USU study: Minority entrepreneurs treated poorly

Saturday , May 31, 2014 - 3:58 PM

Sterling Bone

Sterling Bone, an assistant professor at the Jon M. Huntsman School of Business at Utah State...

LOGAN -- America may be the land of opportunity, but not all entrepreneurs are given an equal chance — discrimination is still an issue in the business world.

“Individuals of racial minority background have a very different experience than those that are of the white majority,” said Sterling Bone, an assistant professor at Utah State University’s Jon M. Huntsman School of Business. “We found that while modern racism is rarely overt, covert discrimination still exists today.”

Bone is part of a team of researchers who recently published their findings about the challenges faced by minority entrepreneurs in the Journal of Consumer Research. His collaborators were Glenn L. Christensen, associate professor of marketing at Brigham Young University, and Jerome D. Williams, research director of the Center of Urban Entrepreneurship & Economic Development at Rutgers University.

“There is a problem,” said Christensen. “That was news to me, personally. We say, ‘Oh, that’s 1950s and 1960s stuff — it doesn’t happen any more.’ Unfortunately, that is not true.”

The trio’s research took three forms: Sending minority and non-minority “mystery shoppers” to financial institutions to ask for information about loans; interviews with minority and non-minority business people; and an experiment exploring minority and non-minority reactions to rejected loan applications.

Nine businessmen were recruited for the “mystery shopper” study — three black, three Hispanic, and three white. They were all about the same height and shape, considered to be equally attractive, and had similar financial profiles and education.

“They were as similar as possible — even wearing the same slacks and shirts,” Christensen said.

The treatment the minority and white consumers received when asking about loans was not similar.

“The minorities were treated more poorly,” said Christensen. “They were offered less help, and asked for more information, like more proof of income.”

Bone said black and Hispanic shoppers did face a heightened level of skepticism and scrutiny. They were even less likely to receive an introduction, be asked their name, or be given a business card.

Christensen said, “They were treated far less friendly, and that was very disheartening.”

The second part of the research, the interviews, focused on the differences between how minorities and non-minorities view the loan process. For the study, a group of 39 entrepreneurs was asked to find pictures that illustrated their feelings about the process, and then discuss their experiences.

“They brought in some very interesting pictures, and we found some themes shared across our groups of interviewees,” said Bone.

Members of minority groups often brought in pictures with a point of view looking up from the bottom.

“For example, in a cavern under the ocean, trying to get to the light,” he said. “Or at the base of a mountain, trying to scale the very arduous path up the mountain.”

In contrast, Bone said, entrepreneurs from the majority brought in pictures that describe a journey from the top down, or at least as a level playing field.

“We asked them to tell us their stories,” said Christensen. “These were in-depth interviews, of two to two-and-a-half hours, talking about their experiences in seeking financing for a small business venture.”

White interviewees never talked about race — it was a non-issue, Christensen said, but it was an issue for those in the minority.

“Some told us about where they would hire a white person to go with them to the loan application interview, even though they didn’t have anything to do with the business, because they felt like that would give them some credibility,” he said.

For the third experiment, the researchers asked minority and non-minority business people to apply for a loan, and then made sure all of the loans were rejected. Half of the entrepreneurs were given loan applications that asked about their race, and half were not — and that one question made a difference in how the rejection was perceived.

After their applications were rejected, each of the entrepreneurs were asked about their self-esteem. Christensen said there was no real difference between white and non-white applicants on self-esteem measures, when the loans were rejected on forms without a box for race. But when applicants were asked about their race, minorities suffered a statistically bigger blow to their self esteem or feelings of autonomy and ability to control their environment.

“It raises a question for the individual,” said Bone. “Am I being denied because I’m unqualified, or unworthy? ... Or because of my race or ethnicity?”

That kind of rejection goes beyond just being unable to get a loan, said Christensen — it has a broad impact across a person’s life.

“Some people said, ‘I’ve been rejected so many times, I’m thinking about suicide,’ ” he said. “When you hear that, your heart breaks.”

Christensen says the third author of the study, Jerome Williams, lives on the East Coast and has testified about their findings before government and congressional panels. But Bone says it’s difficult to legislate, or enforce, fair and equivalent treatment.

“It starts with awareness,” he said, noting that there are people who are unaware of what it’s really like to be a minority in today’s society.

Bone says he’d like to see better networking opportunities for minorities, and incentives for established business people to be mentors, so minority entrepreneurs don’t feel like they have to go it alone. Christensen would like to see better training of employees in the financial industry, to make sure they treat all customers the same and understand the deleterious impacts of discrimination.

“Every time I turn on any radio or television news stations, or websites, I see a lot of discussion about race in our society, so we know there’s an existing dialogue. ... What we’ve tried to do is provide an important voice around minority entrepreneurs,” said Bone. “That’s not to say that white entrepreneurs don’t have a difficult journey, but it’s a different journey.”

Contact reporter Becky Wright at 801-625-4274 or bwright@standard.net. Follow her on Twitter at @ReporterBWright.

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