Why Are Black-Owned Businesses Less Successful than White-Owned Businesses? The Role of Families, Inheritances, and Business Human Capital

Robert W. Fairlie and Alicia M. Robb

Journal of Labor Economics, 2007, vol. 25, pages 289-323

Abstract: Using confidential microdata from the Characteristics of Business Owners survey, 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 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.

Date: 2007
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