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External Financing and the Survival of Black-Owned Start-Ups in the US

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Listed:
  • Yunwei Gai

    (Babson College, Babson Park, MA 02457, USA)

  • Maria Minniti

    (Syracuse University, 900 South Crouse Ave, Syracuse, NY 13244)

Abstract

Since black-owned businesses tend to have access to lower informal financing, we hypothesize that, obtaining commercial financing should play a compensating role and have a stronger marginal effect on black-owned businesses than on businesses owned by other racial groups. Unexpectedly, we find that, while the use of commercial financing reduces the exit rates of new firms in general, the reduction is not significantly different across racial groups. We attribute this result to unobserved heterogeneity linked, at least in part, to the owner’s start-up capital and to other beneficial externalities that access to informal investors produces.

Suggested Citation

  • Yunwei Gai & Maria Minniti, 2015. "External Financing and the Survival of Black-Owned Start-Ups in the US," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 41(3), pages 387-410, June.
    • Handle: RePEc:pal:easeco:v:41:y:2015:i:3:p:387-410
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    Cited by:

    1. Aparicio, Sebastian & Audretsch, David & Urbano, David, 2021. "Why is export-oriented entrepreneurship more prevalent in some countries than others? Contextual antecedents and economic consequences," Journal of World Business, Elsevier, vol. 56(3).
    2. Iryna Demko & Ana Claudia Sant’Anna, 2023. "Impact of Race, Ethnicity, and Gender on the SBA Paycheck Protection Program (PPP) Loan Amounts," Economic Development Quarterly, , vol. 37(3), pages 211-229, August.

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