Examining the success of women of color-owned small and medium-sized enterprises in the United States: A system dynamics perspective

Abstract

The objective of this study was to unravel the challenges confronting women of color (WoC)-owned small and medium-sized enterprises (SMEs) in the United States. This is based on findings that most WoC-owned SMEs fail within the first few years of establishment. The impact of the global financial crisis resulting from the COVID-19 pandemic on WoC-owned SMEs was also explored. System Dynamics (SD) is a computational modeling approach useful for understanding changes in a system over time and is applied in this study to illustrate WoC entrepreneurs' navigation through the startup and maturation of SMEs. The authors calibrated and validated the model with publicly available data. Findings revealed that more emphasis should be placed on failure reduction in the early years of establishment of these businesses. Also, there is the need for early intervention rather than focusing on the improvement of the successful business exit from the system. Results indicated that the creation of new businesses by WoC after the failure of existing businesses produced an increase in the number of failed enterprises. The authors assert that attention must be paid at the individual level through support to the entrepreneur. This study contributes to the extant literature by providing the first known SD model useful in depicting the SME system for WoC entrepreneurs in the US. The model serves as a potentially useful tool for informing effective policy making, education, and programmatic approaches to support the success of WoC entrepreneurs in the US.