Access to product markets is a key barrier faced by minority entrepreneurs. Preferential procurement programs, which include government set-asides and commercial supplier diversity initiatives, are intended to aid these entrepreneurs in overcoming this barrier. Although the first programs resulted in minimal improvements due to design flaws and poor oversight, some recent initiatives have been redesigned to address these inadequacies. Using a qualitative approach, we examine the impact of these programs on product market access and present a conceptual model of their effect on the opportunity identification, evaluation, and exploitation of Black and Hispanic entrepreneurs. Our analysis suggests that preferential procurement programs may expand product market access by improving the information available to entrepreneurs and by altering the incentives of key resource providers. As a result, these programs may actually enable some minority entrepreneurs to achieve rapid expansion (high-growth entrepreneurs) and others to overcome personal limitations and establish viable enterprises (lower growth entrepreneurs) by leveraging their minority status.
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We selected the years 2010 and 2013 because Inc. magazine published a list of the top ten fastest growing Hispanic-owned firms from the 2010 Inc. 5000 list, and a list of the top ten fastest growing Black-owned firms from the 2013 Inc. 5000 list. Close (2015) identified three of the fastest growing Hispanic-owned firms from the 2015 list. We then chose ten White-owned firms from the top fastest growing firms in 2013 and 2015 Inc. 5000 lists respectively as a comparison group.
Although participating entrepreneurs could conduct their interviews in either Spanish or English, all of the participants chose to be interviewed in English. Interviews lasted from 28 to 65 min and were tape-recorded and professionally transcribed. One of the participants declined to be tape-recorded, so the interviewer took extensive notes and provided those notes in lieu of a transcript.
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We are indebted to Timothy Bates and William Bradford for providing insightful feedback and suggestions. We are also grateful to the participants in the Kauffman Foundation Conference for New Insights and Potential Sources of New Entrepreneurial Growth: Minority Entrepreneurship, January 5–6, 2016, for helpful comments. Finally, Maria Lugo and Roger Koppl provided invaluable assistance and advice.
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Shelton, L.M., Minniti, M. Enhancing product market access: Minority entrepreneurship, status leveraging, and preferential procurement programs. Small Bus Econ 50, 481–498 (2018). https://doi.org/10.1007/s11187-017-9881-7
- Black entrepreneurs
- Hispanic entrepreneurs
- New ventures
- Small business programs