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LEGITIMACY, ATTITUDES AND INTENDED PATRONAGE:
UNDERSTANDING CHALLENGES FACING
BLACK ENTREPRENEURS
MICHAEL N. OGBOLU
Howard University, School of Business
2600 6th Street, NW, Washington, DC 20059
michael.ogbolu@howard.edu
ROBERT P. SINGH
Morgan State University, Earl G. Graves School of Business
1700 E. Cold Spring Lane, Baltimore, MD 21251
ANTHONY WILBON
Howard University, School of Business
2600 6th Street, NW, Washington, DC 20059
Received October 2014
Revised February 2015
Published April 2015
Traditional research on the reasons for the depressed rate of black entrepreneurship has focused on
differences between blackaand white entrepreneurs. In this paper, we move beyond the individual
entrepreneur and study consumers’perceptual differences of black and white entrepreneurs. Using a
multi-disciplinary theoretical framework to study 846 participants, we found empirical evidence that
there are significant relationships between perceptions of legitimacy and consumer attitudes toward
entrepreneurs and intended patronage. In addition, there appears to be differences in the way con-
sumers perceive black and white entrepreneurs, which suggest significant challenges facing black
entrepreneurs. Implications and future research directions are discussed.
Keywords: Black entrepreneurship; consumer perceptions; legitimacy.
1. Introduction
Historically, entrepreneurship and self-employment have been paths of economic ad-
vancement for disadvantaged people (Fairlie and Robb,2007). Individuals who are
unable to secure wage employment often turn to self-employment and entrepreneurship
(Dollinger,2003). Given the high rates of unemployment and the low labor participation
rates of black scholars, such as Bates (2006), argue that the formation and expansion of
a
The term “blacks”is used to represent the broader groups of blacks in the United States, which include African-
Americans and also black people from African countries, the Caribbean and other countries.
Journal of Developmental Entrepreneurship
Vol. 20, No. 1 (2015) 1550007 (19 pages)
© World Scientific Publishing Company
DOI: 10.1142/S1084946715500077
1550007-1
black-owned ventures is a viable strategy to address black unemployment rates. U.S. labor
and employment statistics consistently show that blacks suffer a much higher rate of
unemployment than whites. One would expect elevated levels of self-employment and
entrepreneurship among blacks to address the socio-economic impacts of higher unem-
ployment in the black community. However, this is not the case because blacks still
lag behind other racial groups in terms of rates of entrepreneurial entry and sustained
self-employment (Fairlie,2004;Fairlie and Robb,2007). Fairlie (2004) reported that the
self-employment for blacks is about one-third that of whites —about four percent within
the black population to twelve percent in the white population. In addition, black-owned
ventures are more likely than white-owned ventures to fail (Fairlie and Robb,2007).
The diminished rate of black entrepreneurship has generated interest among entre-
preneurship scholars (Bates,1997;Crump,2008;Fairlie,2004;Fairlie and Robb,2007;
Hisrich and Peters,2002;Hout and Rosen,2000; Singh, Crump and Zu, 2009). Factors
such as levels of education and business experience (Fairlie,2004;Scarborough and
Zimmerer,2005), household asset levels (Bates,1997;Fairlie,1999), parental self-
employment (Fairlie and Robb,2007;Hout and Rosen,2000) and family structure (Singh
et al.,2009) have been researched as possible reasons for low rates of entrepreneurial entry
and successful entrepreneurship for blacks. Although these factors are important, they
directly focus on the black entrepreneur’s background and immediate circumstances;
however, little or no attention has been paid to consumers, and specifically, how their
perceptions of an entrepreneur’s race affect their intentions of patronizing that entrepre-
neur’sfirm.
Using a multi-disciplinary approach that encompassed sociology, psychology, mar-
keting and entrepreneurship, we conceptualized that consumers’attitudes and legitimacy
perceptions of entrepreneurs impacted intended patronage. Further, we argue there are
differences in the way black and white entrepreneurs are perceived by consumers, which
impacts patronage of firms. Following a literature review and development of our hy-
potheses, we discuss the research methodology we used to test our hypotheses. Results and
discussion follow. We believe the findings of this study shed further light on the reasons
for the diminished rate of new venture creation and lower rate of success among black
entrepreneurs. Implications, limitations and future research directions are discussed.
2. Literature Review and Hypotheses
Social behaviors (such as consumer behavior) are influenced by experiences, perceptions
of legitimacy, attitudes and stereotypes one believes (Greenwald and Banaji,1995).
