Tiantian Yang, Management, The Wharton School, and Olenka Kacperczyk, London Business School
Abstract: Questions about racial disparities in entrepreneurship have garnered major attention in the literature. Research has primarily focused on independently owned ventures, but individuals can also engage in startup activities via intrapreneurship—by launching and operating new ventures inside established organizations. We propose that these internal routes of new-venture formation offer a more inclusive pathway for racial minorities than external routes. Specifically, we argue that relative to white people, Black people (1) will disproportionately sort into intrapreneurship versus entrepreneurship; and (2) will be more likely to achieve greater financial performance as founders of new ventures due to both supply-side processes concerning self-selection and demand-side processes involving discrimination. We find supportive evidence from a longitudinal dataset identifying a representative sample of American new business founders in 2005. We find that Black people’s tendency to sort into intrapreneurship is amplified when discrimination increases or when they lack strong quality signals. Overall, we provide a more complete theory of racial disparities and inclusion in the entrepreneurial system by offering evidence that organizations mitigate the exclusion of racial minorities.