Collaborative Ventures: Examining the Impact of Joint Ownership on Race in Business Operations

Background:

Entrepreneurship and business ownership are known methods of escaping poverty, seeking personal financial growth, and building generational wealth. However, these strategies of economic freedom are not easily obtained and accessible for all who wish to pursue them. Current research suggests that race, age, low education, and low startup capital can hinder businesses from reaching five years of operation. Other business characteristics, such as whether a business is jointly owned, can be key indicators of whether a business will remain in operation. This study will examine how joint business ownership moderates the relationship between race and business longevity/operation.

Methods:

Data used was from the Public Use Microdata Sample (PUMS) file created for the 2007 Survey of Business Owners and Self-Employed Persons (SBO). SBO collects information on the gender, ethnicity, race, and veteran status of business owners through annual surveys. This SBO is a robust survey with 2.1 million participants, and this study utilizes 1,271,318 of those responses. Whether a business was currently operating and if a business was jointly owned were recoded as binary variables. Race was dummy-coded for the purpose of this analysis, with Black being the contrasting race. A binomial logistic regression with moderation test was used to examine the relationship between race and whether a business is currently in operation.

Results:

The results showed that all races were significant when Black was the contrasting race except for Native Hawaiian and Pacific Islander. However, results showed that white business owners were shown to benefit the least out of all races when jointly owned as the interacting variable. The result showed that white business owners were least likely to survive if jointly owned compared to Black business owners.

Discussion/Implication:

Studies indicate that minority-owned businesses often struggle with business longevity, fighting to meet five years of business maturation and facing disproportionate barriers related to access to capital, networks, and market opportunities. This contrasts with their white counterparts, who may succeed more in solely owned businesses. However, minority entrepreneurs benefit more from collective or joint ownership models, such as partnerships, 50/50 ownership, or cooperatives, which offer advantages such as joint resources, shared risk, expanded networks, and shared decision-making.

This study and findings underscore the importance of reevaluating the support structures and programs provided by state and federal business incubators and programs to ensure they are responsive to the needs of minority entrepreneurs. Rather than focusing on businesses of single ownership, there is a pressing need to consider and promote collaborative business models that have been shown to be more conducive to success within minority communities.