Questions on China

1) What environment in Chinese business influences Chinese entrepreneurship? And How does the local government influence entrepreneurs firm in China?

Chinese entrepreneurs are influenced mainly by three sources:

• The government
• The institution
• The culture

The local government in china was a little bit rigid and didn’t allow for Chinese entrepreneurs to fully fulfil their intentions. The government had the ability to monitor all of the firms. It allocated resources and redistributed profits. This weakened the financial aspect of TVE (town villigae entrepreneurs). Moreover, it allocated bank loans and investments. In doing so, it was able to choose which investment to pursue for it’s own interest instead of the firms’. It had also the power to spread the start up risk, by making all of the community absorb the cost of failure.

The institution wasn’t very clear in china. This only helped entrepreneurs to start-up new businesses. In this environment, new firms could exploit the gaps in the systems and they seized new opportunities from it. Moreover they used networking and building as opportunities for exploration and identification. This method of exploiting the systems’ gaps usually generated short-term approaches to business transactions. The negative influence that the institution gave was that there was a bit of political interference and economic experimentation. Also the legacy of a centrally planned economy didn’t’ help.

The culture also influenced entrepreneurs. Culture is an institutional framework in china and it is partially conducive of entrepreneurship if it is analysed on the base of the Guanxi (personal network relationships), which allows the firms to build social capital and to seek for legitimacy. On the other hand, the entrepreneurial values are in contrast with the Chinese culture – creativity, innovation and flexibility are all lacking in the Chinese values. The entrepreneurial characteristics also differ from the chines ones – a positive response to change, initiative and orientation are all in conflict with the Chinese characteristics.

2) How do you think the increase in innovation in Chinese firms will affect the future developments of family businesses?

The increase in innovation will surely help new firms in their growth and expansion. It will also help family firms which can exploit these new technologies to their advantage. I think that an innovation increase will help all entrepreneurial firims because it allows them to be more productive and probably more efficient in their segment. Overall, if Chinese firms upgrade their technology, i think that it will affect future family businesses at the beginning because they have an advantage over them. However in the long run, also the family businesses will be able to acquire and use these technologies for their own purpose.

3) The research done on the Chinese firms was done about 10 years ago, do these conclusions still hold today?

This research paper is based on early studies, when entrepreneurs were just starting to rise in china. It focuses on the past 25 years, from the beginnings of the TVE’s (township villages entrepreneurs) to major dominant players such as SME’s (small and medium sized enterprises). These conclusions stated on the previous questions, about culture, government and institution, probably don’t hold anymore. The government has become much more flexible and creativity is becoming one of Chinas’ strength. Although we don’t have evidence of this on the paper, we can see that China is growing and its business is expanding very quickly at a global level. Therefore we can deduce that there are less cultural and governmental constraints around entrepreneurs.