The impact of trust on social and financial capital acquisition: A resource integration perspective in minority-owned entrepreneurial organisations

Abstract

Although effective resource integration is a critical requisite for entrepreneurial success, the literature suggests there are crucial gaps for minority entrepreneurs. We examine how interracial distrust (ID), an indicator of the extent to which minority entrepreneurs distrust other races, is related to internal and social capital. We examine the relationships of such capitals on the willingness to borrow from banks and friends, and explore the link with firm performance. Using a sample of 276 primarily African American entrepreneurs, we find support for most of our hypotheses. We find that ID is negatively associated with external social capital and a willingness to borrow from banks. Surprisingly, we found that ID had a negative effect on internal social capital and a willingness to borrow from friends. We also found that internal and external social capital was positively related to firm performance. We discuss the implications of some of these surprising research findings as well as the policy implications.

Three essays on minority entrepreneurship and resource acquisition

“…Minority entrepreneur (ME) is a term coined originally in the economics and sociology literature (Mazzarol, 2021;Light, 1972). Historically, papers have defined minority entrepreneurs by using their operationalization of the construct, that is using the ethnic minority group or nationality of the sample being studied (e.g., Pegram et al, 2022Smith & Viceisza, 2018;Light, 1972). Consequently, the ME literature often uses the term to talk about immigrant entrepreneurs, people of color, refugees, youths, indigenous groups, and ethnic entrepreneurs, while also including a variety of ethnoracial groupings (Cooney, 2021).…”

“…The beginning periods of minority entrepreneurship research saw the constructs of the ethnic enclave studied prominently as a theoretical foundation of the field (e.g., Portes & Jensen, 1987;Sanders & Nee, 1987;Light, 1984;Light, 1972). Starting in the late 1980's and into the new century up to today research on minority entrepreneurship financing continues to develop concerning how MEs acquire debt and equity capital along with the hurdles they encounter (e.g., Pegram et al, 2022;Portes & Sensenbrenner, 1993;Bates, 1991;. In the early 1990s Bailey and Waldinger (1991) published the only article in this review focused on the training of minority entrepreneurs.…”

“…In essence, they find that racial identity is a predictor of business behavior, in this case avoiding debt financing . Similarly, interracial distrust, or the trust among those of different backgrounds, has been shown to negatively relate to MEs access to social and financial capital (Pegram et al, 2022). Interracial distrust is another element that explains how race affects the business decisions and thereby performance of ME firms.…”