Why Aren't There More Minority Entrepreneurs?

We study racial and gender disparities in entrepreneurial activity through the lens of a Roy model, focusing on the distinction between idea generation and execution. Using nationally representative sur-vey data, we find that Black and Hispanic individuals demonstrate higher entrepreneurial intentions than white respondents. They are much less likely, however, to launch ventures once ideas are conceived. A critical determinant of this gap is differential reliance on social networks, which shapes both the likelihood of launching a business as well as the reasons for stopping. Variation in the strength of local, own-group entrepreneurship reveals that stronger networks enhance the relationship between social engagement and business formation. Also, as predicted by the model, access to social networks also predicts seeking capital. The interconnections between socialization and searching for capital are important for understanding-policies aimed at boosting rates of entrepreneurship in underrepresented groups.