Minority entrepreneurship
Patricia G. Greene
Concept
Minority entrepreneurship is a broad concept, the use of which is largely situation dependent. However, in its most specific usage it refers to the creation and growth of businesses by non majority individuals. The topic is one of interest around the world and is often linked to broader, more macro questions related to various issues such as migration, assimilation, and level of eco nomic achievement. Immigrant owned business and ethnic entrepreneurship are related areas of 184 minority entrepreneurship research with overlapping but not identical approaches to concept, theory, and method (Greene, 1997). Immigrant owned business is defined according to the individual’s mode of entry into a geographic region. There are no other inherent assumptions about the owner(s), the creation process, or levels of community involvement. Ethnic entrepreneurship refers to those individuals with common nationalities or migration experiences, combining both individual and community levels of analysis to examine their entrepreneurial behaviors through shared connections and interactions (Waldinger, Aldrich, and Ward, 1990).
Definition
The Small Business Administration adopted the specific term ‘‘minority enterprise’’ in 1969 as part of the US government’s approach to in crease the number and revenue generating potential of black owned businesses. The term replaced ‘‘socially disadvantaged’’ or ‘‘economically disadvantaged,’’ which were used to launch the 8(a) program designed to increase the level of federal purchases made from these businesses. The programs were also dedicated to improving the provision of both direct and guar anteed loans as well as federal contract set asides. Other terms that have been used include Disadvantaged Business Enterprise (DBE), Historically Underutilized Business (HUB), and Small Disadvantaged Business (SDB).
While occasionally the term ‘‘minority business owner’’ also includes a consideration of gender (thereby classifying women as a minority category), most often the defining dimensions are based upon ‘‘race’’ and/or ethnicity. While a debate is underway regarding racial and ethnic categories, the US census currently consolidates economic reporting on minority businesses as including black, Hispanic, Asian Pacific, and Native American. There is an additional requirement that at least 51 percent of the business be owned and operated by at least one member of a minority group. However, the ownership definition does vary by group. The National Sup pliers Development Council viewed the 51 percent ownership requirement as constraining the entrepreneurial growth of these businesses by limiting sources of additional funding to debt or the equity investment of other minority owners. This group therefore changed its definition to allow for as low as 30 percent minority ownership.
Measurement
The US conducts large scale national data col lection efforts to better understand the US economy, with the underlying benefit of learning about the phenomenon of minority entrepreneurship, including the impact of these businesses upon the national economy. Data collection is the responsibility of the US Census Bureau. Both the Public Use Microdata Samples (PUMS), drawn from the decennial census, and the Survey of Income and Program Participation (SIPP), drawn from a special series of national panels, include data on minority owned businesses. However, the most complete representation is derived from the surveys of the federal economic census. The census uses the govern mental definition of 51 percent ownership. In previous years, the Characteristics of Business Owners (CBO) and the Survey of Minority Owned Businesses (SMOBE) were used to build an aggregate description of the state of minority owned businesses in the US. The latest data available are from the 1997 survey and show that approximately 3 million firms, representing about 15 percent of all US firms, are minority owned (US SBA, 1999). The growth rates of these firms are notable: minor ity owned firms grew at 30 percent while non minority firms grew at 4 percent. The firms generated approximately $591 billion in revenues. Of these, 615,222 had employees and created 4.5 million jobs with an aggregate payroll of approximately $96 billion (US SBA, 2002). The data collected for the 2002 economic census will be reported as the Survey of Business Owners and Self Employed Persons (SBO) 2002.
The Panel Study of Entrepreneurial Dynamics (PSED) is a national data collection effort driven by a theoretical focus upon nascent entrepreneurs – those in the start up process. The program was supported through a consortium of schools, foundations, and government organizations and included two National Science Foundation grants (Carter et al., 1998; Greene et al., 1999). Findings include propensity rates for specific population groups showing that minority minority entrepreneurship 185 business owners are more likely to be in the process of starting a business than are white men. Resulting theoretical explanations focus upon issues of human and social capital, more limited access to opportunity structures, and less beneficial social networks to assist the start up process (Reynolds, 2000).
Descriptive studies using the large scale US federal databases have been the foundation of much work to ground the phenomena in statis tics (see Bates, 1997, for a complete review). Theoretical explanations underlying any of the dimensions in question are more limited and often focus upon differences between majority and minority entrepreneurs and their businesses. Others emphasize types of entrepreneurial behaviors as a means of economic survival. The most specific theoretical framework builds upon the concept of ethnic entrepreneurship to propose a ‘‘truncated middleman minority theory’’ that recognizes the artificial detour taken by African Americans due to external in fluences of slavery and long term discrimination (Butler, 1991). This detour is seen to have pre maturely cut off a large proportion of the entrepreneurial tradition among African Americans.
Research Areas
The primary issues in this general research area can be summarized under two questions. First, why are minority owned businesses underrepresented in the overall population of small businesses? Second, why do existing minority owned businesses tend to stay smaller than their majority owned counterparts? Means of exploring these issues include research questions on demographics and resources of the owner(s) and the business, the start up process, business outcomes, economic development, labor market issues, and opportunity structures. Results from these studies will be useful to entrepreneurs, resource providers, educators, and policy makers.
Bibliography
Bates, T. (1997). Race, Self Employment, and Upward Mobility: An Illusive American Dream. Baltimore, MD: Johns Hopkins University Press.
Butler, J. S. (1991). Entrepreneurship and Self Help among Black Americans: A Reconsideration of Race and Economics. New York: State University of New York Press.
Carter, N., Brush, C., Aldrich, A., Greene, P., and Katz, J. (1998). The influence of founder’s gender in business start-ups. National Science Foundation. Grant 9809841.
Greene, P. G. (1997). A call for conceptual clarity. Comments on Bates: Why are firms owned by Asian immigrants lagging behind black-owned businesses? National Journal of Sociology, 10 (2): 49 55.
Greene, P. G., Carter, N., Reynolds, P., Aldrich, H., and Stearns, T. (1999). The influence of founder’s race in the start-up process. National Science Foundation. Grant 9905255.
Reynolds, P. D. (2000). National panel study of US business start-ups: Background and methodology. In J. A. Katz (ed.), Advances in Entrepreneurship, Firm Emergence, and Growth, Vol. 4. Stamford, CT: JAI Press, 153 227.
US Small Business Administration, Office of Advocacy (1999). Minority Business. Washington, DC.
US Small Business Administration, Office of Advocacy (2002). Minorities in Business, 2001. Washington, DC.
Waldinger, R., Aldrich, H., Ward, R., and associates (1990). Ethnic Entrepreneurs. Newbury Park, CA: Sage.