15.

16.

17.

18.

19.

20.

21.

22.

23.

Ivan Light, Ethnic Enterprise in America: Business and Welfare
Among Chinese, Japanese, and Blacks, University of California

Press, 1972.

Ivan Light, "Immigrant and Ethnic Enterprise in North America,"
Ethnic and Racial Studies, Vol. 7 (April 1984), pp. 195-216.

John Mintz, "Vietnam: the Refugees," Washington Post, April 18,
1985.

Alejandro Portes and Robert L. Bach, Latin Journey: Cuban and
Mexican Immigrants in the United States, University of California
Press, 1985.

Thomas Sowell, Race and Economics, David McKay, 1975.

Richard L. Stevens and Gavin M. Chen, "Minority-Owned Business
Problems and Opportunities: A 1983 Update," Research Division,
MBDA, U.S. Department of Commerce, June 1984.

Robin Ward and Richard Jenkins (eds.), Ethnic Communities in
Business, Cambridge University Press, 1984.

JoAnne Willette, "The Sociology of Minority Business Enterprise:
An Overview," Final Report to MBDA, November 1985.

Frank W. Young, "A Macrosociological Interpretation of
Entrepreneurship," pp. 139-149 in Peter Kilby (ed.)
Entrepreneurship and Economic Development, Fress Press, 1971.



TABLE 2

Total Income of Self-Employed Persons in the 50 Largest U.S. Ancestry
Groups (1980)a

Ranked Highest to Lowest
United States
(Persons Reporting Single Ancestry)

Mean Income b Mean Income b

Ancestry Group (dollars) Ancestry Group (dollars)
1. Iranian 31,370 National Average = 18,630
2. Russian 30,270
3. Asian Indian 29,800 27. Portuguese 18,570
4. Filipino 27,800 28. Korean 18,500
5. Rumanian 26,530 29. Dutch 18,470
6. Austrian 26,210 30. English 18,370
7. Lithuanian 25,900 31. Canadian 18,350
8. Latvian 25,660 32. Irish 18,290
9. Lebanese 24,180 33. Colombian 18,170
10. Syrian 23,630 34. German 18,090
ll. Hungarian 23,390 35. Czech 17,510
12. Ukranian 22,170 36. French 17,320
13. Armenian 21,430 37. Cuban 17,310
14. Greek 21,140 38. Norwegian 16,760
15. Yugoslavian 21,000 39. French Canadian 16,730
16. Polish 20,950 40. Slovak 16,400
17. Belgian 20,820 41. Jamaican 15,320
18. Scottish 20,520 42. Hawaiian 14,700
19. Welsh 20,450 43. Finnish 14,420
20. Italian 20,170 44. Ecuadorian 14,160
21. Japanese 19,680 45. Dominican 13,870
22. Haitian 19,100 46. Mexican 13,850
23. Chinese 18,980 47. American Indian 13,110
24. Danish 18,980 48. Vietnamese 11,500
25. Swiss 18,830 49. Puerto Rican 11,490
26. Swedish 18,660 50. Subsaharan African 11,260

Source: Bureau of the Census, U.S. Department of Commerce, 1980 Census of
Population and Housing, Public-Use Microdata Samples, Sample "A"
(tabulations performed by the MBDA research staff).

a) Income reported was for 1979, by persons who designated themselves as
self-employed workers or employees of their own corporation.

b) Mean Income was rounded off to the nearest ten dollars.


likely to be married only once. Groups which are characterized by
stable families are better able to provide assistance for family
members who are business owners in terms of psychological encourage-
ment, role models, training, financial help, and other self-help
support functions. To give a related example, Asian entrepreneurs tend
to rely on more earners in the family than is the case among other
minority groups.(5,22)

MODEL OF MINORITY/ETHNIC BUSINESS DEVELOPMENT

A great deal of work must be done before we can go beyond the
kind of descriptive analysis just presented - which indicates that
groups with higher levels of financial, human, and social capital are
more successful in business than those having lower levels - to create
a more comprehensive theoretical model of minority/ethnic business
development. However, the MBDA research staff has begun this task by
devising the outline of such a model, based on existing research, that
attempts to demonstrate how minority/ethnic enterprises can be catego—
rized into three general types: group-dependent (type I), partially
group-dependent (type II), and independent (type III), according to
generational residence in the United States.

