MBDA Report: 7,219 Black Businesses Helped in 2011

With a number of critics arguing how President Obama has not paid enough attention to the plight of the poor in America, especially poor people of color, a recently released report from the Minority Business Development Agency provides some positive news about the Obama Administration’s investment in the minority community.

According to the report, in Fiscal Year 2011, the MBDA assisted 7,219 Black American-owned businesses in obtaining contracts and capital valued at $5.5 billion. The average contract size for a Black American firm was $4.5 million. The firms receiving assistance were primarily in the following areas:

1. Health care and social assistance;
2. Administration and support;
3. Waste management and remediation services; and
4. Transportation and warehousing.

According to MBDA, these sectors represent 39% of all Black-owned businesses.

From an economic development perspective, the news is important. Black-owned firms have seen an increase in the number of contracts they have been able to obtain. The MBDA estimates that the value in contracts and capital obtained by Black-owned firms increased 155% from three-year period prior to President Obama’s term.

From a going forward perspective, the Obama Administration’s efforts may be keeping Black American businesses focused on the 20th century. As much as the Obama Administration has touted the knowledge economy and the importance of science, technology, engineering, and mathematics as a base for jobs in the knowledge economy, the four sectors having received significant help for the MBDA won’t be producing the next Mae Jemison or Neil deGrasse Tyson any time soon.

In addition to not producing top notched doctors or scientists, firms operating in the four sectors targeted by MBDA are not the types of firms that attract venture capital funding. As Darrin Redus, chief economic inclusion officer for JumpStart, Inc., recently noted, investment capital moves to high-performance opportunities offered by high-tech industry. These opportunities, according to Mr. Redus, also bring a large number of jobs.

But it would probably be a mistake to focus on the residual benefits of job creation that stem from entrepreneurial activity. This may be the mistake the Obama Administration is making. The focus should be on growth, and such a focus does not necessarily leave Black American entrepreneurs in the dust. On the contrary, policy, as implemented by the MBDA, that is focused on economic growth rather than maintaining traditional business sectors may incentivize Black American entrepreneurs to branch into the higher growth areas of high tech.

Given the high returns expected from the emerging knowledge economy, the Obama Administration must continue to recognize and promote the role of entrepreneurship in economic growth. Entrepreneurs are the Higgs Boson of the economy, adding mass and glue to the economy’s components.

As Magnus Blomstrom, Ari Kokko, and Fredrik Sjoholm pointed out in a 2007 study on the knowledge economy and entrepreneurship, entrepreneurs play a role in how knowledge is created and disseminated in the knowledge economy. For the past three decades knowledge has been recognized more and more as the driver of productivity and economic growth. This has meant, according to a 1996 study by the Organization for Economic Co-operation and Development, a focus on the role of information, technology and learning in economic performance.

While the employment gains in the four sectors targeted by MBDA is overall positive, MBDA needs to continue and expand any existing efforts and formulate new efforts to marry budding minority-owned knowledge-based firms with venture capitalists and other investors. We cannot afford to fall further behind a train that is gathering speed.