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Diverse Business Owners Industry Updates

Study Finds Black Women Lead in Entrepreneurship

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Women and particularly women of color are underrepresented in business leadership and ownership roles, but it’s not for lack of effort.

A new study by the Global Entrepreneurship Monitor (GEM) found that 17% of Black women are in the process of starting or running new businesses, compared to only 10% of white women and 15% of white men. And, yet, only 3% of Black women are running mature businesses. 

Writing in Harvard Business Review, the study’s co-authors suggested several reasons for the disconnect between entrepreneurship levels among Black women and their comparative absence in the corner office.

“One explanation may be the types of businesses started,” they wrote. “Our analysis shows that 61% of Black women entrepreneurs start businesses in either retail/wholesale or the health, education, government or social services sectors, compared to the 47% of white women and 32% of white men entrepreneurs. To the extent that these are small, informal businesses with low margins in crowded competitive contexts, they are more difficult to sustain over the long term.”

Access to capital is another potential barrier. “In previous research, we found that 61% of Black women self-fund their total start-up capital,” they noted. “This is in spite of the fact that in our analysis of the GEM data only 29% of Black women entrepreneurs live in households with incomes over $75,000, compared to 52% of white men. This result, along with data showing that Black people take on a higher level of debt to go to college, and are less likely to own their own home, suggest that educated Black women are encumbered with debt, and have fewer personal resources and low collateral.”

That is a concern that is getting quite a bit of attention these days. For example, click here to read about how American Express recently committed $40 million to help fund minority businesses.

Indeed, among their recommendations, the Harvard Business Review writers urged the financial sector to take steps to ensure greater equity in funding entrepreneurs. They also called on institutions of higher learning to play a greater role.

“Black women starting businesses in the U.S. are highly educated,” they wrote. “Although slightly more than one-fourth of Black women in the general population have a college degree or higher level of education, we found that more than three-fourths of Black women entrepreneurs have at least a college degree. Universities are uniquely positioned then to provide Black women with experiential education practices that enable them to learn and practice entrepreneurship and develop capabilities for overcoming constraints they may face, as well as offer peer support and collaboration, in addition to expert advising.”

In an era when the United States has elected its first Black woman vice president and Black Lives Matter has elevated awareness of institutional racism, they concluded, “Never before have we seen such potential for Black women to elevate their voice and their careers, and to achieve social and economic equality. One means for realizing this dream lies in the opportunities offered through entrepreneurship. 

To read more, click here.

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