The model not only takes into account enterprise support
resources characteristic of each stage, but also includes ethnic
enclave community attributes, external conditions, and typical emerging
industries. A schematic summary of the model is presented in Figure l,
although it cannot be overstressed that this is a tentative configu-
ration resulting from ongoing research at MBDA and subject to revision.
Initial testing of hypotheses derived from the model will begin later
in 1987 when appropriate data become available from the "Characteris-
tics of Business Owners Survey" being conducted by the Census Bureau
for MBDA.

But for now, we can at least determine some implications from
the model in the form of the following sample hypotheses. (1)Groups
dominated by the first generation in the U.S. (recent ly-arrived
immigrants) generally display type I business enterprise characteris-
tics with clientele made up of a high proportion of co-ethnics;
employees chiefly co-ethnics, particularly unpaid family members;
financing secured mainly from family and friends; owner trained in a
relative's or friend's enterprise; owner possessing limited business
management experience; and owner working a high number of hours per
week.

The group-dependent enterprises portrayed under Type I would be
like those established by early European and Asian immigrant groups
that came to the United States. They faced a labor market with
considerable entry barriers because of failure to meet educational or
language requirements, lack of job skills, or extensive prejudice/
discrimination directed against them in hiring. The same barriers
limited these groups' entrepreneurial opportunities, but at least
"niches" for small enterprises existed in the local community where


there are large differences in business participation, income, and
other entrepreneurial outcomes across minority/ethnic groups which have
been maintained (with some fluctuations) over time. Determining that
there are differences is certainly important, but we need to go beyond
mere description to understand why the differences exist. Research
efforts attempting this second step have looked at characteristics of
high and low groups to specify which ones may be contributing factors.
(1,2,3,4,5,7,11,20,22) In doing so, large disparities across groups
have been discovered in entrepreneurial inputs - the key resources used
for enterprise support, i.se., financial capital (financial resources),
human capital (individual human resources), and social capital (social
group resources). This section summarizes such findings.

Financial Capital

The research literature on financial capital issues surrounding
minority business and entrepreneurship has only recently begun to
address many complex dimensions such as capital composition of the
firm, equity investment at startup and informal versus formal sources.
There are, however, few references to differences among minority/ethnic
groups. This situation should improve in the near future because of
several projects sponsored by MBDA and the soon-to-be-released Census
Bureau 1982 Characteristics of Business Owners Survey which contains
several financial capital variables. (Note: Readers are encouraged to
contact the authors concerning content and availability of these
studies and the Census Bureau Survey.)

The study by Ando(1) is the first to empirically analyze a
broad spectrum of financial capital issues with comparisons among
groups. Using a sample of 1,300 business owners, of which 400 are
minorities, she found some notable differences. First, Blacks
contributed about the same amount of personal assets for equity seed
capital as nonminorities, while Asian-Americans and Hispanics
contributed more. These additional funds came from a higher percentage
contribution of net worth rather than larger overall assets.

Second, in the year that the firm was started Asian-Americans
had approximately the same debt ratio as nonminorities, but Blacks and
Hispanics had a lower debt ratio. The same relative pattern seems to
continue once the firm is established.

Another difference among groups is the percent of loan applica-
tions submitted to and accepted by commercial banks. Asian- Americans,
Hispanics and nonminorities all had approximately 90 percent accepted,
while the figure for Blacks was 65.7 percent. When these differences
were subjected to multiple regression analysis there was some
indication of racial discrimination against Blacks, but not the other
minority groups. For those firms that received loans there were no
significant differences among the three minority groups in loan terms
or the interest rate.

