Entrepreneurial Success

Capital,Education, andTechnology

U.S. Department of CommerceEconomics and Statistics AdministrationMinority Business Development AgencySeptember 2002

Entrepreneurial SuccessCapital,Education, andTechnologyU.S. Department of CommerceEconomics and Statistics AdministrationMinority Business Development AgencySeptember 2002
Keys to Minority

Entrepreneurial Success:

Capital, Education, and Technology

By

Patricia Buckley, Ph.D.

Patricia.Buckley@esa.doc.gov

U.S. Department of Commerce

Economics and Statistics Administration

Minority Business Development Agency

September 2002
Table of Contents

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Entrepreneurship in the Minority Community . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Characteristics of Minority Business Owners: Income and Education . . . . . . . . . . . . . . . . . . . . . . . . .10

The Role of Information Technology in Entrepreneurial Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Figures

Figure 1: Growth in Number of Firms, 

1992-1997 by Race/Ethnicity of the Business-Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Figure 2: Average Revenue per Firm, 

1992 and 1997 by Race/Ethnicity of the Business-Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Figure 3: Distribution of Minority-Owned Firms (excluding 

C corporations), 1997 and U.S. Average Capital Expenditures

per Employee (including C corporations), 1998 by Industry . . . . . . . . . . . . . . . . . . . . . . . . . .7

Figure 4: Self-Employment by Race/Hispanic Origin, 

September 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Figure 5: Self-Employment by Race/Hispanic Origin for 

Employed Persons with Family Incomes over $75,000

and at Least a Bachelor’s Degree . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

Figure 6: Computer Use At Work, September 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Figure 7: Internet Use From Any Location, September 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

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Tables

Table 1: Revenue and Employees Per Firm Excluding 

C Corporations, 1997 (Firms with Paid Employees) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Table 2: Distribution of Minority-Owned Firms with 

Revenue and Employees Per Firm by Industry, Excluding 

C Corporations, 1997 (Firms with Paid Employees) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Table 3: Percent Minority Ownership and Capital 

Expenditures Per Employee by Industry Sector and 

Size of Company: Firms with Employees 1997/1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8, 9

Table 4: Percent of Employed with Family Incomes Above 

$75,000 By Race and Employment Type, September 2001 . . . . . . . . . . . . . . . . . . . . . . . . . .12

Table 5: Percent of Employed with a Bachelor’s Degree 

By Race and Employment Type, September 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

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Keys to Minority Entrepreneurial Success:

Capital, Education, and Technology

Executive Summary

The strength of the U.S. economy owes much to its entrepreneurs, those who take risks and develop

businesses capable of driving growth into the future. Entrepreneurial energy, the drive to start

businesses, is evident in all segments of the U.S. population, and increasingly so in the minority business

community. The number of minority-owned businesses1 increased ten times faster than other businesses

between 1992 and 1997.

Despite this high level of entrepreneurial energy in the minority business community, the entrepreneurial

success rate may be lagging—minority-owned firms are failing to develop into larger businesses.

Minority-owned firms continue to be smaller than majority-owned firms, both in terms of numbers of

employees and revenues. In fact, the relative size differential between minority businesses and majorityowned firms widened between 1992 and 1997. 

This report describes the size and industry distribution of these businesses, as well as characteristics of the

business-owners themselves, looking for factors that may be contributing to this outcome and finds

evidence that minority owners have lower rates of access to financial capital and utilization of information

technology. Specifically, we find: 

■ Minority firms are concentrated in industries with low rates of capital investment. Even within those

industries, however, minority ownership drops precipitously as firm size rises. Since capital

expenditures, particularly expenditures for computers, rise sharply as firm size increases, these

findings, taken together, suggest that minority-owned firms confront difficulties in accessing capital.

■ Two factors positively associated with the ability to access capital are family income and educational

attainment. In general, minority business owners have lower family incomes and less formal

education than their non-minority counterparts. However, for minority and non-minority businessowners of comparable income and education, indicators of entrepreneurial success (as measured by

firm size) are closer to parity. 

■ In addition to ability to access financial markets, an important factor associated with differential rates

of investment in productivity-enhancing IT is familiarity with computers and the Internet. Survey

data show that minority-owners are less likely to use computers or access the Internet than nonminority business-owners. 

Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

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1 An MBE or minority-owned business is a business in which members of minority groups (African-Americans, Hispanics, Asian Americans,

American Indians, and Alaska Natives) own over 50 percent of the business. Similarly majority-owned businesses refers to businesses where

members of minority groups do not own over 50 percent of the business.
Keys to Minority Entrepreneurial Success:

Capital, Education, and Technology2

Introduction

The willingness of Americans to take risks and start new businesses is an underlying strength of the

U.S. economy. Peter Drucker’s observation over 20 years ago, in the midst of one of the most painful

periods of economic restructuring in U.S. history, remains meaningful today:3

The surest indication of such an atypical cycle—and precisely what we see about

us today in the United States—is the emergence of entrepreneurs across a

spectrum of activities that extends far beyond what at the time is considered high

tech. It is, to be sure, a period of high risk, rapid change, considerable turbulence,

and severe anxiety. Real dangers abound that have nothing to do with business

cycles—the threat of war, for example, or of the collapse of raw material

producers. Nevertheless, it is a period of great opportunity, of fast-growing

employment in certain areas, and of rapid overall growth. And as Schumpeter

understood, what distinguishes such an atypical cycle from a more conventional

trough is not the play of abstract economic forces. It is entrepreneurial energy.4

Entrepreneurial energy is evident in all segments of the U.S. economy, but especially the minority business

community. Nonetheless, minority-owned firms continue to be smaller than majority-owned firms, both

in terms of numbers of employees and revenues.5 This report identifies the size and industry distribution

of these businesses, as well as characteristics of the business-owners themselves, looking for factors that

may be contributing to this outcome. We find that the keys to entrepreneurial success, as measured by the

ability to grow the business, are capital, education, and technology.

Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

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2 The author would like to thank David Beede, an economist with the Economics and Statistics Administration, U.S. Department of Commerce

for valuable comments and suggestions.

3 The high rates of productivity growth that the United States experienced beginning in 1995 and that have continued through the current economic

slowdown are viewed by many as a signal that we are in a “new economy” or at least an “atypical” cycle.

4 Peter F. Drucker, “Our Entrepreneurial Economy,” Harvard Business Review, January/February 1981, p. 64. 

5 An MBE or minority-owned business is a business in which members of minority groups (African-Americans, Hispanics, Asian Americans,

American Indians, and Alaska Natives) own over 50 percent of the business. Similarly majority-owned businesses refers to businesses where

members of minority groups do not own over 50 percent of the business.
Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

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Entrepreneurship in the Minority Community

The National Commission on Entrepreneurship defines entrepreneurs as people who start small businessesthat they intend to grow into larger businesses.6 Although official statistics do not directly measure intent,

they do show that although the rate of increase in the number of minority-owned firms has been substantial,

these firms remain comparatively small in terms of average revenues and average numbers of employees. 

Between 1992 and 1997, the number of minority-owned firms increased by 29.6 percent as compared to

3.6 percent for majority-owned firms. Even after accounting for higher minority population growth over

this period (Figure1), growth in the number of minority-owned firms is still substantially higher (16.1

percent) than growth in the majority-owned firms (1.5 percent). As a result of these growth differentials,

the proportion of minority-owned firms increased from 12 percent in 1992 to 15 percent in 1997.7

6 See http:// www.ncoe.org

7 Comparisons of 1992 to 1997 are not exact because of major differences in the questionnaires in the two survey years. However, the Census

Bureau did publish estimates of change for both the number and receipts for minority-owned firms with caveat that “...exact estimates of change

are not available. However, the trends shown at the aggregate level are believed to be reliable.” One of the adjustments made was to exclude

C corporations from the comparison numbers because C corporations were not included in the sample used in the 1992 survey. For a discussion

of the methodology differences between the two surveys see pages 13 and 14 of the Survey of Minority-Owned Business Enterprises, July 2001. 

Source: Bureau of the Census, U.S. Department of Commerce, 1997 Economic Census, Survey of Minority-Owned Business

Enterprises, July 2001.
Over the same period, minority-owned firms lost ground relative to their majority-owned counterparts in

terms of size. As shown in Figure 2, even though average revenue per firm of minority-owned businesses

rose by $22,000 or 22 percent between 1992 and 1997 this was much lower than the $70,000 or 34 percent

growth experienced by majority-owned businesses. As a result, in 1997, the average revenue of majorityowned firms was 2.3 times as large as minority-owned firms, up from 2.1 percent in 1992. 

