Research has frequently highlighted the structural barriers that impede the ability of individuals, particularly those from the Black community, to initiate their own businesses. However, a recent working paper by Professor David Robinson of Duke University’s Fuqua School of Business finance and his collaborator Victor Bennett from the University of Utah suggests that psychological and social factors may also contribute to the disparities in entrepreneurship. The significance of this issue was further underscored by the events surrounding George Floyd’s death in 2020.
Robinson and Bennett’s research aimed to unravel the reasons behind racial and gender disparities in entrepreneurship, building upon prior research and surveying a representative sample of the U.S. population. Their surprising findings highlighted the barriers faced by individuals, particularly from the Black community.
The research revealed that while Black individuals are as likely as white individuals to consider a business idea and are equally confident in its success, they are less likely to actually start a business. This prompted the researchers to delve deeper into the early stages of the entrepreneurial journey, such as sharing and refining the business idea and seeking market feedback and professional guidance.
To their astonishment, they found that the racial differences did not emerge in the later stages before creating a startup. Instead, they discovered that Black individuals are less likely to share their business idea with friends, but more likely to discuss it with expert strangers. The data suggests that there may be social or psychological costs associated with airing their ideas within their immediate community.
The research also unveiled that the racial gap in startup activity is significantly reduced when high-income Black individuals seek advice from expert strangers, indicating that there may be a wealth divide in access to information and financing. This raises the question of whether there is a fear of failure associated with discussing business ideas within their personal network, or a lack of knowledge within the community itself that acts as a barrier.
Robinson stressed that the data does not point to a direct cause of the racial gap, but it does offer insights that can inform potential policy interventions. He suggested that inexpensive policy measures, such as mentorship or community-building programs, could provide the necessary “soft information” that aspiring entrepreneurs need before taking more expensive steps. For instance, programs like the Kauffman Foundation’s 1 Million Cups have proven to be effective in helping entrepreneurs connect with established business experts in their community.
The study’s findings underscore the importance of addressing the social and psychological determinants that influence entrepreneurship in traditionally underrepresented communities. By promoting more advice-seeking channels and providing access to the necessary resources, policymakers can empower aspiring entrepreneurs and foster a more inclusive entrepreneurial landscape.