Chinese Private Entrepreneurs Research Articles

“Original sin” suspicion and charitable donation of private enterprises in China

PurposeThis study aims to explore the reasons why some Chinese private entrepreneurs are reluctant to make charitable donations, with a focus on the perspective of “original sin” suspicion. The objective of this paper is to examine the challenges faced by these entrepreneurs, especially those suspected of “original sin,” when making charitable donations, and to provide recommendations for addressing these challenges.Design/methodology/approachUsing data from the Chinese Private Enterprises Survey Database for the years 2008, 2010, 2012 and 2014, this study used ordinary least squares regression to examine the relationship between “original sin” suspicion and charitable donations from private enterprises.FindingsThis study examined the impact of “original sin” suspicion on charitable donations and found that it significantly reduces the donations of privatized enterprises. The negative impact of “original sin” suspicion on charitable donations is especially pronounced in small and medium-sized enterprises (SMEs), as well as those that have experienced changes in local leadership.Originality/valueWhile previous research focused on the motivations of private enterprises that donated, they failed to identify which types of enterprises were reluctant to donate and why. By focusing on the “original sin” suspicion surrounding entrepreneurs in privatized enterprises and the political costs they face, this study sheds light on the challenges they encounter in charitable donations and explains why privatized enterprises, especially SMEs, are unwilling to make charitable donations.

Research on the Relationship Between Chinese Private Entrepreneurs and Democratization

While the rise of democracy has been attributed to various factors, including the emergence of a capitalist class. This article adopts a theoretical analysis method to delve into the role of private entrepreneurs in China as a potential catalyst for democratization. Drawing on Barrington Moore's theory of "no bourgeoisie, no democracy" and Samuel Huntington's analysis of democratization movements, the paper explores the dynamics between private entrepreneurs and the Chinese Communist Party (CCP) and analyzes the identity and interests of private entrepreneurs.The study reveals that private entrepreneurs in China maintain close informal connections and share political interests with state officials, indicating an interdependent relationship rather than an antagonistic one. Additionally, the lack of a unified political front and diverging economic interests among private entrepreneurs undermines the potential for class formation and collective action towards democratization. The paper also highlights the integration and cooperation between the CCP and private business owners, dispelling assumptions of discontent and hostility between the two groups. Chinese private entrepreneurs are generally satisfied with the CCP's economic policies, with their primary concern being market competition rather than state policies. This research contributes to a nuanced understanding of the complex dynamics between private entrepreneurs and the CCP in the context of democratization in China.

The Easterlin paradox of entrepreneurs during China's economic transition

AbstractThis paper investigates the determinants and the time pattern of the subjective well‐being of private business owners. We find that both personal and enterprise‐level factors have a significant influence on subjective status of private business owners. Meanwhile, we find supportive evidence of Easterlin paradox among Chinese private entrepreneurs: both personal income and operating revenue enhance subjective status in a certain period, but subjective status declines as time goes by, even as incomes continue to rise. A further Oaxaca–Blinder decomposition suggests that the competition and provincial factors are the keys to explaining the paradox. Finally, we try to verify the positive effect of political connection on entrepreneurs' subjective status to provide some helpful advice for the government.

Rags to riches? Entrepreneurs' social classes, resourceful time allocation, and venture performance

Social classes shape entrepreneurial pursuits in that entrepreneurs from lower social class groups face more resource deficiencies compared to those from higher social class groups. In this study, we theorize that being resourceful with a particular resource—time—helps ventures run by lower-class entrepreneurs achieve better performance. However, we further argue that the extent to which entrepreneurs use time resourcefully is affected by the cognitive schemas stamped on them by their social class backgrounds. Our empirical analysis of 8663 Chinese private entrepreneurs between 2006 and 2010 lends robust support to these arguments. By revealing both material and cognitive constraints stemming from entrepreneurs' social classes, our study contributes to research on social classes and entrepreneurial resourcefulness and has important implications for understanding the persistence of inequality in entrepreneurship.

Social Class and Entrepreneur Resilience: How Entrepreneurs Respond to Institutional Deterioration

There has been a growing recognition of the role of social class in the field of entrepreneurship, and the prevailing view highlights that entrepreneurs from lower social classes will encounter more material deficiencies and cognitive constraints than those from higher social classes in their business. In this study, drawing on insights from social psychology, we argue that those lower-class entrepreneurs could also be more resilient in dealing with adverse situations. Specifically, our empirical analysis of Chinese private entrepreneurs reveals that while entrepreneurs with lower social class origins tends to invest less in long-term development activities (e.g., innovation and employee training), when encountering a deteriorating institutional environment that generally discourages long-term investment, lower-class entrepreneurs show greater resilience in embracing the challenges and the perseverance of their investments compared to those from higher social classes. This study bridges research on social class and entrepreneur resilience to reveal the dual impact of individuals’ social class origins in entrepreneurship.

