LWL | Challenges Faced by Minority Business Owners
By Vasja Gulič
1.1 Abstract
This research paper delves into the question of how belonging to a minority group impacts the initiation and operational dynamics of a founder's business enterprise. Through a comprehensive literature review and analysis, the paper explores the challenges and opportunities faced by minority-owned businesses, as well as the systemic barriers that impede their full participation and inclusion in society.
Historically, minority groups have made significant contributions to society, yet they have also faced discrimination and systemic obstacles. Using examples such as Madam CJ Walker, the paper illustrates the struggles and successes of minority entrepreneurs throughout history.
The literature review highlights key findings from various studies, including disparities in government contracting success between minority-owned and majority-owned firms, and the factors influencing capital suppliers' decisions in financial markets.
Additionally, it discusses initiatives such as affirmative action programs and targeted approaches aimed at fostering economic development in minority communities.
Overall, the paper emphasizes the importance of addressing systemic barriers to minority entrepreneurship and calls for further research to enhance our understanding of this complex issue. By fostering a more equitable and inclusive business environment, we can unlock the full potential of all individuals, regardless of their background.
2.1 Thesis
This research paper aims to investigate the extent to which belonging to a minority group influences the initiation and operational dynamics of a founder's business enterprise. Through a comprehensive literature review and analysis, the paper examines the challenges faced by minority-owned businesses, including disparities in government contracting success, systemic barriers in financial markets, and geographical dynamics within urban regeneration programs. By highlighting the experiences of minority entrepreneurs and exploring potential avenues for addressing systemic obstacles, the paper seeks to contribute to a better understanding of minority entrepreneurship and advocate for a more equitable and inclusive business environment.
3.1 Introduction
Minority groups are defined as culturally, ethnically, or racially distinct groups that coexist with but are subordinate to a more dominant group. Throughout history, many minority groups have significantly shaped the society we live in today. Afro-American, Jewish, and Syrian minorities are just a few examples. Despite their positive contributions to the economic, cultural, and social aspects of many countries, they also faced discrimination, racism, marginalization, and even deportation throughout history. Many brilliant minds were part of these minority groups, and their genius ideas could revolutionize the world. Madam CJ Walker, for instance, was the first self-made American women millionaire and a member of the Afro-American minority (Zonca, 1). She built her wealth by creating and marketing hair care products specifically for Black women during the early 20th century (ibid.). Her success, however, wasn't easy, like it wasn't easy for many others who were born in similar situations to rise to success. Minority groups face systemic obstacles that hinder their full participation and inclusion in society. Racism, bureaucracies, and other challenges still exist in most parts of the world, even in the modern-day. A person who is not originally from the country where they are starting their business faces incredible difficulties in initiating and continuing operational dynamics. Thus, acknowledging the remarkable achievements and contributions of minority groups is crucial; it's equally important to recognize and address the systemic obstacles that continue to impede their full participation and inclusion in society. By doing so, we can strive towards a more equitable and just future where the potential of all individuals, irrespective of their background, can be fully realized.
4.1 Literature Review (with Analysis and Findings)
There isn’t an incredible amount of research done around this topic, but the one that was made for a fact, was high quality one. The Urban Institute conducted a study on the government contracting success of minority-owned firms in comparison to majority-owned firms. The findings reveal substantial disparities, with minority-owned firms receiving only 57 cents for every dollar expected based on their representation (Enchautegui et al., 1-132). Barriers to minority firms include lack of financial and social capital, lower human capital endowments, and historical patterns of discrimination. The study suggests that affirmative action programs, aimed at assisting minority-owned businesses, may help reduce disparities, and calls for further empirical evaluation of race-conscious and race-neutral policies in government contracting to inform future policymaking (ibid.).
Another research paper which got named “The Economic Development Potential of Minority-Owned Businesses” also published it’s research made on the topic of minoritarian owned firms and businesses. There is solid factual support for the widely held belief that discriminatory barriers restrict the number and reach of minority-owned businesses in America (Bates et al., 3-63). Nevertheless, the question of why these businesses are thriving is rarely looked at. The authors look at the reasons behind this growth as well as its extent. The process of progressively lowering discriminatory obstacles impeding the growth of minority entrepreneurship started in the 1960s, advanced in the 1970s, and is still going on today (ibid.). Prior to this path-dependent process of lowering barriers, most minorities would not have found the entrepreneurial choice to be appealing. However, this has changed the incentive structures. A younger generation of highly educated and experienced minorities has been attracted to business ownership as a result, and many of them have been successful in obtaining bank loans. In terms of geography, minority communities have also been successful in drawing in skilled, seasoned African American and Latino business owners as well as funding for their enterprises. (ibid.) The significant increases in the number of workers employed by minority-owned businesses have been driven by those with a wealth of experience.
