Market structure and the pattern of black-owned firms (original) (raw)
Related papers
Increased national attention to racial and economic inequality has created public conversation on approaches for wealth building; but far too often, entrepreneurship is not included in the conversation. Nationally, white-owned businesses without have an average of 508,405peryearinannualrevenue,comparedtoblack−ownedfirmswith508,405 per year in annual revenue, compared to black-owned firms with 508,405peryearinannualrevenue,comparedtoblack−ownedfirmswith58,119, a difference of over 8 times. Creating strategies that increase black firm revenues is critical to expand owner wealth, as well as create jobs and raise income for workers, who are more likely to be people of color. As the nation becomes increasingly diverse, promoting the scalability of non-white firms will also be critical to U.S. competitiveness. This study uses data from the Kauffman Firm Survey (KFS), a panel dataset of startup firms founded in 2004, to understand why white-black revenue gaps exist and policy solutions that can help address it, through the following questions: (A) Is there a significant difference between white and black firm revenue?; (B) What variables significantly explain the gap between white-black firm revenue?; and (C) What variables are most significantly impact a firm’s revenue? The study finds that there is a significant difference of $150,774 between white and black firms in the dataset, 9% of which can be explained by financial, human, and social capital variables. Sales to government agencies are both the most significant variable reducing the gap between white and black firms, as well as the most significant predictor of firm revenue, once time and firm fixed effects are added. The study recommends the preservation and increased adoption of race-conscious procurement policies by both the public, private, and nonprofit sectors, while also expanding access to financing opportunities and business training to help firms succeed – all of which can play a role in reducing the racial wealth gap and expanding domestic competitiveness.
Black Industrialists, Barriers to Entry, and Appropriate Interventions
2019
This paper provides a high level review of the design and objectives of the BIS based on publically available information and insights gathered through interviews with DTI and other organisations providing business support initiatives. The assessment considers the complementarity between BIS and other initiatives and agencies, the selection criteria of potential beneficiaries, the core economic and ownership criteria applied for selection of beneficiaries, the funding model and links to other DFIs and issues in non-financial support since the inception of the programme. Drawing from the detailed interviews with the DTI, Industrial Development Corporation and other stakeholders involved in providing support for SMEs, as well as publically available information, the paper identifies key challenges for businesses relating to access to working capital, the complexity and duration of application, approval and disbursement processes, and coordination issues within the co-funding model. Th...
The purpose of this study is to compare entrepreneurial risk and market behavior patterns between BBE and WBE. This study is a continuation of a prior study on SMEs. A majority of the prior research on Black-owned business enterprises (BBE) concluded that they are less successful and have dismal profitability compared to White-owned business enterprises (WBE). Two independent studies are conducted comparing both groups. Both ethnic/SME groups are examined across 11 different industry types. This research examines the market and economic and entrepreneurial risk patterns of BBEs compared to WBEs. A multivariate regression analysis is used to measure ethnicity as a predictor variable. The results indicate that BBEs were not much different or any more risky compared to WBEs. Despite the prior research that states to the contrary, the results indicate that BBEs are equally likely to be as competitive as WBEs in terms of firm dynamics.
Why are There so Few Black-Owned Firms in Africa? Preliminary Results from Enterprise Survey Data
SSRN Electronic Journal, 2000
Much of the growth in Sub-Saharan Africa in the past decade has come from extractive industries, rather than from private, entrepreneurial activity. Furthermore, non-extractive activity in the private sector is often dominated by firms owned by ethnic minorities. This paper analyzes the characteristics of the formal private sector in five countries in sub-Saharan Africa, with a particular emphasis on Black African-owned (indigenous) firms. We find that indigenous firms start smaller and grow more slowly; however their rate of growth is positively influenced by whether the ownerentrepreneur has a university degree. We do not find overwhelming evidence that credit is the binding constraint but we do find that indigenous firms get less access to trade credit than firms owned by minority entrepreneurs. Finally, we discuss policy solutions that might enable a larger number of indigenous entrepreneurs to enter and survive in a vibrant, multi-ethnic private sector. The Center for Global Development is an independent think tank that works to reduce global poverty and inequality through rigorous research and active engagement with the policy community. Use and dissemination of this Working Paper is encouraged, however reproduced copies may not be used for commercial purposes. Further usage is permitted under the terms of the Creative Commons License. The views expressed in this paper are those of the author and should not be attributed to the directors or funders of the Center for Global Development. This paper was made possible by financial support from the Australian Agency for International Development and the World Bank.
External Financing and the Survival of Black-Owned Start-Ups in the US
Eastern Economic Journal, 2014
Since black-owned businesses tend to have access to lower informal financing, we hypothesize that, obtaining commercial financing should play a compensating role and have a stronger marginal effect on black-owned businesses than on businesses owned by other racial groups. Unexpectedly, we find that, while the use of commercial financing reduces the exit rates of new firms in general, the reduction is not significantly different across racial groups. We attribute this result to unobserved heterogeneity linked, at least in part, to the owner's start-up capital and to other beneficial externalities that access to informal investors produces.
2008
Ribich for their comments. I would like to thank the Institute for their generous support of computing and programming , and Karl and Alma Taeuber who originally interested me in this subject and graciously provided me with unpublished Census data. employment, 1950 to 1960. The impact of these variables depends on the occupation in question: Industrial concentration had a generally depressing effect on employment in the midd1e-and high-level occupations and a favorable effect in the low-level occupations. Unions, as expected, have a depressing, occupation-specific effect on Negro employment. Expansion of employment had a depressing effect on Negro employment. Because educational attainment was standardized when measuring employment representation, it follows that attitudes or prejudice, reinforced by monopoly power, are the primary obstacles to increased Negro employment. Thus, where Negroes have been employed, it would seem attitudes of white employers and employees have been moder...
Not for Lack of Trying: American Entrepreneurship in Black and White
Small Business Economics, 2006
Using a sample obtained from a survey conducted in the United States during summer 2002, we study the variables related to observed differences in the rate of entrepreneurial involvement between black and white Americans. We find strong evidence that differences in subjective and often biased perceptions are highly associated with entrepreneurial propensity across these two racial groups. In addition, we find that black Americans tend to exhibit more optimistic perceptions of their business environment than other racial groups and are more likely than others to attempt starting a business. In fact, our results show that blacks are almost twice as likely as whites to try starting a business. Thus, our results suggest that the under representation of black Americans among established entrepreneurs is not due to lack of trying but may instead be due to stronger barriers to entry and higher failure rates.
2015
Historically Black Colleges and Universities (HBCU’s), as engines of human capital formation, have missions oriented toward educating and training black Americans, are a source for social networking and also provide contractual services. It is posited that they can enhance entrepreneurial ability and create an environment that is favorable to the formation, entry and survival of black-owned firms. Findings were inconclusive and may reveal unobserved effects locally with respect to social, entrepreneurial and/or location variables. For example, many HBCU’s are in socially disadvantaged markets that may include low income, high poverty and crime conditions. Thus, these results provide impetus for further research on these factors and their implications for black entrepreneurship. Vincent E. Mangum Research Fellow LUBER vemangum@gmail.com