Black entrepreneurs start businesses at higher rates than other groups and have high rates of female entrepreneurship, according to a new analysis by researchers at Babson College.
The research shows consistently higher rates of entrepreneurship among Black Americans. On average from 2014 to 2018, about 20% of the Black population in the U.S. started businesses — compared to roughly 12% of the white population and nearly 13% of the Latino population — the analysis found.
The research analyzes data from the college's annual "Global Entrepreneurship Monitor" studies over the last five years, which includes a survey of over 3,000 adults in the U.S.
The research finds Black entrepreneurs are more likely to be in the lowest third of household incomes. Nearly half of white entrepreneurs are in the highest third of incomes, while only a third of Black entrepreneurs are. Latino entrepreneurs are more likely to be in the middle income group, the research found.
"We know that the Black population tends to have higher unemployment rates and lower average earnings," said Babson College professor Donna Kelley, who co-authored the research. "It may be that entrepreneurship represents really an opportunity to have independence in your work, have more control over your work and the possibility of earning more than you would earn in a job."
There is also gender parity among Black entrepreneurs. The analysis found 50% of Black entrepreneurs are women — a higher rate than other groups — 40% of white entrepreneurs are women and 39% of Latino entrepreneurs are women.
Black entrepreneurs also tend to be younger than their white counterparts. The research finds that white entrepreneurs tend to be at the mid-career stage, ages 35-44, while Black entrepreneurs tend to be early in their professional lives, ages 25-34. Latino entrepreneurs also tend to be younger, the research found. Kelley said the younger populations in these groups may be more willing to take risks and see entrepreneurship as a viable path.
The research also looked at whether entrepreneurs started businesses out of necessity, and found less differences between the groups. Latino entrepreneurs were motivated by necessity more than the other groups — around 15%, compared to nearly 13% of Black entrepreneurs and nearly 11% of white entrepreneurs who started business out of necessity.
There were some slight differences in education level — about 72% of Latino entrepreneurs have at least a post-secondary degree, compared to 78% of Black entrepreneurs and nearly 82% of white entrepreneurs.
The coronavirus pandemic has certainly already hit businesses hard and will surely impact entrepreneurship. Kelley said that could go both ways — some people may not be able to start businesses, but there may be people who start businesses out of necessity due to job loss and other setbacks.
A recent poll by MassINC found that the pandemic could exacerbate existing racial disparities among businesses as the state reopens. For example, the poll found businesses owned by people of color were more likely to report not being able to pay bills, and they were less likely to receive Payroll Protection Program loans than white business owners.