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Why Are Black-Owned Businesses Less Successful than White-Owned Businesses? The Role of Families, Inheritances, and Business Human Capital

  • Robert W. Fairlie
  • Alicia M. Robb

Using confidential microdata from the Characteristics of Business Owners survey, we examine why African American–owned businesses lag substantially behind white-owned businesses in sales, profits, employment, and survival. Black business owners are much less likely than white owners to have had a self-employed family member owner prior to starting their business and less likely to have worked in that family member’s business. Using a nonlinear decomposition technique, we find that the lack of prior work experience in a family business among black business owners, perhaps by limiting their acquisition of general and specific business human capital, negatively affects black business outcomes.

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File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?id=doi:10.1086/510763
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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 25 (2007)
Issue (Month): ()
Pages: 289-323

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Handle: RePEc:ucp:jlabec:v:25:y:2007:p:289-323
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