Troops are Business Schools: Military Service and Entrepreneurial Behaviors in China

Abstract

Although research has examined the benefits of military service and the impact of military executives on business operations, the relationship between military service and entrepreneurial behavior remains poorly understood. Using the instrumental variable approach and a nationally representative male sample from the China Labor-forces Dynamic Survey, we discovered that military service significantly increased the probability of entrepreneurship in China, even after a series of robustness checks. Mechanism tests indicated that this positive effect could be explained by human and political capital accumulation, military-related social capital formation, and risk appetite traits. Our supplemental analyses demonstrated that exogenous shocks from the special military-in-business policy strengthened the positive entrepreneurial effect, whereas the higher education expansion policy and China’s accession to the World Trade Organization weakened this effect. Additionally, military entrepreneurs had better business performance and more resilient, persistent, and confident traits. We found no evidence that Chinese veterans were forced to become entrepreneurs. This study enriches research on the styles and traits of military entrepreneurs and managers and provides important insights for assessing and improving veteran welfare policies in China and other developing countries.