Black Entrepreneurs Still Face an Unlevel Playing Field in Seeking Capital
Filed in Research & Studies on June 16, 2014
Business scholars at Utah State University, Brigham Young University, and Rutgers University have conducted research demonstrating that Black and other minority entrepreneurs continue to face a unique set of challenges to success. The research included interviews with entrepreneurs who had already set up business and “testers” of different ethnic backgrounds who were sent to banks seeking new business loans. The testers all were furnished with identical financial credentials and dressed the same when they went to the banks. But the Black and Hispanic testers were not asked for the same amount of information, were not provided with the information they needed to succeed in the loan process, and were not helped or encouraged at the same levels as the White testers.
The authors also conducted an experiment where White, Black, and Hispanic entrepreneurs filled out applications for a loan. The researchers told all of the subjects they were denied the loan. They then gave the participants a survey to ascertain their reactions to the rejection. Whites tended to blame the loan officer for having bad judgment. But Black and Hispanic entrepreneurs were more likely to take the rejection as a personal inadequacy and a blow to their self-esteem.
Sterling Boone, an assistant professor in the School of Business at Utah State University and the lead author of the study, stated, “A lot of research and business practice starts with the premise that individuals have equal choice and what we found, instead, are that there are systemic restrictions to choice for some people just because of their ethnicity.”
The article, “Rejected, Shackled, and Alone: The Impact of Systemic Restricted Choice on Minority Consumers’ Construction of Self,” was published in the Journal of Consumer Research. It may be accessed here.