Black entrepreneurs are finding greater success in intrapreneurship because there are fewer discriminatory barriers in their way, according to new research from Wharton management professor Tiantian Yang. Her co-authored study shows how intrapreneurship, which happens when employees launch new ventures within their firms, can help close the racial wealth gap and boost inclusion in a segment of the economy with a long track record of inequality.
“We found that creating a new business inside an established organization is not only a more attractive option to racial minorities but also a more viable option in terms of outcomes,” Yang said on Wharton Business Daily on SiriusXM. (Listen to the podcast.)
Racial disparities in entrepreneurship are well-documented, with Black-owned businesses accounting for a slim 3% of all employer firms in the United States in 2021. But Yang and her co-author, Olenka Kacperczyk, a strategy and entrepreneurship professor at London Business School, wanted to look at the entrepreneurial ecosystem from a different lens. Instead of focusing on factors that contribute to inequality — including less access to education, training, and capital for minorities — they wanted to focus on inclusion.
“The cornerstone of our study is a very comprehensive examination of both entrepreneurship and intrapreneurship,” Yang said. “And we find some really striking contrasts.”
“Creating a new business inside an established organization is not only a more attractive option to racial minorities but also a more viable option.”— Tiantian Yang
How Intrapreneurship Can Help Close the Racial Wealth Gap
The professors analyzed data from a longitudinal survey of American entrepreneurs who were tracked from 2005 to 2011. According to the data, Black and white individuals became founders at similar rates, yet Black entrepreneurs were half as likely as their white counterparts to achieve financial success. That gap narrowed to just 3 percentage points between Black and white intrapreneurs.
Yang said the findings suggest that supporting more intrapreneurship among Black employees could be an effective way to grow their participation in the economy and raise their wealth. In the U.S., Black families on average own 24 cents for every $1 of white family wealth, according to government statistics.
“The biggest takeaway for me is that policy interventions to promote racial minority entrepreneurship should be directed toward conditions within workplaces, rather than solely targeting investors,” Yang said.
The Benefits of Intrapreneurship Over Entrepreneurship
Yang and Kacperczyk offer two main explanations for why Black intrapreneurs are more successful than Black entrepreneurs. The most significant is that employers tend to know their employees personally, and that proximity helps build a level of comfort that can reduce discrimination. When a Black employee comes to their manager with an intrapreneurial proposal, the manager can make a decision based on firsthand knowledge of that worker’s history, skills, and capabilities.
By contrast, investors may have only superficial knowledge of a potential Black founder, which may allow biases or stereotypes to creep into their decision-making.
“Firms benefit from having a more broad and diverse spectrum of innovative minds.”— Tiantian Yang
Black intrapreneurs also have an advantage on the supply side; their insider perspective helps them anticipate and evaluate discriminatory barriers they may encounter in launching a venture in-house.
“In entrepreneurship, this is a challenge less frequently faced by their white counterparts,” Yang said. “In anticipating discriminatory barriers, Black individuals will adopt a more risk-averse stance towards entrepreneurship.”
Intrapreneurship Is Good for Firms
Yang said a strong organizational structure with adequate support is key to helping Black intrapreneurs succeed, and companies have good reason to want that success.
“Firms benefit from having a more broad and diverse spectrum of innovative minds,” she said.
She said intrapreneurship is beginning to steal a bit of the spotlight from entrepreneurship as more business leaders recognize its importance to innovation, profit, and growth. The attention is also shedding light on the systemic barriers that prevent underrepresented groups, particularly Black people, from fully participating in the economy.
“I think the limitation of prior research is they’ve only focused on the initiation of independent ventures, painting a narrative that Black individuals are relatively detached from entrepreneurial endeavors,” Yang said. “What we show here is the resilience and adaptability of individuals in the face of obstacles. When confronted with barriers in launching independent businesses, many will turn to their current employers as a more viable alternative for venture creation, conditional on such opportunities being provided.”
