Generations of Black business owners have had to fight discrimination to prosper in America, but a new study suggests that these entrepreneurs are now gaining more support in parts of the country when they make their presence known.
The study, coauthored by Harvard Business School Professor Michael Luca, Abhay Aneja at the University of California-Berkeley, and Oren Reshef of Washington University in St. Louis, shows that making it easier to search for Black restaurant owners on Yelp substantially increased their demand, leading to more calls, more delivery orders, as well as more in-person visits—boosting in-store traffic by about 10 percent.
“Technology companies can play a role in working toward racial equity.”
The study, called “The Benefits of Revealing Race: Evidence from Minority-Owned Businesses,” also found that business gains were larger in areas with less racial bias and in Democratic-leaning areas. And new customers of Black-owned businesses were more likely to be white, based on an analysis of reviewers’ profile photos, relative to prior customers.
Luca and his coauthors also worked with Wayfair to analyze a Black supplier program the company piloted in early 2023 and found that the program increased engagement with Black suppliers.
“Technology companies can play a role in working toward racial equity,” explains Luca, who has been probing the role technology can play in creating a more inclusive economy for more than 10 years. His earlier work surfaced widespread discrimination on Airbnb, leading Airbnb to take steps to mitigate bias and prompting broader discussion across other companies.
“Many businesses were unaware of the implications of their decisions,” says Luca, whose research on race in the online economy is taught to all first-year MBA students at HBS.
Luca’s work on labeling Black-owned businesses may reveal another way to nudge more support toward marginalized groups. According to Luca, recent efforts to address longstanding inequities, spurred by both the Black Lives Matter movement and corporate initiatives, may be inspiring—and enabling—more customers to support minority-owned enterprises.
Companies put a spotlight on Black businesses
Luca and his colleagues launched their study soon after a number of tech and non-tech firms, including Yelp, Instagram, Wayfair, GoPuff, Instacart, and Target, announced new programs designed to support Black-owned businesses. For instance, Yelp introduced a system in which users could click a button to search for and identify local Black-owned restaurants.
“We wanted to know whether the programs were effective—or if they could be backfiring.”
The corporate initiatives began to grow amid the social unrest and outrage sparked by the murder of George Floyd by police in Minneapolis, Minnesota, in May 2020. The landscape of programs has evolved over time. Wayfair piloted their Black supplier program in early 2023.
“We wanted to know whether the programs were effective—or if they could be backfiring,” Luca notes.
Customers seek out Black-owned restaurants
For the study, Yelp and Wayfair provided data on their platforms and programs. On Yelp, this included information about platform page views, phone calls, reservations, online delivery orders, and other key restaurant activity data before and after Yelp introduced its “Black-owned” button in June 2020. The authors merged this with other data to identify Black-owned businesses that did and did not receive the label.
Among other things, the study found that Yelp’s new feature increased platform page views, website views, and calls for Black-owned restaurants.
Based on measuring cell phone location data from April 2019 to August 2021, the study also found that Yelp’s new feature led to a 10 percent increase in weekly in-person visits to Black-owned restaurants.
“This feature substantially increased demand for Black-owned businesses,” the study says.
White people are supporting Black businesses
To determine the source of the demand for Black-owned restaurants on Yelp, the team studied data from sources including:
- The US Census Bureau’s American Community Survey.
- The Massachusetts Institute of Technology Election Lab.
- Project Implicit, a research nonprofit that collects data about bias.
The authors used facial recognition technology to assign a likely race to restaurant reviewers based on their profile pictures. Researchers found that after Yelp implemented its race feature, more online restaurant reviewers for restaurants that received the label were white, compared to the racial makeup of reviewers of the same restaurants prior to the introduction of the feature.
The authors also used voting and Census data to determine that increased demand for Black-owned restaurants tended to occur in the predominantly white, Democratic-leaning districts of the seven metropolitan areas of the US they examined: San Francisco, Los Angeles, New York, Minneapolis, Atlanta, Chicago, and Houston.
Using geographic variations in implicit bias surveys from Project Implicit, the authors found that increased demand was larger in areas with less anti-Black racial bias.
“Collectively, our findings suggest that digital platforms can effectively boost the performance of minority firms, particularly during a time of increased national awareness of the challenges that Black business owners face,” the authors conclude in their study. “These effects depend on the specific area and population that is targeted.”
How to support Black-owned businesses
While the study’s findings are encouraging, Luca cautions that it’s not enough for corporate leaders to simply launch initiatives designed to support Black-owned businesses. “Business leaders need to think about the social impact of the business decisions they’re making—and then measure their impact.”
“Even in markets where there is anti-Black bias on average, making it easy for people who want to support Black-owned businesses can have a positive effect.”
Luca—recently elected a fellow by the National Association of Business Economics alongside Treasury Secretary Janet Yellen and former Federal Reserve Chairman Ben Bernanke—stresses that highlighting the race of a business owner has to be handled thoughtfully and carefully, or it could lead to unintended consequences and actually facilitate discrimination.
“These initiatives are an attempt to tap into pent-up demand to support marginalized groups. Even in markets where there is anti-Black bias on average, making it easy for people who want to support Black-owned businesses can have a positive effect,” he says. “The asymmetry of the reduced search costs makes it easy for people who want to support Black-owned businesses, while leaving the process largely unchanged for customers who don’t want to engage with the program.”
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Feedback or ideas to share? Email the Working Knowledge team at hbswk@hbs.edu.
Image: AdobeStock/Rido and HBSWK