Black Entrepreneurial Success: The Effect Of The Neighborhood Type

Americans tend to cluster into distinct neighborhoods based on their race/ethnicity. The extent of this clustering can be seen in the differences in the racial/ethnic constitution of the U.S. inner cities and the suburbs. This clustering profoundly affects the success of ethnic entrepreneurs, who are usually dependent on co-ethnic patronage in their ethnic enclaves because of their ethnic identity. Successful ethnic entrepreneurship affects the economic vibrance of the ethnic enclave, the neighborhood’s health and the inhabitants’ wealth. Most African American-owned businesses are in African American enclaves, which are usually in urban areas and depend primarily on African American customers for survival. Individual and group outcomes are influenced by how individuals develop their social identities based on demographic characteristics (Miller, 2019). Social identity theory postulates that the social category into which individuals fall and to which individuals feel they belong forms the basis of their identity (Tajfel and Turner, 1979). However, there are some instances where these expected outcomes are violated. Unlike other ethnic-owned businesses in other ethnic enclaves that are thriving, African American-owned businesses continue to suffer higher failure rates and lower founding rates. As reported in an earlier study, one reason for the low entrepreneurship rates for Blacks is consumer attitudes toward Black entrepreneurs. Consumer attitudes can influence patronage, especially when information asymmetry or bias exists. This paper further explores the relationship between consumer attitudes and intended patronage of Black-owned businesses in the context of neighborhood type. Findings and implications are discussed.