Why Black Entrepreneurship MATTERS

By Randal Pinkett, PH.D., MBA; Co-Founder, Chairman and CEO, BCT Partners;

Jeffrey A. Robinson, PH.D.; Academic Director, The Center for Urban Entrepreneurship and Economic Development

Ever since we co-founded our first company while undergraduates at Rutgers University, entrepreneurship has been at the center of our community building strategies. Entrepreneurship is about creating value in the world. In our forthcoming book, Black Faces in High Places: 10 Strategic Actions to Reach the Top and Stay There, we explain why we are such big proponents of Black entrepreneurship.

Entrepreneurs can make a difference in our neighborhoods, communities, and regions by building businesses that create jobs and invest in the organizations and institutions. In fact, in a research study by Karen Parker of University of Delaware that appeared in Urban Affairs Review, a rise in Black business ownership in urban neighborhoods during the 1990s into the 2000s led to a decrease in youth violence in those same neighborhoods. And it wasn’t coincidence. After controlling for other possible variables (poverty, unemployment, etc.), Dr. Parker found that as the number of Black businesses rose in these neighborhoods, Black youth violence decreased. Why? Dr. Parker speculates Black businesses bring three things to a community: role models, reshaping, and resources. Black entrepreneurs become role models for young people who are trying to figure out what they want to do. Black entrepreneurs cause all residents, but especially youth, to reshape their perceptions of their community. Black entrepreneurs bring resources to the community that strengthen it.

We believe this entrepreneurial mindset is the key to the Black community’s future economic development. Entrepreneurs are the major wealth creators in America but unfortunately less than 5% of the Black population is self-employed or engaged in founding and running registered businesses. Furthermore, the entrepreneurs who are making money in Black communities are too often not Black. Paradoxically, the wealth that is created from Black communities doesn’t stay in Black communities and therefore Black people do not reap the benefits of the kind of entrepreneurship that also invests in the local community.

We see three strategies to increase the effectiveness of entrepreneurship as an economic development tool for the Black community:

1. We must recognize the importance of entrepreneurship as the most important vehicle of economic development in the Black community. In a study conducted by the Kauffman Foundation, it was noted that Black Americans, and in particular Black males, were the most likely to say they wanted to open their own business. Unfortunately, the statistics also tell us that Blacks are the least likely to actually open business. There may be several explanations for this paradox, but it points towards the untapped potential for entrepreneurial activity in our community. In fact, based on a study conducted by the U.S. Minority Business Development Agency, if we raised the participation rate of Black and other minority entrepreneurs to a level that is even with our percentage of the U.S. population we would not only create more wealth in the community, but wewould wipe out the unemployment problem in minority communities. When we ran the same models specifically on Black entrepreneurship in New Jersey, we found that by doubling the number of Blackowned businesses we would create an additional 56,000 jobs in the state. These findings should make building entrepreneurs and supporting entrepreneurship a priority in our community.
2. We must shift the mindset from being small business owners to being executives of business enterprises. We meet many “solopreneurs” who are running small businesses without any business partners and we know that their potential is limited. In order to truly transform our neighborhoods into thriving communities, we need to build more “business enterprises.” A business enterprise is an entity that builds wealth that can be passed on to future generations or simultaneously creates community wealth through job creation and other social impacts. In fact, the most impactful entrepreneurship occurs when teams of entrepreneurial individuals join together to create enterprises that leverage the five “M”s – money, marketing, management, mentors, and mergers/acquisitions/strategic partnerships – to create wealth. In our book, we discuss examples of successful Black entrepreneurs who have used these five Ms to become incredibly successful.
3. We must use double- and triple-bottom line thinking to make economic progress, social impact, and address issues of environmental justice and degradation. To use this kind of logic in your business endeavors means achieving financial goals and social and/or environmental goals simultaneously. These “social entrepreneurs” blur the lines between making a profit and making a difference by combining them into a holistic agenda. Just as entrepreneurs change the face of industry by focusing on the “bottom line” of making a profit, social entrepreneurs change the face of society by focusing on the “doublebottom line” of making a profit and making a difference; building organizations and building communities; doing good business and goodwill; and implementing solid business practices and socially responsible behavior (and environmentally-friendly practices, which reflects a “triplebottom line”). In this age of “buying local” and building “sustainable” communities, this double- and triple-bottom line logic is a must for all, but especially for our Black businesses if we are ever going to make a significant impact on the social and economic problems we face as a community.

These examples underscore the need to support Black social entrepreneurs in every community. If we want to see significant economic improvement across our nation in the 21st century, we must increase the number of Black business enterprises, entrepreneurs, and social entrepreneurs in our communities. Black entrepreneurship matters!