Skip to main content
SpringerLink
Log in

How entrepreneurs discover opportunities in China: An institutional view

  • Published:
Asia Pacific Journal of Management Aims and scope Submit manuscript

Abstract

This paper investigates how entrepreneurs in China accumulate and integrate information and knowledge to identify opportunities when facing weak infrastructure and changing institutional settings. By employing institutional theory and an interactive framework of entrepreneurship, this paper proposes a model that incorporates both individual and environmental effects. First the individual characteristics that lead to opportunity recognition are discussed: (1) human capital, (2) social capital, and (3) social skills. Next the model proposes that the relationships between individual characteristics and opportunity recognition are contingent upon: (1) the entrepreneurial environment in which opportunities are discovered, and (2) the personal turbulence experienced by entrepreneurs.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Abernatyh, W. J., & Utterback, J. 1978. Patterns of industrial innovation. Technological Review, 80(7): 40–47.

    Google Scholar 

  • Ahlstrom, D., & Bruton, G. D. 2002. An institutional perspective on the role of culture in shaping strategic actions by technology-focused entrepreneurial firms in China. Entrepreneurship Theory and Practice, 26(4): 53–69.

    Google Scholar 

  • Aldrich, H. 1999. Organizational evolving. London: Sage.

    Google Scholar 

  • Aldrich, H., & Fiol, M. 1994. Fools rush in? The institutional context of industry creation. Academy of Management Review, 19(4): 645–670.

    Article  Google Scholar 

  • Aldrich, H., & Zimmer, C. 1986. Entrepreneurship through social networks. In D. L. Sexton & R. W. Smilor (Eds.). The art and science of entrepreneurship: 3–23. Cambridge, MA: Ballinger Publishing Company.

    Google Scholar 

  • Baron, R. A. 1999. Counterfactual thinking and venture formation: The potential effects of thinking about “what might have been.” Journal of Business Venturing, 15: 79–91.

    Article  Google Scholar 

  • Baron, R. A. 2008. The role of affect in the entrepreneurial process. Academy of Management Review, 33: 328–340.

    Google Scholar 

  • Baron, R. A., & Ensley, M. D. 2005. Opportunity recognition as the detection of meaningful detections: Evidence from comparisons of novice and experienced entrepreneurs. Management Science, 52: 1331–1344.

    Article  Google Scholar 

  • Baron, R. A., & Markman, G. D. 2003. Beyond social capital: The role of entrepreneurs’ social competence in their financial success. Journal of Business Venturing, 18: 41–60.

    Article  Google Scholar 

  • Baron, R. A., & Tang, J. 2009. Entrepreneurs’ social skills and new venture performance: Mediating mechanisms and cultural generality. Journal of Management, 35: 282–306.

    Article  Google Scholar 

  • Bates, T. 1995. Self-employment entry across industry groups. Journal of Business Venturing, 10: 143–156.

    Article  Google Scholar 

  • Becker, G. S. 1964. Human capital. Chicago: University of Chicago Press.

    Google Scholar 

  • Becker, G. S. 1980. Human capital, a theoretical and empirical analysis, with special reference to education. Chicago: University of Chicago Press.

    Google Scholar 

  • Bird, B. 1989. Entrepreneurial behavior. Glenview, IL: Scott, Foresman and Company.

    Google Scholar 

  • Birley, S. 1985. The role of networks in the entrepreneurial process. Journal of Business Venturing, 1: 107–117.

    Article  Google Scholar 

  • Boden, R. J., & Nucci, A. R. 2000. On the survival prospects of men’s and women’s new business ventures. Journal of Business Venturing, 15(4): 347–362.

    Article  Google Scholar 

  • Boxall, P., & Steeneveld, M. 1999. Human resource strategy and competitive advantage: A longitudinal study of engineering consultancies. Journal of Management Studies, 36(4): 443–463.

    Article  Google Scholar 

  • Bruederl, J., & Preisendoerfer, P. 1998. Network support and the success of newly founded businesses. Small Business Economics, 10: 213–225.

    Article  Google Scholar 

  • Bruederl, J., Preisendoerfer, P., & Ziegler, R. 1992. Survival chances of newly founded business organizations. American Sociological Review, 57: 227–242.

    Article  Google Scholar 

  • Bruton, G. D., & Ahlstrom, D. 2003. An institutional view of China’s venture capital industry: Explaining the differences between China and the West. Journal of Business Venturing, 18: 233–259.

    Article  Google Scholar 

  • Burt, R. S. 1992. Structural holes: The social structure of competition. Cambridge, MA: Harvard University Press.