Buddhist Entrepreneurs, Managerial Attention Allocation, and New Ventures' Access to External Resources

AbstractNew ventures are often short of resources crucial to their survival and development. This research sheds new light on how new ventures can obtain better access to external resources by analysing a survey of a large sample of Chinese private entrepreneurs. We found that by comparison with their non‐Buddhist counterparts, Chinese Buddhist entrepreneurs tend to give greater attention to external activities and have a higher chance of gaining sociopolitical legitimacy and therefore have a better chance of accessing external resources such as bank loans. Moreover, the indirect effect on bank loans of the amount of attention allocated to external activities by Chinese Buddhist entrepreneurs is weakened by lower government intervention and better development of intermediary agencies in regions where new ventures are located, largely due to Chinese Buddhist entrepreneurs' reduced reliance on sociopolitical legitimacy to access external resources.

Analysis of the Causes of Most Chinese Private Entrepreneurs' Nonparticipation in Charity

Analysis of the Causes of Most Chinese Private Entrepreneurs' Nonparticipation in Charity

An Empirical Analysis of the Relationship Between the Uncertainty of Chinese Economic Criminal Law and the Crime of Private Entrepreneurs

Chinese economic criminal law embraces the blank description of crime and the special forms of normative constituent elements and the distribution of miscellaneous provisions, which has violated the clarity principle of the criminal law and is contrary to the scientific legislative guidelines. The results of the study show that not all unclear provisions will lead to the increase in the criminal risk of Chinese private entrepreneurs, that the simple blank description of crime will not lead to a sharp increase in the related crimes and that the special form of the normative constituent elements and miscellaneous provisions have greatly increased the judicial application of related crimes to private entrepreneurs.

Waking from Mao’s Dream: Communist Ideological Imprinting and the Internationalization of Entrepreneurial Ventures in China

We theorize how an ideological imprint—ideology formed through past events—serves as an information filter that persistently affects individuals’ decision making and how subsequent behaviors of the imprinter—the entity that established the imprint—may alter it. We test our model with a longitudinal dataset of Chinese private entrepreneurs from 1993 to 2012, investigating the influence of a founder’s communist ideological imprint, which characterizes foreign capitalism as evil, and subsequent dynamics introduced by the imprinter—the Communist Party–led government of China—on two internationalization strategies that deal with foreign investors and markets: firms’ efforts to attract foreign capital and to expand globally. Our findings show that Chinese entrepreneurs’ communist ideological imprint negatively affects the internationalization of their ventures, while available and credible information contradicting communism—coming from the government directly, government-created industry social networks for entrepreneurs, or observing governmental support of internationalization—weakens the influence of the imprint. Our study contributes to a better understanding of imprinting and its decay, the effects of corporate decision makers’ political ideology, and the internationalization of firms.

Finding the Ethics of “Red Capitalists”: Political Connection and Philanthropy of Chinese Private Entrepreneurs

In China, many private entrepreneurs have obtained political offices in the government. In this study, we argue that Chinese private entrepreneurs who are formally connected with government institutions, compared to other Chinese private entrepreneurs, tend to contribute more to philanthropic causes not only for instrumental concerns but also out of altruistic values. We submit this argument to an empirical test through a secondary data analysis of a representative sample of Chinese entrepreneurs collected by a coalition of government and industry groups. The results of this analysis show that politically connected entrepreneurs are more likely to make major philanthropic donations and, at the same time, hold a stronger sense of the responsibility for doing so. The most important contribution of this research is that it reveals the ethical basis of the philanthropic activities of Chinese private entrepreneurs, especially those with political connections, that has been unappreciated by extant literature.

The Horatio Alger Myth in China: Origins of the First Generation of Visibly Richest Chinese Private Entrepreneurs

This article traces the socio-economic origins of the first generation of the visibly richest private entrepreneurs in China by analysing the roles of political background, family connections and culture capital. Based on a data set essentially reconstructed from two leading Chinese rich lists from 2003 to 2012, the author finds no clear evidence to support the hypothesis of strong political capitalism. The theory of interrupted embourgeoisement is applicable to those who come from pre-communist elite or petty-bourgeois families, but more than half of the rich founders were born into the lower-middle class, such as the urban working class or peasantry. Moreover, for those who majored in social sciences and humanities, having a college degree is considered a ticket for landing a job in a public institute early in their career, while those having credentials in sciences and engineering are more likely to start their business in relevant areas directly. The author concludes that although each factor is vital, none of these provides a satisfactory single explanation for individual super-wealth. There is also a significant distinction between pioneers (early adopters) and newcomers (the recently established entrepreneurs).

