Take Me Home, Country Roads: Return Migration and Platform-Enabled Entrepreneurship

Despite the rise of digital platforms that connect rural entrepreneurs to urban customers, rural online businesses are hampered by a lack of talent. Some have pointed to the potentially enabling role of rural returnees. However, although international returnees bring valuable knowledge to businesses in their home countries, it is unclear how domestic returnees affect entrepreneurship in rural, underdeveloped parts of their country. We study this question using a natural experiment involving a regional policy change, which reduced the barriers for rural migrants to return home in one Chinese province but not in others. We find that, after the policy change, rural e-commerce businesses in the province that implemented the policy change enjoyed a 19% performance gain relative to those in other provinces. We theorize and test four mechanisms that may underlie the relationship between return migration and online entrepreneurship: knowledge transfer, demand spillover, de novo businesses, and financial support from returnees. Our results support the knowledge transfer mechanism, but we also find evidence of demand spillover. This study highlights the salience of return mobility and “return barriers” in shaping local entrepreneurship. It also suggests a novel approach toward fostering entrepreneurship in underdeveloped regions: policymakers and digital platforms may work together to pave the country roads that take people home.