Abstract

Governments often provide assistance to small businesses during crises. With mounting evidence that minority-owned businesses (MOB) suffer from systemic difficulties in accessing funds, there has recently been a push for governments to prioritize them when providing assistance. In this research, we examine whether provision of equal amount of aid to MOB and non-minority-owned businesses (NMOB) who are otherwise "similar" leads to different outcomes. We utilize the context of Restaurant Revitalization Fund which provided relief for restaurants during the Covid-19 pandemic. We focus on the marketing relevant outcomes of service quality (Yelp ratings) and sales (SafeGraph data) and three minority groups matched to NMOB and find consistent evidence of a performance gap where MOB have significantly lower service quality and sales after receiving the funding, compared to NMOB. Further analysis provides support to the explanation that these results are due to a gap in human capital between MOB and NMOB. We recommend policymakers adopt a funding strategy that focuses on bridging the human as well as financial capital gap.

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