Taking the “Red Hat” off Chinese Private Entrepreneurs

China's new capitalists, who have arisen from the booming private sector in the postcommunist era, are widely regarded as supporters of China's authoritarian political regime—the oft-cited “red capitalists.” Challenging the common view on the close connections between private entrepreneurs and political elites, this study applies an agency-centered perspective to examine how private entrepreneurs' organizational strategies in coping with formidable institutional environments created by the government have shaped their political values. From statistical analysis of a firm-level nationally representative data set, I find little evidence in the existing literature for the often depicted “redness” of Chinese private entrepreneurs. Although political connections that entrepreneurs seek to build with the government help mitigate the effects of institutional obstacles on their political opinions, such entrepreneur-state connections alone lead to entrepreneurs' unfavorable views on the polity. Private entrepreneurs' organizational innovations and particularly collaborative innovations beyond the firm level are found to significantly shape their political values, contributing to their potential role as political opponents in the future.

What explains Chinese private entrepreneurs' charitable behaviors?—A story of dynamic reciprocal relationship between firms and the government

This paper studies Chinese private entrepreneurs' charitable behaviors by exploring the dynamic reciprocal relationship between private firms and local governments. By using three waves of a nationwide survey of private firms in 2002, 2004 and 2006 from China, we provide robust evidence that Chinese private entrepreneurs with access to preferential loans from state-owned banks when their businesses first started are more likely to participate in donation and anti-poverty programs organized by the government, and the effects of such loans are more pronounced for small firms and firms in regulated industries. Furthermore, we find that this reciprocal relationship between local governments and private entrepreneurs is a personal relationship rather than an institutional relationship, which declines in importance in areas with better legal institutions and in regions with change of local leadership. Finally, there is evidence that Chinese private entrepreneurs' charitable behaviors are also motivated by political returns and other individual characteristics.

Insights from China for the United States: Shadow Banking, Economic Development, and Financial Systems

The growth of China’s shadow banking industry has been a recent source of serious concern for the US-China Economic and Security Review Commission. US shadow banking practices contributed to the 2008 financial crisis. The proliferation of these practices in China potentially threatens not only China but also economies that are intimately tied to China through trade, investment, and financial relationships such as the United States’ economy. An investigation of Chinese shadow banking, in the context of China’s post-1978 debt financing experience, reveals that China poses a challenge to the established theory that strong, formal financial systems are required for economic growth. Contrary to expectation, China’s outstanding economic growth in the last thirty-five years took place without a strong formal financial system that was easily accessible to private entrepreneurs. This article examines the remarkable story of how China, constrained by political and historical legacies, relied upon informal financing structures to fund Chinese private entrepreneurs who contributed significantly to China’s stellar economic growth. China’s story affirms the work of scholars who have emphasized the importance of sociopolitical structures and who have theorized that law does not necessarily precede economic development but is engaged in a complex relationship with other normative structures. An examination of the sociopolitical underpinnings of China’s informal finance sector also reveals how shadow banking has grown to concerning levels in China and the challenges ahead that China faces as it attempts to use policy and legislative responses. Interestingly, this examination also reveals commonalities between China and the United States and suggests that there is the potential for mutual enlightenment despite the vastly different political systems and histories of these two countries. Thus, China’s shadow banking story advances our understanding on two fronts: (a) China’s example challenges current theoretical understandings of law, finance and economic development and requires us to broaden our inquiry to include political history and informal societal structures and (b) a sociopolitically informed understanding of China also allows us to draw comparisons to the United States to isolate commonalities and differences that may inform future legislative responses and mutual understanding between both countries.

Insights from China for the United States: Shadow Banking, Economic Development, and Financial Systems

The growth of China’s shadow banking industry has been a recent source of serious concern for the US-China Economic and Security Review Commission. US shadow banking practices contributed to the 2008 financial crisis. The proliferation of these practices in China potentially threatens not only China but also economies that are intimately tied to China through trade, investment, and financial relationships such as the United States’ economy. An investigation of Chinese shadow banking, in the context of China’s post-1978 debt financing experience, reveals that China poses a challenge to the established theory that strong, formal financial systems are required for economic growth. Contrary to expectation, China’s outstanding economic growth in the last thirty-five years took place without a strong formal financial system that was easily accessible to private entrepreneurs. This article examines the remarkable story of how China, constrained by political and historical legacies, relied upon informal financing structures to fund Chinese private entrepreneurs who contributed significantly to China’s stellar economic growth. China’s story affirms the work of scholars who have emphasized the importance of sociopolitical structures and who have theorized that law does not necessarily precede economic development but is engaged in a complex relationship with other normative structures. An examination of the sociopolitical underpinnings of China’s informal finance sector also reveals how shadow banking has grown to concerning levels in China and the challenges ahead that China faces as it attempts to use policy and legislative responses. Interestingly, this examination also reveals commonalities between China and the United States and suggests that there is the potential for mutual enlightenment despite the vastly different political systems and histories of these two countries. Thus, China’s shadow banking story advances our understanding on two fronts: (a) China’s example challenges current theoretical understandings of law, finance and economic development and requires us to broaden our inquiry to include political history and informal societal structures and (b) a sociopolitically informed understanding of China also allows us to draw comparisons to the United States to isolate commonalities and differences that may inform future legislative responses and mutual understanding between both countries.

