From Job-Assignment to Job-Hunting: Labor Market Reform and Entrepreneurship in China

Abstract

Although research at the junction of institutional change and entrepreneurship suggests that a new institutional environment encourages entrepreneurship by providing resources and opportunities, it has paid little attention to the role of the individual during the change process. In this study, we propose that institutional change may have a lasting effect on individual decision-making by imprinting a mindset that fits with the new institution, and that subsequent experience may influence the strength this imprinted mindset. We test our model with an alumni survey from a top Chinese university during a period in which the country’s labor market reform took place. We find support for our argument that reform, as a formal institutional change, can imprint an individual mindset with autonomy, which positively affects entrepreneurial entry. This study enriches our understanding of the relationship between institutional change and entrepreneurship and highlights the impact of historical conditions on entrepreneurship.