Racial Differences in Access to Capital for Innovative Start-Ups

This paper uses data from the Current Population Survey and the Kauffman Firm Survey to examine racial differences in the prevalence of innovative business ownership and in the amount of financing that innovation-intensive firms obtain. We find clear evidence that the racial differences in access to capital among start-ups found more broadly in Fairlie, Robb, and Robinson (2022) are also visible among innovation-intensive firms. Part of the disparity arises because Black founders are much more likely than white founders with similar credit scores to anticipate that banks will reject their loan applications, and thus not apply for credit at all. Policies aimed at addressing funding disparities must confront these challenges.