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A study on the role of guanxi in entrepreneurship and employment


  • Chen, Yao-Tung


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.

Suggested Citation

  • Chen, Yao-Tung, 2011. "A study on the role of guanxi in entrepreneurship and employment," Economic Modelling, Elsevier, vol. 28(4), pages 2049-2053, July.
  • Handle: RePEc:eee:ecmode:v:28:y:2011:i:4:p:2049-2053

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    References listed on IDEAS

    1. 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.
    2. Fan, Ying, 2002. "Questioning guanxi: definition, classification and implications," International Business Review, Elsevier, vol. 11(5), pages 543-561, October.
    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. Thurik, A. Roy & Carree, Martin A. & van Stel, André & Audretsch, David B., 2008. "Does self-employment reduce unemployment?," Journal of Business Venturing, Elsevier, vol. 23(6), pages 673-686, November.
    5. Antoni Calvó-Armengol & Matthew O. Jackson, 2004. "The Effects of Social Networks on Employment and Inequality," American Economic Review, American Economic Association, vol. 94(3), pages 426-454, June.
    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. 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 719-748, August.
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    Cited by:

    1. Huatao Peng & Geert Duysters & Bert Sadowski, 2016. "The changing role of guanxi in influencing the development of entrepreneurial companies: a case study of the emergence of pharmaceutical companies in China," International Entrepreneurship and Management Journal, Springer, vol. 12(1), pages 215-258, March.

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    Guanxi Entrepreneurship Employment;


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