Alicia Robb

Greater Access to Capital Is Needed to Unleash the Local Economic Development Potential of Minority-Owned Businesses

Limited access to financing restricts the ability of minority business enterprises (MBEs) to achieve viability, to generate new jobs, and, generally, to reach their full potential to contribute to the economic development of the communities and regions in which they operate. Although MBEs rely more heavily on financial institutions for loans than all other borrowing sources combined, they experience higher costs than White firms when they borrow, receive smaller loans, and have their loan applications rejected more often. For MBEs in minority neighborhoods, these borrowing problems are compounded. Action is needed. The federal government needs to prosecute financial institutions that discriminate against MBEs on the basis of borrower race. Local governments can assist by weighing bank-lending activity in local minority communities when choosing the local banks with which they do business. Prompt payment of MBE vendor invoices by public-sector clients is needed.

Financing Strategies of New Technology-Based Firms: A Comparison of Women-and Men-Owned Firms

In this article we used data from the Kauffman Firm Survey to compare the financing strategies of women-and men-owned new technology-based firms. Our findings reveal that women raised dramatically less financial capital than men in the startup year and in the subsequent four years of operation. We also found that women used a significantly higher level of external debt and a significantly lower level of external equity during the startup year. Although our findings do not allow us to definitively rule out the possibility of discrimination, particularly in the market for external equity, our results indicate that women may have different motivations and expectations for their firms. These, in turn, may determine some of their financing choices.

Small-business viability in America’s urban minority communities

Although minority and immigrant entrepreneurs in the US have chosen to concentrate in low-profit retail and service lines of business clustered geographically in urban minority neighbourhoods, their reasons for doing so are unclear. We investigate their motivations by analysing viability among urban small businesses; specifically, we compare the longevity of firms targeting clients in minority neighbourhoods to those serving clients in nonminority-white residential areas. Our broader concerns are to understand why the entrepreneurial occupational choice has been embraced. A key objective is to identify specific barriers that may retard small-firm creation and development in minority-neighbourhood environs. While some claim this market offers attractive opportunities, others stress that predominance of minority- and immigrant-owned firms in this sector reflects the fact that only the least desirable market niches are accessible to them. We find that serving local clienteles in minority neighbourhoods is strongly related to firm closure and low profitability.

Impacts of Owner Race and Geographic Context on Access to Small-Business Financing

Multiple studies document both the scarcity of small-business financing in inner-city minority communities and the higher loan application rejection rates among minority business enterprises (MBEs), compared with equally creditworthy White-owned firms. When MBEs do receive bank financing, they get smaller loans than Whites. Two aspects of these findings are troublesome. First, urban MBEs are heavily concentrated geographically in minority communities, raising the issue of whether difficulties accessing financing reflect firm location, minority ownership, or both. Second, applicable studies rest on weak theoretical foundations. The authors’ findings suggest that banks engage in discriminatory practices limiting credit availability to MBEs. Controlling for risk factors, however, firm location in a minority or inner-city neighborhood has no apparent impact on loan availability or size. Owner race/ethnicity, in contrast, is important. Subtle processes discourage MBEs from seeking bank loans. Owner race and wealth both powerfully shape loan access: high wealth opens doors, minority ownership closes them.

Has the Community Reinvestment Act increased loan availability among small businesses operating in minority neighbourhoods

The 1977 Community Reinvestment Act (CRA) established a bold agenda requiring financial institutions in the USA to serve the credit needs of low- and moderate-income areas, including traditionally excluded minority residential areas. Initially opposed by both bankers and the federal regulatory authorities responsible for enforcement, the CRA has been contentious for decades. This study explores CRA impacts by investigating whether small businesses located in minority neighbourhoods have the same degree of bank-loan access as equally creditworthy firms located in other environs. We analysed both the unmet credit needs of small firms and the outcomes of their loan applications. We found that equality in loan access has been attained in some respects, indicating the CRA has had positive effects on loan availability. Inequality nonetheless persists. Regarding unmet credit needs, firms are penalised if their owners are African American, Latino or Asian American. Since roughly half of owners in minority communities are minorities, our challenge was to disentangle the effects on loan access of small-business geographic location versus owner race. Causal factors underlying our findings were investigated. Did bank regulators take the initiative in lessening traditional discriminatory lending practices? Alternatively, were activist community groups responsible? While the agenda advocated by activist groups coincides closely with actual gains, the overlapping but differing stated objectives of regulators did not.

Entrepreneurial Ecosystems and Growth of Women’s Entrepreneurship

The Diana International Project 1 is committed to advancing knowledge about the status of women’s entrepreneurship around the world. This book is the eighth volume in the series associated with the Project and will build on the success of the first volume Brush, C., Carter, N.M., Gatewood, E.J., Greene, P.G. and Hart, M. (eds.) (2006) Growth-oriented Women Entrepreneurs and their Businesses: A Global Research Perspective. This new volume will further consider the various national and international, social and contextual influences on women’s entrepreneurship by examining ecosystems, and how these affect and influence growth strategies and business potential.