Minority Entrepreneurs Research Articles

Size Matters: The Impact of Loan Size on Measures of Disparate Treatment toward Minority Entrepreneurs in the Small Firm Credit Market

Abstract This paper reports the results of investigating differences in measures of disparate treatment, or discrimination, in the small firm credit market that are related to loan size. Because small loans tend to be less profitable to originate than large loans, the competitive nature of the product markets for large and small loans may be quite different. Becker suggests that more competition will reduce the level of discrimination in a market. And some market-based evidence of Becker’s competition effect has been reported in the literature on discrimination in the small firm credit market. We add to this literature by considering the impact of differing levels of competition across products (i.e. small versus large loans). The results for our small loan subsample exhibit strong evidence of disparate treatment, or discrimination, against African-American entrepreneurs. However, the results for the large loan subsample are statistically different. In particular, for the large loan subsample there is no significant evidence of discrimination, or disparate treatment, against African-American entrepreneurs applying for business loans. This strongly suggests that the current evidence of discrimination in the small firm credit market needs to be reconsidered for public policy application purposes.

News Briefs

Corporate Philanthropy ReportVolume 33, Issue 9 p. 2-3 News Briefs News Briefs First published: 16 August 2018 https://doi.org/10.1002/cprt.30223Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinkedInRedditWechat Abstract Exelon Foundation launches STEM Innovation Leadership Academy. YouTube pledges $25 million for quality journalism initiatives. UPS Foundation awards over $10 million for diversity and inclusion efforts. ExxonMobil Foundation commits $10 million for sustainable development in Guyana. Blackbaud throws support behind Center for the Digital Nonprofit. JPMorgan Chase invests $4 million to support minority entrepreneurs. Walmart awards $2 million for internship opportunities for youth. Tiffany & Co. Foundation commits $1 million for reef protection programs. Volume33, Issue9September 2018Pages 2-3 RelatedInformation

Minority Entrepreneurship and Alternative Opportunities Inside Established Organizations

Whereas prior research has documented persistent inequality in entrepreneurial performance between African American and White entrepreneurs, less attention has been devoted to investigating whether and how racial minorities cope with such obstacles. In this study, we propose and empirically document one such adaptation strategy: the pursuit of a new venture through intrapreneurship –or within employer organizations. Analyzing a representative sample of entrepreneurs in the United States from the Panel Study of Entrepreneurial Dynamics II, we found that, relative to Whites, African Americans are more likely to found new businesses through intrapreneurship than through entrepreneurship. We further show that, individuals from disadvantaged groups are more likely to seek funding to start a new business from employers than marketplace investors. Consistent with the notion that employer firms provide more support to minorities than do investors in the market, we find lesser disparities across minorities and non-minorities in accumulation of entrepreneurial resources internally. Our findings also suggest that minorities are more motivated to grow new ventures, when exploiting these new businesses within an employer organization than through an independent startup. Finally, our results lend support to the notion that intrapreneurship offers a substitute for entrepreneurship: we find that the tendency to pursue internal ventures is amplified when opportunities for startups are scarce, and when minorities perceive other venues of advancement as inferior to intrapreneurship. More generally, the study illuminates a novel adaptation strategy to address barriers that minorities face within an entrepreneurial setting.

Neither Here nor There? How the New Geography of Ethnic Minority Entrepreneurship Disadvantages African Americans

AbstractRecent research shows that the foreign born utilize both local and long-distance social relationships to become entrepreneurs, affecting immigrants’ chances at upward mobility and their contributions to economic development. Scholars have yet to assess how African American entrepreneurs take part in similar types of geographically dispersed business communities. Using multi-level social network analyses and OLS regressions to compare the geography of buyer-supplier ties originating from one immigrant neighborhood and one African American neighborhood in Chicago, this article highlights a unique mechanism that places African Americans at a disadvantage compared to immigrants: a lack of geographic diversity in African American social capital. Immigrant entrepreneurs’ social networks, unlike African Americans’ networks, connect the foreign born to more people in different places, enabling them to circumvent the limitations of their local communities and accrue more business assets. Contrary to existing research, many foreign-born business owners in this study relied on intra-national rather than local or transnational social ties. These findings challenge researchers to reevaluate the geographic foundations of immigrant and African American entrepreneurship and reexamine how ethnic minority entrepreneurship affects patterns of social stratification and economic development.