Consumers will patronize businesses they perceive as legitimate (Aldrich and Fiol,1994)
and toward which they have favorable attitudes (Fairchild,2008). Consumers’attitudes
and perceptions of legitimacy may be even more critical for black entrepreneurs whose
businesses may suffer from the effects of negative stereotypes held about African Amer-
icans (Fairchild,2008). This may also be true of black consumers and other minority
ethnic groups who also tend to adopt the prejudices of the dominant group (Burgess and
Mosso, 2001; Jost, Pelham, Mauricio and Carvallo, 2002; Sarnoff,1960). In the following
M. N. Ogbolu, R. P. Singh & A. Wilbon
1550007-2
sections, we discuss the importance of perceived legitimacy and attitudes toward intended
patronage, as well as differences that may exist for black and white entrepreneurs.
2.1. Legitimacy
New businesses have to overcome the liabilities of newness (Stinchcombe,1965) that exist
because of the lack of specific sets of resources and capacities that more established
businesses have. New ventures experience higher rates of failure than more established
ones because they have weak claims to sources of support and are highly vulnerable to
environmental shocks, making them more prone to fail than established firms (Hannan and
Freeman,1984). Morse, Fowler and Lawrence (2007) explained the issues of liabilities of
newness and their effects on new ventures in general, stating that new ventures must
develop extant routines because they lack established roles and systems, which can result
in issues of trust and legitimacy.
Aldrich and Fiol (1994) pointed out that trust is a critical first-level determinant of
business success and is an important factor in most social transactions, including business
transactions in which there is uncertainty about outcomes. Consumers tend to be careful
about what they buy and where they buy. Trust of a business establishment is important to
consumers in their business patronage decisions (Child and Mollering,2003;Gounaris,S).
Consumers are usually skeptical and are afraid of being taken advantage of by new or
unfamiliar businesses. Like trust, legitimacy is critical for diminishing the effects of the
liabilities of newness. An entrepreneur’s success ultimately depends on the entrepreneur’s
ability to gain customer support by achieving high levels of legitimacy (Zarkada-Fraser
and Fraser,2002). This leads to our first hypothesis:
Hypothesis 1: Perceived legitimacy of an entrepreneur and his/her new venture startup is
positively related to intended patronage of that venture.
2.2. Attitudes
Allport (1954) stated that attitude was the most indispensable concept in social psychol-
ogy. Attitude has been defined in various ways, such as an inclination toward evaluation
of a class of objects (Sarnoff,1960). Greenwald (1989) has referred to it as a person’s
disposition to respond favorably or unfavorably to a thing, person, place, or event
(Greenwald,1989). However one defines attitude, it has an impact on consumer behavior
(Perkins, Forehand, Greenwald and Maison, 2008). Attitudes speak to one’s favorable or
unfavorable views of a person, place, thing, cultures and even businesses. Although some
researchers have reported a weak correlation between attitude and behavior (e.g., Bagozzi,
1978), others like Glasman and Albarracín (2006) have argued that attitudes indeed in-
fluence behavior, especially when the information the attitude is formed on is one sided,
for instance, stereotypes. Consumers’favorable or unfavorable attitudes toward a specific
ethnic group may determine their likelihood to patronize a business establishment owned
by that ethnic group (Cummings,1980;Light and Rosenstein,1995;Wilson and Portes,
1980). Just as with our discussion of legitimacy above, it is unlikely that one would
Legitimacy, Attitudes and Intended Patronage
1550007-3
patronize a business that one has a negative attitude toward. More formally, we hypoth-
esize the following:
Hypothesis 2: Attitudes about an entrepreneur and his/her new venture startup are posi-
tively related to intended patronage.
2.3. Intended patronage of black- vs. white-owned firms
Liabilities of newness can be reduced by improving consumers’perceptions of business
legitimacy, which in turn increases business patronage (Aldrich and Fiol,1994;Morse
et al.,2007). However, one issue for black entrepreneurs is that black enclaves in which
the majority of blacks in the United States live are usually located in inner cities and are
densely populated and inhabited by individuals in the lowest income quartile (Iceland,
Sharpe and Steinmetz, 2005). This fact is likely a result of how black enclaves formed in
the United States Black enclaves, unlike other ethnic enclaves, formed because of legal
exclusion of African Americans from patronizing mainstream businesses (Bates,2006),
while other enclaves formed in response to voluntary immigration of other ethnic groups.
In contrast to other ethnic groups who have used their ethnic enclaves in the United States
as starting points in their American journey, black enclaves have been home to generations
of some black families who have largely remained in poverty. This poses an obvious
problem for black entrepreneurs in that their customer base is not likely to have the same
wealth and income as other groups.
Ethnic enclaves provide business and employment opportunities for their residents that
otherwise would not be available to them in the larger society (Cummings,1999).
