employer discrimination deter entry into entrepreneurship because they increase the overall appeal of paid employment relative to entrepreneurship. Despite the reduction in the rates of entrepreneurship, however, the share of high-quality entrants increases, because antidiscrimination policies motivate the pursuit of higher-potential opportunities. Finally, these two effects are amplified in states with higher rates of discrimination, in general, where the benefits of antidiscrimination practices are most acute.