Are Perceptions Self-Fulfilling for Minority Entrepreneurs?

Abstract

Research on minority entrepreneurs suggests that their perceptions are shaped by past outcomes. Minority entrepreneurs fear credit denial because of past rejection of financing applications. Lack of financing in turn contributes to unfavorable financial ratios for the enterprises primarily owned by minorities. These entrepreneurs then fear failure because of prior poor business performance. Such performance in turn impairs their financing relationships. With these linkages, such perceptions may exacerbate the outcomes. How perceptions may alter the outcomes for these entrepreneurs has not been explored in the entrepreneurship literature. To reconcile these negative perceptions of minority entrepreneurs with their accelerated growth in numbers, this study proposes that important differences exist among minority entrepreneurs themselves. Prior research compares the experiences of minority entrepreneurs to those of nonminority entrepreneurs. As a novel approach, this study compares cohorts of successful entrepreneurs and unsuccessful entrepreneurs separately between these groups to resolve whether the negative perceptions are warranted and to determine their previously ignored impact on financing and performance outcomes. This method also addresses whether universal factors affect the outcomes for comparable minority and nonminority entrepreneur groups.