African American Entrepreneurship

:
The View from the 1910 Census

Margaret Levenstein t
Universityof Michigan

Despitelimitedstudyin recent years,entrepreneurship playsa crucialrole

in economic growth, bothin society large within at and specific communities. 2 In
a capitalist market economy, firmsinitiateandcoordinate widerangeof ongoing a economic activity, haveincreasingly thesiteof innovation. and been The formation and nurturingof firms, of organizations which can createand sustaineconomic activity,is the mostbasicof entrepreneurial activities. Understanding who forms businesses, why they succeedor fail, should be of great importance and to economists. Understanding those how processes havechanged overtime should alsobe an important areaof studyfor economic historians. Successful entrepreneurs often rely on networksfor the provisionof information andresources whichgive thema competitive advantage privileged access information to about product markets, sources laboror capital, of production technology, management and organization.Sometimes thesenetworks based are on family and extendedkinship. Other networksare basedon commonracial, ethnic,or religious identification. Historians sociologists focused these and have on "non-economic" networks explainethnicand racial differences patterns to in of entrepreneurship [1,3]. Lessformal,andlessvisiblewhennotassociated a with distinct "minority" group, are networks based on common membershipin professional, craft, educational. social,or culturalinstitutions.More generally, overlapping business personal and associations be thoughtof as highways can for
the flow of resources information. Firms, industries, and communities,and nations

succeed whentheyare at a majorintersection, wheremutuallysustaining networks

intersect. Whilesociologists historians focused personal, and have on familial,and

• Theauthor acknowledges veryhelpful the research assistance AnneYoung Gema of and
Ricart-Moes, andcomments from SkipperHammond,Warren Whatley, and participants in seminarsat the Universityof Michigan, UCLA, Caltech,and the 1995 Business History
Conference.

:Following standard among use sociologists economists and[4]), I define and ([1] an
"entrepreneur" onewhorunshisor herown business. do not restrict studyto those as I my whowereparticularly innovative theirbusiness in activities transformed industries or the in which they participated.

BUSINESS AND ECONOMIC HISTORY, Volumetwenty-four, no. I, Fall 1995.
Copyright¸1995 by the Business HistoryConterence.ISSN 0849-6825.
106

107

cultural networks, economists haveimplicitlyassumed existence privatefirms the of
whose business is the creation of such networks, and the sale of the information

obtained. Bankswhich build networks borrowers of and lenders, employment agencies networks employers workers, directmarketing with of and and companies with networks consumers saleto potential of for suppliers examples firms are of
whose business is the construction of such networks.

An examinationof African-Americanentrepreneurship implicitly or explicitly must threequestions: ask first,to whatextent havetheinformal networks on which white Americansrelied in forming businesses been replacedby more
formal businesses who sell information and resources to customers; second, do
African-Americans have access to those resources and information at the same

pricesandquantities do whiteAmericans; third,to whatextentare there as and informal networks withintheAfrican-American community whichentrepreneurs on andpotentialentrepreneurs rely. can Understanding dynamics African-American the of entrepreneurship of is particular importance today.Therehasbeenincreasing attention givento policies whichemphasize African-American entrepreneurship. these But policies havebeen informedby little historical study. An historical perspective may shedlight on today'slack of African-American entrepreneurship suggest kinds of and the networks and institutions which would be able to support successful entrepreneurship. Thispaper takes smallstep a toward fillingin thismissing historical picture. It presentssnapshot theAfrican-American a of business population 1910,based in ontwopublic samples the 1910Census Population. use f•om of Thiswasthefirst census includea questionon employment to status(employer,own account,or employee) isthus firstnationwide and the survey include to information about both business ownership race. This studyfocuses a periodbeforethe great and on migrationof African-American northward, which may have disrupted existing networks among African-American businesses. wasafter,however, first "buy It the black" politicalmovement and the formationof the NationalNegro Business League, thatwe knowthatthemexisted vocal,if notlargeAfrican-American so a business community. While support fromlargewhitebusinesses giveshistorical visibility to thesepoliticalmovements, therehasbeenno systematic attemptto measure their impacton the number,size, or distribution African-American of business. Booker Washington T. estimated there that were9,838African-American businesses requiring capitalin 1900 [5, p. 12]. If thatnumber accurate is the findings heresuggest considerable a increase thenumber Af¾ican-American in of businesses thedecade in fbllowing upsurge the"BuyBlack"movement.The the in most comparable figurewhichonecandrawfromthecensus is thepredicted data number African-Americans of employers outside agriculture. 1910therewere of In almost19,000suchbusinesses, almost doubleWashington's estimate a decade of
earlier.