The authors Taner Oc and Steven Tiesdell have written a paper named: “Supporting Ethnic Minority Business: A Review of Business Support for Ethnic Minorities in City Challenge Areas”, which is a research paper on the location in which those minority owned businesses are located. This article examines the employment and training initiatives in England during the early and mid-1990s, particularly within mainstream urban regeneration programs like Training and Enterprise Councils (TECs) and specialized initiatives such as City Challenge and the Single Regeneration Budget Challenge Fund (SRBCF) (Oc & Tiesdell, 1723-1746). The focus is specifically on business support for ethnic minority groups within City Challenge areas, shedding light on targeted approaches aimed at particular localities, sectors, or social groups to foster urban regeneration and economic development (ibid.). The study delves into the dynamics of ethnic minority business support within the context of broader urban renewal efforts in England during the specified period.
Adding onto the research, the researchers Timothy Bates, William D. Bradford and William E. Jackson III developed a research paper based on how ethnicity changes . Whether discrimination occurs in financial markets is a long-standing question that the study attempts to answer. Studies have not provided a sufficient explanation for why minority customers who seek financing are singled out for discriminatory treatment, despite the abundance of empirical evidence showing that minorities are treated differently. This research produced a theoretical framework that explains why capital suppliers seeking to maximize profits might decide to give minority clients less favorable terms than they would give similar white clients. (Bates et al., 445-461) The structure emphasizes reservation prices and search costs. The researchers then put their theory to the test by contrasting the relative profitability of Gary Becker's recommended strategy of investing private equity in small businesses owned by white and minority owners (ibid.).
5.1 Conclusion
The research paper explores how belonging to a minority group affects the establishment and operation of a business enterprise. It discusses the challenges faced by minority-owned businesses, including systemic barriers that prevent their full participation and inclusion in society. The paper highlights the disparities in government contracting success between minority-owned and majority-owned firms. Lack of financial and social capital, lower human capital endowments, and historical patterns of discrimination are identified as significant challenges faced by minority entrepreneurs. However, there is evidence of progress and resilience within minority-owned businesses, with initiatives such as affirmative action programs contributing to their growth and success.
The paper also examines the geographical dynamics of minority-owned businesses, particularly within urban regeneration programs. It discusses the targeted approaches aimed at fostering economic development in specific localities and sectors that have proven successful in supporting ethnic minority entrepreneurship.
Furthermore, the research offers insights into the factors influencing capital suppliers' decisions and how minority customers seeking financing may face discriminatory treatment in financial markets.
The paper highlights the importance of overcoming the systemic barriers that hinder the progress of minority entrepreneurs. By cultivating a more fair and inclusive business environment, we can discharge the full potential of every individual, regardless of their background. Moreover, the paper urges for more research to be conducted on the experiences of minority entrepreneurs to enhance our understanding of this subject.
6.1 Bibliography
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Bates, Timothy, Joseph Farhat, et al. The Economic Development Potential of Minority-Owned Businesses, journals.sagepub.com/doi/full/10.1177/08912424211032273. Accessed 3 Feb. 2024.
Bates, Timothy, William D. Bradford, et al. “Are Minority-Owned Businesses Underserved by Financial Markets? Evidence from the Private-Equity Industry - Small Business Economics.” SpringerLink, Springer US, 21 June 2017, link.springer.com/article/10.1007/s11187-017-9879-1.
Bates, Timothy, William E. Jackson, et al. Advancing Research on Minority Entrepreneurship - Sage Journals, journals.sagepub.com/doi/abs/10.1177/0002716207303405. Accessed 3 Feb. 2024.
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Wang, Qingfang. Journal of Small Business & Entrepreneurship - Taylor & Francis Online, www.tandfonline.com/doi/full/10.1080/08276331.2013.803675. Accessed 3 Feb. 2024.
