Guanxi and Entrepreneurship in Urban China

Journal of Asia Pacific Economy( Vol.17, No.2, 315-331)

Michael Troilo* and Jun Zhang**

*University of Tulsa, Collins College of Business, 302-D, 800 South Tucker Drive, 800 South Tucker Drive, Tulsa, OK 74120, USA

**China Center for Economic Studies, Fudan University, Shanghai, 200433 China

ABSTRACT

We test for the relative importance ofguanxi(“connections”) as a catalyst for entrepreneurship in urban China using survey data from five cities for the period 1996-2001. We find thatguanxiwith the Chinese Communist Party (CPC) is negatively correlated with the likelihood of being either a sole proprietor or an entrepreneur with employees. Familyguanxihas no effect for sole proprietors, but is positively correlated with the probability of being an entrepreneur with employees. These findings add to the literature on entrepreneurship in China by differentiating the effects of various types ofguanxion various forms of entrepreneurship.

JEL classification: H00, O10, P2, P3, Z13.

Keywords:Guanxi, entrepreneurship, urban china, family