Principal Topic

This paper examines the relationship between social capital and minority business enterprise. Ultimately, using an index of municipal social capital and the percentage of minority-owned businesses in 100 U.S. metropolitan statistical areas, the paper demonstrates that there is, on average, a negative relationship between municipal social capital and minority enterprise. The paper concludes with an exploration of its findings for policy-makers seeking to facilitate minority enterprise growth as a community development strategy.

Method

This study’s examination of the correlation between minority business enterprise and social capital in communities required developing three different sets of variables. The first, the rate of minority business enterprise as a percentage of total business in the communities, served as a dependent variable. The second, social capital in metropolitan statistical areas, served as the independent variable, and required developing a specific index for measuring municipal social capital. The third, business to population ratios for minority and non-minority groups in each of the metropolitan statistical areas, served as a second dependent variable. Correlation analyses were conducted between the independent and dependent variables to determine if there is any relationship between minority enterprise and social capital in metropolitan areas.

Results and Implications

Results from several analyses suggest that there is a negative correlation between the level of social capital and the percentage of minority business in a community. Results also suggest that there is a positive correlation between the ratio of non-minority business (as related to non-minority population size) and social capital and either no relationship or a negative relationship between the ratio of minority business (as related to minority population size) and social capital. In sum, findings indicate that the more social capital in a metropolitan area on a macro-scale, the better for non-minority owned businesses, and the worse for minority-owned businesses.

The implications of the research are two-fold. First, it raises the need for additional exploration into the theoretical and operational dynamics related to social capital, particularly as it might enable or inhibit minority enterprise development. Second, it raises a number of questions on how policy makers might want to engage in the engineering of social capital for a variety of economic development strategies. Ultimately it leads to the conclusion that the dynamics related to social capital are far more complex than much of the current research suggests, particularly when it might be considered as a tool for leveraging minority business growth.

CONTACT: Kyle Farmbry, San Diego State University, School of Public Administration and Urban Studies, 5500 Campanile Drive, San Diego, CA 92182-4505; (T) 619-594-6224; (F) 619-594-1165; drkf@hotmail.com