How private enterprises establish organizational legitimacy in China's transitional economy

PurposeThe purpose of this paper is to reveal how Chinese private entrepreneurs behaved in a transition economy with a weak institutional environment to obtain organizational legitimacy.Design/methodology/approachDrawing on five consecutive nation‐wide surveys from 1997 to 2006 in China, the study provides empirical evidence and theoretical explanation on private entrepreneurs' behaviors in obtaining organizational legitimacy in China's transition economy.FindingsThe paper finds that the institutional environment in China's transition economy for private firms was weak. Specifically, weak property protection and Three Payouts showed a high risk of property confiscation for private firms; an under‐developed (discriminatory) financial system and a weak credit system had been big obstacles for the development of private firms, which resulted in debt chain among firms, a substitution for the weak financial system. Under such a hostile institutional environment where firms have been facing a high risk of organizational legitimacy, private entrepreneurs have great willingness to connect with government officers, participate in PC or CPPCC which are likely be politically connected, employ isomorphism in organizational structure, apply government‐oriented corporate social responsibility behaviors, on which they depend to obtain organizational legitimacy in transitional economy.Originality/valueThe paper exhibits the institutional environment in the past ten years in China's transition economy, and proposes the likely ways in which private entrepreneurs choose to establish legitimacy under a weak institutional environment.

Conflict Resolution Strategies of Chinese Private Entrepreneurs: The Role of Political Participation

This study investigated the link between private entrepreneurs’ political networking and organizational strategies for conflict management in China. We predicted, and found, that those with political influence were more likely to use a “rights” approach to resolve inter-organizational disputes (i.e., going to court), while those without political influence were more likely to use an “interests” approach (i.e., mediation and negotiation). There were no differences between those with and without political influence in use of “power” (i.e., going directly to government agencies). These findings are based on a survey of 4149 private Chinese entrepreneurs in 1995, 1997, and 2000.

Conformity, political participation, and economic rewards: The case of Chinese private entrepreneurs

Using institutional and resource dependence theories as the conceptual framework, this study identifies three forms of conformity—political, economic, and social—that can affect the level of private entrepreneurs’ formal political participation in a transition economy. Data from a 2004 national-wide survey of 3,012 private firms in China show that political conformity (indicated by membership in the ruling party), economic conformity (amount of taxes paid), and social conformity (amount of charity donated) are each antecedents to private entrepreneurs’ formal political participation. Moreover, political conformity negatively moderates the relationship between social conformity and private entrepreneurs’ formal political participation—for party members, a lesser amount of charity is associated with higher levels of political position as compared to non-party members. We also found that the rewards of formal political participation have institutional boundaries: political participation can indeed bring private entrepreneurs economic rewards such as a greater amount of loans from state banks but not from shareholding and underground banks.

Conflict Resolution Strategies of Chinese Private Entrepreneurs: The Role of Political Participation

Conflict Resolution Strategies of Chinese Private Entrepreneurs: The Role of Political Participation

Allies of the State: Democratic Support and Regime Support among China's Private Entrepreneurs

AbstractThis article examines the intensity and sources of Chinese private entrepreneurs' support for the current political system. The study presented here is based on data from a representative sample of private entrepreneurs collected from five coastal provinces in late 2006 and early 2007. In general, China's private entrepreneurs tend to support the current party-state and to be in favour of the status quo. Subjective values are far more important than CCP membership and relationship to the state in determining which capitalists are regime supporters. Among all the factors analysed in this study, democratic values, life satisfaction, evaluation of government policy performance and perception of official corruption play the most decisive roles in shaping private entrepreneurs' support for the incumbent regime. Only red capitalists who are former cadres are likely to be reliable supporters of the regime when subjective values are also considered; other ties to the state do not create support for the regime. The degree of regime support also exhibits considerable regional variation. These findings have important implications for the survival of the regime and for the role of private entrepreneurs in a potential political change towards democracy.