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Racial Differences in Access to Capital for Innovative Start-Ups

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  • Robert Fairlie
  • David T. Robinson

Abstract

This paper uses data from the Current Population Survey and the Kauffman Firm Survey to examine racial differences in the prevalence of innovative business ownership and in the amount of financing that innovation-intensive firms obtain. We find clear evidence that the racial differences in access to capital among start-ups found more broadly in Fairlie, Robb, and Robinson (2022) are also visible among innovation-intensive firms. Part of the disparity arises because Black founders are much more likely than white founders with similar credit scores to anticipate that banks will reject their loan applications, and thus not apply for credit at all. Policies aimed at addressing funding disparities must confront these challenges.

Suggested Citation

  • Robert Fairlie & David T. Robinson, 2023. "Racial Differences in Access to Capital for Innovative Start-Ups," Entrepreneurship and Innovation Policy and the Economy, University of Chicago Press, vol. 2(1), pages 149-166.
    • Handle: RePEc:ucp:eipoec:doi:10.1086/723238
    DOI: 10.1086/723238
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    References listed on IDEAS

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    1. Robert W. Fairlie & Alicia M. Robb, 2008. "Race and Entrepreneurial Success: Black-, Asian-, and White-Owned Businesses in the United States," MIT Press Books, The MIT Press, edition 1, volume 1, number 026206281x, April.
    2. Couch, Kenneth A. & Fairlie, Robert W. & Xu, Huanan, 2020. "Early evidence of the impacts of COVID-19 on minority unemployment," Journal of Public Economics, Elsevier, vol. 192(C).
    3. Erik Hurst & Benjamin Wild Pugsley, 2011. "What Do Small Businesses Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 73-142.
    4. Robert W. Fairlie & Javier Miranda, 2017. "Taking the Leap: The Determinants of Entrepreneurs Hiring Their First Employee," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(1), pages 3-34, February.
    5. Aaron K. Chatterji & Kenneth Y. Chay & Robert W. Fairlie, 2014. "The Impact of City Contracting Set-Asides on Black Self-Employment and Employment," Journal of Labor Economics, University of Chicago Press, vol. 32(3), pages 507-561.
    6. William D. Bradford, 2003. "The Wealth Dynamics of Entrepreneurship for Black and White Families in the U.S," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(1), pages 89-116, March.
    7. Robert W. Fairlie & Aaron K. Chatterji, 2013. "High‐Technology Entrepreneurship in Silicon Valley," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(2), pages 365-389, June.
    8. Lisa D. Cook & Janet Gerson & Jennifer Kuan, 2021. "Closing the Innovation Gap in Pink and Black," NBER Chapters, in: Entrepreneurship and Innovation Policy and the Economy, volume 1, pages 43-66, National Bureau of Economic Research, Inc.
    9. repec:mpr:mprres:5716 is not listed on IDEAS
    10. Vincenzo Quadrini, 1999. "The Importance Of Entrepreneurship For Wealth Concentration And Mobility," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(1), pages 1-19, March.
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    More about this item

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination

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