Entrepreneurial skills and growth of Small and Medium Enterprise (SMEs): A comparative analysis of Nigerian entrepreneurs and Minority entrepreneurs in the UK

The significance of Small and Medium Enterprises (SMEs) to an economy development of a country cannot be ignored. Therefore, the growth of a business depends on the development of abilities needed to execute a smooth running of day to day business activities. Research established the fact that the flat economy growth of region relies on the extent of trade activities in the area. Given this importance of enterprise, this present study aims at developing an understanding of the influence of entrepreneurial skills on SMEs in Nigeria compare with the UK, as perceived by SME owners. The research will benefit the researcher, SME owners in Nigeria, Policymakers, and other researchers. Data collection was through an online survey questionnaire, and it was administered to a population of 38 SME owners both in Nigeria and in the UK. The research followed judgmental sampling techniques to explore their experience, beliefs, and attitudes to entrepreneurial skills because of the limited time frame. Moreover, this survey was used to validate the study conceptual framework and establish an insight on the opinion of business owners of the context. The study findings were that entrepreneurial skills have a significant influence on the growth of SMEs in Nigeria and the UK. However, the respondent in Nigeria and the UK agreed that creative thinking, Problem solving and communication skills are critical for increase sales and competitive advantage. Moreover, the respondent in Nigeria strongly agrees that high level of creative thinking with a bit of problem solving and communication skills will SMEs growth. By contrast, UK minority entrepreneurs argue that great creative thinking and a balance of problem solving and communication skills are critical to SMEs growth.

Shaping Small Business Lending Policy Through Matched-Paired Mystery Shopping

Abstract With limited financial sophistication, entrepreneurial consumers approach the financial marketplace more like retail financial consumers than business customers. However, the assumption of both legislators and regulators is that business-borrowers are more financially savvy than consumer-borrowers, and thus do not require as broad-reaching protections. This gap between marketplace policy protections and the lived reality of the vast majority of small business entrepreneurs sets the stage for entrepreneurial consumers to fall through the regulatory cracks and sets the stage for possible exploitation and abuse. This situation is potentially exacerbated for minority entrepreneurs who belong to protected classes that are generally more vulnerable to exploitation in the marketplace including the small business lending marketplace. In this paper, we highlight the current state of this policy gap in the marketplace relative to minority entrepreneurial consumers and present a matched-paired mystery shopp...

Toward a Theory of Minority Entrepreneurship in the Non-Profit Arts Sector

ABSTRACTThroughout most of the entrepreneurship research literature, the entrepreneur is generally identified as a native-born White male who undertakes either self-employment or firm creation in Western developed countries. In addition, most of the literature frames these entrepreneurial actions as for-profit activities. Perhaps due in part to such prevailing frames, we know little about minority entrepreneurship, let alone as it occurs within the non-profit arts sector. To aid the field in new understandings, I review the minority entrepreneurship literature, identify minority entrepreneurship strategies, make connections to the non-profit arts sector, and propose new directions for theory development in the field.

Challenges and issues facing ethnic minority small business owners

Studies investigating the challenges and barriers faced by ethnic minority entrepreneurs have often concentrated on areas where there is a large supportive ethnic minority community. Less work has been conducted on the experience of those entrepreneurs operating in cities where such ethnic resources may be less widely available. Considered from the perspective of mixed embeddedness framework, this study uses face-to-face interviews with 25 ethnic minority entrepreneurs to gain a greater understanding of the constraints experienced by the starting and running businesses in one such location, the Scottish city of Aberdeen in the United Kingdom. Although issues found by previous studies such as access to funding remain an issue, the entrepreneurs indicated problems with access to labour as United Kingdom Border Agency’s immigration rules and tightening of the Post Study Work visa have had a profound effect on these entrepreneurs. The results imply that the weakening of the ethnic resource microsphere has not opened up opportunities which are exploited by the entrepreneurs, but they have still been exposed to external forces from the regulatory macrosphere. Both entrepreneurs and policymakers need to think carefully about the retention, training and recruitment of staff. In particular, the wider ramifications of immigration rule changes need to be considered, but also whether entrepreneurs need to be more open to the potential of recruiting non-ethnic employees and if so what support is required to achieve this.

Does Equity Crowdfunding Democratize Entrepreneurial Finance?

This paper investigates whether gender, age, ethnicity, and geography affect the choice of equity crowdfunding offerings vs initial public offerings (IPO) on traditional stock markets and whether these characteristics increase the likelihood of a successful offering. Using 167 equity offerings in Crowdcube and 99 equity offerings on London’s Alternative Investment Market raising between £300,000 and £5m, we find that companies with younger top management team (TMT) members are both more likely to launch equity crowdfunding offerings than IPOs, and have higher chances to successfully complete an equity crowdfunding offering. Remotely located companies are more likely to launch equity crowdfunding offerings than IPOs and have higher chances to successfully complete an equity crowdfunding offering. On the contrary, female entrepreneurs do not have higher chances to raise funds in equity crowdfunding. Minority entrepreneurs do not have higher chances of successfully raising capital but do attract a higher number of investors. Overall, our evidence provides empirical guidance for the first time to the oft-repeated policy claim that equity crowdfunding democratizes entrepreneurial finance by providing access to funding to underrepresented groups of potential entrepreneurs.

