How can racial-minority entrepreneurs close the performance gap in the sharing economy? While recent studies reveal discrimination against racial-minority customers, less attention has been paid to the performance disparities faced by many racial-minority suppliers. Especially, more evidence is needed to identify mechanisms that exacerbate or mitigate these biases. This paper aims to understand how racial backgrounds influence entrepreneurs' business performance in the sharing economy by examining where discrimination is more prevalent, why it occurs, and how racial minority entrepreneurs can potentially mitigate it.

Analyzing all Airbnb listings across the United States from May 2015 to April 2023, I show that Black, Hispanic, and Asian entrepreneurs experience reduced consumer demand for comparable offerings and have higher exit rates. To understand the impact of ideological distance on their success, I examine granular data on public opinion and find that the race effect is more pronounced in conservative ZIP Code Tabulation Areas. Importantly, while better numerical ratings fail to bolster their performance relative to White entrepreneurs, I use natural language processing techniques to examine more than 90 million Airbnb reviews and show that specific textual reviews provide a pathway to mitigating these disparities.

This paper expands existing research on racial bias on platforms by addressing the critical issue of discrimination against suppliers. It also contributes to understanding how polarization and ideology shape firm performance, and it adds to the literature on platform design.