Does social capital influence small business entrepreneurship? Differences between urban and rural China

Abstract

This study investigates the relationship between social capital and small business entrepreneurship in China. Unlike previous studies that focus solely on rural or urban residents, this paper pays more attention to the differences between them. According to our study, social capital has both positive and negative impacts on small business entrepreneurship. Based on the data drawn from China General Social Survey, we find that the impact of social capital differs significantly between rural and urban areas. In rural China, residents who have higher social capital tend to have entrepreneurial behaviors, while higher social capital leads to lower intention of small business entrepreneurship in urban China. Individuals whose parents have the experiences of small business tend to have small business entrepreneurial activities; individuals who are better educated tend to find regular jobs instead of having their own small business. The results suggest that small business entrepreneurship in rural China might be “entrepreneurship by necessity.”

This is a preview of subscription content, access via your institution.

Fig. 1
Fig. 2
Fig. 3

Notes

  1. 1.

    Data source: Comprehensive statistical data and material on new China.

  2. 2.

    The Shi refers to scholars and officials, the Nong refers to farmers and peasants, and the Gong refers to artisans. More information can be found in https://www.hierarchystructure.com/chinese-social-hierarchy/.

  3. 3.

    Social capital is a broad concept that consists of many components. Due to the availability of data in the data set (CGSS), the parental status is used to estimate social capital.

  4. 4.

    In the ideal case, a number of other variables that are expected to influence people’s decision to start a firm would be included, as, e.g., risk propensity. However, such data are unfortunately not included in the data set over the individuals in the CGSS and cannot be obtained from other sources.

References

  1. Ács ZJ, Varga A (2005) Entrepreneurship, agglomeration and technological change. Small Bus Econ 24(3):323–334

    Article  Google Scholar 

  2. Allen WD (2000) Social networks and self-employment. J Soc Econ 29(5):487–501

    Article  Google Scholar 

  3. Audretsch D, Dohse D, Niebuhr A (2010) Cultural diversity and entrepreneurship: a regional analysis for Germany. Ann Reg Sci 45(1):55–85

    Article  Google Scholar 

  4. Banerjee A, Duflo E, Glennerster R, Kinnan C (2009) The miracle of microfinance? Evidence from a randomized evaluation. MIT Working Paper

  5. Batjargal B (2007) Internet entrepreneurship: social capital, human capital, and performance of internet ventures in china. Res Policy 36(5):605–618

    Article  Google Scholar 

  6. Bian Y (1994) Guanxi and the allocation of urban jobs in China. China Q 140:971–999

    Article  Google Scholar 

  7. Bian Y (1997) Bringing strong ties back in: indirect ties, network bridges, and job searches in China. Am Sociol Rev 62(3):266–285

    Article  Google Scholar 

  8. Bian Y, Huang X, Zhang L (2015) Information and favoritism: the network effect on wage income in China. Soc Netw 40:129–138

    Article  Google Scholar 

  9. Bourdieu P (1990) In other words: essays towards a reflexive sociology. Stanford University Press, Palo Alto

    Google Scholar 

  10. Bourdieu P, Wacquant L (1992) An invitation to reflexive sociology. The University of Chicago Press, Chicago

    Google Scholar 

  11. Bramoullé Y, Goyal S (2009) Favoritism. Cambridge working papers in economics 0942. Faculty of Economics, University of Cambridge, Cambridge

    Google Scholar 

  12. Brockhaus RH (1982) The psychology of the entrepreneur. In: Kent CA, Sexton D, Vesper KH (eds) Encyclopedia of entrepreneurship. Prentice Hall, Englewood Cliffs, pp 39–57

    Google Scholar 

  13. Burt RS (1980) Models of network structure. Ann Rev Sociol 6(1):79–141

    Article  Google Scholar 

  14. Bygrave WD, Timmons JA (2009) Venture capital at the crossroads. Social Science Electronic Publishing, Rochester

    Google Scholar 

  15. Cai D, Qiu L, Meng X, Ma S (2018) Liquidity constraints, social capital and family entrepreneurial choices. Manag World 3:79–93

    Google Scholar 

  16. Chen WT (2017) Entrepreneurial learning, knowledge acquisition and entrepreneurial performance: study on the next generation of family firms. (Doctoral Dissertation) Dongbei University of Finance and Economics

  17. Cheng T, Selden M (1994) The origins and social consequences of China’s Hukou system. China Q 139(6):44–68

    Google Scholar 

  18. Christiansen F (1990) Social division and peasant mobility in mainland China: the implications of the Hukou system. Issues Stud 26(4):78–91