The vast majority of firms in the United States are small and in 1997 only one quarter of firms in the

United States had any paid employees. For minority-owned firms that proportion is even lower—20

percent. Among this very large number of firms without employees are most likely large numbers of

marginal businesses that are part-time or hobby-like enterprises. These are not the type of firms that are

entrepreneurial in nature using the definition above. Therefore, the remainder of this section will consider

only those firms with paid employees—firms that have passed a major entrepreneurial milestone. Even

when consideration is limited to firms with paid employees, however, minority-owned firms are

substantially smaller in terms of average revenues and number of employees than the majority-owned

firms (see Table 1).8

Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

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8 C corporations are excluded to provide comparability between minority and majority-owned firms. Although the universe for the 1997 survey

includes all corporations, “businesses that were foreign-owned, publicly held, nonprofit, or whose ownership was shared by its membership,

such as mutual companies, were tabulated separately and not distributed to the race/ethnicity of ownership categories.” The majority-owned

businesses, however, included all C corporations, including publicly held companies. Since it was not possible to subtract the publicly held C

corporations from the majority-owned firms, all C corporations were excluded. 

Source: Bureau of the Census, U.S. Department of Commerce, 1997 Economic Census, Survey of Minority-Owned Business

Enterprises, July 2001.
Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

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What factors could account for this size differential? Part of the explanation, no doubt, is that faster rates

of increase in the total number of minority-owned firms has led to these firms being, on average, younger

and therefore they would be expected to be smaller. Unfortunately, the data are not sufficient to explore

this issue. 

Another possible explanation is that minority-owned firms are more prevalent in industry groups where

small firm size, measured either by revenues or employees, is the norm (perhaps because economies of

scale are unlikely in such industry divisions). However, as shown in Table 2, there does not appear to be

a strong relationship between the distribution of minority-owned firms and average revenues or average

number of employees of individual industry groups.9 In fact, Table 2 shows that minority-owned firms are

substantially smaller than majority-owned firms in all industry groups.

Another variable that might be contributing to smaller size is lower rates of capital investment. As shown

in Figure 3, minority-ownership is concentrated in industries, such as services and retail trade, where U.S.

average annual capital expenditures for equipment are very low. Low capital requirements would be an

attractive feature to someone who wanted to start a business, but had limited access to capital. While that

may explain the concentration of minority-ownership in certain industries, it does not address the issue of

differential size within industries. Even in low-investment industries, minority-owned firms are

concentrated in small size categories.

However, limited access to capital might also be an explanation of the relatively small firm size within

industry divisions since one factor associated with superior firm performance is capital investment.10

9 This assertion is given further support by data that show less than 25 percent of people employed in retail and services industries work for firms

of less than 25 employees. See Economics and Statistics Administration, U.S. Department of Commerce, Main Street and the Digital Age:

How Small and Medium-Sized Businesses Are Using the Tools of the New Economy, February 2002.

10 For example research examining characteristics of a selection of individual manufacturing plants that were fast growing in 1977-1982 and

1982-1987 found that these plants were more capital intensive and had high productivity rates than their peers. Nathan Musick, “Heroic Plants:

Persistently-Rapid Job Creators in the Longitudinal Research Database—Their Distinguishing Characteristics and Contribution to Employment

Growth,” posted on IDEAS on November 8, 1998. 

 

 

 

* Data for American Indian and Alaska Natives not presented separately because of high standard

errors of the estimates, but are included in the Minority Total.
Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

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Therefore, one hypothesis suggested by this evidence is that minority-owned businesses grow more slowly

because they have less to invest than their non-minority counterparts. This hypothesis is also supported

by other research that suggests that lack of financial capital is one impediment to the survival and growth

of minority-owned businesses.11

11 See for example, U.S. Small Business Administration, Office of Advocacy, “Minorities in Business, 2001,” November 2001

(http://www.sba.gov/advo/stats). and Cavalluzzo, Ken S. and Linda C. Cavalluzzo. “Market Structure and Discrimination: The Case of Small

Businesses.” Journal of Money, Credit, and Banking, vol. 30, No. 4, November 1998, pp. 771-792.

