Chapter 5: Entrepreneurship
* INTRODUCTION Entrepreneurship and self-employment start-ups are important drivers of growth, particularly for an economy such as China where partial marketisation relies on the rapid development of the non-state sector in the transition from central planning, as discussed in Chapter 2. China’s gradualist reforms are associated with a high degree of market imperfection where many sectors are still controlled by the state and private economic activity tends to be characterised by a great deal of uncertainty as a result. Moreover, China is a developing country where there are numerous information-related obstacles which can impede obtaining credit and starting a business. In developing countries, self-employment is challenging due to imperfect credit markets, supply chains, and product markets (Banerjee and Newman 1993). The literature on what determines entrepreneurship focuses on institutional factors, such as credit constraints (Blanchflower and Oswald 1998) and individual traits, such as a more positive attitude toward risk for those who choose to enter into selfemployment or start small- and medium-sized enterprises (Rees and Shah 1986). Both sets of approaches would support the importance of a number of characteristics that foster entrepreneurship, including social networks, motivation and having the drive to achieve economic gain, as well as attitudes toward taking risks. Moreover, China has traditionally had a cultural and historical emphasis on interpersonal relationships or guanxi, which informs business dealings both within and outside of China. This suggests that networking is possibly an important factor in determining non-state sector development, alongside the other noted traits such as having drive and...
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