The Economic Development Potential of Minority-Owned Businesses

Abstract

The consensus view that discriminatory barriers limit the size and scope of America’s minority-business community is factually well-grounded. Rarely examined, however, is the question of why these firms are flourishing. The authors examine the scope of this growth and its causes. The process of selectively reducing discriminatory barriers inhibiting minority entrepreneurship’s development began in the 1960s, moved forward in the 1970s, and continues presently. This path-dependent process of lowering barriers has altered the incentive structures, previously making the entrepreneurial choice an unattractive one for most minorities. This, in turn, has drawn into business ownership a younger generation of highly educated and experienced minorities, many of whom have successfully obtained bank loans. Spatially, minority neighborhoods as well have successfully attracted talented, experienced African American and Latino owners and financing for their firms. Those with abundant expertise have driven the substantial gains in numbers of workers employed by minority-owned businesses.