Previous Challenges for Minority-Owned Businesses

Aldrich and Waldinger (1990) reveal that in order for minorities to build successful companies there needs to be an interaction “between opportunity structures and group characteristics.” (Aldrich and Waldinger, 1990)

Opportunity structures consist of being able to offer products and services beyond their own ethnic groups, being able to easily access business opportunities, favourable market conditions, a competitive environment, and government policies. (Aldrich and Waldinger, 1990)

Group characteristics include culture, selective migration, aspirations of the business owner, organising capabilities, the ethnic and social networks they are a part of, their ability to mobilise resources, and whether or not the government aids or stifles the group. (Aldrich and Waldinger, 1990)

During the 1960s, for instance, these conditions were not favourable for minority entrepreneurs, especially African Americans. The reasons minority-owned businesses failed then include, a lack of education, lack of business funding and a lack of trust for their own communities. (Boston, 2001)

Blacks were educated in second-rate schools in mainly segregated neighbourhoods and were mostly low-wage, low-skill workers. In the 1960s, very few Blacks held technical, managerial or administrative jobs as employees that would equip them to become successful entrepreneurs in the future. In the 1980s, only 18.5 percent of Black business owners, 18.8 percent of Hispanic business owners and 26.6 percent of other minorities had some kind of supervisory, executive or managerial experience. (Boston, 2001)

Blacks were also not allowed to be a part of some of the nation’s most prestigious country clubs and business associations. Just as important as they are today, at the time, these places were where networking happened, conversations were had and where business deals were made. (Boston, 2001)

Blacks having less education, smaller networks, and less experience, meant that they also had less access to capital, credit and business opportunities, which affected the types of businesses they started and operated.  (Boston, 2001)

Segregation fabricated legal and psychological obstacles among Black entrepreneurs and consumers (Alexander, 1992). For many years, Blacks were taught to trust Whites and to doubt and distrust other Blacks. 

At the time, Blacks were reluctant to grow their businesses past “mom and pop” shops. Growing a larger business, would have meant being either dependent on White suppliers and/or consumers, which could have led to physical harm or destruction of their property. (Boston, 2001)

And after desegregation, open housing policies led middle- and high-income minorities to move to the suburbs. Because of this dispersion and stiff competition from major chains and franchises who were moving into minority urban communities, minority business owners lost their “protected market” and now had to compete with major players in order to survive. (Boston, 2001)