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A study on the role of guanxi in entrepreneurship and employment

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  • Chen, Yao-Tung
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    Abstract

    This paper examines the role of guanxi in influencing the decision of an individual to be an entrepreneur facing a risky technology or to become a worker facing an unemployment rate. Individuals are assumed to vary in terms of the strength of their established guanxi that could be utilized either to lower the set-up cost as entrepreneurs or to secure jobs as workers. Compared with the case where guanxi can only be used to reduce the individual's set-up cost to become an entrepreneur, it is shown that if guanxi can also help a worker find a job, then whether the employment rate might be improved or worsened will depend on the absolute risk aversion that is increasing or decreasing in income.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0264999311001052
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    Bibliographic Info

    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 28 (2011)
    Issue (Month): 4 (July)
    Pages: 2049-2053

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    Handle: RePEc:eee:ecmode:v:28:y:2011:i:4:p:2049-2053

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    Web page: http://www.elsevier.com/locate/inca/30411

    Related research

    Keywords: Guanxi Entrepreneurship Employment;

    References

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    1. André van Stel & Roy Thurik & David Audretsch & Martin Carree, 2005. "Does Self-Employment Reduce Unemployment?," Scales Research Reports N200504, EIM Business and Policy Research.
    2. Matt Jackson, 2003. "The Effects of Social Networks on Employment and Inequality," Theory workshop papers 658612000000000032, UCLA Department of Economics.
    3. Steier, Lloyd, 2003. "Variants of agency contracts in family-financed ventures as a continuum of familial altruistic and market rationalities," Journal of Business Venturing, Elsevier, vol. 18(5), pages 597-618, September.
    4. Marco Cagetti & Mariacristina De Nardi, 2006. "Entrepreneurship, Frictions, and Wealth," Journal of Political Economy, University of Chicago Press, vol. 114(5), pages 835-870, October.
    5. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-48, August.
    6. Erik Hurst & Annamaria Lusardi, 2004. "Liquidity Constraints, Household Wealth, and Entrepreneurship," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 319-347, April.
    7. Fan, Ying, 2002. "Questioning guanxi: definition, classification and implications," International Business Review, Elsevier, vol. 11(5), pages 543-561, October.
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