Race and Entrepreneurial Success

Posted by Jon Winston 
 
Nick Guerrero introduced today's speaker, Professor Robert W. Fairlie. Rob is the Director of Masters Programs in the Department of Economics at UCSC and the author of a new book "Race and Entrepreneurial Success: Black-, Asian-, and White-Owned Businesses in the United States" (MIT Press, 2008).
 


Noting that 13 million workers, or 1 in 10, in the US are small business owners, Rob set out to study the factors that lead some businesses to succeed and others to fail.  His goals were:

  1. Document trends in biz ownership vis-à-vis race,
  2. Identify the determinants of success,
  3. Identify why African American and Latino owned businesses fared worst and,
  4. Why Asian owned small businesses did best.  

He gauged success by looking at survival rate, profits, employment and sales. 

Gaining access to highly protected but info-rich government census and tax data was Rob's first hurdle. After successfully passing the fingerprint and in-depth background checks, he was in.

He found the primary determinates of success to be: Education of the owner, prior work experience in family or similar biz and access to startup capital.  Although all significant, the last point turned out to be the most important. 

"Why do we care?" Rob asked.  The answer: because big changes in social inequity and unemployment can be achieved by modest increases in minority owned businesses.  To get there we need to increase access to capital, provide better educational opportunities for minorities and implement mentoring programs, internships and apprenticeships.