Decision-Making Policies among Mexican-American Small Business Entrepreneurs

The number of Hispanic businesses increased 80.5 percent during the five-year time frame from 1982 to 1987, while the number of U.S. business firms increased 28 percent (U.S. Department of Commerce 1992; U.S. Small Business Administration 1993). There has been a 24 percent increase in total sales of the top 500 Hispanic businesses over the past six years (Hispanic Business 1993). However, while Hispanics comprise 8.8 percent of the U.S. population, in spite of the rapid growth of Hispanic businesses, they only account for 3.1 percent of all firms in the U.S. and 1.2 percent of gross receipts. While statistics reveal that more than 50 percent of all new businesses will fail within the first two years of operation, there are indications that minority business failure is higher than that for non-minorities (Hisrich and Brush 1986; U.S. Small Business Administration 1988; Cooper, Gascon, and Woo 1991). For the Hispanic-owned small businesses, the failure rate may be as high as eight to nine failures out of every ten new business starts (Sahagun 1984). Certainly, there are factors that are not controllable by any entrepreneur that effect success or failure of any small business. Availability of capital, inflation, interest rates, and political attitudes toward small business are just a few of these external influences on all small businesses. However, the focus of this study is not on any outside force or on assessing the success or failure of small businesses; rather, it focuses on the differences, if any, between the internal decision-making patterns of Mexican-American versus Anglo-American small business entrepreneurs with the intention of contributing to the development of an effective theory of minority entrepreneur decision-making patterns. Mexican-American entrepreneurs are targeted for investigation because Mexican-Americans are the largest segment of the U.S. Hispanic subgroup (U.S. Bureau of Census 1991), representing more than 61 percent of the U.S. Hispanic population, which represents about 9 percent of the U.S. population. In 1987, Hispanic businesses represented 35 percent of all minority-owned businesses, with 55 percent of all Hispanic firms being owned by Mexican-American entrepreneurs (U.S. Department of Commerce 1992). In addition, the differences in values and culture that exist among the Mexican, Puerto Rican, and Cuban Hispanic subgroups due to different subcultures, immigration backgrounds, and socioeconomic status are marked enough to justify segmenting the Mexican-Americans from the Hispanic population as a whole (Valencia 1989). Research Hypotheses The literature clearly establishes poor decision-making skills or failure to engage in strategic planning at all as primary reasons that most businesses fail (Haswell and Homes 1989; Ibrahim and Goodwin 1986; Mescon 1987; Susbauer and Baker 1989; and Weitzel and Jonsson 1989). Gaskill, Van Auken, and Manning (1993) identified managerial and planning skills as the most important factor in the perceived failure of small businesses for the apparel and accessory retailer industry. Alpander, Carter, and Forsgren (1990) confirmed that owner/managers successful in the first three years of a new business were those who were analytical and who were willing to undertake a solution involving an element of risk. However, since the data for these studies were obtained from non-minority small business entrepreneurs, little is known about entrepreneurial decision-making characteristics and styles of minority small business entrepreneurs, particularly sub-groups within an ethnic culture (Feldman, Koberg, and Dean 1991; U.S. Small Business Administration 1988). Research comparing minority subgroup cultures to nonminority populations has been recommended to develop the theory of small business decision-making (Gaskill, Van Auken, and Manning 1993; U.S. Small Business Administration 1988). Wright and Geroy (1991) found that a firm's decision-making process is as much a function of the culture developed within the firm as well as of the culture outside the firm. …