Exploring the Family’s Role in Reducing the Racial Gap in Entrepreneurship

Exploring questions at the crossroads of demographics and economics

Qian Wang, fourth-year PhD student in the management and organizations (M&O) group at the Samuel Curtis Johnson School of Management at the Cornell SC Johnson College of Business, has had a long-standing interest in the relationship between demographics and economic phenomena. As an undergraduate student in China, Wang studied how in a family, a child’s gender often influenced the family’s expenditures due to various social norms. Now, with a focus on strategy and entrepreneurship, Wang is researching the impact of demographics on entrepreneurship, particularly how race, gender, and age play into the formation, funding, and success of startups. He is also interested in the role family could play in the process.

Since the first year of his PhD journey, Wang has worked closely with his chair advisor, Matt Marx, Bruce F. Failing Sr. Professor of Personal Enterprise, on a paper investigating the effect of social movements on venture capital (VC) investments in the US. In this paper, he focuses on the murder of George Floyd and the subsequent Black Lives Matter movement, examining whether and how the murder affected investors’ portfolios. Wang and his coauthors documented a big jump in investment in Black-founded startups following the George Floyd incident, particularly among investors who had never invested in Black startups before. However, the trend lasted only two years. This research inspired Wang to delve deeper into the challenges faced by minority groups in the entrepreneurial world, particularly Black entrepreneurs, who often encounter significant resource constraints. They often face greater challenges and discrimination in the marketplace and are less likely to attract investors in general and seek external funding (Younkin and Kuppuswamy 2018; Younkin and Kuppuswamy 2019; Cook, Marx, and Yimfor 2022). This might discourage them from pursuing entrepreneurship since there is more risk and more uncertainty to contend with. Wang decided to examine the impact of family, which he believes provides a new mechanism to explain the racial gap in entrepreneurship.

Exploring the impact of family on the decision to become an entrepreneur

In an ongoing research project, Wang is collaborating with Hongyuan Xia, fifth-year PhD student in economics at Cornell University, to investigate how having a spouse in a public-sector job could affect the racial gap in entrepreneurship. Prior studies concerning family entrepreneurship have largely focused on intergenerational impact, such as the effect of parents on entrepreneurs (i.e., provision of resources and insights) or the effect of children on entrepreneurs (i.e., how having children affects female entrepreneurship). However, the role of the spouse has received relatively little attention. According to Wang, the partner, too, can affect the focal person’s decision to become an entrepreneur in various ways, such as by providing financial resources or human capital resources. The spouse also can share risks with the entrepreneur. If the spouse has a stable job, that can help alleviate various concerns related to the uncertainties of entrepreneurial endeavors. Together with Xia, Wang found that having a spouse employed in the public sector is associated with a smaller racial gap in entrepreneurship between Black people and others, and he argues that the safety net provided by the public-sector job may serve as the main mechanism here.

According to Wang, the public sector has, for a long time, been a “shelter” for African Americans in the US. While racial discrimination is prevalent in the private sector, the public sector offers a pathway for many African Americans to attain middle-class status (Madowicz, Price, and Weller, 2020; Williams, 2011; Cohen, 2015). Based on research interpretations, Wang has discovered that members of this community are much more likely to embark on entrepreneurship if they have a spouse with a steady job in the public sector. He found that this is especially true among people with low education and greater financial burdens, such as those carrying mortgages. Wang’s findings highlight an overlooked mechanism: the role of family, and especially spouses, in reducing risk for potential entrepreneurs in marginalized groups.

Furthering research in family entrepreneurship

Going forward, Wang plans to build on his main research focus—demographics and entrepreneurship—and continue examining how families perform a role in entrepreneurship, otherwise known as “family entrepreneurship.” Wang has gained insight into this area of study from entrepreneurship scholars such as Olav Sorensen, Joseph Jacobs Chair in Entrepreneurial Studies and faculty director of the Price Center for Entrepreneurship and Innovation at the Anderson Graduate School of Management at UCLA, and Olenka Kacperczyk, professor of strategy and entrepreneurship at the London Business School, who spoke at SC Johnson College as part of the speaker series “Embracing the Intersection of Entrepreneurship and Family Business.”

“The seminar participants come to Cornell from all over the world to present the latest cutting-edge research to Cornell faculty and students,” explains Wesley Sine, John and Dyan Smith Professor of Management and Family Business and faculty director of the Smith Family Business Initiative at the SC Johnson College. “This has inspired many students and faculty to engage in research on family business and has also resulted in research collaborations between Cornell students and faculty from other universities.”

Upon completing his PhD, Wang aspires to continue his journey in academia and further his research. He hopes that one of his future research streams can further shed light on how families may empower individuals from various racial and age groups at different stages of their entrepreneurial journey.

 

 

 

 

Resources consulted for this article

Cohen, Patricia. 2015. “Public-Sector Jobs Vanish, Hitting Blacks Hard.” New York Times, May 24. https://www.nytimes.com/2015/05/25/business/public-sector-jobs-vanish-and-blacks-take-blow.html.

Cook, Lisa D. and Marx, Matt and Yimfor, Emmanuel. 2023. “Funding Black High-Growth Startups” (March 28, 2023). Columbia Business School Research Paper No. 4279986. Available at SSRN: https://ssrn.com/abstract=4279986.

Madowicz, Michael, Anne Price, and Christian E. Weller. 2020. “Public Work Provides Economic Security for Black Families and Communities.” InProgress, October 23. https://www.americanprogress.org/article/public-work-provides-economic-security-black-families-communities/.

Williams, Timothy. 2011. “As Public Sector Sheds Jobs, Blacks Are Hit Hardest.” New York Times, Nov. 28. https://www.nytimes.com/2011/11/29/us/as-public-sector-sheds-jobs-black-americans-are-hit-hard.html.

Younkin, Peter, and Venkat Kuppuswamy. 2018. “The Colorblind Crowd? Founder Race and Performance in Crowdfunding.” Management Science 64 (7): 3269–87. https://doi.org/10.1287/mnsc.2017.2774.

Younkin, Peter, and Venkat Kuppuswamy. 2019. “Discounted: The Effect of Founder Race on the Price of New Products.” Journal of Business Venturing 34 (2): 389–412. https://doi.org/10.1016/j.jbusvent.2018.02.004.

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