Abstract
Using data from multiple sources, including the Characteristics of Business Owners Survey, the authors trace out the relationship between wealth and access to financial capital and the African American—owned business. African Americans are found to have levels of wealth that are one-eleventh those of whites. Starting with this disparity, blacks are much less likely to start businesses than are whites, which results in a substantially lower rate of business ownership. Even for those black entrepreneurs who are successful in starting businesses, the authors find that they invest much less capital at start-up on average than white entrepreneurs. Lower levels of start-up capital among black businesses appear to also limit their ability to grow and succeed. Racial disparities in start-up capital contribute to higher failure rates, lower sales and profits, less employment among black-owned businesses, and less survivability of the business.
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