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Minority Entrepreneurs Hit Marketplace Roadblocks

Racially-diverse business owners

Minority entrepreneurs in the U.S. who believe their road to success is more difficult than those of the racial majority may be right, according to new research.

A recent study published in the Journal of Consumer Research examines how racial minority entrepreneurs maneuver the marketplace and approach financial situations where there are restrictions.

Sterling Bone, assistant professor of business at Utah State University and one of the researchers on the project, said entrepreneurs who are minorities face more obstacles and deal with rejection differently than their Caucasian counterparts.

“We were surprised to see how differences these experiences really were,” said Bone. “There are differences in the level of treatment, the level of opportunity, the level of information that minorities receive when seeking these types of services.”

The research included sending “mystery shoppers” to banks seeking information about loans, in-depth interviews with minority owners of small businesses and an experiment which studied how minority and non-minority consumers felt about themselves before and after a loan request rejection.

Associate professor of marketing at Brigham Young University and researcher on the study Glenn Christensen said race impacted all decisions minority individuals made during the process of trying to secure financing for their small businesses. He said ethnicity not only affected business financing attempts, but altered other life experiences and how individuals viewed themselves as well.

“Their self-esteem, their sense of control and autonomy and efficacy in the world—all of those are hit pretty hard when they encounter the inability to make marketplace choices,” said Christensen.

Caucasian entrepreneurs in the study tended to view setbacks as bad judgment of those making the decisions, not as a threat to self-esteem.

Read more from the study in the Journal of Consumer Research