Birds of a Feather Struggle Together? The Perils of Racial Homogeneity to Entrepreneur Performance

Abstract

Several studies suggest minority business owners face higher barriers relative to their majority counterparts and this may be why they stagnate or fail. However, such arguments are limited in that they emphasize the macro and micro limitations of minority entrepreneurs, ignoring the meso-level elements affecting minority businesses. The tendency of entrepreneurial ventures to operate in teams, be distinctively endogenous compared to organizational teams, along with the importance of team composition to its performance, suggests that the plight of minority entrepreneurs can be explained by the interaction of minority status with the different team formation and functioning stages an entrepreneurial team goes through. In this paper, we study the minority team composition-emergence-performance relationship, leveraging the homophily perspective and entrepreneurial team cognition literature. Using these frameworks, we argue that racial homogeneity can have both positive and negative effects on startup performance, and the direction of such effect is contingent on the team development stage. In making these arguments, we contribute to the minority entrepreneurship literature, entrepreneurial teams research, and team learning processes space.