Principal Topic

This study compares characteristics of non-high tech businesses started by ethnic, specifically entrepreneurs of Asian and Latino origins, with those started by “mainstream entrepreneurs,” or those of European origin. Prior research points that several limitations may handicap ethnic startups. Ethnic founders would have fewer personal resources and their businesses would operate in small niche markets. Also they tend to be ethnic enclaves, with founders showing high personal ethnic involvement. Such personal and firm attributes may lead to lower levels of business performance.

Method

In this study, personal characteristics were measured in business goals, education and business experience, entrepreneurial values, and personal ethnic involvement. Firm attributes included business linkages to ethnic community, business type i.e., service, manufacturing, or retail, perceived business environment, and types of competitive strategies. Firm performance was gauged in goal satisfaction, annual sales, return on sales, and employment growth. A structured questionnaire was used to gather data from two sources. First, mailings were done to random samples of ethnic and mainstream businesses in the Northeast, and second, additional questionnaires were completed through personal interviews. Data from 114 ethnic startups and 98 mainstream startups has been analyzed so far.

Results and Implications

T-tests showed that Asian and Latino entrepreneurs relative to those of European origin had significantly higher ethnic involvement in personal sphere, fewer years of education and industry experience, and headed their firms for shorter periods. Yet, their entrepreneurial values were not-significantly different, nor was their goal emphasis on societal and ethnic community contribution significantly higher than that of mainstream entrepreneurs. However, mainstream entrepreneurs did emphasize financial goals for business much more. Few of the firm attributes differed significantly among these two groups, except that proportionately there were more manufacturing firms among mainstream startups. It is notable that linkages of the business to ethnic community were not significantly stronger among the Latino and Asian group and their perceptions of business environment did not significantly vary from the mainstream entrepreneurs’. Firm performance differed significantly only the one criterion of employment growth, with ethnic startups having grown much faster during the preceding three years. These results suggest that the ethnic entrepreneurs’ business aspirations may be similar to those of European descent, but limited opportunity structure may handicap the former group in key aspects of managerial preparation. For instance, their high ethnic involvement may be the result of limited opportunities for interaction with the outside community, and this in turn may lead to inability to compete in the mainstream markets, and hence to continued disadvantage in operation and performance.

CONTACT: Radha Chaganti, Department of Business Policy & Environment, Rider University, Lawrenceville, NJ 08648; (T) 609-895-5529; (F) 609-8965304; Chaganti@rider.edu