MOBI Studies Success Factors for Latino-Owned Small Businesses

The My Own Business Institute (MOBI) has completed a research project to examine factors that impact the economic success of Latino-owned small businesses in Silicon Valley with the aim of informing the development of policies and programs to support this important segment of the economy. MOBI Executive Director and Leavey School of Business Professor of Information Systems and Analytics Drew Starbird, Ph.D. led the study, funded by a grant from the Ciocca Center at Santa Clara University, and summarized the research and findings in a paper entitled, “The Impact of Formality, Integration, and Commitment on the Performance of Latino-Owned Small Businesses,” which was published online August 24 by Administrative Sciences, an international peer-reviewed open access journal published by MDPI (Multidisciplinary Digital Publishing Institute). The paper will also appear in the September 22, 2022 issue of the publication. 

“A challenge facing many countries is how to support small business growth and development in minority communities, and the importance of this goal is exemplified by Latino entrepreneurs in the US who are starting businesses faster than any other demographic group,” Starbird writes in the paper’s introduction. Citing relevant research Starbird continues, “Despite evidence of entrepreneurial success, Latino wealth and income lag behind other groups. In this study we hope to identify characteristics of Latino-owned small businesses and business owners that are related to financial success. Our hope is that, armed with this information, policymakers and educators can develop programs that support the creation and success of Latino-owned small businesses.”

Latino-Owned Businesses and Latino Entrepreneurship in Silicon Valley

As stated in the paper, the importance of Latino-owned businesses (LOBs), of which Latino-owned small businesses are a subset, to the economy of Silicon Valley is often overlooked. A 2012 survey of Santa Clara County business owners revealed 3,033 Hispanic-owned businesses generating a total revenue of almost $4.2 billion and employing nearly 25,000 people, as reported by the New American Economy Research Fund, 2016. The importance of Latino entrepreneurship is evident from these findings, however, economic success among these businesses is varied and Latino wealth and income have not kept pace with the broader society. Supporting the creation, growth, and sustainability of small businesses, especially underserved and minority-owned businesses, is a key goal for MOBI and the motivation for this study. 

MOBI sought the expertise of Yacanex Business Group to join the project. Yacanex Business Group, founded by MOBI Advisory Board Member Yacanex Posadas, provides a variety of business services, mentoring, and education to Latino entrepreneurs, low-income immigrants, and businesses of all sizes.

How the Study Was Conducted

A thorough literature review was conducted to narrow areas of study and to examine critical success factors (CSFs) cited among entrepreneurs through other research. Starbird, along with fellow researchers from the Yacanex Business Group and the MOBI team, constructed the study to combine two parallel themes present in the literature: the identification of performance drivers for small businesses and challenges and opportunities facing ethnic minority entrepreneurs, specifically Latino entrepreneurs. 

A survey of over 200 Latino small business owners in Santa Clara County and San Mateo County conducted between December 2020 and March 2021 generated the data used in the analysis. The results suggest that in addition to the gender and education of the owner, the most important factors impacting business performance are formal registration of the business, the degree to which the business is integrated into the broader business community, and the owner’s commitment to the business.

The survey questions were selected to collect information about the business owners, their businesses, and business performance. Questions about business owners included demographic questions as well as questions about motivation and goals. Questions about businesses included questions about location, product or service, customers, revenue, and operations. Questions were available in English and Spanish.

“One advantage of this study is that it considers data from the same geographic area and the same period, allowing us to focus on business characteristics and business owner characteristics,” Starbird writes in the paper. 

Implications of the Study

The three hypotheses presented in the paper were affirmed to varying degrees by the findings: 1) Formally registered Latino-owned small businesses in Silicon Valley are more likely to generate higher sales revenue than Latino-owned small businesses that are not formally registered; 2) Latino-owned small businesses that are integrated into the broader community are more likely to generate higher sales revenues than Latino-owned small businesses that are not integrated into the broader community; and 3) Latino entrepreneurs who commit to one business are more likely to generate higher sales revenues than entrepreneurs who are committed to more than one business.

“The results of this survey identify several factors that are related to the financial success of Latino-owned small businesses and suggest several strategies for increasing the odds that they become financially successful businesses,” writes Starbird in the paper’s concluding remarks. “The most powerful factor appears to be the formal registration of the business.” Discussion continues in the paper to propose that it may not be the registration itself that contributes to financial success, but the process of identifying information and answering questions about the business as part of the registration process that may help entrepreneurs be better prepared to achieve greater financial success.

“The findings of this study indicate an opportunity to provide greater access to entrepreneurship education for Latino-small business owners, especially in the areas of formalizing the business and strategies for expanding beyond the immediate community to other communities or the mainstream economy,” says Starbird. “We look forward to learning more, providing educational resources through MOBI, and sharing insights with policymakers to support Latino entrepreneurship in Silicon Valley.”

Detailed discussion of the study’s formulation, findings, analysis, implications, and suggestions for further research are included in the paper that has been published by Academic Sciences. Professor Starbird was assisted by Yacanex Business Group founder Yacanex Posadas and senior business analyst Alma Gutiérrez as well as the MOBI team. MOBI is part of the Leavey School of Business at Santa Clara University. 

“The Impact of Formality, Integration, and Commitment on the Performance of Latino-Owned Small Businesses” can be viewed online at https://doi.org/10.3390/admsci12030105 

Ciocca Center at Santa Clara University

Starbird and his team applied for and were awarded a grant to pursue this research by the Ciocca Center at Santa Clara University. The Ciocca Center supports several programs to enhance the University’s understanding and practice of innovation and an entrepreneurial mindset. The objective of its research program is to support original research in processes and challenges relating to innovation and entrepreneurial thinking.

Yacanex Business Group/Yacanex Community

Yacanex Posadas is the founder of Yacanex Business Group and Yacanex Community. Yacanex Business Group is a full service business consulting firm for small- to medium-sized businesses. Yacanex Community is a nonprofit organization that focuses on education and entrepreneurship in underserved communities in Santa Clara County, with an emphasis on the Latino population. Yacanex Community hosts the annual Latina Emprendedora conference, a free event, featuring a full Spanish program for aspiring and existing women business owners. Latina Emprendedora 2022 is being held October 15, and information can be found at https://yacanexcommunity.org/le-2022/.

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