Race, Families, and Success in Small Business: A Comparison of African-American, Asian, and White-Owned Businesses

In American society, self-employment is often touted as an avenue to economic self-sufficiency. Yet self-employment is risky: most small ventures fail within the first five years, and financial returns can be very low. Statistics also show that entrepreneurship is a different phenomenon for people of different races and ethnicities. Black-owned businesses experience higher failure rates, lower profits, lower sales, and smaller payrolls than white-owned firms. Meanwhile, firms owned by Asian Americans do better on all indicators than either black- or white-owned firms.

With previous support from the Foundation, Robert Fairlie and Alicia Robb have explored the role that previous exposure to small business management has on the success of entrepreneurs. Using data from the Characteristics of Business Owners (CBO) survey, they found that individuals with a self-employed parent were two to three times more likely to be self-employed as someone who did not have a self-employed parent. They also found that Asian Americans were more likely to have grown up in a household with small business owners, giving them more experience with business and a greater understanding of self-employment. Now, Fairlie and Robb will write a book on how family business experience differs by race and ethnicity. The book will be the first to present a comparative analysis of the causes of black, white, and Asian differences in small business outcomes, using the detailed CBO data.