However, there have been arguments that slavery and continued discrimination in the
broadest terms may have deprived African Americans of acquiring entrepreneurial acu-
men, resulting in the lack of a black business tradition (Bristol,2004). In addition, negative
stereotypes and lower self-esteem are by-products of discrimination and may affect Af-
rican Americans’ethnic affiliations and ethnocentric behaviors including consumer eth-
nocentrism (Greenwald and Banaji,1995; Negy, Shreve, Jensen and Uddin, 2003). In
some cases, minorities have been found to identify with dominant groups and take on the
negative stereotypes and prejudices toward them (Sarnoff,1960), thus perpetuating these
negative stereotypes. All of these factors above may result in unfavorable attitudes toward
African American entrepreneurs and preferential patronage of non-African American-
owned businesses. This is similar to consumers’preference of foreign goods over national
goods in some countries (Huddleston, Good and Stoel, 2001; Supphellen and Rittenburg,
2001).
Consistent with this view, in a study by Yoon (1991), Korean merchants in black
neighborhoods were found to specialize in five lines of business, including beauty sup-
plies. Because of their access to capital through intra-ethnic economic linkages and other
sources, their beauty supply stores tended to be larger, pushing out smaller firms owned by
blacks in black neighborhoods (Lee,2000). Subsequently, beauty supply shops in these
neighborhoods became associated with Koreans because black consumers in these
neighborhoods were more likely to patronize beauty shops owned by Koreans. It is likely
M. N. Ogbolu, R. P. Singh & A. Wilbon
1550007-4
that black consumers viewed Koreans as having greater expertise in the beauty supply
business and/or had come to trust Korean beauty store owners and their products more
than they trusted co-ethnic black owners and their products (Ogbolu,2011).
Most ethnic enclave entrepreneurs have a concentrated trusting customer base of
co-ethnic consumers who view them as legitimate (Logan, Zhang and Alba, 2002; Model,
1985). This tends to allow enclave entrepreneurs to grow at a faster rate than entrepreneurs
in the wider market (Cummings,1999; Waldinger, 1983). The lower rates of entre-
preneurship and the higher rate of failure among black entrepreneurs suggest that they do
not enjoy the same perceptions of legitimacy by co-ethnic consumers as do other ethnic
groups. Legitimacy or “street credibility”is a recognized point of reference in black
enclaves; it carries the power of believability and authenticity and is largely based on an
individual’s reputation (Podoshen,2008). Lack of black business tradition (Bristol,2004)
has resulted in consumers, including co-ethnics, associating most successful businesses
with non-black entrepreneurs, such that it is difficult for black entrepreneurs to enter, thrive
in, or be successful in certain types of businesses (Ogbolu,2011). Because of this per-
ceived lack of legitimacy (at least from the consumers’point of view), black entrepreneurs
are sometimes limited to certain types of businesses (mostly service types, for instance hair
salons and barber shops) that consumers have come to associate them with. Black
entrepreneurs who wish to start ventures in industries not typically associated with blacks,
such as high tech businesses, may have difficulty establishing legitimacy.
Further, the collective impact of negative stereotypes, elevated crime rates in urban
areas, which tend to contain black enclaves and negative portrayals of blacks in the media,
are likely to influence consumer attitudes in negative ways toward black entrepreneurs.
Research has shown that white customers tend to patronize white-owned establishments
(Quellet,2007). However, there is no strong evidence that black customers equally support
black entrepreneurs. In fact, there is some research to show that black consumers also seem
to prefer non-black owned businesses (Gregory,1973). It may be that they also hold the
same negative attitudes toward co-ethnic entrepreneurs.
Cummings (1999) argued that urban enclave markets are more limited than the
broader markets within the economy and that this is a possible reason black-owned
businesses in the black enclaves fail or do not perform as well as those outside the
enclave. We believe this is consistent with the idea that negative consumer attitudes and
low perceptions of legitimacy for black entrepreneurs and their firms exist. Toward this
end, Boston and Ross (1996) found that, in general, black-owned businesses located in
the lowest income areas (usually in the inner city) and the very highest income areas
tendedtobetheleastprofitable. However, those located in the middle to upper middle-
income class areas (the suburbs) performed much better. This may be a result of reduced
negative stereotypes and higher self-esteem, perhaps because of higher educational at-
tainment and higher incomes of the black consumers and black entrepreneurs who may
live in these suburbs and the fact that whites are less likely to ascribe negative stereo-
types to blacks who live and work in their geographic proximity (Fairchild,2008).
Moreover, suburbanites are more likely to see themselves as sharing the same interests as
their neighbors, and they also see themselves as having similar incomes and education
Legitimacy, Attitudes and Intended Patronage
1550007-5
(Tallman and Morgner,1970). The problem for black entrepreneurs is that the percentage
of blacks who live in middle- and upper-class suburbs is low relative to the population of
all blacks in the United States.
