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Entrepreneurial Reluctance: Talent and Firm Creation in China

Author

Listed:
  • Chong-En Bai
  • Ruixue Jia
  • Hongbin Li
  • Xin Wang

Abstract

This paper examines the correlation between cognitive ability and firm creation. Drawing on administrative college admission data and firm registration records in China, we investigate who had created firms by their mid-thirties. We find a clear pattern of entrepreneurial reluctance: given the same backgrounds, individuals with higher college entrance exam scores are less likely to create firms. Through an exploration of firm performance, alternative career trajectories and variations across regions, we propose an explanation: the ability represented by exam scores is useful across occupations, yet higher-scoring individuals are attracted to waged jobs, particularly those of the state sector.

Suggested Citation

  • Chong-En Bai & Ruixue Jia & Hongbin Li & Xin Wang, 2025. "Entrepreneurial Reluctance: Talent and Firm Creation in China," The Economic Journal, Royal Economic Society, vol. 135(667), pages 964-981.
    • Handle: RePEc:oup:econjl:v:135:y:2025:i:667:p:964-981.
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    File URL: http://hdl.handle.net/10.1093/ej/ueae094
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    Cited by:

    1. Chuantao Cui & Leona Shao-Zhi Li, 2024. "More but not better: Career incentives of local leaders and entrepreneurial entry in China," Working Papers 202417, University of Macau, Faculty of Business Administration.
    2. Lin, Xin & Hui, Eddie Chi-man & Cong, Zhenglong & Shen, Jianfu, 2026. "Solving coordination failures: Collective land transfer rights and rural entrepreneurship," Journal of Development Economics, Elsevier, vol. 178(C).
    3. Huang, Zhuo & Tao, Yunqing & Zhang, Qidi & Ye, Yongwei, 2023. "The road to entrepreneurship: The effect of China's broadband infrastructure construction," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1831-1847.
    4. Li, Zhaohua & Pang, Suqin & Zhu, Zhiyun, 2024. "The impact of pilot free trade zones on entrepreneurship: Evidence from a quasi-natural experiment in China," Socio-Economic Planning Sciences, Elsevier, vol. 92(C).
    5. Zou, Jian, 2024. "The peer effect of persistence on student achievement," Economics of Education Review, Elsevier, vol. 102(C).
    6. Han, Linsong & Li, Xun & Xu, Gang, 2022. "Anti-corruption and poverty alleviation: Evidence from China," Journal of Economic Behavior & Organization, Elsevier, vol. 203(C), pages 150-172.
    7. Klingler-Vidra, Robyn & Chalmers, Adam William & Wade, Robert H., 2025. "Who’s governing the market? bringing the individual back into the study of the developmental state," World Development, Elsevier, vol. 191(C).
    8. Xun, Yang, 2024. "Corruption and Talent Allocation," The Warwick Economics Research Paper Series (TWERPS) 1526, University of Warwick, Department of Economics.
    9. Cui, Chuantao & Li, Leona Shao-Zhi, 2023. "Trade policy uncertainty and new firm entry: Evidence from China," Journal of Development Economics, Elsevier, vol. 163(C).

    More about this item

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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