Migrant entrepreneurship in China: entrepreneurial transition and firm performance

Abstract

China is experiencing rapid urbanization during which millions of migrants move from rural to urban areas. Recently, China initiated the national strategy of “mass entrepreneurship and innovation” to tap into the innovative potential and promote entrepreneurial development among the general public, with rural migrants being one of the targeted groups of this policy. This context calls for a better understanding of rural migrants’ entrepreneurial formation and transition. Using the 2012 and 2014 Chinese Labor-force Dynamics Survey (CLDS) data, we test the importance of human capital, social capital, and community trust on migrants’ entrepreneurial entry with cross-sectional and panel data analyses. We find that rural migrants’ entrepreneurship rates and entrepreneurial entry rates surpass both their urban resident and rural resident counterparts, indicating the active role they play in urban business landscape. While individual characteristics and social networks play similar roles in these three groups’ entrepreneurial transition, rural migrants’ business activities are particularly shaped by their perception of communities. Further analysis of migrant-owned businesses reveals their over-representation in main-street industries but their firm performances are on par with other businesses, suggesting their positive economic contribution in cities.