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Regional institutional development, political connections, and entrepreneurial performance in China’s transition economy

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  • Wubiao Zhou

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Abstract

While previous research emphasizes the role of political connections in facilitating entrepreneurial performance during China’s early reform period (1978–1999), this study argues that regional institutions were increasingly conducive to entrepreneurial activities and, thus, also played a key role in China’s entrepreneurial success during that period. The purpose of this study is twofold. First, it aims to demonstrate how regional institutional development facilitated entrepreneurial performance in China. Second, it aims to understand how formal institutional development among Chinese regions affected the role of political connections. Using a two-level hierarchical dataset on Chinese private enterprises, this study finds that not only legal protection of property rights but also the development of market systems mattered for entrepreneurial performance. In addition, it shows that political connections played a diminishing role during regional institutional development in China. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Wubiao Zhou, 2014. "Regional institutional development, political connections, and entrepreneurial performance in China’s transition economy," Small Business Economics, Springer, vol. 43(1), pages 161-181, June.
  • Handle: RePEc:kap:sbusec:v:43:y:2014:i:1:p:161-181
    DOI: 10.1007/s11187-013-9527-3
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    1. repec:kap:sbusec:v:52:y:2019:i:3:d:10.1007_s11187-017-9972-5 is not listed on IDEAS
    2. Li, Jiaming & Lin, Xiaohua, 2017. "Assessing credit guarantee companies in China: Applying a new framework," China Economic Review, Elsevier, vol. 44(C), pages 98-111.
    3. Chun Yang & Bart Bossink & Peter Peverelli, 2018. "The Value of Business–Government Ties for Manufacturing Firms’ Product Innovation during Institutional Transition in China," Sustainability, MDPI, Open Access Journal, vol. 11(1), pages 1-27, December.
    4. Dai, Weiqi & Si, Steven, 2018. "Government policies and firms' entrepreneurial orientation: Strategic choice and institutional perspectives," Journal of Business Research, Elsevier, vol. 93(C), pages 23-36.
    5. Christopher Boudreaux, 2019. "When does privatization spur entrepreneurial performance? The moderating effect of institutional quality in an emerging market," Papers 1901.03356, arXiv.org.
    6. Martin Borowiecki & Karl-Heinz Leitner, 2015. "Determinants of new business formation in China: Regional evidence from a panel data model," ERSA conference papers ersa15p598, European Regional Science Association.
    7. repec:kap:sbusec:v:52:y:2019:i:3:d:10.1007_s11187-017-9981-4 is not listed on IDEAS
    8. Ge, Jianhua & Stanley, Laura J. & Eddleston, Kimberly & Kellermanns, Franz W., 2017. "Institutional deterioration and entrepreneurial investment: The role of political connections," Journal of Business Venturing, Elsevier, vol. 32(4), pages 405-419.
    9. repec:kap:sbusec:v:52:y:2019:i:3:d:10.1007_s11187-017-9980-5 is not listed on IDEAS
    10. Xu, Bing, 2019. "Permissible collateral and access to finance: Evidence from a quasi-natural experiment," China Economic Review, Elsevier, vol. 54(C), pages 237-255.
    11. Yang Zhou & Joshua C. Hall, 2017. "The Impact of Marketization on Entrepreneurship in China: Recent Evidence," Working Papers 17-22, Department of Economics, West Virginia University.
    12. Boudreaux, Christopher, 2019. "Do private enterprises outperform state enterprises in an emerging market? The importance of institutional context in entrepreneurship," MPRA Paper 93039, University Library of Munich, Germany.
    13. Zhou, Wubiao, 2017. "Institutional environment, public-private hybrid forms, and entrepreneurial reinvestment in a transition economy," Journal of Business Venturing, Elsevier, vol. 32(2), pages 197-214.
    14. Feifei Yu & Yue Guo & Fiona Lettic & Stuart J Barnes, 2019. "Regional Anti‐Corruption Effort, Political Connections And Firm Innovation Effort: Evidence From China," Bulletin of Economic Research, Wiley Blackwell, vol. 71(1), pages 18-32, January.

    More about this item

    Keywords

    Entrepreneurial performance; Legal protection of property rights; Development of market systems; Political connections; China; O12; O17; O43; P26; R58; L26;

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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