    Google Scholar 

  19. Coleman JS (1988) Social capital in the creation of human capital. Am J Sociol 94:95–120

    Article  Google Scholar 

  20. Coleman JS (1990) Foundations of social theory. Harvard University Press, Cambridge

    Google Scholar 

  21. Davern M, Hachen DS (2006) The role of information and influence in social networks: examining the association between social network structure and job mobility. Am J Econ Sociol 65(2):269–293

    Article  Google Scholar 

  22. Davidsson P (2003) The domain of entrepreneurship research: some suggestions. Cognitive approaches to entrepreneurship research. Emerald Group Publishing Limited, Bingley, pp 315–372

    Google Scholar 

  23. Davidsson P, Honig B (2003) The role of social and human capital among nascent entrepreneurs. J Bus Ventur 18(3):301–331

    Article  Google Scholar 

  24. Démurger S, Xu H (2011) Return migrants: the rise of new entrepreneurs in rural China. World Dev 39(10):1847–1861

    Article  Google Scholar 

  25. Driessen MP, Zwart PS (1999) The role of the entrepreneur in small business success: the entrepreneurship scan. In: 44th ICSB world conference proceedings innovation and economic development: the role of entrepreneurship and SMEs, Nápoles, 20–23

  26. Dunn T, Holtz-Eakin D (2015) Financial capital, human capital, and the transition to self—employment: evidence from intergenerational links. J Labor Econ 18(2):282–305

    Article  Google Scholar 

  27. Fan C (2002) The elite, the natives, and the outsiders: migration and labor market segmentation in urban China. Ann Assoc Am Geogr 92(1):103–124

    Article  Google Scholar 

  28. Gedajlovic E, Honig B, Moore CB, Payne GT, Wright M (2013) Social capital and entrepreneurship: a schema and research agenda. Entrep Theory Pract 37(3):455–478

    Article  Google Scholar 

  29. Grootaert C, Bastelaer TV (2001) Understanding and measuring social capital: a synthesis of findings and recommendations from the social capital initiative. The World Bank, Social Capital Initiative, Working paper No. 24

  30. Huhe N (2014) Understanding the multilevel foundation of social trust in rural China: evidence from the China general social survey. Soc Sci Q 95(2):581–597

    Article  Google Scholar 

  31. Jenssen JI, Koenig HF (2002) The effect of social networks on resource access and business start-ups. Eur Plan Stud 10(8):1039–1046

    Article  Google Scholar 

  32. Kansikas J, Murphy L (2011) Bonding family social capital and firm performance. Int J Entrep Small Bus 14(4):533–550

    Article  Google Scholar 

  33. Kim PH, Aldrich HE (2005) Social capital and entrepreneurship. Found Trends Entrep 1(2):245–268

    Google Scholar 

  34. Kim J, Miner AS (2007) Vicarious learning from the failures and near-failures of others: evidence from the U.S. commercial banking industry. Acad Manag J 50(3):687–714

    Article  Google Scholar 

  35. Kinnan C, Townsend R (2012) Kinship and financial networks, formal financial access, and risk reduction. Am Econ Rev 102(3):289–293

    Article  Google Scholar 

  36. Knight J, Yueh L (2008) The role of social capital in the labor market in China. Econ Transit 16(3):389–414

    Article  Google Scholar 

  37. Laffineur C, Barbosa SD, Fayolle A, Nziali E (2017) Active labor market programs’ effects on entrepreneurship and unemployment. Small Bus Econ 49(4):889–918

    Article  Google Scholar 

  38. Le AT (1999) Empirical studies of self-employment. J Econ Surv 13(4):381–416

    Article  Google Scholar 

  39. Li H, Yang Z, Yao X, Zhang H, Zhang J (2012) Entrepreneurship, private economy and growth: evidence from China. China Econ Rev 23(4):948–961

    Article  Google Scholar 

  40. Light I, Dana L (2013) Boundaries of social capital in entrepreneurship. Entrep Theory Pract 37(3):603–624

    Article  Google Scholar 

  41. Lin N (1999) Social networks and status attainment. Ann Rev Sociol 25:467–487

    Article  Google Scholar 

  42. Lindquist MJ, Sol J, Praag MV (2015) Why do entrepreneurial parents have entrepreneurial children? J Labor Econ 33(2):269–296

    Article  Google Scholar 

  43. Ma X (2016) Determinants of the wage gap between migrants and local urban residents in China: 2002–2013. Mod Econ 7:786–798