Human Capital

The individual human resources that entrepreneurs bring to


The next step is to determine the relation between business
participation rates and self-employment income among specific ancestry
groups. When Tables 1 and 2 are compared, it is clear that groups
having self-employed persons with low total incomes are generally the
same ones with low BPRs. For example, of the ten groups with the
lowest mean incomes, eight of them are also among the bottom ten in
BPR (Subsaharan African, Puerto Rican, Vietnamese, Mexican, Dominican,
Ecuadorian, Hawaiian, and Jamaican). Conversely, of the ten groups
with the highest mean incomes, five of them are among the top ten in
BPR (Russian, Rumanian, Austrian, Lebanese, and Syrian). Using a
rank-order correlation measure (Spearmen's rho) to compare the
rankings in Tables 1 and 2, a correlation of .61 was obtained which is
statistically significant at the .01 level, indicating a positive
association between self-employed ancestry groups' mean incomes and
their business participation rates.(13)

Other Outcome Differences

A full understanding of group differences in entrepreneurship
requires an analysis of changes over time. Unfortunately, the
minority/ethnic delineations found in the 1980 Census are not
available for other time periods. Regardless, there are some
important trends at the aggregate group level discernible from the
1960 through 1980 Censuses of Population and the 1972 through 1982
Surveys of Minority-Owned Business Enterprises.

The first observation is that business participation rates at the
aggregate group level are increasing. This is true for three general
minority groups: Black, Hispanic and Asian-American. Technical data
problems prohibit comparison of relative change, but Asian-Americans
continue to out-distance their minority counterparts.

Another key trend is that industrial composition is changing. In
1960, minority firms were concentrated in the personal services,
retail and construction industries. That remained true in 1980, but
to a lesser extent. Almost all of the growth during the twenty year
period took place in industries such as business services, finance,
wholesale trade, transportation, and communication. These new
industries have the potential for generating higher returns to
entrepreneurial pursuits and may explain why relative self-employment
earnings of minorities have increased substantially since 1960. These
relative gains can be found for all of the three groups with Blacks
registering the largest gain compared to nonminorities. And, in some
industries such as retail trade, repair services, personal services,
recreation and professional services there is virtual parity in self-
employment earnings with nonminority groups.(2)

INPUT DIFFERENCES ACROSS GROUPS

The outcome differences just summarized are generally con-
firmed by additional research studies sponsored or conducted by MBDA,
though they may ascertain outcomes for broader population categories.
Accumulated evidence points to the same general conclusions: clearly


Social Capital

Research offers another explanation, based on social resources,
for group differences in business participation. According to this
explanation, self-help support networks play a critical role in
starting and maintaining a business enterprise by providing an owner
with an entire range of assistance, from informal encouragement given
by family members and friends to dependable sources of co-ethnic labor
and clientele. Support networks are composed of primary institutions
closest to the individual and include family, peer, and community/
neighborhood subgroups which together supply several major functions.

Most entrepreneurs have had parents or other relatives who were
self-employed as business owners or professionals and were viewed as
role models upon whom their children could pattern themselves; groups
with relatively small numbers of business owners offer few role models.
Potential entrepreneurs often receive informal training in a relative's
business (or the enterprise of a nonfamily co-ethnic) to acquire
skills, procedures, and knowledge needed to run a business. Groups
deficient in these informal training sources must rely on more formal,
and not always adequate or effective, educational institutions to learn
entrepreneurial practices.(7,11,15,23)

Minority business owners have depended primarily on family
funds and ethnic community resources for financial capital, not on
commercial credit institutions; groups with weak support networks are
less able to raise financial capital in this manner. Minority/ethnic
entrepreneurs have found a source of labor in spouses, children, other
relatives, and friends who perform their duties out of the expected
fulfillment of kin or ethnic obligations. The ethnic community in
which a particular enterprise is embedded sustains it by delivering a
consumer market, iee., a ready-made source of clientele to use the
enterprise's goods or services. Access to both sources of labor and
clientele appears to vary widely across groups.(11,15,19,21)

Informal business contacts in some groups through family,
friends, co-ethnic clubs, churches, etc., give the individual owner
access to business advice and other assistance to help him/her manage
an enterprise; groups having weak support networks simply offer fewer
informal contacts. Some minorities possess more positive attitudes/
values toward entrepreneurship than others, such that they believe a
career in business ownership is a rewarding and attainable means for
economic advancement. These differences in attitudes/values may be
particularly important among young people. One key attitude concerns
the status of entrepreneurs which is perceived to be high in some
groups while low in others, indeed so low in the latter that their
young people may prefer salaried employment in private corporations or
government rather than self-employment as a career goal.(6,8,9,11)

Recent research has indirectly pointed to the critical nature
of the family in minority/ethnic enterprise support networks. Data
show that groups with substantial numbers of business owners and high
incomes also have relatively stable families: they register higher
rates of marriage, lower rates of divorce or separation, and are more


AN EXPLANATION OF MINORITY/ETHNIC GROUP
DIFFERENCES IN ENTREPRENEURSHIP

Frank A. Fratoe, Minority Business Development Agency
Richard L. Stevens, Minority Business Development Agency

ABSTRACT

Results obtained through studies conducted by the Research
Division of the Minority Business Development Agency (MBDA) show that
there are large differences in business participation rates and income
of self-employed persons across minority/ethnic groups. Efforts to
explain why these outcome differences exist have focused on input
differences across groups, in particular the unequal distribution of
financial capital, individual human capital, and social capital which
are available to entrepreneurs. This paper delineates such
differences chiefly through data obtained from the 1960, 1970, and
1980 Censuses of Population and the 1972, 1977, and 1982 Surveys of
Minority-Owned Business Enterprises. The paper also Suggests a
further explanation by briefly discussing a theoretical model of
minority/ethnic business development being formulated by the MBDA
research staff.

INTRODUCTION

The Federal Government initiated programs for minority business
development in the mid 1960s. Most of those Programs treated minority
business owners as a homogeneous group - assuming similar entrepre-
neurial characteristics and problems. The alleged "problems" were
generally cast as economic in nature such as inability to access
financial, management and market resources.

The first comprehensive effort to gain a better understanding
of minority business problems was undertaken in 1981 by MBDA's
Research Staff. This effort resulted in a conceptual model of the
business formation, growth and failure process. (7) This model
attempted to explain observed differences in levels of business
ownership among the Black, Hispanic, Asian-American and nonminority
populations. Several hypotheses were developed in order to gain a
better understanding of the entrepreneurship and business development
process in minority communities. Furthermore, these hypotheses
considered sociological and psychological as well as economic
variables.


business owners could count on a strongly cohesive ethnic enclave to
provide support networks with financial, human and social resources, as
well as a ready-made consumer market composed of co-ethnics to whom
goods/services could be sold. This restricted market, however, meant
that the firms established were heavily concentrated in retail trade
and other lines of business primarily serving ethnic needs.

(2)Groups dominated by the second generation in the U.S. generally
display type II business enterprise characteristics with mixed
clientele including a moderate proportion of coethnics; employees
originating from inside and outside the ethnic group; mostly paid;
financing secured from both informal and formal (commercial) sources;
owner trained in a co-ethnic's enterprise, with some formal training;
owner having some business management experience; and owner working a
high number of hours per week.

Type II enterprises are partially-group dependent and represent
a mixed mode whereby ethnic firms use both the resources of a weaker
enclave community marked by reduced population centralization and
resources outside that community to create business opportunities.
These firms also develop products/services which are marketed to both
ethnic and nonethnic group clientele. Labor market barriers come down
somewhat but enough blockage remains to supply a large pool of loyal
workers for co-ethnic business owners to exploit. At this point,
expansion beyond traditional lines of business occurs and new
industries emerge in such fields as wholesale trade, construction, and
light manufacturing. Entire networks of ethnic-owned businesses may
evolve, furnishing each other's needs, from manufacturers or
wholesalers to retailers. Examples of Type II enterprises can be found
historically among second generation European groups in the early to
mid twentieth century or, more currently, among Cubans residing in
south Florida.

(3)Older groups in the U.S. (three generations or more)
generally display type III business enterprise characteristics with
mostly non-ethnic group (general population) clientele; mostly
non-ethnic group paid employees; financing secured primarily from
formal sources; owner with formal training (some family role models
available, however); owner possessing moderate to high business
management experience; and owner working a moderate number of hours per
week.

Little need be said about Type III firms except that they
represent the common notion of what the normal enterprise "is like" as
depicted in business-oriented and popular literature. Resources are
supplied usually by formal institutions rather than informal support
networks which, by this time, are no longer visible because the ethnic
enclave has disappeared. Entrepreneurs sell their goods/services with
no particular ethnic appeal to a consumer market of general clientele.
Some emerging industries in this stage (e.g., finance, communications,
business and professional services) require much higher levels of human
resources, although other lines of business continue to require only
moderate levels.


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their business endeavors consist chiefly of their educational back-
ground, work effort, and skills learned through business/occupational
experience. First, research evidence indicates that groups most
successful in business, i.e., those displaying the highest business
participation rates and self-employed incomes, generally record the
highest education levels (years of school completed). Among both male
and female business owners in the traditional minority categories,
Asian-origin groups have higher levels of education than the others;
Asian Indians, Koreans, and Filipinos rank highest in educational

several conclusions. Highly educated people are better off when they
gravitate toward fields such as professional services and finance,
insurance, and real estate. In many other industries, like construc-
tion and personal services, returns to advanced education are often
negligible. Although self-employed minorities became better educated
between 1960 and 1980, their earnings' determinants did not change much
except for minority females. Minority females with college degrees
have been moving rapidly into finance, business services, and other
fields offering generally substantial returns to advanced educational
credentials.(2,3)

Second, the self-employed in groups with the highest BPRs and
incomes expend the greatest work effort, i.e., they work more hours per
week and more weeks per year. Again among minorities, Asian-origin
groups record the highest annual work time as measured by the mean
number of hours worked per year.(22) Rates of entrepreneurial earnings
are also correlated with inputs of time, since those registering higher
annual hours of work tend to earn more per hour. This explains why
females, both minority and nonminority, average less in self-employment
earnings than their male counterparts; not only do female entrepreneurs
work fewer hours per year but each hour of their work produces a
smaller earnings’ payoff.(2,3,5)

Third, white collar and service-type occupations, together with
services' industry experience, strongly lend themselves to entrepre-
neurial pursuits. Thus, the predominantly blue collar occupational
backgrounds of some minorities are poorly matched to emerging business
Opportunities. Many of these opportunities are sought by budding
entrepreneurs on a part-time basis. Data show that wage or salaried
employees who pursue self-employment on a part-time basis are an
important source of long term upgrading for the minority entrepreneur
universe. This group is younger, much better educated, and earning
higher income relative to minority entrepreneurs overall.(2,4,5,22) A
large proportion of part-timers are at the managerial/professional
level, but there are variations across groups. Asian part-timers, both
male and female, are the most highly represented at the managerial/
professional level, while Black males and females have the lowest
Percentages in this category. Such findings support Previous research
indicating that Black business owners are more likely to have gained
their experience and skills from blue collar origins, whereas Asian and
nonminority owners are more likely to have a white collar
background. (22)


based on such data will allow us to clarify several assumptions
detected in the research literature about minority business
participation.

First, it has long been claimed that Black-Americans from the
West Indies are much more likely to be engaged in business than Blacks
native to the American mainland ("Subsaharan Africans" are all
Black-Americans not reporting their ancestral origins in the West
Indies).(10,14) Our data show that the two largest Black West Indian
groups in the United States, Jamaicans and Haitians, have BPRs only
somewhat above that of Subsaharan Africans. Second, among the Asian
groups, Vietnamese and Filipinos are clearly the most disadvantaged in
business participation. Their rates are far below those of Koreans
(69.2), Japanese (64.8), Chinese (60.2), and Asian Indians (47. 1), all
of whom score better than the general population average except for
Asian Indians. Until now, limited reports on Vietnamese who have
settled in the U.S. allege that they have entered self-employment in
large numbers(17), an assumption. not substantiated by our data.

Third, observers have implied that Cubans are more heavily
represented in business than other Hispanics.(16,18) Although the BPR
recorded by Cubans (47.9) is close to the general population average,
it is well above the BPRs of all other Hispanic groups found in the 50
largest categories. Thus, the literature seems fairly correct here,
but probably has only begun to discern the evident differences among
Hispanic groups; for example, the extreme business participation
disadvantage experienced by Puerto Ricans living on the American
mainland (those residing in Puerto Rico are not included in the data).
Fourth, notable by their absence from the lowest ranked groups are
American Indians. Although their BPR (33.3) is below average, it is
not so low as to qualify them for severe disadvantage. American
Indians may be making better headway in self-employment, at least
relative to others on the BPR factor, than they have received credit
for doing.

Income of Self-Employed

Turning to Table 2, we see there is a wide variation in group
mean incomes for the self-employed, ranging from $11,260 for
Subsaharan Africans to $31,370 for Iranians, a difference of over
$20,000. Of the ten groups with the lowest total incomes, all can be
classified as minority except one (Finnish). On the other hand, two
minority groups - Asian Indians and Filipinos - are among the ten with
the highest total income. Other observations from Table 2 concern
traditional categories of minority groups. Among the Black
self-employed, Jamaicans and Haitians do much better than Subsaharan
Africans in mean income, with Haitians actually above the national
average. Among Asians, Vietnamese stand alone as earners of low
incomes, as all other Asian ancestry groups are near or beyond the
national average. All six Hispanic groups are below that average,
although Colombians and Cubans have mean incomes well above the rest.


ABSTRACT
1987 Babson College Entrepreneurship Conference

"AN EXPLANATION OF MINORITY/ETHNIC GROUP DIFFERENCES IN
ENTREPRENEURSHIP"

by Frank A. Fratoe and Richard L. Stevens

Results obtained through studies conducted by the Research Division of
the Minority Business Development Agency (MBDA) show that there are
large proportional differences in business participation rates (BPR)
and income of self-employed persons across minority/ethnic groups.
With only a few exceptions, groups recording the highest BPR rates also
have the highest average self-employed incomes, while those recording
the lowest rates have the lowest incomes. Efforts to explain why these
outcome differences exist have focused on input differences across
groups, in particular the differential distribution of financial
capital (financial resources), human capital (individual human
resources such as education and experience), and social capital

(social group resources like self-help networks) which support business
enterprises. This paper delineates such differences chiefly through
data obtained from the 1960, 1970 and 1980 Census of Population and the
1972, 1977, and 1982 Survey of Minority-Owned Business Enterprises.

But the paper goes beyond descriptive analysis to offer a theoretical
model of minority/ethnic business development to explain differences
across groups. This model, based on existing research, attempts to
demonstrate how minority/ethnic enterprises can be categorized into
three general types - group-dependent, partially group-dependent, and
independent - according to generational residence in the United States.
The model takes into account enterprise support resources
characteristic of each stage, along with ethnic enclave attributes,
external conditions, and typical emerging industries. Hypotheses are
derived from the model with implications for data analysis at both
cross-sectional and longitudinal levels. However, initial data
analysis and testing of hypotheses must wait until Spring 1987 when
appropriate data will be made available from the "Characteristics of
Business Owners Survey" being conducted by the Census Bureau for MBDA.


across groups: financial resources (equity and debt capital, commercial
loans), individual human resources (educational level, work effort,
occupational experience), and social group resources (family background,
self-help support networks).

Major Implications

Policy planning devoted to assisting the process of minority business
development should take into account the uneven distribution of
financial, human and social resources available to entrepreneurs as well
as the length of residence and stage of business development of the
groups to which the entrepreneurs belong. The MBDA staff is undertaking
further research to clarify these issues.


TABLE I
Business Participation Rates of the 50 Largest U.S. Ancestry Groups (1980)a

Ranked Highest to Lowest
United States

(Persons Reporting Single Ancestry)

Business Business
Participation Participation
Ancestry Group Rate Ancestry Group Rate
1. Russian 117.4 26. Ukranian 59.7
2. Lebanese 106.6 27. English 59.6
3. Rumanian 104.3 28. Finnish 53.3
4. Swiss 104.2 29. French 51.9
5. Greek 94.9 30. Polish 51.6
6. Armenian 94.5 31. Yugoslavian 50.2
7. Danish 93.2 32. Irish 49.7
8. Syrian 92.7 33. Canadian 49.2
9. Norwegian 88.2
10. Austrian 85.7 National Average = 48.9
ll. Czech 76.9
12. Swedish 76.2 34. Cuban 47.9
13. Belgian 74.7 35. Asian Indian * 47.1
14. Latvian 74.4 36. French Canadian 45.6
15. Welsh 72.4 37. Portuguese 42.9
16. Dutch 72.2 38. Slovak 35.3
17. Scottish 69.7 39. American Indian 33.3
18. Korean 69.2 40. Colombian» 30.1
19. Hungarian 68.3 41. Ecuadorian ~« 22.7
20. Lithuanian 68.1 42. Filipino * 22.4
21. German 68.1 43. Jamaicans« 21.5
22. Iranian 66.4 44, Hawaiian 20.3
23. Japanese * 64.8 45. Mexican 18.6
24. Chinese 60.2 46. Vietnamese « 16.5
25. Italian 59.9 47. Haitian * 15.5
48. Dominican 14.6
49, Subsaharan African 13.6
50. Puerto Rican « 10.6

Source: Bureau of the Census, U.S. Department of Commerce, 1980 Census of
Population and Housing, Public-Use Microdata Samples, Sample "A"
(tabulations performed by the MBDA research staff).

no. of self-employed x 1,000
a)Business Participation Rate = total persons in group



Subsequent research studies have documented differences in
formation, growth and failure rates among the three minority groups
mentioned above.(20) However, analysis of the 1980 Census Public Use
Samples has made it clear that substantial progress in our research
strategy requires a finer delineation of minority/ethnic groups than
those three. This paper discusses that delineation by analyzing
entrepreneurial traits of the fifty largest ancestry groups in the
United States. It also offers a first cut at an improved conceptual
model for explaining the many differences in traits among minority
groups. This line of research should eventually give policy-makers
the type of information needed to improve the design and delivery of
services necessary for minority-owned business development.

OUTCOME DIFFERENCES ACROSS GROUPS

Data presented here are derived from studies conducted or
sponsored by the MBDA Research Staff.(5,12,13,22) They are the first
known attempts to compare specific minority/ethnic groups on their
degree of business participation, rather than looking at broad
population categories such as Blacks, Hispanics, Asian/Pacific
Americans, and Native Americans (the standard components of the
“minority group" classification) and a large residual category
("nonminority"). The first two studies to be reviewed here examine
data on single ancestry background, self-employment, and income
extracted from 1980 Census results. Then research efforts based on
additional data sources are analyzed to determine other outcome
differences.

Business Participation Rates (BPR)

Cross tabulations of single ancestry by self-employment were
Produced to find the business participation rate for each group, that
tate being defined as the number of self-employed persons per 1,000
population of a group. Self-employment, of course, is not identical
to business ownership but is a reasonably accurate proxy for the
latter characteristic, which is not specified in decennial censuses.
(The terms business ownership, business participation, and
entrepreneurship are used interchangeably in this paper.) Cross
tabulations of single ancestry by income of persons reporting
self-employed status were also produced. Results of these
computations are shown in Tables 1 and 2 which rank the 50 largest
U.S. ancestry (minority/ethnic) groups by national-level BPR and
self-employed mean incomes, respectively.

Examination of Table 1 shows a wide variation in BPR for
specific ancestry groups, with some ranging far below and others far
above the national average of 48.9. Puerto Ricans (10.6) record the
lowest national BPR, while Russians (117.4) record the highest figure.
Further analysis shows that most groups included under the "minority"
classification are clustered near the bottom of BPR rankings, but a
few are near or even above the national average. Other distinctions


8.

