Entering Entrepreneurship

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Entering Entrepreneurship: Racial Disparities in the Pathways into Business Ownership

About the report

The current landscape of entrepreneurship in the United States is radically different than it was a century ago, but the connections between entrepreneurship and the capital needed to finance it still greatly contribute to today’s racially-embedded disparities. Research on entrepreneurship often highlights that business ownership is a key element for building wealth. Moreover, a substantial literature suggests that the story of business ownership does not look the same for blacks as it does for whites. While black Americans are almost twice as likely to start a business, black-owned businesses persistently lag behind their white counterparts, appear disproportionately less in high-revenue-earning industries, and fail at higher rates. In fact, even when comparing the same industries, black-owned businesses that do survive have fewer employees and smaller revenues than white-owned businesses.

Despite past studies, this body of work is silent on the role of prior wealth in shaping the pathways into business ownership and the corresponding racial disparities associated with entering entrepreneurship. On this account, this report aims to address the following question: How do characteristics of black business owners (or black entrepreneurs) and black-owned businesses differ from characteristics of white business owners and white-owned businesses at the time of entry into business ownership? This study aims to contextualize patterns of initial ownership and to shed some light on the mechanisms and processes by which racial stratification in business ownership persists. Insight into racial disparities in business will move us one step closer to understanding how we can tackle structural inequality in contemporary America.