News coverage of racial incidents lowers support for Black entrepreneurs, study finds

Black Lives Matter demonstrators march in St. Paul
Black Lives Matter demonstrators hold signs during a march in St Paul, Minnesota on March 19, 2021. REUTERS/Nicholas Pfosi

One might expect that black entrepreneurs are receiving some long-deserved recognition. After the murder of George Floyd last summer, calls to #SupportBlackBusinesses and #BuyBlack soared. Top U.S. companies vowed to invest $50 billion in promoting racial equity, including support for communities of color, according to Fortune.

A year later, anecdotal reports from Black business owners suggest that the uptick in sales during the Black Lives Matter protests didn’t last. As of May 2021, U.S. companies had spent or made specific pledges worth only $250 million, or 0.5% of their total commitment.

Andreea Gorbatâi, an assistant professor in the Management of Organizations group at Berkeley Haas, is not surprised. Her latest research—forthcoming in Organization Science—paints an even bleaker picture: Black entrepreneurs have an even harder time finding support when racial discrimination is top of mind. In her paper, she estimates that the overall success rate for Black founders raising money through Kickstarter fell 21% after racially charged deaths of African Americans topped the news.

“This confirms what sociologists have long known: When people are reminded of how they differ from others, they often become more inclined to identify—and side—with their own group,” Gorbatâi says.

When people are reminded of how they differ from others, they often become more inclined to identify—and side—with their own group. —Andreea Gorbatâi

Calling attention to differences

Gorbatâi’s article explores the social mechanisms behind the drop-off in support. When news reports call attention to acts of racism, potential crowdfunding investors who self-identify as white are more likely to question the quality of Black founders’ idea or ability to succeed, she found.

This shows, says Gorbatâi, that discriminatory behavior is not just a function of individual dislikes for a particular group, nor is it what economists call “statistical” discrimination—a function of the information one has about that group. Rather, the extent to which people engage in discriminatory actions is also influenced by changes in their environment, even when those changes are unrelated to the action at hand. “Reading about racial discrimination occurring elsewhere in the United States seems to affect one’s likelihood of shopping from an African-American-owned local business—completely unrelated to the event in the news,” Gorbatai says.

This change in preferences is not limited to whites. Gorbatâi and her co-authors found evidence that Black participants were also more likely to favor Black entrepreneurs after reading about highly publicized incidents of racism. Yet at the societal level, deep-rooted systemic racism, the resulting differences in cumulative net worth between Blacks and whites, and the fact that Black Americans constitute just 13.4% of the U.S. population translate into greater economic discrimination against Black entrepreneurs.

“These research results add to the painful picture of pernicious and multifaceted discrimination against Black people in the U.S.,” says Gorbatâi, who is set to become an associate professor at the Vlerick Business School in Belgium in August.

Reacting to news reports

Gorbatâi and her collaborators, Peter Younkin, PhD 10 (Sociology), an assistant professor at the University of Oregon, and Gordon Burtch, an associate professor at the University of Minnesota, confirmed their findings across three online experiments and one real-world experiment that examined the impact of Black Lives Matter media coverage on Kickstarter campaigns.

In their first study, 323 U.S. adults—most of whom were white—were given one of two Associated Press articles to read. The first group read a neutral account of plans by Starbucks to provide racial bias training to employees after two Black men were arrested for asking to use a Philadelphia store bathroom. The second group read about a snowstorm in the Midwest. All participants were then asked to review a crowdfunding proposal for a waterproof speaker, being told that it was either led by either a Black or white founder. The researchers found a significant difference between the groups: Those who read about the snowstorm rated the two proposals similarly, in terms of quality of the idea and abilities of the entrepreneur, while those who had been primed to think about race judged the white-led project to be better than the Black led-one.

Because the first study had very few Black participants, the researchers repeated it, recruiting equal numbers of people self-identifying as Black or white (400 each). In this experiment, they found that after reading about the Starbucks incident, both white and Black participants favored entrepreneurs of their own race—despite the fact that everyone evaluated virtually identical projects.

A third experiment sought to understand what role political affiliations and the tone of media coverage play in people’s attitudes. Specifically, the researchers wanted to assess whether party affiliation is a better predictor of how individuals respond to a Black entrepreneur than racial identity, and whether the tone of media coverage changed their reactions. They asked 500 Republicans and 500 Democrats to read versions of the Starbucks article that had been modified to portray either the police, or the Black men arrested, as behaving disrespectfully and aggressively. These articles were meant to simulate left- or right-leaning media reports, in contrast to the more neutral Associate Press tone.

To Gorbatâi’s surprise, political leanings and media tone were not a significant factor in people’s reactions, with no significant differences between liberals and conservatives. They did, however, note that reading an article that placed blame on either party led the readers to give even lower evaluations of Black founders than the original, neutral article. This was true even for those who read articles that put the police clearly at fault.

“Instead of greater empathy, there was a greater penalty for Black founders,” says Gorbatâi.

Instead of greater empathy, there was a greater penalty for Black founders.

Drop in crowdfunding support

The fourth study examined 2012-2015 Kickstarter data from nearly 22,000 crowdfunding projects. The researchers coded the founders’ perceived race based on their profile photos, and then examined fundraising success rates. Consistent with the experimental results, they found that the percentage of perceived-Black founders who met their funding goal fell from 19% to 15% in the 30-day periods following a series of widely publicized, racially charged deaths—a 21% decline compared to the month before each episode. The cases started with George Zimmerman shooting teenager Trayvon Martin in 2012 and ran through Sandra Bland’s 2015 suicide in jail following a traffic stop arrest.

Gorbatâi says these findings are ripe for further research, including whether positive media coverage involving African Americans leads to less discrimination, even though racial awareness is heightened, and whether other events than the Starbucks incident would yield different responses. For now, it sheds some light on why the empathy that Black Lives Matter inspires is often fleeting.

“We post memes with hashtags like #BLM and write messages of support on social media profiles, but it doesn’t necessarily translate into shopping at, or investing in, Black-owned businesses,” she says. “It’s important to understand why that is and learn how we can challenge and change this pattern of inequity and inequality in a durable fashion.”

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