 

 

 

 

 

 

 

 

 

 

 
Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

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As shown in Table 3,12 investment intensity, as measured by expenditure per employee, varies substantially,

not only among industry divisions, but also by firm size (with the exception of construction). These data

support the notion that, on average, smaller firms tend to invest less heavily in capital equipment, in

general, and in computer equipment, specifically. These data also show that the percent of firms with

minority-ownership drops precipitously as firm size increases in all industry classes shown. The negative

relationship between the percent of firms with minority-ownership and capital expenditures, particularly

expenditures for computers and peripheral equipment, is quite strong.13

The next section examines two characteristics of minority business owners that may be related to ability

to access capital—education and income. The third section of the report considers a specific type of

investment—investment in information technology—and discusses why it is of special importance to

entrepreneurs and why investment in this key technology may be lagging in minority-owned firms. 

12 The proportion of minority-owned firms in each size and industry category includes C corporations because it is not possible to subtract them 

out. This factor is most likely creating substantial downward bias in the proportion of minority-owned firms in the 500 employee and 

above category.

13 The negative correlation between minority-ownership by industry and firm size is 46 percent with per employee total equipment capital

expenditures and 60 percent with per employee computer expenditures. 

Source: Bureau of the Census, U.S. Department of Commerce, 1997 Economic Census, Survey of Minority-Owned Business

Enterprises, July 2001 and Annual Capital Expenditure Survey: 1998, Unpublished data.
Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

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Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

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Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

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Characteristics of Minority Business

Owners: Income and Education

Owners of larger businesses (represented in our data by those who are self-employed with incorporated

businesses) seem to have better access to social and financial capital networks than owners of smaller

businesses (represented by those who are self-employed in unincorporated businesses.14

Figure 4 indicates significant differences in the proportion and type of self-employment among racial and

ethnic groups among the employed population. The proportions of self-employment for Native Americans

(American Indians, Eskimos, and Aleuts) and Asian Americans are similar to those of Whites; while

Blacks and Hispanics are not only less likely to be self-employed, they are also far less likely to own

incorporated businesses.15

There does appear to be a relationship between the probability of owning a larger business and higher

incomes and educational attainment. Of the three employment categories considered here,16 people who

are self-employed in incorporated businesses are more likely than the other two groups to have family

incomes over $75,000. As shown in Table 4, over one-half of the Whites and Asians and over 40 percent

of Blacks and 46 percent of Hispanics who are self-employed in incorporated businesses have incomes

over $75,000. 

The incorporated self-employed are also more likely to have attained at least a bachelor’s degree. In

general, the percent of employed individuals in the United States (all races and ethnicities) with at least a

bachelor’s degree is 28 percent. As shown in Table 5, 43.6 percent of the White, non-Hispanics who are

incorporated self-employed have a bachelor’s degree, with the percentages for other racial/ethnic groups

ranging from 32.2 percent for Hispanics to 58.2 percent for Asians. 

High family income could be generated from other jobs held by family members or from savings or

bequests and serve as a source of capital (either directly or as collateral) for starting and growing a

business—raising the probability of future entrepreneurial success. Alternatively, high family income

14 Lacking a direct comparative measure for “size of firm” to match with the data on characteristics of business owners, “self-employment in

incorporated businesses” is used as a proxy for self-employed in larger businesses. These data, which are derived from the September 2001

Current Population Survey (CPS), do not distinguish between C corporations and Subchapter S corporations. The larger the firm, the higher

the likelihood that the business is incorporated. For example, minority-owned C Corporations are twice as large in terms of revenues as

partnerships and five times as large as individual proprietorships. Minority-owned subchapter S Corporations, the other category of

incorporated business, are 1.6 and 4.3 times as large as partnerships and sole proprietorships, respectively. In addition, owners of incorporated

businesses may be more likely to be willing to take the risks necessary to grow their businesses and may therefore have a greater need for

limited liability protection than do owners of unincorporated businesses. Including C corporations in this section does not present

comparability issues as in the earlier section because individuals all treated the same in the survey because the focus on self-employment status

largely eliminates the inclusion of large, publicly traded companies for both minority- and majority-owned firms. The CPS does not report the

ownership shares for self-employed persons in partnerships and corporations, however, so the minority ownership status of some firms may

not be exactly comparable in the CPS and SMOBE.