    Google Scholar 

  • Busenitz, L. W. 1996. Research on entrepreneurial alertness. Journal of Small Business Management, 34(4): 35–44.

    Google Scholar 

  • Cable, D. M., & Shane, S. 1997. A prisoner’s dilemma approach to entrepreneur-venture capitalist relationships. Academy of Management Review, 22: 142–176.

    Article  Google Scholar 

  • Carter, N. M., Gartner, W. B., & Reynolds, P. D. 1996. Exploring startup event sequences. Journal of Business Venturing, 11: 151–166.

    Article  Google Scholar 

  • Casson, M. 1982. The entrepreneur. Totowa, NJ: Barnes and Noble Books.

    Google Scholar 

  • Chen, C. C., & Chen, X.-P. 2009. Negative externalities of close guanxi within organizations. Asia Pacific Journal of Management, 26: 37–53.

    Article  Google Scholar 

  • Cohen, W., & Levinthal, D. 1990. Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 35: 128–152.

    Article  Google Scholar 

  • Coleman, J. S. 1988. Social capital in the creation of human capital. American Journal of Sociology, 94(S): S95–S120.

    Article  Google Scholar 

  • Cooper, A., Folta, T., & Woo, C. 1995. Entrepreneurial information search. Journal of Business Venturing, 10(2): 107–120.

    Article  Google Scholar 

  • Cooper, A. C., Gimeno-Gascon, F. J., & Woo, C. Y. 1994. Initial human and financial capital as predictors of new venture performance. Journal of Business Venturing, 9(5): 371–395.

    Article  Google Scholar 

  • Davidsson, P., & Honig, B. 2003. The role of social and human capital among nascent entrepreneurs. Journal of Business Venturing, 18: 301–331.

    Article  Google Scholar 

  • Dew, N., Velamuri, S. R., & Venkataraman, S. 2004. Dispersed knowledge and an entrepreneurial theory of the firm. Journal of Business Venturing, 19: 659–679.

    Article  Google Scholar 

  • DiMaggio, P. 1992. Nadel’s paradox revisited: Relational and cultural aspects of organizational structure. In N. Nohria & R. G. Eccles (Eds.). Networks and organizations: Structure, form and action: 118–142. Boston: Harvard Business School Press.

    Google Scholar 

  • Dimov, D. P., & Shepherd, D. A. 2005. Human capital theory and venture capital firms: Exploring “human runs” and “strike outs.” Journal of Business Venturing, 20: 1–21.

    Article  Google Scholar 

  • Dixon, J. R., & Duffey, M. R. 1990. The neglect of engineering design. California Management Journal, 32: 9–23.

    Google Scholar 

  • Dubini, P. 1988. The influence of motivations and environment on business startups: Some hints for public policies. Journal of Business Venturing, 4: 11–26.

    Article  Google Scholar 

  • Duchesneau, D., & Gartner, W. 1990. A profile of new venture success and failure in an emerging industry. Journal of Business Venturing, 5(5): 297–312.

    Article  Google Scholar 

  • Eckhardt, J. T., & Shane, S. 2003. Opportunities and entrepreneurship. Journal of Management, 29(3): 333–349.

    Article  Google Scholar 

  • Ensley, M. D., Peterson, A. W., & Amason, A. C. 2002. Understanding the dynamics of new venture top management teams: Cohesion, conflict, and new venture performance. Journal of Business Venturing, 17(4): 365–386.

    Article  Google Scholar 

  • Florin, J. M., Lubatkin, M., & Schulze, W. 2003. A social capital model of high growth ventures. Academy of Management Journal, 46(3): 374–384.

    Article  Google Scholar 

  • Fukuyama, F. 1995. Trust: Social virtues and the creation of prosperity. London: Hamish Hamilton.

    Google Scholar 

  • Gaglio, C. M., & Katz, J. A. 2001. The psychological basis of opportunity identification: Entrepreneurial alertness. Small Business Economics, 16: 95–111.

    Article  Google Scholar 

  • Gartner, W. B. 1988. “Who is an entrepreneur?” is the wrong question. American Journal of Small Business, 13: 11–32.

    Google Scholar 

  • Gimeno, J., Folta, T., Cooper, A., & Woo, C. 1997. Survival of the fittest? Entrepreneurial human capital and e persistence of underperforming firms. Administrative Science Quarterly, 42: 750–783.

    Article  Google Scholar 

  • Gnyawali, D., & Fogel, D. 1994. