Dynamics of Minority-Owned Employer Establishments,

1997–2001

by Ying Lowrey, Ph.D.

U.S. Small Business Administration, Office of Advocacy

2004. [29 pages]. Washington, D.C. 20416

This report tracks the dynamics of minority-owned

employer establishments that were in operation in

1997 over the period 1997-2001. The data used here

track business closure, expansion, and contraction by

the business owners’ race or ethnicity and by their

state and industry. To provide context for the discussion of business dynamics, the report also gives a

summary of minority population and business

growth between 1982 and 2002.

Overall Findings

Minority-owned employer establishments had lower

survival rates than non-minority-owned employer

establishments. At the same time, minority-owned

establishments had higher expansion rates and lower

contraction rates than non-minority-owned establishments. While there was an overall loss of employment due to business closures and contraction among

employer establishments that were in operation in

1997, employer establishments owned by Hispanics

and by American Indians and Alaska Natives offered

a significant increase in new jobs during the 1997-

2001 period.

Highlights

• Minorities’ share of the total U.S. population

increased from 21 percent in 1982 to 32 percent in

2002. The share of businesses owned by minorities

rose from 6.8 percent of all U.S. businesses in 1982

to 15.1 percent in 1997.

• Hispanics were the fastest growing minority

group between 1982 and 2002. The Hispanic share

of U.S. population went from 7 percent in 1982 to

13.8 percent in 2002. Asian and Pacific Islanders

grew second-fastest, from 1.9 percent in 1982 to 4.2

percent in 2002.

• American Indians/Alaska Natives were the

fastest growing business group. The number of businesses owned by American Indians or Alaska Natives

grew tenfold between 1982 and 1997, followed by

Hispanic-owned businesses, the number of which

quadrupled during this period.

• The four-year survival rates of the four minorityowned business categories were all lower than the

survival rate for non-minority-owned business, which

was 72.6 percent. Those for the minority categories

were as follows:

Asian- and Pacific Islander-owned: 72.1 percent;

Hispanic-owned: 68.6 percent;

American Indian and Native Alaskan-owned:

67.0 percent;

Black-owned: 61.0 percent.

• During 1997-2001, the business expansion rates

of three minority business groups were higher than

that for non-minority-owned businesses. While 27.4

percent of non-minority owned establishments

expanded during this period, 34.0 percent of

Hispanic-owned employer establishments expanded,

as did 32.1 percent of Asian and Pacific Islanderowned establishments, and 27.8 percent of American

Indian/Alaska Native-owned establishments; 25.7

This Small Business Research Summary summarizes one of a series of research papers prepared by the U.S. Small Business Administration’s Office of Advocacy. The opinions and recommendations of the authors of this study do not necessarily reflect official policies of the

SBA or other agencies of the U.S. government. For more information, write to the Office of Advocacy at 409 Third Street S.W., Washington,

DC 20416, or visit the office’s Internet site at www.sba.gov/advo.

No. 251

February 2005

SMALL BUSINESS

RESEARCH

SUMMARY
percent of the Black-owned employer establishments

in operation in 1997 expanded their businesses.

• Hispanic- and Black-owned employer establishments had the lowest contraction rates (17.8 percent

and 19.9 percent, respectively) between 1997 and

2001. By contrast, 21.1 percent of non-minorityowned businesses shrank, as did 22.4 percent of those

owned by American Indian and Alaska Natives, and

22.9 percent of those owned by Asian and Pacific

Islanders.

• Business closure, expansion, and contraction

directly influenced total employment of firms operating in 1997. The U.S. employer establishments in

operation in 1997 had lost 11.5 million jobs by 2001.

(Again, this dataset does not include the new businesses that started in the period 1997-2001, nor the

jobs they created.) Hispanic-owned businesses operating in 1997 had created a surplus of 136,964 new

jobs by 2001, and American Indian/Alaska Nativeowned businesses had created 26,050 new jobs.

• During 1997-2001, the survival rate of all U.S.

businesses was highest in the manufacturing sector

(74 percent), followed by services (72 percent),

wholesale (71 percent), and agriculture (70 percent).

The lowest rate was in non-classifiable establishments (21 percent). On average, Asian Americanowned business establishments had the highest survival rate among minority establishments. Asian businesses were most resilient in the finance, insurance

and real estate sector and the service sector, with 74

percent survival. The Hispanic business survival rate

was highest in the manufacturing and retail sectors.

• The states with the highest survival rates for

minority business groups for the period 1997-2001

were as follows. Delaware had the highest survival

rate for American Indian/Alaska Native-owned

employer establishments (93.8 percent); Wyoming

had the highest survival rate for Black-owned businesses (93.5 percent); South Carolina had the highest

survival rate for Hispanic businesses (88.6 percent);

New Mexico had the highest survival rate for Asian

and Pacific Islander-owned firms (84.6 percent).

Data Sources and Methodology

The Census Bureau provided the Small Business

Administration’s Office of Advocacy with a series of

statistical tabulations that track establishments

belonging to minority-owned business enterprises

that responded to the 1997 Survey of MinorityOwned Business Enterprises (SMOBE). The dataset

has some significant limitations. First, it only contains information on employer establishments, not

firms, which are a better measure of business ownership. Second, it contains no information on establishments that opened after 1997; it only tracks the fortunes of those in existence in 1997.

This report was peer-reviewed consistent with

Advocacy’s data quality guidelines. More information on this process can be obtained by contacting the

director of economic research at advocacy@sba.gov

or (202) 205-6533.

For More Information

The complete report, Dynamics of Minority-Owned

Employer Establishments, 1997-2001, is available on

the Office of Advocacy website at www.sba.gov/advo.

The statistical database is available there as well. 

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