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Marketplace®

Daily business news and economic stories

Black communities saw a boost in entrepreneurship during the pandemic

One reason for the surge in Black business formation could be that Americans have increased their understanding of historic inequality.
One reason for the surge in Black business formation could be that Americans have increased their understanding of historic inequality.
FG Trade via Getty Images

Predominantly Black communities in cities like New York, Houston and Atlanta saw lots of growth in startup businesses during the pandemic, according to a new study from the National Bureau of Economic Research.

The study said new businesses were disproportionately concentrated in Black neighborhoods and that Black Americans were more likely than white Americans to take steps toward entrepreneurship during lockdown.

It also found that in the weeks after federal economic relief packages passed last year, there was a surge in registered business formation, even though the CARES Act did not directly infuse money into new businesses.

“Its purpose was not to catalyze a lot of startup formation,” said Catherine Fazio, faculty director of MBA programs at Boston University, who helped write the study. “It was very interesting for us to see that the CARES Act had that ripple effect.”

Another reason for the surge in Black entrepreneurship could be that many Americans now have a better understanding of historic inequality.

“There’s been clear intent in banks and government, etc., to make sure all the financial support throughout this year reaches Black neighborhoods,” said Jorge Guzman, assistant professor of management at Columbia University and a co-author of the study.

Andre Perry, a senior fellow at the Brookings Institution, said that speaks to a larger lesson of this study, about access to capital.

“If you really want to see the economy grow, figure out ways to invest in the underappreciated assets in our community,” he said. “That happens to be Black and brown communities. It happens to be Black and brown entrepreneurs.”

Perry said Black people represent about 14% of the population in the U.S., but only 2% of businesses with more than one employee. This investment in Black businesses, he added, shouldn’t be a pandemic-induced anomaly. 

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