One of the moststrikingfindingsof this studyis that in 1910 AfricanAmericans weremorelikely thanwhite Americans be employers, almostas to and

likely as whitesto be self-employed (Table 1). This contrasts with the current periodin whichAfrican-Americans onlya thirdaslikely aswhites workin are to theirownbusinesses. raises This questions about claims, such those Light[3], as of thatAfrican-American cultureis unsupportive entrepreneurial of activity,or that "cultural differences explain may blackwhitedifferentials self-employment" in [4,

108

p. 26]. If culturaldifferences to explainlate20th century are differentials selfin employment, theymustbe a twentieth century development.
African-American Entrepreneurs in 1910: Where Were They? As suggested the introduction,the overall rates of entrepreneurship in (defined hereastheproportion the laborforcewhichwaseitheran employer of or working on one'sown account)were roughlyequal for African-Americans and whitesin 1910 (26% of African-Americans compared with 29% of whites; Table 1). This contrasts sharply with the situation thecurrentperiod,in whichwhite in entrepreneurship significantly is higherthanthat of African-Americans.Again in contrast contemporary to findings, entrepreneurship significantly is morecommon amongbothwhitesandAfrican-Americans 1910thanamongAsians(thoseof in Japanese, Chinese,or Hawaiian descent (Table 1). This latter changeprobably
reflectsdifferencesin both the characteristics cohortsof Asian immigrantsand of the opportunities whichtheyfacedin the United States.

Table 1. Distribution of EmploymentStatusby Race
Race
White African-American Asian Total

Employer
12.52 13.91 7.96 12.73

Own Account
16.30 12.88 9.33 15.68

Worker
71.18 73.20 82.71 71.59

Total
82.21 17.25 0.54 100.00

Table 2. Distribution of Employment Status in and out of Agriculture

Employment Status

Percent of non-agricultural
work force

Percent of agricultural
work force

Employer
Own Account
Worker

5.15
11.53
83.32

27.17
23.67
49.16

In aggregate, 15.68% of the labor force was self-employed, 12.73% an employer. Thedistribution entrepreneursagriculture of in differsfromthatin nonagricultural sectors (Table2). As thepaths andmeaning entrepreneurship to of are different thetwosectors, will be analyzed in they separately. However, because the vastmajority Af¾ican-American of entrepreneurs in agriculture, a sizable were and

109

proportion white entrepreneurs, would be misleading ignorethe sector of it to altogether, is frequently as donein modern literature. While overall ratesof entrepreneurship whitesand African-Americans of were comparable 1910, thereare three important in differences the patternof in entrepreneurship amongAfrican-Americans and whites. Thesedifferences may help us to understand declinein African-American the entrepreneurship the over twentieth century.First,thesectoral distribution African-American of entrepreneurs was different from that of whites;African-Americans were much more heavily concentrated agriculture in (Table 3 and Table 4). Second, therewere differences in the patterns entrepreneurship of amongmenand women(Table 5). In general, men were more likely to be entrepreneurs than women. But African-American women weremore"entrepreneurial" white womenandalsomadeup a larger than proportion the African-American of laborforce. Finally,thedistribution between employers and the self-employed ("own account") was differentfor whitesand African-Americans. Overall,African-Americans whitesweresplitaboutevenly and between"employer"and "own account"(Table 1). But this apparentsimilarity disappears whenthe dataare disaggregated sector by andgender (Table 3, Table 4, andTable5). A largeproportion African-American of menin agriculture were
employers a largeproportion African-American and of womenin services wereselfemployed.In bothcases, proportions the werehigher thantheirwhitecounterparts. Outsideof agriculture, African-American employers were relativelyrare. I will

discuss eachof these threeissues turn. Finally,I conclude in with a discussion of the particular non-agricultural industries whichAfrican-American in entrepreneurs do appearin significant numbers. The sectoral distribution African-American whitebusinesses very of and was different. Seventy-three percentof all African-Americanentrepreneurs were in

agriculture? Whiteentrepreneurs also were concentratedagriculturebecause in the average number workers any farm is relativelylow - but, with fewer than of on 60% of white entrepreneurs located in agriculture,were less so than AfricanAmericans. When one examines the concentration gender the lack of by diversification African-American of entrepreneurs becomes even more noticeable. Fully 92% of all Afi'ican-American maleentrepreneurs, over97% of Aft'leanand American maleemployers werein agriculture (Table6). The comparable figures for whitemen were64% of all entrepreneurs 68% of all employers and (Table 6). Almost93% of African-American femaleemployers werein agriculture, only but 61% of white women (Table 7). The only sizablegroup of African-American entrepreneurs werenotconcentrated agriculture who in wereself-employed women. (Onlya smallproportion self-employed of whitewomen werein agriculture well. as Runninga farm on one'sown doesnot seemto have beena popularoption for women.) AmongbothAfrican-American whitewomen,aboutten percent and of the selfemployed werein agriculture.Because self-employed womenmakeup a significant portionof the African-American work force.theyintroduced degree a of diversification of agriculture African-American out t3r entrepreneurs general. in

•Extrapolating thesample from suggests therewere1.25millionAfrican-American that
"entrepreneurs" agriculture in and not quite half a million outsideagriculture.