Minority Entrepreneurship: Does It Pay to Discriminate?

Minority Entrepreneurship: Does It Pay to Discriminate?

Detecting Discrimination in Small Business Lending

With limited financial sophistication, entrepreneurial consumers approach the financial marketplace more like retail financial consumers than business customers. However, the assumption of both legislators and regulators is that business-borrowers are more financially savvy than consumer-borrowers, and thus do not require as broad-reaching protections. This gap between marketplace policy protections and the lived reality of the vast majority of small business entrepreneurs sets the stage for entrepreneurial consumers to fall through the regulatory cracks and sets the stage for possible exploitation and abuse. This situation is potentially exacerbated for minority entrepreneurs who belong to protected classes that are generally more vulnerable to exploitation in the marketplace including the small business lending marketplace. In this paper, we highlight the current state of this policy gap in the marketplace relative to minority entrepreneurial consumers and present a matched-paired mystery shopping study that demonstrates the critical need for reliable, primary data to inform regulatory agencies as they work to implement available protections to ensure equal access to credit within the small business lending marketplace.

The Interface of Ethnicity and Gender in the Resilience of Minority and Women Entrepreneurs

By exploring resilience skills of African-American and Hispanic entrepreneurs, this study examines the resilience of entrepreneurs who have received less attention in the entrepreneurship literature, but still start more businesses than their White counterparts (Fairlie & Robb, 2009). We argue that the unique experiences of risk and protective factors that minorities and women experience will lead to differences in resilience. The purpose of this study is to empirically test two major research questions: Do gender and ethnicity impact the level of resilience in entrepreneurs? Do different gender and ethnic groups vary quantitatively in their levels of resilience? We examined data from a detailed questionnaire administered by email to small business owners from across the United States. Our empirical results demonstrate that resilience varies among gender, racial groups, and among entrepreneurs, and make an important contribution to the fields of psychology and entrepreneurship.

How does agency workforce diversity influence Federal R&D funding of minority and women technology entrepreneurs? An analysis of the SBIR and STTR programs, 2001–2011

US Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs provide Federal research and development (R&D) grants to technology ventures. We explore how grantor demographic diversity explains why demographically diverse grantees experience different odds for successfully transitioning from initial to follow-on R&D grants. We empirically analyze 52,126 Phase I SBIR/STTR awards granted by 11 Federal agencies (2001–2011). We find a positive association between agency workforce diversity and Phase II funding for Phase I grantees, but minority and women technology entrepreneurs are less likely to receive this funding than their non-minority and male counterparts. Agencies valuing workforce ethnic diversity or leveraging gender homophily positively influence the likelihood of women technology entrepreneurs obtaining Phase II funding. We discuss evidence-based implications for policy and practice.

Entrepreneuring gender diversity in entrepreneurship through critical theory and reflexivity

PurposeThe purpose of this paper is to raise awareness of conflicts between the innovation ideologies fundamental to entrepreneurial theory and the exclusivity embedded in the discipline’s research and discursive practices.Design/methodology/approachThe paper draws upon entrepreneurship and critical theory literature to deconstruct some embedded assumptions inhibiting the participation of women as entrepreneurs.FindingsThe underrepresentation of female and minority entrepreneurs has been examined most often by researchers from the perspective of trying to discover and overcome barriers to participation, rather than seeking to understand why and how these barriers are created and sustained. The paper identifies processes contributing to the construction of obstacles inhibiting inclusivity and proposes that conscientious implementation of practices such as critical reflexivity can limit their reproduction.Research limitations/implicationsBy situating critical theory and reflexivity as key practices for cultivating diversity and innovation in entrepreneurship, this paper offers a useful basis for expanding subsequent research and pedagogical practices representative of a wider variety of populations and activities.Practical implicationsEntrepreneurship is key to job creation and economic growth. Rigid conceptualizations of entrepreneurship and unexamined biases of scholars and educators limit the accessibility of research and constrain students’ entrepreneurial intentions and behaviors.Originality/valueThe paper fills a gap in the literature by exploring disciplinary practices that cultivate and sustain gender exclusivity. It provides a structured approach to understanding discrepancies between the innovation entrepreneurship idealizes and the practices that confine participation to specific populations and economic practices.

