This study investigates the extent to which the performance of African-American businesses is determined by owner-manager's socio-economic attributes, by the business attributes, and by industry and regional characteristics. An extensive review of the literature shows that little attention has been paid to the effects of business conduct and strategies on the performance of African-American businesses. Nor have the effects of the various factors affecting African-American business performance been analyzed simultaneously.
Using the "organization-environment" analytical tradition as conceptual base, an alternate framework for analyzing business performance was developed. The basic proposition of the framework is that business performance is a function of the business' internal (organizational) factors, the factors characteristic of its external environment, and the interaction between these two groups. Two dimensions (output and growth) of the business performance concept were included as dependent variables in the framework. Structural equation modeling, estimated by Partial Least Squares technique, was used to test the validity of the proposed framework.
The findings support the proposition that factors in both the internal and external environments influence the performance of African-American businesses, with the internal environmental factors being the most important. Productive resource base and business conduct and strategies, conceived as making up the internal environment, exhibited the hypothesized positive relationships with performance. The most important factors in the internal environment are total assets, number of employees, introduction of new products/services, focusing on government for patronage, and obtaining financing from commercial banks.
Regarding the external environmental factors, industry characteristics, as a group, performed as expected and posted positive signs with performance. Level of entry barriers, rivalry among industry members, and rate of product/process innovations are the most important industry characteristics. Regional characteristics, as a group, exhibited a negative relationship with performance. The most important regional factors, in a negative sense, are labor and capital availability.
The findings further suggest that the output and growth dimensions of business performance are driven by different forces. The output dimension is driven principally by the productive resource base, whereas the growth dimension is driven by business conduct and strategies.
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