I10

Table 3. Distribution of Male Employment Status by Sector and Race

Sector

Employer
AfricanAmerican

Own Account
White AfricanAmerican

Worker
AfricanAmerican

White

White

Agriculture Mining
Construction

34.43 0.30
3.00

29.33 1.51
10.41

15.42 0.30
9.73

30.14 2.79
10.92

50.15 99.40
87.27

40.53 95.70
78.66

Non-Durable

0.56

4.99

2.24

2.69

97.20

92.3 I

Manufacturing
Durable 0.35 2.95 0.42 1.57 99.23 95.48

Manufacturing Transportation,
Communication

1.02

1.80

0.77

1.1I

98.21

97.09

and Utilities Wholesale Durables

3.75

10.56

20.95

21.31

75.30

68.12

Wholesale Nondurables Retail

0.00

10.63

7.70

15.07

92.30

74.30

3.15

16.96

12.25

23.66

84.59

59.38

Finance, Real
Estate, and
Insurance

0.00

5.64

3.30

23.15

96.70

71.20

Business
Services

8.64

8.99

27.16

32.65

64.21

58.37

Personal
Services

2.12

15.73

8.49

21.52

89.39

62.75

Recreation
Prol'essional
Services

0.66
0.00

7.07
3.43

15.99
10.42

18.27
38.43

83.34
89.58

74.66
58.14

111

Table 4. Distribution of Female EmploymentStatusby Sectorand Race
Sector Employer
AfricanAmerican White

Own Account
AfricanAmerican White

Worker
Africanwhite White

Agriculture Mining
Construction
Non-Durable

5.46 0,00
0,00
0.75

20.00 0.00
7.35
0.46

3.17 0.00
0.00
0.75

I 1,28 2.78
4.41
1,23

91.35 100,00
100,00
98.50

68.72 97.22
88.24
98.31

Manufacturing
Durable 0.00 0.32 0.00 1.59 98.09

Manufacturing
Transportation,
Communication,
and Utilities

0.00

0,46

6,47

0,15

93.53

99.39

Wholesale Durables

0.00

5.00

100,00

95.00

Wholesale Nondurables

0.00

0,58

6.33

1.73

93,67

97.69

Retail Finance, Real

10,00 0.00

3.98 0.91

18.75 4.54

11.16 4.88

71,25 95.46

84.86 94.2 I

Estate, and
Insurm•ce

Business Services Personal Services Recreation Professional
Services

0,00 0,24 0,00 0.00

2.63 2.45 0.80 0,21

30.07 30.38 0.00 9,68

45.26 23,24 11.20 13.17

69,93 69.38 100.00 90.32

52,1 I 74,31 88,00 86,62

112

Table 5. Distribution of EmploymentStatusby Race and Gender
White men White Women African-American
Men

