Hispanic-Owned Businesses: The (Dis)Advantages of Being a Family Firm & Accessing Growth Financing

Hispanic-owned businesses in the United States are not growing at the same rate as their non-Hispanic counterparts. While prior studies note that Hispanic-owned businesses face challenges in accessing financial capital during startup, less is known about if and when such obstacles exist as these firms grow. Using legitimacy theory and stigma-specific logic, we suggest that when Hispanic-owned firms seek to grow, in general, they lack access to financial capital. Nonetheless, not all Hispanic-owned businesses are the same. Given this, we suggest that Hispanic-owned family firms experience unique benefits and limitations, compared to similar nonfamily firms, when seeking financial capital for growth. Specifically, we theorize that Hispanic-owned family firms benefit from enhanced legitimacy and reduced stigma, increasing the likelihood of securing bank loans and personal savings for firm growth. However, we further theorize that among Hispanic-owned family firms, those operated by copreneurs are less likely to secure the same funding sources for growth. These findings are confirmed using a large, national dataset of firms in the United States. The results advance knowledge related to the growth limitations faced by Hispanic-owned businesses and demonstrate the (dis)advantages experienced by Hispanic-owned family firms when financing their growth.