Although co-ethnic consumers have consistently been found to support businesses
founded by entrepreneurs of similar racial backgrounds (Cashdan,2001;Cummings,1999;
Wilson and Portes,1980), we believe this may not be true for black-owned businesses.
Based on the above discussion regarding perceptions of lower legitimacy and negative
attitudes black entrepreneurs face, we believe black consumers will show no preference for
black-owned businesses, but that white consumers will show a preference for white-owned
businesses. More formally:
Hypothesis 3: Black consumers will have similar intentions to patronize new ventures
founded by black entrepreneurs as white consumers.
Hypothesis 4: White consumers will have higher intentions to patronize new ventures
founded by white entrepreneurs than black consumers.
3. Research Methods
3.1. Survey questionnaire and sample
Data were originally collected during a 52 day period between December 2010 and
January 2011. Participants were volunteer individuals who were approached by a data
collector at several different locations around a major east coast city and its suburbs.
Respondents were assured complete confidentiality and the survey took about ten minutes
to complete.
The survey and data collection procedures received Institutional Review Board ap-
proval and the survey was pretested to check for appropriateness of the questions and the
chosen sample. There were two versions of the survey questionnaire that asked respon-
dents to answer questions about an entrepreneur and his new venture that was purported to
be in the process of being founded in the area. Both versions of the questionnaires
contained the same biological information (i.e., name, education and work experience)
about the entrepreneur and were the same except that the entrepreneur was represented by
two different pictures —one was a white man and the other a black man. The pictures of
each man were similar in terms of smile, background and clothing. There was no reference
to race specifically made on the questionnaire; the only differentiating factor between the
two questionnaires was the picture. Appendix A contains the brief bio sketch and pictures
of the two men used in the survey questionnaires.
Most of the questions were adapted from General Social Survey (GSS) questions, as
well as questionnaires utilized by Heatherton and Polivy (1991); Luhtanen and Crocker
(1992); Maxham and Netemeyer (2002); Newell and Goldsmith (2001) and Sweeney and
Soutar (2001). The items selected were used to measure the respondents’perceptions of
legitimacy, attitudes and intended patronage of the new venture (a restaurant) described in
the brief background sketch on the questionnaire. Although these subscales had previously
established reliability, a pilot test was used to establish the reliability of the total survey
M. N. Ogbolu, R. P. Singh & A. Wilbon
1550007-6
prior to full data collection. In addition, the questionnaire included demographic ques-
tions about the participants (e.g., age, race, gender, education, income levels). This design
is similar to that used in previous ethnicity-based research (e.g., Nesdale, Durkin, Maass
and Griffiths, 2005; Shutts, Kinzler, Katz, Tredoux and Spelke, 2011; Stokes-Guinan,
2010; Clark and Clark,1947;Hraba and Grant,1970). The full questionnaire is not
contained in this paper, but is available upon request. However, the question items used
to measure legitimacy, attitudes and intended patronage are provided in Table 2later
in the paper.
Table 1summarizes the demographic characteristics of the 846 participants that made
up the respondent sample of the study. The mean age of the participants was just under
40 years. Most participants were female (59.4%). The participants were about evenly
distributed by race. Black participants constituted 50.8 percent (430) of the sample, while
white participants made up 49.2 percent (416) of the sample. Most participants had
completed high school and some post high school education (75.2%) and more than half of
the participants (55.7%) reported an annual income above $50,000.
3.2. Measures and statistical analyses
Hierarchical regression analyses were used to test the hypotheses in this study. Age,
education, income and gender were used as control variables. The full list of variables
included in the analyses follows:
LEGITIMACY —This variable was calculated by adding up the responses for nine
5-point Likert-type question items in the survey instrument (see Table 2). The minimum
score was nine and the maximum was 45. The nine-item scale had an alpha of 0.88.
ATTITUDES —This variable was calculated by adding up the responses for six 5-point
Likert-type question items in the survey instrument (see Table 2). For this variable, the
minimum score was six and the maximum was 30. The six-item scale had an alpha of 0.82.
Table 1. Respondent demographic characteristics.
Age (Years) Mean/SD Min-Max
39.4/17.2 18-88
Frequency Percent
Gender
Female 444 59.4
Male 303 40.6
Race/Ethnicity
Black 430 50.8
White 416 49.2
Education
HS Diploma or Lower 209 24.8
Above High School 633 75.2
Income
<$50,000 320 44.3
$50,000 or greater 402 55.7
N¼846* N varies because of missing data.
Legitimacy, Attitudes and Intended Patronage
1550007-7
INTENDED PATRONAGE —This variable was calculated by adding up the
responses for two 5-point Likert-type question items (see Table 2). The minimum score
was two and the maximum was ten. The two-item scale had an alpha of 0.75.
