Impact of Preferential Procurement Policies on Minority-Owned Businesses

Abstract

Financial data on minority firms that compete for business in government and corporate set-aside programs reveal that these firms lag behind their nonminority counterparts in important respects. They are, relative to nonminorities, (1) less profitable, (2) younger, and (3) much more highly leveraged. Large-scale minority enterprises are no longer the rarity that they were 20 years ago. These firms have not, however, achieved parity with their nonminority cohorts, and their unique traits—especially undercapitalization—continue to reflect the vestiges of discrimination.