Livelihood Disruption and Venture Creation: Entrepreneurship as Technology Adoption A Comparison between Kentucky and Shaanxi Farmers

In the US, The Tobacco Transition Payment Program, also called the "tobacco buy-out," helps tobacco quota holders and producers transition to the free market. In China, the transaction of Land Use Rights providing farmers’ ability to buy or sell Land Use Rights has been seriously considered by the Chinese government. The uncertainty in household income and changes in economic environment during the US Tobacco Transition Payment Program and the Chinese Land Use Rights Regime lead many individuals into entrepreneurial activities. Entrepreneurship often means making changes in livelihood activities that involve substantial risks to income. While the rewards may be substantial, transactions costs may make decisions irreversible. This paper draws a comparison between entrepreneurship and technology adoption. Adopting a new production technology also involves substantial risks. The economics of technology adoption is a well developed literature with many accepted and testable models. Most prominent are the theories of learning by using and learning by doing. We review the technology adoption literature, drawing out lessons for entrepreneurship research. We then apply an ‘entrepreneurship as technology adoption’ model to a unique dataset collected in Kentucky, US and in Shaanxi province, China. Using a sample of 702 Kentucky farmers at the time of the buyout and 730 Chinese farmers, we test several of the implications of this model and compare significant results between Kentucky and Shaanxi farmers. This study finds that both farmers in Kentucky and Shaanxi with a strong social network are more likely to become entrepreneurs. Kentucky farmers with low income are more likely to start new businesses. The finding supports the “push” hypothesis as farmers with low income are pushed into starting a new business. The human capital factor is strongly associated with Shaanxi farmer’s entrepreneurial decision.