Table 2provides the wording of the question items that made up the scales for the
above variables. All three scales demonstrated good reliability and validity, and have been
used in prior published research studies. However, reliability was re-examined for this
sample of participants and all scales demonstrated good reliability as demonstrated by the
Cronbach’s alphas above 0.7.
AGE —This variable is the age of the respondent in years. It was taken directly from
the survey.
EDUCATION —This was a dummy coded variable, which measured whether
respondents had achieved any post high school education. Respondents who had gradu-
ated high school and pursued some college or post high school education were coded as
“1”. Those who had just a high school degree or less were coded as “0”.
INCOME —This was a dummy coded variable, which measured whether respondents
earned more than $50,000. Respondents who reported annual income at $50,000 or more
were coded as “1”. Those who reported income below $50,000 were coded as “0”.
RACE OF RESPONDENT —This dummy variable identified the race the respondent.
This was taken directly from the survey. Only black and white respondents were included
in this study. Black respondents were coded as “1”and white respondents as “0”.
Table 2. Consumer perception scales: Reliability, mean and ranges.
No. Items αM/SD (Range)
Legitimacy Scale 9 0.88 30.2/6.1 (9-45)
Keith is prepared to start the business 3.5/1.0
Keith has the background to be a successful entrepreneur. 3.4/1.0
Keith has the appropriate experience to get the bank loan. 3.1/1.0
Keith knows how much he needs to invest in the business. 3.1/1.1
I would not expect any problems with Keith’s restaurant. 2.8/1.1
The idea of Keith opening a restaurant in the area is appealing. 3.7/0.9
Keith’s restaurant would perform well near my home. 3.3/1.0
Keith’s restaurant would be well received by me 3.6/0.9
Keith’s restaurant would be well received by people in my
neighborhood.
3.5/0.9
Attitude Scale 6 0.82 23.1/3.8 (6-30)
I expect Keith will still be in business in 5 years. 3.3/1.0
I hope Keith is successful. 4.6/0.6
Keith seems like an interesting person. 3.8/0.9
Keith is a good role model for children in my neighborhood. 3.6/0.9
I would probably enjoy socializing with Keith. 3.5/0.9
If he is successful, people in my neighborhood are more likely to
have a good impression of him
4.1/0.9
Patronage Scale 2 0.75 8.5/1.4 (2-10)
I would try his restaurant if it is located in my neighborhood 4.1/0.8
If I liked the food and prices, I would recommend Keith’s restaurant
to friends and relatives.
4.3/0.7
M. N. Ogbolu, R. P. Singh & A. Wilbon
1550007-8
RACE OF ENTREPRENEUR —This dummy variable was coded the same as the
Race of Respondent variable. Respondents who filled out the survey with the picture of the
black entrepreneur were coded as “1”and those with the picture of the white entrepreneur
as “0”.
4. Results
Table 3details the results of descriptive statistics and correlations among the variables
used in the study.
To test Hypothesis 1 (Perceived legitimacy of an entrepreneur and his/her new venture
startup is positively related to intended patronage of that venture) and Hypothesis 2
(Attitudes about an entrepreneur and his/her new venture startup are positively related
to intended patronage), age, income, education and gender (control variables) were
first regressed on intended patronage (see Model 1of Table 4). Then, legitimacy and
attitudes were entered into the regression model (see Model 2of Table 4). The control
variables in the first step of the regression model did not significantly explain any of the
variance in intended patronage. The only control variable that had a significant re-
gression coefficient was age (β¼0:0708,p<0:05). This result indicates that with
age, respondents were less likely to patronize the new venture (restaurant) that was
being founded by the entrepreneur.
The next step of the analyses was testing the effects of the independent variables —
legitimacy and attitudes —on intended patronage. As seen in Table 4, both independent
variables were significantly related to intended patronage (see Model 2 of Table 4).
Adding legitimacy and attitudes to the regression model resulted in an adjusted R2of
0.340 (F¼59:956,p<0:001). The standardized regression coefficients for legitimacy
(β¼0:257,p<0:001) and attitudes (β¼0:384,p<0:001) were both positive and
statistically significant. One standard deviation change in legitimacy results in a 0.257
change in patronage, one standard deviation change in attitudes results in a 0.384 change
in patronage. These results provide strong support for Hypotheses 1 and 2.
