Abstract
Despite the growing acknowledgement that social capital has positive influence on entrepreneurship, former researches mainly focus on individual and group level, and how social capital impacts entrepreneurship has been less formally examined. This paper investigates the mechanism of social capital raising entrepreneurship on a provincial level by using a panel data set of 30 Chinese provinces from 2003 to 2012. Since SMEs have some troubles to finance through former financial organizations in China, and informal finance based on social relationship may help them solve this problem, informal finance are added as the mediating variable in this article. We estimate the amount of informal finance by indirect method, and classify entrepreneurship into two categories: business entrepreneurship and innovation entrepreneurship. System generalize methods of moments is used to test the regression, and the result suggests that informal finance has mediating effect on social capital and both business entrepreneurship and innovation entrepreneurship. This research has theoretical value on China’s “mass entrepreneurship and innovation” policy, and we suggest Chinese government could stimulate entrepreneurship by supporting informal finance and fostering social capital.
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