15 Because of differences in unemployment rates and labor force participation, percentages in Figure 5 are not the same as the rates of selfemployed as a percent of the population. For example, as a percent of the population aged 18 to 65 (whether employed, unemployed, or not

in the labor force), self-employment rates were 9.2 percent for Whites, 3.7 percent for Blacks, 7.4 percent for Native Americans, 7.7 percent

for Asian Americans, and 4.7 for Hispanics in September 2001. For purposes of this discussion, comparisons based on employed persons are

most relevant.]

16 Employed by government, private industry, and nonprofits. 
Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

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could reflect success in the self-employment job itself and thus reflect current entrepreneurial success.

Higher levels of education could imply greater access to increased information about financing and

management, as well as personal connections that could increase access to various types of capital

including venture capital.

Even though self-employed members of minority groups who have incorporated businesses have higher

levels of income and education than minorities with other types of employment, they still trail the income

and educational levels of Whites similarly self-employed. This accounts for much of the disparity in selfemployment rates. Figure 5 shows a subset of the employed universe considered in Figure 4—those with

incomes over $75,000 and holding at least a bachelor’s degree. The Figure shows that the percentages of

incorporated business owners in the high income and education category are also relatively similar across

racial and ethnic groups. This finding suggests that, despite continuing differences, entrepreneurial

success rates for minority and non-minority business-owners of comparable income and education are

substantially similar.

Source: Economics and Statistics Administration, U.S. Department of Commerce, calculations based on the September 2001

Current Population Survey. 
Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

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Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

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Source: Economics and Statistics Administration, U.S. Department of Commerce, calculations based on the September 2001

Current Population Survey. 
The Role of Information Technology in

Entrepreneurial Firms

I

nformation technology (computers, communications equipment, and software) has been described as a

general-purpose technology, i.e., a technology capable of generating dramatic productivity

improvements, including organizational improvements.17 IT facilitates productivity improvements in

many ways. Voicemail, for example, allows the sole proprietor message keeping abilities formerly only

available to someone who could afford to hire support staff. Off-the-shelf computer software allows the

small entrepreneur to manage inventories with a degree of efficiency formerly available only to large

firms, freeing up scarce capital. One of the most important IT tools, however, especially for smaller firms,

is access to the Internet. The Internet expands the growth potential of entrepreneurial firms in three

important ways: access to information, access to suppliers, and access to customers (See Box 1). 

Because most of the various components of IT, including software, communications equipment, and

computers, continue to decline in cost and complexity, this type of technology is increasingly within

financial reach of the small business owner. However, before any business owner would invest in IT or

any other type of business equipment, they need familiarity with the technology and an understanding of

its potential benefits.

One measure of familiarity with IT is computer and Internet use. People who actually have hands-on

experience with these tools could be expected to have an increased understanding of their capabilities over

people who do not use computers or the Internet. 

The data confirm that the incorporated self-employed are more likely to use computers and the Internet

than either those who are self-employed but not incorporated and those who work for others. Figures 6

and 7 confirm that these trends generally hold for individual race and ethnic groups. However, these

figures also point out that significant differences exist between the various groups in rates of both

computer and Internet use. The education and income differentials discussed in the previous sections are

significant in this context since both of these factors are associated with higher rates of computer and

Internet use.18

Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

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17 Timothy Bresnahan, Erik Brynjolfsson, and Lorin Hitt, “Information Technology, Workplace Organization, and the Demand for Skilled Labor:

Firm-level Evidence,” Quarterly Journal of Economics, vol.117, pp 339-376, February 2002.

18 Previous research using these data has shown that education and income have independent impact on computer and Internet use rates.

Unfortunately it is not possible to test for the independent impacts of race versus income and education for the self-employed categories

because of insufficient sample size.
Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

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Box 1

BUSINESS USES OF THE INTERNET

Accessing Information. Information is a critical input to any business, but for someone just starting a business

or looking to grow their business, the information needs are immense. A host of decisions, beginning with

deciding what type of business to start and where to locate, are followed by determining operational issues, such

as what laws and regulations apply. Information found over the Internet can help inform and speed these

decisions and help resolve operational issues. For example, a group considering launching a computer repair

business can conduct competitive research on area firms already providing this service (their prices, some

indication of their gross receipts, response time, complaints filed against them, etc) and can peruse real estate

listing sites to identify potential business locations and match this information against demographic and zoning

information. A person considering expanding an auto body refinishing operation can check on permitting

requirements for an increase on the volatile organic compounds (VOCs) emissions. While all of the information

gathering activities contained in the above examples can be conducted offline, the speed at which the online

information can be gathered, the breadth of the information, and the fact that these searches can be done at the

convenience of the searcher irrespective of time or day of the week, cannot be matched in the offline world. 