To test Hypothesis 3 (Black consumers will have similar intentions to patronize new
ventures founded by black entrepreneurs as white consumers), a similar regression anal-
ysis as the one described above was conducted (see Table 5) except that we only tested the
respondents who were surveyed about the black entrepreneur (i.e., those who received the
survey with the picture of the black man). Once again, the control variables were first
entered (see Model 1 of Table 5) into the regression analysis. Little variance was explained
and only the regression coefficient for education was significant ( p<0:05). As seen in
Model 2 of Table 5, adding legitimacy and attitudes to the regression model resulted in an
adjusted R2of 0.287 (F¼23:896,p<0:001). The standardized regression coefficients
for legitimacy (β¼0:302,p<0:001) and attitudes ( β¼0:286,p<0:001) were both
positive and statistically significant. The final step of the regression analysis was exam-
ining the difference between black and white respondents in terms of intended patronage.
We expected no difference between black and white respondents in terms of their intended
Legitimacy, Attitudes and Intended Patronage
1550007-9
Table 3. Descriptive statistics and correlations.
Variable Mean SD 1 2 3 4 5 6 7 8 9
1. Age 39.44 17.25 1.00
2. Income 0.56 0.50 0.138*** 1.00
3. Education 0.75 0.43 0.026 0.347*** 1.00
4. Gender 0.41 0.49 0.012 0.030 0.082* 1.00
5. Legitimacy 30.32 6.13 0.014 0.161*** 0.200*** 0.017 1.00
6. Attitudes 23.14 3.72 0.028 0.106** 0.113*** 0.009 0.698*** 1.00
7. Intended Patronage 8.49 1.40 0.084* 0.047 0.064 0.000 0.484*** 0.528*** 1.00
8. Race of Respondent 0.49 0.50 0.310*** 0.032 0.019 0.095** 0.046 0.026 0.090** 1.00
9. Race of Entrepreneur 0.50 0.50 0.034 0.012 0.056 .035 0.171*** 0.244*** 0.136*** 0.047 1.00
*Significant at p<0:05 level.
**Significant at p<0:01 level.
***Significant at p<0:001 level.
M. N. Ogbolu, R. P. Singh & A. Wilbon
1550007-10
patronage of the black entrepreneur’s new venture and the results were as we expected
(β¼0:005). Thus, the results shown in Model 3 of Table 5provided support for
hypothesis 3.
The final regression analysis tested the respondents who were surveyed about the white
entrepreneur (i.e., those who received the survey with the picture of the white man). The
results shown in Table 6strongly support hypothesis 4 which states that White consumers
will have higher intentions to patronize new ventures founded by white entrepreneurs than
black consumers. The control variables were insignificant (see Model 1 of Table 6), but
once again, the inclusion of legitimacy and attitudes greatly improved the regression
model. Including the two independent variables resulted in an adjusted R2of 0.368
(F¼34:332,p<0:001) and the standardized regression coefficients for legitimacy
(β¼0:201,p<0:001) and attitudes ( β¼0:462,p<0:001) were both positive and
statistically significant (see Model 2 of Table 6). Clear support for hypothesis 4 can be
seen in Model 3 of Table 6. Entering race of respondents into the regression model
Table 5. Regression results for intended patronage of black-
owned businesses.
Variable Model 1 Model 2 Model 3
Beta Beta Beta
Age 0.049 0.098 0.100
Income 0.005 0.065 0.065
Education 0.133* 0.072 0.072
Gender 0.067 0.054 0.054
Legitimacy 0.302*** 0.302***
Attitudes 0.286*** 0.286***
Race of Respondent 0.005
F2.316 23.896*** 20.424***
Adjusted RSquare 0.015 0.287 0.284
*Significant at p<0:05 level.
***Significant at p<0:001 level.
Table 4. Regression results for intended patronage.
Variable Model 1 Model 2
Beta Beta
Age 0.077* 0.121***
Income 0.015 0.050
Education 0.043 0.026
Gender 0.008 0.005
Legitimacy 0.257***
Attitudes 0.384***
F1.403 59.956***
Adjusted RSquare 0.002 0.340
*Significant at p<0:05 level.
***Significant at p<0:001 level.
Legitimacy, Attitudes and Intended Patronage
1550007-11
improved the variance explained by nearly three percent (adjusted R2of 0.394,
F¼32:986,p<0:001), and the standardized regression coefficient was negative and
statistically significant (β¼0:178,p<0:001), which points to the fact that white
respondents were statistically more likely to indicate they would patronize the white
entrepreneur’s business than the black respondents.
