Why are black-owned businesses less successful than white-owned businesses? The role of families, inheritances, and business human capital

Using confidential microdata from the Characteristics of Business Owners survey, we examine why African American - owned businesses lag substantially behind white-owned businesses in sales, profits, employment, and survival. Black business owners are much less likely than white owners to have had a self-employed family member owner prior to starting their business and less likely to have worked in that family member's business. Using a nonlinear decomposition technique, we find that the lack of prior work experience in a family business among black business owners, perhaps by limiting their acquisition of general and specific business human capital, negatively affects black business outcomes.