Is intrapreneurship the answer for Black founders and firms?

Entrepreneurship can carry great appeal for resourceful individuals. For many, it’s a chance to rewrite the rule book and do things differently, and enjoy the autonomy of being one’s own boss. For some, starting up is also a pathway to social mobility: a way for enterprising individuals to leapfrog career obstacles and achieve greater success and personal growth. Little wonder that entrepreneurship is booming. In America alone, a record-breaking 5.5 million new business applications were filed in 2023, according to the US Chamber of Commerce.

Yet behind these encouraging statistics lies a less heartening reality; one linked to racial disparity. Roughly 14% of the US population is Black. Despite that, recent studies show that just 3% of all American employer firms are Black-owned businesses, accounting for a meagre 1% of gross revenue in the private sector.

Black founders face a plethora of well-documented challenges, among them less access to education, training and investor capital or bank loans. And even if they do make it past the startup stage, they are still four times more likely to fail than white counterparts.

Organisations and policymakers continue to grapple to find solutions that can help level some of this playing field and give Black founders a greater shot at success. But research by LBS Professor of Strategy and Entrepreneurship, Olenka Kacperczyk and Wharton’s Tiantian Yang, may have unearthed a new way to help close the racial wealth gap and drive inclusion, and it’s through intrapreneurship.

Shielding Black founders from discrimination

Kacperczyk and her co-author wanted to explore whether the internal path—setting up new ventures or divisions within existing organisations—might afford Black and minority founders a way to bypass some of the barriers to success by “sheltering them from the discrimination they routinely face.”

“Entrepreneurship and intrapreneurship are similar but different,” says Kacperczyk. “Both involve identifying and exploiting a new opportunity and require certain skills. But the internal path is going to be easier for Black founders because they are already known to their backers. Their employers already know how talented or productive they are. They’re way less likely to bring bias or racial stereotypes into evaluating potential.”

To test this, she and Yang looked at Michigan’s Panel Study of Entrepreneurial Dynamics, a longitudinal survey of American entrepreneurs who were starting new ventures both independently and inside organisations between 2005 and 2011. Parsing the data, they found that Black and white entrepreneurs were founding new businesses at roughly the same rate, although Black-founded ventures were only half as likely to attain financial viability. When they looked at intrapreneurship, however, a very different picture emerged.

“The data shows that Black respondents are just as keen to start up their own ventures, but the odds are heavily stacked against them making things work,” says Kacperczyk. “In contrast, Black employees are far more likely to put themselves forward for intrapreneurial challenges inside their organisations. And when they do, they are just as successful. We found that the gap in financial success between white and Black-led internal ventures was just 2% over five years.”

In other words, enterprising Black employees are finding a path to success leading new initiatives within their existing organisations; likely because they are indeed more shielded from investor discrimination as the researchers hypothesise. Black intrapreneurs also have the advantage of insider knowledge, says Kacperczyk. They may well be in a better position to anticipate and plan for discriminatory barriers within the organisation as it is known to them, though the researchers also acknowledge that stereotyped or biased decision-making is likely weaker within firms that employ Black and minority talent.

Broader implications

Intrapreneurship could well represent something of a win-win-win for Black workers, firms and society at large, says Kacperczyk. Leading successful new ventures from within posits challenges similar to entrepreneurship and clearly signals ingenuity, creativity and managerial skill that Black employees can point to and leverage, either to advance inside the organisation, or to bolster their chances of success with investors if they choose to start up independently.

Firms, meanwhile, are the direct beneficiaries of a greater diversity of innovative minds and talent.

“Our findings should be great news for organisations that want to be more inclusive in the way they allocate resources and stretch skilled people. We show that it’s a good idea to empower minority employees to tinker, to take risks and to be creative because they achieve the same kinds of outcomes,” says Kacperczyk. “Employers that create the conditions to enable inclusive intrapreneurship will also benefit from a greater breadth of diverse approaches and perspectives.”

For policymakers looking to drive a more equitable share of wealth and empower minority workers to fully participate in the economy, the study should be compelling food for thought. Entrepreneurship has long been “idealised” say Kacperczyk and Yang, as an attractive alternative to paid employment and a key driver of growth in the knowledge economy. For enterprising Black individuals, however, starting up has historically entailed an outsized share of failure and risk.

“Black families are on the back foot in the US. They own just 24 cents for every $1 of white household wealth,” says Kacperczyk. “Intrapreneurship could well be an effective way to support Black employees to engage and contribute to the economy while empowering them to raise their wealth. Because of this, we think policymakers need to start looking at the kinds of interventions and communication that focus on the workplace, and not just on investors.”