5. Discussion
In this study, the theoretical relationships identified in the literature review were found to
be significant based on the responses by our sample of participants. All four hypotheses
were supported as we found a clear link between intended patronage, perceptions of
legitimacy and attitudes toward the entrepreneur and his firm. More specifically, re-
gardless of the race of the entrepreneur, higher legitimacy and attitude scores were found
to be positively related to intended patronage. Quellet 2007 showed that because the
United States is largely multi-cultural/multi-ethnic, each ethnic group exhibits a signifi-
cant preference for its own ethnic products or businesses (Quellet,2007). It seems this
was the case for the white entrepreneur, who had a distinct advantage in terms of
expected patronage of his new venture by white respondents, and not for the black
entrepreneur, who was not favored by co-ethnic respondents. With respect to the first
finding, the scales we used to measure legitimacy and consumer attitudes showed very
good reliability and were significant factors in explaining 34 percent of the variance in
intended patronage of the projected new ventures in our study. By itself, we believe this
is a significant research contribution; however, there were differences in the ways in
which these variables impacted intended patronage of black- vs. white-owned new
ventures. In total, the inclusion of legitimacy, attitudes and race of the respondents in the
regression model explained nearly 40 percent of the variance for intended patronage
of the white entrepreneur’s new venture. This compares with just 28.4 percent of the
variance for the black entrepreneur.
Table 6. Regression results for intended patronage of white-
owned businesses.
Variable Model 1 Model 2 Model 3
Beta Beta Beta
Age 0.078 0.132** 0.085
Income 0.036 0.039 0.023
Education 0.030 0.108* 0.104*
Gender 0.066 0.056 0.077
Legitimacy 0.201*** 0.230***
Attitudes 0.462*** 0.453***
Race of Respondent 0.178***
F1.138 34.332*** 32.986***
Adjusted RSquare 0.002 0.368 0.394
*Significant at p<0:05 level.
**Significant at p<0:01 level.
***Significant at p<0:001 level.
M. N. Ogbolu, R. P. Singh & A. Wilbon
1550007-12
Given the fact the information about the new venture and the background of the
entrepreneurs that was given to survey respondents was exactly the same except the
pictures of the entrepreneurs, there should be no difference in the intended patronage
levels of the new ventures that respondents were asked about. Obviously, this was
not the case and understanding the eleven percent gap in variance explained in
intended patronage may help us better understand the unique challenges facing black
entrepreneurs.
One might immediately jump to the conclusion that this is a case of simple discrimi-
nation and overt racism, but we believe it is far more complex than that. Our results
showed that while white entrepreneurs were more likely to be supported by their co-ethnic
white consumers, the same was not the same for black entrepreneurs. This points to a
subtle, but clearly negative issue for black entrepreneurs. If the difference could be tied
simply to racism then we would still expect black consumers to support black entrepre-
neurs more than white consumers do, but that is not the case.
Ethnic identity confers certain important business resources on ethnic enclave busi-
nesses such as market penetration and power, tight-knit financial and social networks, and
enhanced ethnic bond and loyalty, which ultimately strengthen consumer allegiance to
ethnic ventures (Light and Rosenstein,1995). Ethnic solidarity or ethnocentrism promotes
a collective approach to business development (Cummings,1980). In other words, the
success of ethnic enclave businesses is often dependent on the degree of consumer eth-
nocentrism exhibited by co-ethnics. The stronger the consumer ethnocentrism exhibited by
co-ethnics in an ethnic enclave, the greater the likelihood of entrepreneurial entry by co-
ethnics, and of success by ethnic enclave businesses. We believe the finding that black
consumers do not show any preference for black entrepreneurs is consistent with the
negative reasons we discussed in the literature review (e.g., stereotypes, lower self-esteem,
reactions to discrimination). However, this was not directly tested and future research is
needed.
A closer inspection of the results suggests that perceptions of legitimacy were more
important for black entrepreneurs than attitudes. For white entrepreneurs the importance of
these variables is reversed. This may be because of the lack of business tradition (Bristol,
2004) and higher failure rates (Fairlie and Robb,2007) of black entrepreneurs, which
makes consumers take more of a “wait and see”attitude. They may be more concerned
about performance or ability to deliver for black entrepreneurs than they are for white
entrepreneurs. White entrepreneurs may already enjoy consumer perceptions that their
firms are legitimate or they are qualified and able to conduct whatever business they
engage in. In other words, their ability to perform is not really questioned in the same way
as black entrepreneurs.
6. Limitations
There are a number of limitations that must be acknowledged. First, in this study, ques-
tions were asked about a hypothetical entrepreneur starting just one type of business
(a restaurant). It would be better to study real entrepreneurs operating in various industries.
Legitimacy, Attitudes and Intended Patronage
1550007-13
Further, this is a cross-sectional entrepreneurship study that was limited to two racial/
ethnic groups in the United States. Cross-sectional studies represent only one point in time
and cannot be used to establish cause and effect relationships. The study was implemented
in a relatively small area, one state, within the United States. In addition, the implemen-
tation of this study offered some unique challenges. Because this study had some racial/
ethnicity components, which can be controversial, responses may have been influenced by
social desirability response biases. People are often sensitive to ethnic/racial discussions
and questions. Although the study design and data collection procedure did not explicitly
draw attention to the race of the entrepreneur, there were clearly differences in the intended
patronage scores achieved by the businesses that were to be founded by the black and the
white entrepreneur. Whether this was because of positive factors such as white support for
the co-ethnic white entrepreneurs or negative factors such as discrimination and racism
cannot clearly be determined.
