Do Wealth and Race Affect Business Start-Up Rates??

WASHINGTON, D.C. - The wealthiest nascent entrepreneurs - individuals putting effort towards opening a business, but who have not yet done so - are more likely to start a business than are their less wealthy counterparts. However, this effect differs when the race and ethnicity of the entrepreneur are considered as factors. These conclusions are part of a recent study, "The Effect of Wealth and Race on Start-up Rates," conducted by the Office of Advocacy of the U.S. Small Business Administration (SBA). 

"Self-employment rates among minorities are generally less than would otherwise be predicted," said Dr. Chad Moutray, Chief Economist for the Office of Advocacy. "Yet, there tends to be more 'pre-business' activity among nascent minority entrepreneurs. This study looks at some of the
possible factors that might explain that gap."

The study finds that as a whole amongst nascent entrepreneurs:

* The wealthiest (top 25 percent as determined by net assets) are four times more likely to open a business than those in the lower part of the wealth distribution. 

* White nascent entrepreneurs are more likely to open a business than are Black or Hispanic nascent entrepreneurs.

* Those with experience in their intended industry are less likely to open a business than those with no experience in the field.

* Having entrepreneurial parents did not affect start-up rates.

* The existence of a formal business plan did not influence start-up rates.

* Those who sought funds for start-up are more likely to open a business than those who did not.

The Office of Advocacy serves the "small business watchdog" role of the federal government. It examines the role and status of small business in the economy and independently represents the views of small business to federal agencies, Congress, and the President. It is also the source for small business statistics presented in user-friendly formats, and it funds research into small business issues. 

(Source: SBA Office of Advocacy)