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4 Ways to Spur Native American Entrepreneurship

Kauffman researcher Emily Fetsch examines ways to strengthen entrepreneurship in the Native American community.

Entrepreneurship is a challenging venture with numerous obstacles. As outlined in previously, many of the barriers faced by Native American entrepreneurs are encountered by entrepreneurs on a broad scale.

But research suggests that for Native Americans, especially on reservations, “the challenges to starting a business may be greater by virtue of their more isolated geographic location and the associated lack of available resources.”

However, research has helped shed light on areas where changes could be made that create an environment where entrepreneurship can be more successful for the Native American population.

Independent Management for Entrepreneurial Ventures

Research has shown that political sovereignty increases the chances of successful economic development on reservations. In fact, research has shown that sustainable economic development is not “dependent…on economic factors such as education or natural resources or location.”

Instead, sustainable economic development benefits from self-rule, capable institutions of self-governance, cultural match (that institutions “fit indigenous conceptions of how authority should be organized and exercised”), and strategic orientation.

However, entrepreneurial sovereignty is also important to success. Research shows that tribal enterprises are more profitable when they have independent management, rather than council-controlled management. Independent management of tribal enterprises are nearly five times more likely to be profitable than council-controlled tribal enterprises.

Kauffman research has found that top-down approaches do not work best to promote entrepreneurial activity. Instead, an entrepreneur-centered approach is recommended, where the government still plays a supportive role, but avoids dictating specifics.

Consistent Regulation

Along with greater independence among entrepreneurs to begin their entrepreneurial ventures, reservations should also rethink how they regulate businesses. In a survey of small business owners nationwide, research shows they believe “the keys to a pro-growth environment are ease of compliance with tax and regulatory systems and helpful training programs.” While many local governments vary in their regulatory process, entrepreneurship benefits when the process is clear, consistent, and streamlined.

Research shows that “small business owners are less likely to start or expand their business if they think the rules of the game might change at any moment.” When tribal governments fail to provide consistent, uniform regulatory requirements, they disincentivize prospective entrepreneurs from starting a business. While all reservations, their governance, and their regulatory environment are unique, reservations can benefit from reworking their regulatory process to be more entrepreneur-friendly.

Educate Financial Players

While many entrepreneurs face financing challenges, some are specific to the Native American community.

Challenges include the lack of assets or credit from which to begin an entrepreneurial venture, the lack of financial institutions both on the reservation and within geographic proximity, and the lack of knowledge about reservation communities among these financial institutions.

In the words of one study which focuses on Native American Entrepreneurship in South Dakota:

“For relationships between mainstream financial institutions and Native entrepreneurs in reservation communities to develop and expand, it is critical that mainstream financial institutions familiarize themselves with the unique barriers for Native entrepreneurship, the special capital needs of Native entrepreneurs, [and] Tribal business development regulations.”

The paper suggests solutions for how to increase awareness that may improve financial institutions’ ability to transact with Native American entrepreneurs. These include outreach to improve financial literacy among Native Americans. It would also be beneficial to expand knowledge of the Tribal regulatory environment among financial institutions located near reservations.

Highlight Stories of Successful Native American Entrepreneurs

Finally, the entrepreneurial community should raise up examples of individual Native Americans, as well as reservations, that have achieved entrepreneurial success. While Native Americans are less likely than Americans overall to begin entrepreneurial ventures, that does not mean that there are not many Native Americans who have started their own businesses or reservations that have developed a strong entrepreneurial ecosystem.

Entrepreneurs can teach and learn valuable lessons from each other when they share success stories. Success stories educate people about the entrepreneurial influence of the Native American population. In addition, within the Native American population, hearing stories of fellow Native Americans that have found success through starting their own businesses can help inspire others within the community to consider entrepreneurship as a career path.

People who know entrepreneurs are more likely to become entrepreneurs. In addition, experienced entrepreneurs serving as mentors are an important part of entrepreneurial success. If more people are aware of successful Native American entrepreneurs, more connections can be made that can build a network to connect mentors to aspiring entrepreneurs.

Entrepreneurship is an inherently risky venture. For certain populations, especially minorities, many additional economic and social barriers exist which can make starting a business even riskier. For Native Americans in particular, there are unique challenges facing aspiring entrepreneurs. However, there are potential solutions that can help smooth the pathway on their road to entrepreneurship.