The Challenges of Business Ownership: A Comparison of Minority and Non-Minority Women Business Owners

Abstract

IntroductionWomen-owned businesses represent a rapidly growing segment of the U.S. economy. According to the Small Business Administration (2011), the number of women-owned businesses increased by 44% since 1997 which was double the growth in male-owned firms. In 2011, women-owned businesses accounted for 36% of all firms. While business ownership presents its own set of challenges, it may be particularly challenging for women business owners (e.g., Winn, 2004). Minorities comprise an increasing share of new entrepreneurs, increasing from 23.6% in 1996 to 39.8% in 2011 (Fairlie, 2012). Among women business owners, minority women may experience greater challenges than their non-minority counterparts. Smith-Hunter and Boyd (2004) found that minority women became business owners for different reasons than did non-minority women, and that they faced greater challenges in starting and operating their businesses. Drawing from Aj zen's theory of planned behavior (1991), differences in perceptions of challenges may affect the decisions the business owners make and ultimately the direction and success of the business. The purpose of this study is to examine differences in the perceptions of challenges faced by minority and non-minority women business owners.Literature ReviewPrevious research has focused on differences in the business environment for women- and minority-owned businesses, examining differences in challenges associated with major business functions, accessing financial capital, and developing social capital. Considerable research has been performed on the differences between male and female entrepreneurs as well as between minority and non-minority entrepreneurs; however, due to sample size constraints, few studies have been able to examine the joint effects of gender and minority status simultaneously, particularly for minority women business owners.Harris (2011) examined the differences between small business owners' perceptions of problems presented by major business functional areas by gender and ethnicity. He found few differences between the perceived problems of male and female small business owners (women perceived greater problems in the area of strategic goal development), but found many differences between minority and non-minority business owners of both genders combined. Minority small business owners perceived greater problems in the areas of finance, accounting, personnel management, and purchasing.The challenge of woman- and minority-owned businesses in obtaining financial capital is well documented. Pearson, Fawcett, and Cooper (1993) listed the most significant impediments to successful relationships involving minority businesses from the perspectives of both owners of minority business enterprise (MBEs) and corporate purchasing personnel (CPPs). Undercapitalization was perceived as the first issue for both MBEs and CPPs. Lucas (2006) argued that minority women business owners may have difficulty in obtaining access to capital because of a lack of both business experience and industry-specific experience and because their businesses tend to be smaller and newer. Rosa and Hamilton (1994) examined how gender barriers and stereotypes disadvantage women business owners in acquiring business funding. Christopher (1998) estimated that 46.6% of African American, 38.7% of Hispanic, and 33.4% of Asian business owners utilized commercial bank loans as compared to 55.4% for non-minority business owners. Christopher (1998) also found that a threshold debt to equity ratio of 65% with access to commercial capital increased the likelihood of survival of the enterprise, thus highlighting the importance of access to capital. Coleman (2004) examined the relationship between the business owners' gender, race, level of education and their ability to borrow money. She found that white women were no less likely than white men to apply for loans or to avoid applying because of a fear of being turned down. …