AfricanAmerican Women

Employer
Own Account
Worker

14.53
17.14
68.33

3.77
12.65
83.58

21.11
11.14
67.75

2.97
15.54
81.50

Table 6. Sectoral Distribution of Male Entrepreneurs

Sector

Employer
AfricanAmerican

Own Account
African-American White

White

Agriculture Mining
Construction Non-Durable

97.35 0.03
0.60 0.08

68.43 0.41
5.38 3.01

82.58 0.06
3.69 0.60

59.60 0.64
4.79 1.38

Manufacturing

DurableManufacturing Transportation,
Communication, and
Utilities

0.15 0.44

2.75 1.33

0.35 0.63

1.23 0.69

Wholesale- Durables
Wholesale Nondurables Retail

0.03
0.00

0.40
1.30

0.32
0.23

0.69
1.56

0.61

11.86

4.51

14.03

Finance, Real Estate,
and Insurance

0.00

0.74

0.17

2.58

Business Services Personal Services Recreation
Professional Services

0.18 0.51 0.01
0.00

0.76 2.66 0.25
0.72

I. 10 3.86 0.41
1.50

2.33 3.08 0.55
6.85

113

Table 7. Sectoral Distribution of Female Entrepreneurs

Sector
AfricanAmerican

Employer
White AfricanAmerican

Own Account
White

Agriculture

92,74

60,65

10.22

10.19

Mining
Construction
Non-Durable

0.00
0.00
0.33

0,00
0.58
2,33

0,00
0,00
0.06

0.03
0.10
1.87

Manufacturing
Durable 0.00 0,35 0.00 0.52

Manufacturing Transportation,
Communication

0.00

0,35

0.06

0.03

, and Utilities
Wholesale Durables
Wholesale 0.00 0,12 0.02 0.10

0.00

0.00

0.00

0.07

Nondurables

Retail

3.32

13.74

1.19

11.47

Finance, Real

0.00

0.35

0.06

0.55

Estate, and
Insurance Business 0,00 0.58 0.16 2.98

Services Personal
Services Recreation 0,00 0.12 0.00 0.49

3,61

20.02

86.99

56,64

Professional
services

0,00

0.81

1.23

14.94

The quantitative importance of agricultural businesses the Africanto

Americanbusiness community one of the moststriking,even if predictable, is findings thisstudy.This sectorhasbeenalmostcompletelyignoredby boththe of historicalliterature,whichhasfocused sectors on suchas personal service,retail,

114

banking, and insurance. Promotersof African-American businessat the time recognizedthe importanceof agriculture. For example, at the 1911 national conventionof the National Negro BusinessLeague, the "importantsubjects"

addressed included "Raising Shipping and FruitsandPoultry," "PickleKing," the "My Success a Horticulturist," well as severaldiscussing as as wholesaling of agricultural products [6, p. 22]. The concentrationof African-American entrepreneurs agriculturesuggests in that the relative lack of entrepreneurial behavior on the African-Americans today may have little to do with cultural attitudestoward risk-takingor the desirefor the independence, authority,and responsibility associated owningone's with ownbusiness. Ratherit may reflectthe
extreme concentration African-American'sentrepreneurial of resources, and the

networksof African-American entrepreneurs, a sectorwhichwas undergoing in long term decline. This also suggests that further researchon the effect of agricultural policieson African-American entrepreneurship shedlight on the may declineof African-American entrepreneurship.

One mightclaimthatthepresence a largenumber African-American of of employers and self-employees agriculture in reflectsthe heavyconcentration of African-American labor,generally, agriculture, notentrepreneurial in and behavior
per se. It is certainlytrue that African-Americansgenerallywere concentrated in

agriculture (about56% of the total African-American work force). But AfricanAmericanmenin agriculture wereactuallymorelikely thanwhites be employers, to notsimplyself-employed. This is trueevenif onecompares African-American and
white men within the south, where the lack of mechanization increased labor

requirements relative the north. While theconcentration agriculture to 4 in may
reflectexistingskillsandhuman capitalspecific agriculture, mayalsoreflect to it barriersto entrepreneurial activityoutside agriculture.And the experience of of being an employeror self-employed agriculture, in while certainlydifferentfrom owning factory a store,is stillonein whichtheindividual theresponsibility a or has and assumes for a wide rangeof decisions: risk whatand how muchto produce, what inputs, including labor, to buy, where to sell. As in other sectors, entrepreneurs agricultureare interactingwith the market, locating markets, in locatinginputs. This distinguishes themfrom employees who, havinglocatedan employer, relate to that employer,that firm or farm, but do not, as producers,
continue to have a direct interaction with the market.

Thereare very largedifibrences the patternof entrepreneurship in between At¾ican-American andwomen men (Table5). To some extent theyreflectthesame patterns gendered of participation labormarkets among in as whites.BothAfricanAmerican and white women are less entrepreneurial and less specializedin agriculture theirrespective than malecounterparts (compare Tables3, 4, 6, and7). Theyarealsobothmuchmorelikelyto be selfemployed thanemployers (Table 5). There are actuallymore African-American male employers than self-employeds,

4Differences theuseof employed in laborin northern southern and agriculture helpto do
createthedifferentpauerns observed.White men in southern agriculturewere more likely to be employers thanweretheir northern counterparts (33.64% compared 27.21%). Only to 10% of (the very few) African-Americans northern in agriculture wereemployers, much a lower proportion thaneither whitesin the northor African-Americans the south. in

