Restaurant Crowdfunding Activities and African American Restaurateurs' Financing Experiences: From Macroeconomic Policies to Ethnic Enclaves
Gleaning from restaurant funding behaviors in conventional markets, macro-level factors have a significant impact on restaurant funding behaviors. Yet, existing restaurant crowdfunding research has mostly examined micro-level project attributes without considering influential factors at the macroeconomic level. Additionally, notwithstanding the National Restaurant Association’s call to support a greater number of African American restaurateurs, the financing behaviors regarding race remain understudied in the restaurant industry. Finally, albeit the clear differences between the conventional and the crowdfunding financing mechanisms, there is scant research on restauranteurs’ perceived differences between these two funding environments. Therefore, the current study aims to fill the abovementioned literature gap by examining macro- and micro-level attributes in restaurant financing. Study 1 examines how the two goals of agency theory—incentive alignment and risk-aversion mitigation—affect entrepreneurs’ financing behaviors. The state-year level of entrepreneurial activities is examined through quadratic regression analyses. Results show that state-level free market policies and social safety-net spending have an inverted U-shaped relationship with restaurant entrepreneurs' crowdfunding activities. Study 2 explores strategies that African American restaurateurs can use to secure financing in the conventional capital market with a qualitative design and a grounded theory approach through interviews with African American and non-Hispanic White restaurateurs. The proposed African American Startup Framework (AASF) consists of eight themes and 23 subthemes. AASF identifies strategies that African American restaurateurs leverage cultural, social, and economic capital to solve financing issues. The contextual impact of racial membership on financing success indicates that racial membership has a perceived negative impact on the group’s ability to secure restaurant financing while the common bond rooted in this shared membership leads to strong community support for African American businesses. Finally, African American restaurateurs perceive that crowdfunding can provide critical gap financing while offering an alternative funding mechanism that is both inexpensive and simple compared to conventional financing. Overall, the study contributes to expanding the knowledge of seemingly opposed macroeconomic policies, as prior literature seldom combines the two despite capitalism being a mixed market system encompassing both. The study defines maximum values for state-level free market policy and social safety-net spending to provide guidance for policymakers, restaurant industry advocates, and crowdfunding platforms to maximize restaurant crowdfunding activities. AASF systematically organizes and connects mechanisms, solutions, and the contextual environment to uncover how African American restaurateurs can blend various types of capital to secure funding in the conventional capital market. The study pioneers ethnic minority entrepreneurial finance literature by uncovering relationships between cultural, social, and economic capital to tackle African American restaurateurs’ funding challenges. By examining macro- and micro-level attributes, restaurant industry stakeholders can improve strategies to increase successful restaurant ownership.