Black and White: Access to Capital among Minority-Owned Startups

Robert Fairlie, Alicia Robb and David Robinson

No 28154, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use confidential and restricted-access data from the Kauffman Firm Survey and matched administrative data on credit scores to explore racial disparities in access to capital for new business ventures. The novel results on racial inequality in startup financing indicate that black-owned startups start smaller and stay smaller over the entire first eight years of their existence. Black startups face more difficulty in raising external capital, especially external debt. We find that disparities in credit-worthiness constrain black entreprenuers, but perceptions of treatment by banks also hold them back. Black entrepreneurs apply for loans less often than white entrepreneurs largely because they expect to be denied credit, even when they have a good credit history and in settings where strong local banks favor new business development.

JEL-codes: J15 J71 L26 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-ent, nep-fdg, nep-sbm and nep-ure
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Published as Robert Fairlie & Alicia Robb & David T. Robinson, 2022. "Black and White: Access to Capital Among Minority-Owned Start-ups," Management Science, vol 68(4), pages 2377-2400.

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