115

and the two groups are divided about evenly for white men. Unlike the concentration male entrepreneurs agriculture,the largestgroupsof female of in entrepreneurs, whiteandAfrican-American, in personal both are service(Table 7). Thereareseveral important differences between entrepreneurial the behavior of African-American whitewomen,however.First, womenmakeup a much and largerproportion theAfrican-African of laborforcethanof the whitelaborforce (40% and 19% respectively).Thus patterns entrepreneurship of amongAfricanAmericanwomenhavea largerimpacton African-American entrepreneurship as a whole. Second, overallrateof entrepreneurshipAfrican-American the of women wassomewhat higherthanfor whitewomen(Table 5). As with males,this slightly higheraveragerate masksa differencein the distribution between employers and self-employeds. White womenweremorelikely thanAfrican-American womento be employers, lesslikelyto be self-employed. and Finally, whileneitherwhitenor African-American femaleentrepreneurs were heavilyconcentrated agriculture, in
African-women were much more concentrated into a few sectors than was the case

for whitefemaleentrepreneurs (Table7). Seventy-four percent femaleAfricanof Americanentrepreneurs, 87% of femaleAfrican-American and self-employeds, were in the personalservicesector. This was the largestsectorfor white female entrepreneurs well, but the concentration as was significantlyless (48% of entrepreneurs 57% of self-employeds). and For bothAfrican-American and white femaleentrepreneurs nextlargest the sector wasagriculture.And again,AfricanAmericanentrepreneurs were moreconcentrated thanwhite women. Twenty-three percentof African-American female entrepreneurs were in agriculture, and only 22% of whitewomen.(Ninety-three percent African-American of femaleemployers werein agriculture, and only 61% of white, but the numberof employers both for African-Americanand white women was quite small.) So 97% of all African-

Americanfemale entrepreneurs were in either personalserviceor agriculture, compared only70% of whitewomen.The concentration African-American to of femaleentrepreneurs thesetwo sectors in againreflectstheir overalllabor force behavior, mayreflecttheirexclusion and from othersectors.But, aswasthecase for African-American men in agriculture, concentration entrepreneurs the of is greaterthanthe (very high) concentration the laborforce as a whole. (About of 78% of all African-American female employees were in either agricultureor personal service.) African-American women's entrepreneurship cannot be dismissedas simply America's 20th century peasantry. Perhapsbecauseof exclusion fromopportunities engage wagelabor,African-American to in women set up businesses sectors in wheretheyhadskillsandcouldfind customers. their But concentration two sectors, into bothof whichexperienced declineoverthecourse of thecentury, notbodewell for the longtermsuccess these did of efforts. The last important difference in African-American and white entrepreneurshipin thedivision, is discussed brieflyabove, between employers and theself-employed. African-American menweremorelikely to be employers than self-employed (Table 8). This pattern wasat variance withthatobserved any for other group, and is explainedby the large proportionof African-American employersin agriculture(Table 3). Over 34% of African-American men in agriculturewereemployers (Table 3). This led to a difference the patternof in entrepreneurship between African-American andwomen, men whoweremorethan five timesmorelikely to beself-employed anemployer than (Table5).

116

Outside of agriculture,the difference in the rates of entrepreneurship between African-American whitemenwasquitelarge. African-American and men wereabouta thirdaslikely aswhitemento be employers self-employed or (6% of African-Americanmen, 17.4% of white men). There were small but significant numbersof African-Americanmale entrepreneurs construction, in retail, and personalservice. In each casethere are about three to four times as many selfemployeds as employers, but with significant numbers of each (Table 6). Extrapolatingfrom the samplessuggests that there were almost5000 AfricanAmerican male employersin construction, 2500 running eating and drinking establishments, running 2000 barber shops, 1500repairbusinesses, a thousand and grocery stores. There were smaller numberswith trucking businesses, taxi cab businesses, shoerepairshops,and dry goodstores.There were somewhat larger numbersof individuals,in theseand similar industries,working on their own account.In addition, therewasa significant number (about4000) of self-employed African-American maleprofessionals no employees.(Therewasnot a single with African-Americanprofessional the samplewith an employee.) Most of these in were mulattos. Every African-American lawyer in the samplewas mulatto;over 60% of the medicalprofessionals were mulatto. Mulatto men madeup only 16%
of the African-American male work force.

