A New Nationwide Data Base for Minority Business

Abstract

A NEW NATIONWIDE DATA BASE FOR MINORITY BUSINESS Over the past ten years, the dialogue on minority business development has evolved from dramatic confrontations in public arenas to sedate technical discussions in board rooms and research offices. When facts, rather than arguments, are needed, the shortage of data becomes obvious as decision makers confront untested hypotheses and limited or, even worse, misleading information. When researchers began the systematic investigation of minority firm behavior in the early 1970s, their findings were biased by limiting sampling techniques. Data on minority business activity at the micro' level was, then, the by-product of loan programs1 targeted to socially or economically disadvantaged business groups. Inevitably, investigations based on that data uncovered a high incidence of loan defaults2 and marginally viable business enterprises. 1 Mainly the Economic Opportunity Loan (EOL) Program, begun by the Small Business Administration in the mid-1960s. 2 Timothy Bates and William Bradford, Financing Black Economic Development (New York: Academic Press, 1979), Chapters 9 and 10. In 1979, a research project funded by the Office of Minority Business Enterprise in the Department of Commerce, created a new data base. It included for the first time sufficient information on large and viable minority businesses to allow the study of minority firm profitability, debt, liquidity, and asset management.3 That data base,4 updated and reformatted to better support analyses and further data developments, is now managed by the Minority Business Development Agency (MBDA)5 of the U.S. Department of Commerce. information presented in this article summarizes the development of the data base, describes the information system it presently supports, and evaluates its significance and limitations for policy and research. 3 Antonio Furino (Principal Investigator), The Development of Key Business Ratios of Minority-Owned Business Enterprises,' unpublished report (Washington, D.C.: Office of Minority Business Enterprise, 1979). 4 work leading to the present MBDA information system was the result of a project funded by that agency and completed in 1982 under the direction of Antonio Furino with the contribution of several co-investigators. 5 Timothy Bates had major responsibilities in data analysis and Richard Wadsworth led the design and implementation of the computerized information system. authors gratefully acknowledge Richard Wadsworth's assistance in organizing the data and producing the descriptive tables for this writing. DATA BASE DEVELOPMENT Exploratory work on creating a minority business data base began in 1978. It was quickly ascertained that national surveys were either too limited or too costly.6 Furthermore, the use of data already being collected by some governmental agencies was either impractical or subject to legal restrictions.7 After evaluating available alternatives against MBDA budget constraints, the financial records maintained by Dun & Bradstreet (D&B) to create credit reports were chosen as a data source. A major problem, the absence of ethnic identifiers in the D&B records, was solved by commissioning researchers at several universities to compile lists of minority firms.8 firm names were then matched with those in the D&B files. results were 18,350 names and 2,271 matches.9 Only 818 of this early group of minority firms were still in Dun & Bradstreet files in the fall of 1981 when the current phase of data base development began.10 Shortly thereafter, 3,001 additional firms were added using matches between D&B files and several local, state, and national directories.11 Recent updates have extended the coverage, for some firms, to the 1982 fiscal year. In conclusion, the MBDA data base contains financial records, for one or more years during the 1975-1982 period, of 3,819 minority businesses. …