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Capital Constraints and Industry Mix Implications for African-American Business Success

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The Review of Black Political Economy

Abstract

Although not universally appreciated, African-Americans have a long history of entrepreneurial achievements against the odds. African-Americans are more likely to start a business, yet, are less likely to succeed. Well-documented discriminatory practices by industry sectors exclude minorities from lucrative business opportunities. This paper examines participation of African-American owned businesses in key industries to assess implications for revenue generation and hiring potential. While the numbers of African-American owned businesses are increasing; and these firms are providing greater contributions to the socio-economic progress of African Americans and potentially other disadvantaged groups, evidence that African-American owned businesses suffer adversely from unequal access to capital markets and institutional barriers is prevalent. A wealth gap between African-American owned business and non-minority business owners exists and for some industries has widened, as survival of African-American owned business is threaten.

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Notes

  1. The 2007 Survey of Business Owners (SBO) data come from the U.S. Census Bureau and were collected as part of the 2007 Economic Census. The SBO includes a sample of more than 2.3 million nonfarm businesses filing 2007 tax forms as individual proprietorships, partnerships, or any type of corporation, and with receipts of $1,000 or more. It provides estimates of business ownership by ethnicity, race, gender, and veteran status for both the number of employer and non-employer firms, sales and receipts, annual payroll, and employment. Data aggregates are available by 2007 North American Industry Classification System (NAICS) sectors (https://www.census.gov/econ/sbo/getsof.html?07cosum).

  2. https://www.sba.gov/about-sba/what_we_do/history. Retrieved December 23, 2014.

  3. https://www.sba.gov/about-sba/what_we_do/history. Retrieved December 23, 2014.

  4. “Small Business JOBS Act of 2010,” Small Business Administration (SBA) Press Release, https://www.sba.gov/about-sba/sba_initiatives/small_business_jobs_act_of_2010. Retrieved December 23, 2014.

  5. Industry segments defined by Financial Research Associates (FRA) for small businesses are subcategories of the NAICS sectors defined for the U.S. Census Bureau, Survey of Business Owners (SBO) data. Therefore, the authors selected a sub-set of FRA industry segments which closely map to the broader NAICS sectors examined.

  6. Efforts at Massachusetts Institute of Technology (MIT) and other schools are successful with matching African-American entrepreneurs with venture capitalists – Black Enterprise Magazine, 24(11), 48.

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Authors and Affiliations

  1. Fuqua School of Business, Duke University, 100 Fuqua Drive, Durham, NC, 27708, USA

    Lucy J. Reuben

  2. Earl G. Graves School of Business and Management, Morgan State University, 1700 East Cold Spring Lane, Baltimore, MD, 21251, USA

    Pamela E. Queen

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  1. Lucy J. Reuben
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  2. Pamela E. Queen
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Correspondence to Pamela E. Queen.

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Reuben, L.J., Queen, P.E. Capital Constraints and Industry Mix Implications for African-American Business Success. Rev Black Polit Econ 42, 355–378 (2015). https://doi.org/10.1007/s12114-015-9210-9

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  • DOI: https://doi.org/10.1007/s12114-015-9210-9

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