Thursday, May 26, 2011

Minority Entrepreneurship and Community Development

By Jonathan Miller, Project Associate. 

Ethnic enterprises constitute an important source of job creation, innovation, and economic growth in our economy. However, ethnic entrepreneurship (primarily pertaining to Asian-, Black-, and Hispanic-owned enterprises) is often omitted from development strategies, or simply subsumed by broader discussions of business creation. In a paper that has been submitted to the Journal of the American Planning Association, my coauthors and I argue that ethnic entrepreneurship impacts communities in specific economic and noneconomic ways that are often overlooked.

Most recent statistics from the Survey of Business Owners show that between 2002 and 2007, the number of Asian-owned businesses grew by 40.7 percent to 1.6 million and the number of Hispanic-owned businesses grew by 43.7 percent to 2.3 million, in comparison to an 18.0 percent growth rate of all businesses. According to a 2009 Minority Business Development Agency report, minority-owned firms, between 2002 and 2007, outpaced growth of non-minority businesses in gross receipts and number of employees. The 2010 Kauffman Index of Entrepreneurial Activity, Asian and Latino adults were more likely to begin businesses in 2010, with Latino rates of entrepreneurial activity especially robust.

Scholarly research has shown how communities impact entrepreneurship. For example, coethnic communities often endow ethnic entrepreneurs with social networks, workforce, and market resources, which may be integral to a successful venture. However, less is known about how entrepreneurship transforms places than how it changes the lives of people. By comparing three communities with sizeable ethnic and immigrant business sectors – Buford Highway in Atlanta, GA; Sunset Park in Brooklyn, NY; Monterey Park in Los Angeles, CA – we are able to analyze how communities benefit.

Ethnic enterprises in Sunset Park, Monterey Park, and along Buford Highway reflect a diversity of histories and local experiences. However, commonalities exist that these businesses can accrue economic, social, physical, and political benefits to their respective communities. For example, ethnic businesses serve unmet market needs of certain neighborhoods and households, provide ethnic goods and services that appeal to both ethnic and non-ethnic shoppers, create job opportunities and generate tax revenues, revitalize and fuel the commercial development of abandoned communities, organize and promote social life and cultural diversity, as well as organize and contribute collective interest and voice in local policy and planning. The following table is an abbreviated version of the one appearing in the paper, but illustrates specific noneconomic contributions of ethnic businesses to a community.

Several policies can be effective bridges for the needs of ethnic businesses. First of all, local governments can partner business assistance centers with local non-profit agencies who have cultural and linguistic capacities in ethnic communities and with whom ethnic businesses are willing to work. These partnerships can advise potential and existing business owners about their business plans and better communicate commercial rules and regulations. Second, microlending institutions and microfinance organizations represent a powerful intermediary for financing needs, especially as many ethnic businesses may fail to qualify for larger loans. Third, local governments can use land-use design and marketing to promote ethnic business districts, especially as shopping destinations. As well, local development efforts should identify and involve ethnic merchants in local planning processes. Local governments and chambers of commerce should work to involve ethnic businesses as they truly represent an important driver of prosperity.