    Article  Google Scholar 

  44. Ma G, Yang E (2011) Social networks, informal finance and entrepreneurship. Econ Res J 46(03):83–94

    Google Scholar 

  45. Paterson L (2014) Education, social attitudes and social participation among adults in Britain. Sociol Res Online 19(1):1–15

    Article  Google Scholar 

  46. Reynolds P, Bosma N, Autio E, Hunt S, De Bono N, Servais I, Lopez-Garcia P, Chin N (2005) Global entrepreneurship monitor: data collection design and implementation 1998–2003. Small Bus Econ 24:205–231

    Article  Google Scholar 

  47. Robison LJ, Siles SME (2002) Is social capital really capital? Rev Soc Econ 60(1):1–21

    Article  Google Scholar 

  48. Shen J (2013) The joint use of formal and informal job search methods in China: institutional constraints, working mechanisms and advantages. (Doctoral Dissertation) University of Toronto

  49. Shen J (2015) A third type of job search behavior: the use of the formal-informal joint channel in matching individual qualifications with hiring requirements in urban China. J Chin Sociol 2(1):3

    Article  Google Scholar 

  50. Sluis JVD, Praag MV, Vijverberg W (2010) Education and entrepreneurship selection and performance: a review of the empirical literature. J Econ Surv 22(5):795–841

    Article  Google Scholar 

  51. Stuart T, Hybels HRC (1999) Interorganizational endorsements and the performance of entrepreneurial ventures. Adm Sci Q 44(2):315–349

    Article  Google Scholar 

  52. Stuart T, Sorenson O (2003) The geography of opportunity: spatial heterogeneity in founding rates and the performance of biotechnology firms. Res Policy 32(2):229–253

    Article  Google Scholar 

  53. Timberlake S (2005) Social capital and gender in the workplace. J Manag Dev 24(1):34–44

    Article  Google Scholar 

  54. Wang Y (2013) Research on the individual businesses of city—based on the investigation on Xinyang city in Henan province. (Doctoral Dissertation) Dalian University of Technology

  55. Wennekers S, van Stel André, Reynolds TP (2005) Nascent entrepreneurship and the level of economic development. Small Bus Econ 24(3):293–309

    Article  Google Scholar 

  56. Westlund H (2006) Social capital in the knowledge economy: theory and empirics. Springer, Berlin

    Google Scholar 

  57. Westlund H, Bolton R (2003) Local social capital and entrepreneurship. Small Bus Econ 21:77–113

    Article  Google Scholar 

  58. Xiong A, Li H, Westlund H, Pu Y (2017) Social networks, job satisfaction and job searching behavior in the Chinese labor market. China Econ Rev 43:1–15

    Article  Google Scholar 

  59. Yao X, Zhang T (2008) Strong ties and weak ties: Guanxi dependence in growth of firm. J Manag Sci China 11(1):143–152

    Google Scholar 

  60. York JG, Venkataraman S (2010) The entrepreneur-environment nexus: uncertainty, innovation, and allocation. J Bus Ventur 25:449–465

    Article  Google Scholar 

  61. Yueh L (2009) China’s entrepreneurs. World Dev 37(4):778–786

    Article  Google Scholar 

  62. Zhang LY, Zhang HN (2013) Financial constraints and family entrepreneurship: based on perspective of urban-rural differences in China. J Financ Res 9:123–135

    Google Scholar 

  63. Zhang B, Hu J, Fan C (2015) Social network, information acquisition and households’ entrepreneurial income: an empirical research based on perspective of urban-rural differences in China. Econ Rev 2:52–67

    Google Scholar 

  64. Zhao Y (2002) Measuring the social capital of Chinese workers. Curr Sociol 50(4):555–571

    Article  Google Scholar 

  65. Zhao W, Ritchie JRB, Echtner CM (2011) Social capital and tourism entrepreneurship. Ann Tour Res 38(4):1570–1593

    Article  Google Scholar 

Download references

Acknowledgements

This work was supported by the research fund from Chongqing Technology and Business University (KFJJ2018037) and the Ministry of Education of the People's Republic of China (19YJC630187).

Author information

Affiliations

Authors

Corresponding author

Correspondence to Xianhua Sun.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Sun, X., Xiong, A., Li, H. et al. Does social capital influence small business entrepreneurship? Differences between urban and rural China. Ann Reg Sci (2019). https://doi.org/10.1007/s00168-019-00922-1

Download citation

JEL Classification

  • J70
  • R23