Minority entrepreneurship in twenty-first century America

Prior to the 1970s, minority-owned small businesses were small in size and scope, and common in only a few industry niches. Business owners were severely capital-constrained, lacking in higher education, and training in skilled occupations. The median owner today, in contrast, is college educated, access to financing has expanded, and opportunities to serve corporate and public-sector clients are commonplace. Nearly 40% of all new firms created nationwide in 2015 were minority owned. Changing attitudes in mainstream society reduced traditional barriers. True equality of opportunity among small minority- and white-owned firms of similar size and scope has nonetheless not been achieved. This issue of Small Business Economics examines lingering barriers impeding the development of a more vibrant minority business community. Focusing on access to financing and government procurement markets, articles in this issue offer explicit analyses of enduring barriers, along with explanations of adoptive strategic firm behavior appropriate for reducing those barriers.

The Colorblind Crowd? Founder Race and Performance in Crowdfunding

The dearth of minority entrepreneurs has received increasing media attention but few academic analyses. In particular, the funding process creates challenges for either audit or correspondence methods, making it difficult to assess the role, or type, of discrimination influencing resource providers. We use a novel approach that combines analyses of 7,617 crowdfunding projects with an experimental design to identify whether African American men are discriminated against and whether this reflects statistical, taste-based, or unconscious bias on the part of prospective supporters. We find that African American men are significantly less likely than similar white founders to receive funding and that prospective supporters rate identical projects as lower in quality when they believe the founder is an African American male. We conclude that the reduction in perceived quality does not reflect conscious assumptions of differences in founder ability or disamenity but rather an unconscious assumption that black founders are lower quality. In two additional experiments, we identify three means of reducing this bias: through additional evidence of quality via third-party endorsements (i.e., awards, evidence of prior support), through evidence that African American founders have succeeded previously, and by removing indicators of the founder’s race. The online appendix is available at https://doi.org/10.1287/mnsc.2017.2774 . This paper was accepted by Toby Stuart, entrepreneurship and innovation.

Enhancing product market access: Minority entrepreneurship, status leveraging, and preferential procurement programs

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.

Loop Capital: Funding Growth in an Investment Bank

Jim Reynolds Jr. founded Loop Capital in 1997 as an investment bank specializing in bond sales for municipalities. Ten years later, with thirteen offices and almost 100 employees, Loop Capital was a national company and had brokered more than $800 billion of underwritings in equity, tax-exempt, and taxable fixed income markets. In the process of building its municipal finance and equity trading businesses, Loop Capital had developed close relationships with a number of government officials, large institutional money managers, and corporate executives. These customers began asking Loop Capital for help with other financial services, leading the firm to build corporate finance, tax-exempt, and taxable fixed-income platforms so it could offer a wider array of investment services. Municipal and corporate finance as well as equity, taxable, and tax-exempt trading were generating positive cash flow. In a field where failures were frequent, Loop Capital was thriving, and Reynolds saw great but untapped potential in the company's future. Over the past several years, Loop Capital had served as financial advisor to several municipalities that wanted to lease or sell public assets such as airports, toll roads, and seaports. Now he confronted several intriguing questions: Should he launch a $700 million infrastructure fund to invest in the types of deals the firm had helped structure? Did it make sense to invest in order to staff, market, and support the start-up of this new fund? If the fund was launched, should Loop Capital commit to the 1% investment likely to be required as the fund's general partner?Learn how to start a new financial services firm/investment bank venture Learn how an investment banking firm becomes successful at doing a few things well Assess risks of expanding into a new line of business with a different business model Examine differences between investment banking and fund management, and between high-growth entrepreneurship and lifestyle entrepreneurship Examine the significance, if any, of being a minority entrepreneur

Entrepreneurial drivers and performance: an exploratory study of urban minority and women entrepreneurs

This study examines the relationship between entrepreneur demographics (education, experience), characteristics (personality traits, motivation) and entrepreneurial success in the context of urban minority and women entrepreneurship. Based on a survey of 68 minority and women entrepreneurs from Baltimore, a large city in the USA, the research investigates whether there are significant differences between successful and less successful entrepreneurs in terms of personality traits, motivation, and education and experience levels. Success was measured in terms of average net profit and average sales growth over three years. The findings suggest that entrepreneurs who had more education and experience had higher growth in sales and net profits. Further, successful entrepreneurs were more persistent and enthusiastic, had better sense of achievement, and were more cautious in taking risks.

Entrepreneurial drivers and performance: an exploratory study of urban minority and women entrepreneurs

This study examines the relationship between entrepreneur demographics (education, experience), characteristics (personality traits, motivation) and entrepreneurial success in the context of urban minority and women entrepreneurship. Based on a survey of 68 minority and women entrepreneurs from Baltimore, a large city in the USA, the research investigates whether there are significant differences between successful and less successful entrepreneurs in terms of personality traits, motivation, and education and experience levels. Success was measured in terms of average net profit and average sales growth over three years. The findings suggest that entrepreneurs who had more education and experience had higher growth in sales and net profits. Further, successful entrepreneurs were more persistent and enthusiastic, had better sense of achievement, and were more cautious in taking risks.