Institutional theory and institutional racism: barriers to business success faced by POC entrepreneurs and the family firm advantage

Abstract

PurposeCompared to Whites, People of Color (POC) in the USA face substantial cultural, structural and institutional challenges on their paths to entrepreneurial success. Many of these challenges have their roots in institutional racism—pervasive discriminatory practices and policies found within institutions. Institutional theory suggests that organizations gain access to institutions and resources when they conform to “appropriate” business practices. How does the reality of institutional racism square with institutional theory when many of those institutions, like banks, are fundamentally afflicted by racist practices and norms? Can another institution, the family, act as a resource substitute to provide POC business owners the necessary resources for success?Design/methodology/approachFocusing on White-, Black- and Asian-American business owners, the authors analyze data from the USA. Census's Annual Business Survey.FindingsDespite vast performance differences between POC- and White-owned businesses, family firms of every racial group outperform their same-race nonfamily counterparts. Idiosyncratic resources families bring into family firms, known as familiness, appear to help mitigate the challenges to entrepreneurial success that POC face.Practical implicationsPolicy makers should consider specific types of support different entrepreneurs require given the kinds of hurdles racial minorities continue to face in the USA.Social implicationsDespite scholarly attention on family firm heterogeneity, there is scant research on race.Originality/valueThis research is one of the first to explore the implications of institutional racism on institutional theory and the first to employ this concept within the context of family firms.