7. Future Research Directions
Future research should address the limitations discussed above. Replication studies in
other geographic areas and using real entrepreneurs from different demographic groups in
various industries should be conducted. In the future, longitudinal studies of real en-
trepreneurial ventures should be conducted to establish if indeed attitudes and legitimacy
predict intended patronage and actual patronage. In such a study, follow-up surveys
should be given to participants during the study period to determine if and how their
responses change over time. Results from a longitudinal study would more accurately
explain the factors that predict patronage of black-owned businesses versus white-owned
businesses.
Although there are challenges involved in using real businesses, such as controlling
for quality, service and pricing —which were not required with the present research
method —careful selection of business establishments for comparison could yield in-
valuable insight and provide more generalizable results. In addition, studying real entre-
preneurs and their firms may minimize social desirability response bias because the
researcher would actually observe respondents as they go in and out of the selected
business establishments. In addition, different types of businesses should be studied to
determine if differences exist between black-owned and white-owned businesses con-
cerning how consumer perceptions impact patronage.
Other data collectors of different race/ethnicity, gender and age may be used in different
settings. The use of different data collectors may facilitate data collection efforts from
participants of varied demographics. In addition, this study can also be implemented in an
anonymous manner. For instance, the Internet can be used to ensure that study partici-
pants’responses are not biased because of the presence of the researcher. Individuals are
more likely to respond honestly when they believe there is total anonymity, such as that
provided by the Internet (Nosek, Banaji and Greenwald, 2002a,b). This study can also be
expanded to include businesses that are owned by people with different demographics.
Because the United States is made up of more than blacks and whites, future research
M. N. Ogbolu, R. P. Singh & A. Wilbon
1550007-14
could include entrepreneurs of other races/ethnic groups. Moreover, gender and age dif-
ferences may exist in consumer perceptions; therefore, for future research, the gender and
age of the entrepreneurs can also be manipulated to determine if differences based on age
and gender exist. Finally, a cross-country study could also be implemented to compare
results from different countries, especially a country like South Africa, which in the past
had institutionalized racial discrimination like the United States.
8. Conclusions
In conclusion, the reason for the persistent low rate of black participation in entre-
preneurship is not fully understood. Although researching black entrepreneurs and their
circumstances such as education, finances, family dynamics is helpful, these studies
do not fully explain the state of black entrepreneurship. Because consumers are central
to successful entrepreneurship, a closer examination of their impact is warranted
because this can help further illuminate the importance of certain variables such as
attitudes and legitimacy, and their relationship with patronage and ultimately successful
entrepreneurship.
The limitations notwithstanding, this paper empirically demonstrates that attitudes and
legitimacy have strong positive relationships with intended patronage. Furthermore,
findings show that although legitimacy has a stronger relationship with and may better
predict intended patronage for black-owned businesses, attitudes has a stronger relation-
ship with and may better predict intended patronage for white-owned businesses. Although
this research is in its early stages, it may be worthwhile for black entrepreneurs to strive to
improve the legitimacy perceptions of their businesses and for white entrepreneurs to be
seen in a favorable light by consumers.
Another important finding is that whites more than blacks were more likely to have an
intention to patronize white-owned businesses, showing high consumer ethnocentrism.
The findings did not show that blacks felt the same way about new ventures founded by
co-ethnic entrepreneurs. This demonstrates the lower level of consumer ethnocentrism
among blacks. Further exploration of the reasons for this significant difference may be key
to understanding additional dynamics involved in black entrepreneurship that are not well
understood. We hope this paper introduces readers to new concepts, which can be further
studied to better understand the challenges facing black entrepreneurs. Much work remains
to be done.
Appendix A. Text of Bio Sketch of the Entrepreneur on the Questionnaire
The following text appeared at the beginning of the survey instrument as well as a picture
of the entrepreneur. For half the respondents the picture was of a black man, the other half
received a picture of a white man.
“Keith is 33 years old. He has worked in the restaurant industry as a waiter for the past
8 years. Keith has also taken some college classes in business and hospitality management,
and is planning to open a family-style restaurant in your neighborhood. Keith has written a
Legitimacy, Attitudes and Intended Patronage
1550007-15
business plan and is currently seeking a suitable location for his restaurant. He is also
attempting to secure a bank loan so he can start his business within the next year.”
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