Empowerment Through Entrepreneurism —
Building the Networks To Make Our Businesses Work—Part 1 —
It isn’t widely recognized that the tradition of entrepreneurship in the Black community is quite strong. In the days of slavery, skilled craftsman were able to run businesses on the side after fulfilling certain obligations to their owners. Among free Blacks, racial discrimination meant that they had to rely on themselves for services like banking and insurance. Black owned banks, insurance companies and newspapers were not accustomed to looking outside their own community for markets.
Paradoxically, the civil rights movement of the 1960s had two negative effects on Black entrepreneurship. The gradual decline in discrimination eliminated the protection some Black business-owners enjoyed because of aggressive redlining. Meanwhile, some of the best Black talent went to work for white-owned businesses or for government.
The civil rights movement accelerated the debate in the African-American community between assimilationist and separatist theories of economic development. Before then, the choice didn’t really exist, because the assimilationist model — relying on professional employment in the mainstream economy—was so difficult to do. The separatist theory of economic development was always associated with Black entrepreneurship. Only nowadays, the hope is that Black-owned businesses can market to whites as well as to Blacks.
Today Black entrepreneurship is not where it should be, if you take the view that Black business ownership should be roughly proportional to the Black population . . . about 12%. So the question remains; what are the barriers-and challenges—facing Black entrepreneurs today?
You can’t answer that question without mentioning continued racial discrimination and the gap in education levels between Blacks and whites, which is reinforced by concentrated poverty in central cities. Even controlling for education, Blacks are under-represented in science and engineering occupations, which are obviously important fields for entrepreneurship in the New Economy. As crucial as these problems are for explaining overall outcomes for African-Americans, our research addresses a more manageable problem and basic question.
What about the barriers facing an African-American who is educated and already motivated to start his or her own business?
Past research on this question has almost always focused on the economic barriers facing Black entrepreneurs, particularly their historically poor access to formal education, markets, mentoring and financial capital.
But my work is different. I’m interested in the entrepreneur’s access to social capital (networks).
This sociological approach is relatively new to the study of entrepreneurship. Let me explain. Social capital is defined as the resources that are accessed through your network of contacts and relationships.
For example, most entrepreneurs don’t get their ideas in a vacuum. A new idea usually comes onto the radar screen from someone in their social network. Then, they use others in their network to validate the idea. In other words, recognizing a business opportunity is a social process.
Your network—or lack thereof—can help or hinder initial idea development. Other important resources can also be accessed through a network, including capital, labor, and emotional support.
Said another way, it’s “who you know, who knows you and what is it they know about you”. It is clear from our Gallup Study on Networking In Black America that the first recognition of a new venture opportunity grows out of a conversation or interaction with someone you know and where the respect and trust is mutual. These contacts encourage not only the basic idea, but also its development into a business plan, referrals to secure financing, a startup labor force and so forth. It’s a complicated process, but people who will share their knowledge are clearly crucial to it.
So while knowing a lot of people is good it’s more important to have an effective network than simply a large one.
Part II To be continued….