South Middlesex Times

Nearly 50 percent of new businesses fail within the first five years. Many former entrepreneurs apply for 9-to-5 jobs to get back on their feet, but new research reveals an unexpected obstacle: hiring bias.

In a Rutgers-led study published in the spring 2024 issue of the journal Personnel Psychology, researchers created fake resumes and showed them to 219 people with corporate recruiting experience in high-tech manufacturing, software development, healthcare, and other industries. The resumes displayed virtually identical qualifications with one major exception: some of the fictional applicants were former business owners.

"This difference is statistically significant across various firms and industries, suggesting a systematic bias against hiring former entrepreneurs," said Jie (Jasmine) Feng, the lead researcher and associate professor of human resource management at the Rutgers School of Management and Labor Relations.

The study found that recruiters were less likely to recommend former business owners for jobs, even when they had similar qualifications to other applicants. Wang, an associate professor of management and global business at Rutgers Business School, explained, “Entrepreneurs behave differently. They value autonomy. They are used to making decisions on their own and taking risks. Some recruiters view that as a red flag.”

Interestingly, the research also highlighted that women, new recruiters, and those with entrepreneurial experience themselves were more open to hiring former business owners. Feng elaborated, “Women are more open to applicants with a different identity or a different set of experiences. Newer recruiters are less constrained by organizational norms and more willing to consider an unconventional candidate. Former entrepreneurs can relate to those who have followed a similar path.”

The study urges employers to diversify their recruiting staff and provide training to raise awareness of biases against unconventional job applicants. Overall, the findings contribute to the understanding of the challenges faced by former business owners, who often experience lower earnings compared to other employees, known as the “entrepreneurship penalty.”

Feng summarized the situation by stating, "Unfortunately for many entrepreneurs, closing their business is just the beginning of a long and difficult road."