Principal Topic

The purpose of this research is to measure the impact of initial gestation decisions for viable firm creation among African American entrepreneurs. While we continue to learn more about the methods many African Americans use to create viable firms (Bates 1997; Young 1998; 2000), there has no been no systematic study of the gestation process among African Americans. Given the fact that “the kinds of activities that nascent entrepreneurs undertake, the number of activities, and the sequence of these activities have a significant influence of the ability of nascent entrepreneurs to successfully create new ventures” (Carter, Gartner, and Reynolds 1996), this analysis aims to contribute to the understanding of the factors initial gestation decisions and start-up event sequences have for shaping viable firm births for African Americans in two midwestern cities.

Method

Data for the study come from a recently completed ethnographic probability sample of 60 African American entrepreneurs in two midwestern American cities. Multiple linear regression was used to ferret out specific start-up event sequences that affect firm performance.

Results

In an effort to make better sense of the factors shaping viable firm births among African Americans entrepreneurs, this paper attempts to link gestations decisions to initial firm performance. In doing so, I find that certain decisions made by African American entrepreneurs in the initial stages of firm development does affect firm performance. Specifically, while African American entrepreneurs whose initial gestation decision was to develop his/her business plan reported greater sales in the first year of the new venture, those whose initial gestation decision was to purchase or rent facilities reported higher profits during the same period. Additionally, while one of the stronger predictors of first years sales was the third gestation decision made by the entrepreneur after recognizing the entrepreneurial opportunity, none of the three gestation decisions had a statistically significant impact on first year profits.

CONTACT: Nicholas Young, Morrison Center for Entrepreneurship, University of St. Thomas, Mail #TMH 470, 1000 La Salle Avenue, Minneapolis, Minnesota 55403-2005; (T) 651-962-4459; (F) 651-962-4410; nmyoung@stthomas.edu