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UW-EXTENSION: A deep dive into entrepreneurial development system

UW-EXTENSION: A deep dive into entrepreneurial development system

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In a research paper titled “Social Capital and Start-Up Motivation: Deepening Trust in the Entrepreneurial Development System” Diana Hammer Tscheschlok, Steven Deller and Tessa Conroy find that, nationally, minority and immigrant business owners start businesses at higher rates than white business owners and they are a major contributor to the future of business growth in Wisconsin.

Yet, comparatively little is known about this subset of entrepreneurs in Wisconsin. Using insight from Tscheschlok’s interviews with 35 minority business owners with a newly forming economic development system in Fond du Lac County, the researchers discuss factors that have an impact on the participants’ decision-making and relationships. They conclude the paper by lending suggestions that business development professionals can use to maximize the success of entrepreneurs in their communities.

Minority-owned businesses

Minority business ownership is well below parity in Wisconsin. In 2007, minority residents represented 14.6 percent of the total population and owned 6.2 percent of all firms in the state. The largest number (11,276) were owned by African-Americans. From 2002-2007 the numbers in Wisconsin increased by 47.5 percent and their gross receipts increased 77.5 percent while the minority population increased only 13.6 percent. In spite of well-documented difficulties accessing capital and other barriers minority-owned firms in the U.S. outpace the growth of non-minority owned in number, gross receipts, and paid employment even when the number of businesses is below parity. Surely engaging minority-owned firms is no longer an ethical imperative; it is also a commercial and economic one. Minority-owned businesses are a vital part of the economic engine of our country.

Immigrant-owned businesses

In spite of financial hardship, cultural and racial discrimination, and linguistic barriers potentially contributing to difficulties for immigrants to the U.S., successful immigrant entrepreneurs are prolific throughout U.S. history. One researcher found that white, black, Asian, and Hispanic immigrants of both genders were more likely to own businesses than their same-race, same-gender, US-born counterparts. She concludes, “most regional economic development policies, especially those related to business ownership, should take into account ethnicity, gender, and foreign-born status, along with other social factors. The results of this study suggest it is a ‘must.’

Women-owned businesses

Other related research supports the notion that women start businesses three to four times more often than men, which should indicate many more women-owned firms than there actually are. In Wisconsin, 20 percent of businesses are women-owned which is below the national rate of 29 percent. Notably, the percent of African-American businesses owned by women in Wisconsin (68 percent) was the second highest in the nation, and the rate of Latino-owned businesses in Wisconsin owned by women (50 percent) was the fifth highest in the nation during these five years.

Who trusts whom?

At the heart of the later part of the study is research findings about social capital and trust. I see that many minority entrepreneurs may not trust institutions and institutions may not trust minority entrepreneurs. What can we do to affect the degree and number of relationships between resourced individuals and those seeking resources?

The entrepreneurial development system in Kenosha County is rich and could be enhanced when even more innovators are surrounded by other innovators, funders, and technical experts that inspire, mentor, fund, and teach others how to navigate through the start-up journey. A community’s ability to create trusting networks pays dividends for the businesses who benefit and the area economy.

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