Fairlie & Robb's "Race and Entrepreneurial Success"

Robert W. Fairlie is Professor of Economics at the University of California, Santa Cruz, and an adjunct researcher at the RAND Corporation. Alicia M. Robb is a Research Associate in Economics at the University of California, Santa Cruz, and a senior economist with Beacon Economics.

They applied the “Page 99 Test” to their new book, Race and Entrepreneurial Success: Black-, Asian-, and White-Owned Businesses in the United States, and reported the following:

Page 99 is a summary page on how we explore the relative underperformance of black-owned businesses. So, it’s not too bad of a page to look at to get a feel for the book.

About the book:

Thirteen million people in the United States—roughly one in ten workers—own a business. And yet rates of business ownership among African Americans are much lower and have been so throughout the twentieth century. In addition, and perhaps more importantly, businesses owned by African Americans tend to have lower sales, fewer employees and smaller payrolls, lower profits, and higher closure rates. In contrast, Asian American-owned businesses tend to be more successful. In Race and Entrepreneurial Success, minority entrepreneurship authorities Robert Fairlie and Alicia Robb examine racial disparities in business performance. Drawing on the rarely used, restricted-access Characteristics of Business Owners (CBO) dataset compiled by the U.S. Census Bureau, Fairlie and Robb examine in particular why Asian-American owned firms perform well in comparison to white-owned businesses and black-owned firms typically do not. They also explore the broader question of why some entrepreneurs are successful and others are not.

Selected Findings from the Book:

• African-American owned businesses have lower sales and profits, hire fewer employees, have smaller payrolls, and have higher closure rates than white-owned businesses.

• Asian-American owned firms have higher sales, profits, employment, and survival rates than white-owned firms.

• Family links in business ownership are strong. Half of all business owners had a self-employed family member prior to starting their business, and entrepreneurs who work in family businesses have business outcomes that are 10-40 percent better.

• Education and prior work experience in a similar type of business are also important for entrepreneurial success.

• Access to startup capital is essential for success in business. Firms with higher levels of startup capital are less likely to close, have higher profits and sales, and are more likely to hire employees.

• Black-owned businesses start with substantially lower levels of financial capital than white-owned firms, which is the single largest factor contributing to racial disparities in business performance.

• Black business owners are less likely to work in family businesses, negatively affecting black business outcomes.

• Black business owners are found to have lower levels of education than white business owners, on average.

• The most important factor in contributing to the higher survival rates, profits, employment, and sales of Asian-owned firms is that Asian-American entrepreneurs invest more startup capital in their firms than white entrepreneurs.

• Nearly half of all Asian business owners are college educated, which is a major reason Asian-owned businesses are successful.

Read the Preface and Introduction to Race and Entrepreneurial Success, and learn more about the book at the publisher's website.

--Marshal Zeringue