Table 8. Distribution of Employment Status of Men

Race

Employer

Own Account

Worker

Outside Agriculture Agriculture
White 6.94 29.33

Outside Aghculture Agriculture
10.48 30.14

Outside Agriculture
82.58

Agriculture

40.53

Negro
Mulatto

1.16
2.13

34.41
34.53

4.23
6.78

15.34
15.80

94.61
91.09

50.24
49.68

As suggestedabove, African-American female entrepreneurs outside agriculture wereheavilyconcentrated personal in services.Three industries had more than one thousandfemale employers:lodging places,private household services, eating& drinkingestablishments. and AmongAfrican-American female self-employeds, 50% workedin personal over household services.Thesewere not simply mis-classified maids;the census distinguished them from a much larger (three times as many) group of African-Americanwomen workers in private householdservices. The next largest group of African-Americanfemale

117

Table 9.
Variable

Logit Estimates of the Probability of Being an Employer
1:Pooled 2:White 3:A-A 4:White in 5:A-A in

Data

outside
agriculture

outside
agriculture
11056

agriculture

agriculture

N

128391

7631 I

25804

14004

Intercept
Age

- 1.61
0.07

- 1.61
0.05

-2.69
0.05

-4.93
0.10

-3.79
0.08

Literacy
Female

0.57
-1.85

1.26
- 1.78

* 0.63
* -0.60

0.9(•
- 1.37

0.38
-2.70

Home

0.29

0.67

0.98

*

0.02

-0.77

Mortgage

0.22

* -0.13

* -0.09

0.48

0.59

Unemployed

-2.81

-2.39

• -3.17

-3.71

-2.42

SIZE

-5.60

-5.20

-4.64

Agriculture
South

0.58
0.49 0.21 * 0.18 0.68 2.12

A-A Asian COUNTY

-0.80 -0.98 0.42 * -0.15 0.65

INDUSTRY
Home * A-A

2.51
-0.92

-2.91

-5.03

Mong* A-A
Unemp*A-A
confidence levels.

* 0.26
* 0.38

* Not significantat the 99% level. All unmarkedcoefficients are significantat greaterthan 99%

118

Table 10. Logit Estimates of the Probability of Being Self Employed

Variable

l:Pooled

2:White

3:A-A outside

&White

in

5:A-A

in

Data

outside agriculture
80884

agriculture

agriculture

agriculture

N

133056

12966

25850

12048

Intercept
Age

1,13
0.06

1.42
0.05

* 0.32
0.03

-3.82
0.08

-2.54
0.06

Literacy
Female

0.56
-0.65

* 0.11
-0.37

0.17
I. 15

0.80
- 1.80

0.51
-2.27

Home

0.29

0.43

* -0.17

* 0.00

* -0.08

Mortgage

* 0.04

-0.17

0.36

0.23

• 0.05

Unemployed

-2.38

-2.10

-1.58

-2.96

-I.73

SIZE

-7.73

-7.46

-6.28

Agriculture
South

-0.64
0.35 0.33 0.84 0.43 0.61

A-A

-2.97

gsian
COUNTY INDUSTRY Home * A-A

-0.99
0.51 8.95 -0.34 * 0.35 3.45 * 0.25 -5.38

Mortg * A-A

* 0.04

Unemp*A-A

0.99

* Not significant the 99% level. All unmarked at coefficients significant greaterthan 99% are at
confidence levels.

119

self-employeds was dressmakers, whichtherewere about35,000. There were of over 10,000African-American womenrunningboarding houses ("lodgingplaces, excepthotelandmotel"), 1750 with their own beautyshops, nearlythat many and with their own restaurants clothingstores.Therewere alsoover a thousand and African-American women whowereself-employed health practitioners (presumably midwives)and a similarnumberprovidingeducational services. The numberof African-American entrepreneurs outside agriculture of was dwarfedby those withinit. But evenexcluding agriculture African-Americans were morelikely to be entrepreneurs 1910thanin 1990(6% of African-American in men

in 1910 compared 4.4% in 1990 [2, p. 1]). This reflectsa declinein selfto
employmentthroughout Americaneconomyover the courseof the twentieth the century.The rateof declinein self-employment outsideagriculture seems have to
been the same for white and African American men, about 25% over the 80 year

period. Thus there has been no convergence the aggregate in patternof entrepreneurship outsideagriculture over the century. This also suggests that virtually noneof the entrepreneurial skillsreflectedand developed the large by numbersof African-American employersin agriculturewere transferred into entrepreneurial activities outside agriculture agriculture as declined.
Analyzing the Determinants of African-American Entrepreneurship