Key general business information can also be gathered over the Internet, with some sites providing information

especially tailored for specific communities or specific activities. For example, the Minority Business

Development Agency of the U.S. Department of Commerce's supports a web site, www.mbda.gov, which

provides business development information, including information on alternative financing, capital trends, and

some cash management tools, all developed especially for minority business-owners. Another government

portal, www.export.gov, provides one stop information on a wide variety of topics, covering a wide variety of

services offered by all the different agencies of the Federal Government that impact the export process.

Accessing Suppliers. Smaller businesses are often at a disadvantage vis a vis large firms because face higher

supply cost. They generally have access only to local suppliers and they lack the market clout to negotiate for

volume discounts. The Internet increases the range of choice available to smaller businesses. No longer does

the warehouse operator have to buy pallets from the local hardware store at retail prices. Nor is the dry cleaner

owner unable to offer her employees life insurance because her local agent only provides one high cost optionshe can shop for an affordable plan over the Internet. The advantage of using the Internet to improve access to

suppliers may be even larger for minority-owned firms operating in minority communities if these communities

have fewer supplier options.

Accessing Customers. As of September 2001, even though only 26.7 percent of people over the age of 18

reported using the Internet to make purchases, over 40 percent reported using the Internet to search for product

and service information making the Internet an important channel for businesses to reach potential customers.

However, for many firms, other businesses or the government are their primary customers, not individuals. A

recent survey of larger minority-owned firms confirmed that a majority of the respondents stated that their

customers were primarily other businesses and government, not individual consumers.A For firms seeking sell

to larger firms or the government, access to the Internet is critical as these groups increasingly are requiring all

their suppliers to bid, contract, and coordinate logistics online. Last year, the Minority Business Development

Agency contracted for three studies of industries where large firms dominate (Telecommunications, Automotive,

and Energy and Utilities).B As these studies point out, there is room for substantial increases in minority

sourcing for these industries, however, it should also be recognized that these are industries where most of the

firms are electronically connected to all key suppliers, either through the Internet or other networks. 

A Waldo Lopez-Aqueres, Minority Businesses' Use of Internet Technology: A Preliminary Case Study of Large Firms, 2001,

http://www.mbda.gov.

B These studies conducted by The Asaba Group in 2001 are all available at www.mbda.gov.
Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

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Source: Economics and Statistics Administration, U.S. Department of Commerce, calculations based on the September 2001

Current Population Survey. 

Source: Economics and Statistics Administration, U.S. Department of Commerce, calculations based on the September 2001

Current Population Survey. 
Conclusion

Defining entrepreneurs as people who start small businesses that they intend to grow into largerbusinesses, this report explores the entrepreneurial experience of the minority business community.

The report finds that although entrepreneurial energy is high and the number of minority-owned firms is

increasing, entrepreneurial success appears to be lagging—minority-owned businesses are remaining

smaller than other businesses. 

Entrepreneurial success of minority-owned firms appears to be related to ability to access capital and use

information technology. Minority business-owners with high income and education, for example, are

more like their non-minority counterparts in owning businesses that are presumed to be large. The extent

to which minority businesses are investing in and using technology is another important factor influencing

the ability of minority-owned firms to grow and prosper. The fact that minority business owners are less

likely to be computer or Internet users may be a limiting factor in their adoption of electronic business

processes that could substantially improve the productivity of their businesses.

Keys to Minority Entrepreneurial Success: Capital, Education, and Technology

17
Entrepreneurial Success

Capital,Education, andTechnology

U.S. Department of CommerceEconomics and Statistics AdministrationMinority Business Development AgencySeptember 2002

Entrepreneurial SuccessCapital,Education, andTechnologyU.S. Department of CommerceEconomics and Statistics AdministrationMinority Business Development AgencySeptember 2002