Abstract
This paper sheds light on how ethno-racial status characteristics affect legitimacy perceptions about entrepreneurs. Our findings causally establish that compared to nonminority entrepreneurs; minority entrepreneurs are perceived less legitimate due to their ethno-racial attributes. Moreover, we reveal the presence of an ethno-racial hierarchy among different minority groups that increases the harshness of legitimacy perceptions for ascribed lower status minority groups. While entrepreneurs’ higher level of education alleviates some of those inequalities, it fails to eliminate them completely. Worse, the gap in legitimacy perceptions increases unfavorably for minorities when comparing highly educated nonminority and highly educated minority entrepreneurs. We further demonstrate that observers’ beliefs in a just world play a fundamental role in mitigating or increasing the harshness of legitimacy perceptions. Through three conjoint experiment studies, totaling 22,608 evaluations nested in 1,413 observers in the United States, we examine how entrepreneurs from two minority groups, Black Americans and Latinx, are judged relative to nonminority entrepreneurs (White Americans) after their endeavors have failed. We then examine whether there are differences when these two groups of minority entrepreneurs are judged relative to each other. This study contributes to a deeper understanding of how system inequality and prejudice endure in business lowering the economic potential of minority entrepreneurs.