Small-business viability in America’s urban minority communities

Abstract

Although minority and immigrant entrepreneurs in the US have chosen to concentrate in low-profit retail and service lines of business clustered geographically in urban minority neighbourhoods, their reasons for doing so are unclear. We investigate their motivations by analysing viability among urban small businesses; specifically, we compare the longevity of firms targeting clients in minority neighbourhoods to those serving clients in nonminority-white residential areas. Our broader concerns are to understand why the entrepreneurial occupational choice has been embraced. A key objective is to identify specific barriers that may retard small-firm creation and development in minority-neighbourhood environs. While some claim this market offers attractive opportunities, others stress that predominance of minority- and immigrant-owned firms in this sector reflects the fact that only the least desirable market niches are accessible to them. We find that serving local clienteles in minority neighbourhoods is strongly related to firm closure and low profitability.