Race’s Role in Startup Success

By | September 12, 2008

John Tozzi, Business Week

– Blacks and Latinos start businesses at a lower rate than whites and Asians, and their companies are less likely to be profitable, less likely to hire employees, and more likely to close. A new book, Race and Entrepreneurial Success, explores the reasons behind those gaps.

Authors Robert Fairlie and Alicia Robb, researchers at the University of California at Santa Cruz, find that differences in startup capital, education, and experience working in other businesses explain the racial disparity in business success. Blacks, for example, have less than 10% the median personal wealth of whites and Asians, which limits the capital available to invest in businesses. (More data from the book are available here.) Fairlie and Robb base their conclusions on extensive research from the past quarter-century of data on business ownership, including access to Census Bureau surveys not publicly available.

Fairlie, a leading expert on minority entrepreneurship who has spent 17 years researching the topic, spoke recently with BusinessWeek’s John Tozzi, and fielded questions from BusinessWeek readers about why these differences in business performance persist. Edited excerpts of their conversation follow.

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