9.

10.

ll.

12.

13.

14,

REFERENCES

Ando, Faith H., "Capital Issues and the Minority-Owned Business,"

Final Report to MBDA, November 1986.

Timothy Bates, "An Analysis of Minority Entrepreneurship Utilizing

the Census of Population Public-Use Ss.
January 1986.

amples," Final Report to MBDA,

Timothy Bates, "An Analysis of the Minority Entrepreneur: Traits
and Trends," Final Report to MBDA, July 1986.

Peter Bearse, "An Econometric Analysi

s of Minority

Entrepreneurship," Final Report to MBDA, September 1983.

Peter Bearse and Peter Johnson, "Minority and Ethnic

Entrepreneurship in the United States
Analysis," Final Report to MBDA, Sept

Edna Bonacich and John Modell, The Ec

- 1980: A Comparative
ember 1986.

onomic Basis of Ethnic

Solidarity: Small Business in the Japanese~American Community,

University of California Press, 1980.

Gavin Chen, et al., "Minority Busines
and Their Causes," Research Division,
Commerce, January 1982.

s Enterprise Today: Problems
MBDA, U.S. Department of

Scott Cummings (ed.), Self-Help in Urban America: Patterns of

Minority Business Enterprise, Kennikat Press, 1980<

Eugene P. Foley, "The Negro Businessman: In Search of a
Tradition," Daedalus, Vol. 95 (Winter 1966), pp. 107-144.

Nancy Foner, “West Indians in New York City and London: A

Comparative Analysis," International

Migration Review, Vol. 13

(Summer 1979), pp. 284-297.

Frank A. Fratoe, "Sociological Perspectives on Minority Business
Ownership: A Synthesis of the Literature with Research and Policy
Implications," Research Division, MBDA, U.S. Department of

Commerce, December 1984.

Frank A. Fratoe and Ronald L. Meeks,

“Business Participation Rates

of the 50 Largest U.S. Ancestry Groups: A Preliminary Report,"
Research Division, MBDA, U.S. Department of Commerce, June 1985.

Frank A. Fratoe and Ronald L. Meeks,

"Income of Self-Employed

Persons Among the 50 Largest U.S. Ancestry Groups," Research
Division, MBDA, U.S. Department of Commerce, March 1986.

Nathan Glazer and Daniel P. Moynihan,
Press, 1963.

Beyond the Melting Pot, MIT


SUMMARY
Names

Frank A. Fratoe
Richard L. Stevens

Address

Research Division

Minority Business Development Agency (MBDA)
U.S. Department of Commerce

Washington, D.C. 20230

Telephone
(202) 377-4671

Title

An Explanation of Minority/Ethnic Group Differences in Entrepreneurship

Principal Topics

This paper examines differences across specific U.S. minority/ethnic
groups in entrepreneurial outcomes, ise., business participation rates,
self-employed incomes, etc. It then offers some possible explanations
for these differences by focusing on the unequal distribution of
entrepreneurial inputs, i.se., financial capital, individual human
capital, and social capital.

The paper also suggests a further explanation by briefly discussing a
theoretical model of minority/ethnic business development being
formulated by the MBDA Research Staff.

Method and Data Base

Data are derived from studies conducted or sponsored by the MBDA
Research Staff. They are based on results, pertaining to
self-employment and business ownership from the 1960-1980 Censuses of
Population and the 1972-1982 Surveys of Minority-Owned Business
Enterprises, supplemented by additional information from reviews of the
research literature. Data were analyzed in the original studies using
cross-tabulations and multiple regressions, although only two summary
tables utilizing the former are presented here.

Major Findings

There is a wide variation in business participation rates across U.S.
minority/ethnic groups, ranging from a low of 10.6 for Puerto Ricans to
a high of 117.4 for Russians. Similarly, there is great variation in
group mean incomes for the self-employed, ranging from $11,260 for
Subsaharan Africans to $31,370 for Iranians. These and other outcome
differences are at least partially determined by input differences