With a somewhat clearerpictureof the extentand locationof AfricanAmerican entrepreneurs 1910, we would like to be able to addressthe in fundamental socialand economic questions raisedin the introduction.How was African-American entrepreneurship affected differential by access resources to from
the formal, commercial sector? Were African-American entrepreneurs

discriminated against creditmarkets? difibrential in Did treatment labormarkets in affect African-Americanentrepreneurship?Did African-Americans turn to entrepreneurship whenwagelaborwas unavailable, did they,presumably or like whiteAmericans, wagelaborto accumulate use wealthandexperience a pathto as entryintoentrepreneurship? African-American Did customers "buyBlack?" Did African-Americans preferto work for otherAfrican-Americans? While the 1910 census provides virtually financial no information aboutindividuals with business, or thebusinesses themselves doesallowa limitedexploration thesequestions. it of
Tables 9 and 10 summarizethe resultsof a seriesof logistic regressions

estimating likelihoodthat an individualwill be either an employeror selfthe employedas a functionof thingswhich we can measure usingthe 1910 Census. Theseinclude verycrudeproxies theaccumulation human two for of capital- AGE andLITERACY - andoneverycrudeproxyfor personal wealth- homeownership (HOME). Because observed the pattern entrepreneurshipsodifferent of is between men and women,gender(FEMALE) is alsoincluded. Access labor andcredit to
markets are measured with two variables - UNEMPLOYED and MORTGAGE.

These two variablesreport whetherthe individualwas unemployed any point at during the previousyear and whetherthe individual,if a home owner, has a mortgage thehome. Because on industries largeraverage with sizefirmshaveless potentialfor entrepreneurial activity, the variableSIZE, measuring average the number workersperfirm in detailed of industry groups, included.Of course, is a potentialentrepreneur's choiceof industry maydepend botheaseof entryand on

120

potentialfor growth,the latterof whichmay be greaterin industries with larger
firms.

Severalvariables attempt capture relationship to the between raceand racerelatedphenomena the likelihoodthat an individualwill be an entrepreneur. and A-A indicatesthat the individual is African-American(Negro or mulatto) and ASIAN thathe or sheis Chinese, Japanese, Hawaiian. Two variables or designed to pick uptheeffects occupational residential of and segregation included.The are first (COUNTY) measures percent the countypopulation the of which is AfricanAmerican.The second (INDUSTRY) measures percent totalemployment the of in a detailed industry groupwhichis African-American. theregressions which In in African-Americans and whites are pooled I include variablesinteractingthe unemployed,home, and mortgagevariables with the African-Americanrace variable, to determine whether the relationshipbetween those variables and entrepreneurshipdifferent African-Americans whites.The regressions is for and are run separately agriculture for andnon-agriculture. In every specification the regression whichthe data waspooledfrom of in
individuals of different races, the coefficients on AFRICAN-AMERICAN and

ASIAN were negative,suggesting that, given the other thingscontrolledfor, African-Americans and Asianswere lesslikely than whitesto be entrepreneurs. Since I have not controlled for wealth and other important determinants of entrepreneurship, should interpreted this be cautiously.For example, muchof this negative effectmayreflectthe loweraverage wealthlevelsof African-Americans and Asians. As wouldbe expected from the discussion above,beingfemalewas also generallyassociated with a decreased probability beingan entrepreneur. of
The oneexception (Table 10, column3) wasthe caseof African-Americans outside agriculture,where women were significantlymore likely than men to be self

employed. The "humancapital"variablesbehaveas expected- older, literate peopleare morelikely to be entrepreneursbut the literacyvariableis frequently insignificant, especially the selfemployment in regressions. In the pooledregressions (Table 9, column 1 and Table 10, column 1) and
in most of the non-agriculturalregressions (Table 9, column 2 and Table 10,

column owning homewasassociated an increased 2), a with likelihoodof beingan
entrepreneur. But in othercases, coefficientis negativeand insignificant. This the efl•ct seems drivenby a largenumber tenantfarmersand sharecroppers to of who areself-employed employers. or Therearetwowaysto thinkabout result.One this is thathomeownership maybe a reasonable proxyfor wealthoutside agriculture, butnotwithinagriculture. The otheris to accept homeownership correlated that is with wealth,but thatwealthis lessimportant entrepreneurship agriculture to in than
outside it, because there were institutional mechanisms which allowed those with

littlewealthto acquire through tenancy sharecropping inputsnecessary or - the to engagein business.African-Americans agriculture in were actuallysignificantly

lesslikely to be employers theyowneda home(Table9, column This may if 5). suggestthat African-Americans who have moved their way up the agricultural laddersufficiently own their homemay alsobe in a position diversifytheir to to cropplantings outside cottonin a way thatdecreases of theirneedfor laboroutside thefamily. Havinga mortgage (visibleevidence access creditandof indebtedness) of to was usually positively associatedwith entrepreneurship. The variable is insignificant several in regressions, however, apparently beinglessimportant for

