Department of Economics, UCSC
Why Are Black-Owned Businesses Less Successful than White-Owned Businesses? The Role of Families, Inheritances, and Business Human Capital
- Author(s): Fairlie, Robert
- et al.
Using confidential microdata from the Characteristics of Business Owners, we examine why African-American owned businesses lag substantially behind white-owned businesses in sales, profits, employment, and survival. Black business owners are much less likely than white owners to have had a self-employed family member owner prior to starting their business and are less likely to have worked in that family member's business. Using a nonlinear decomposition technique, we find that the lack of prior work experience in a family business among black business owners, perhaps by limiting their acquisition of general and specific business human capital, negatively affects black business outcomes.