121

thosewhowereselfemployed thanemployers, somewhat and moresignificant in agriculture thanoutside Again,this maywell reflectthe patterns tenureon it. of agricultural used different land for crops cultivated different or at scales. Previous unemployment strongly significantly and decreases probability the thatanindividual beanentrepreneur. is truefor bothwhites Africanwill This and Americans. The results stronger the employer,than the self-employed, are in regressions.In all the self-employed regressions, absolute the value of the coefficient is smallerfor African-Americans than white; in the pooled, selfemployed regression variableinteracting andprevious the race unemployment is positive significant and (Table10,column These 1). results suggest therewas that

some"fallinginto,"asopposed "opting to into,"self-employment, thatthere and was somewhat moreof it amongAfrican-Americans amongwhites. But than overall, bothAfrican-American whiteentrepreneurs morelikelyto have and were been continuously employed. African-American entrepreneurs haveleft wage may laborbecause discrimination limitedopportunities, those but individuals whohad found wage labor, perhaps with unsatisfactory conditions, were more likely to become entrepreneurs those than whohadbeenexcluded from wagelabor. Across variety specifications, a of African-Americans in a county living with a larger percentage African-Americans of (COUNTY) were more likely to be entrepreneurs. This provides somesupport "enclave" for explanations ethnic of business, which arguethat ethnicallyhomogenous residential communities can providea marketor otherformsof support ethnicbusinesses. similar for A measure, INDUSTRY, wasdesigned pick up the effectof a largeAfricanto American presence, a poolof African-American and workers whowerepotential entrepreneurs, withindetailed industry divisions.It gavevery inconsistent results. In threeof theAfi-ican-American regressions, INDUSTRY coefficient only the was negativeand significant. Thus, African-American employers, and the selfemployed agriculture, less in were likelyto be in industries a heavilyAfricanwith
American work force. This reflects the concentration of African-American workers

in industries with few African-American entrepreneurs. The industries where African-Americans located wereones whicha largeproportion theworkforce in of wasentrepreneurial, those and werenottheindustries whichhadlargeproportions of African-Americans workers.In contrast, the non-agricultural, in self-employed African American regression (Table X:3), the coefficienton INDUSTRY is significant positive. in Thisreflects largenumber African-American the of women entrepreneurs in services,sector a which employed largenumber Africanalso a of
American Conclusion workers.

This paperhasfoundthat overallratesof entrepreneurship, definedhere simply working one's as in ownbusiness, employees not,wereroughly with or equal betweenwhites and African-Americans 1910. This averageequality masks in important differences. Thesedifferences notobviously are explained the off by referred lackof entrepreneurial to values thepartof African-American on culture or institutions. theotherhand,thedifferences patterns entrepreneurship On in of duringthisperiodmayhelpto explainthe decline,overthefirst threequarters of thetwentieth century, African-American of entrepreneurship. mostimportant The feature African-American of entrepreneurship whichonecandrawfrom thisstudy

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is the heavy concentration agriculture,and for African-Americanwomen, in agriculture personal and services. Onecanspeculate asthesesectors that declined over the course of the century, so did African-Americanentrepreneurship. While the results the regression of analysis presented heremustbe treated very carefully, becauseof the limited natureof the data, they do suggest two important findings. First, most African-American employers were truly entrepreneurs the sense "opting" in of ratherthan"falling"into entrepreneurship. The African-American self-employed includeda small,but significantly greater proportionof the previouslyunemployed than did the white. Second,AfricanAmericanentrepreneurs were more likely to be locatedin counties with a higher percentage African-American population. This providestentativesupportfor enclave explanations African-American of entrepreneurship, beforethe creation of largeurbanghettos.All that thispapercannotanswerpointsto the importance of
further research to understand the historical context of Afi'ican-American

entrepreneurship. This research should also shed light the process of entrepreneurship the United Statesmore generally. If competitive in forceshave not led to convergence, ratherdivergence, the entrepreneurial but in behaviorof African-Americans whites,a re-examination the varietyof networks and of which support entrepreneurship among majorityethnicgroupis alsoin order. the
References

I.
2.

John SibleyButler,Entrepreneurship Seal'Help and Among BlackAmericw•s: Reconsideration A
qfRace and Economics (Albany, NY, 1991 ). Robert W. Fairlie and Bruce Meyer, "The Ethnic and Racial Characterof Self Employment," (NationalBureauof EconomicResearch Working PaperNo. 4791, 1994). Ivan Light,EthnicEnterprtse America(Berkeley,1972). in Bruce Meyer, "Why Are There So Few Black Entrepreneurs'?" (National Bureau of Economic Research Working PaperNo. 3537. 1990). BookerT. Washington, TheNegro in Buxine.vx (Chicago,1969). Monroe N. Work, Negro YearBook1912 (Tuskegee,1912).

3. 4
5. 6.

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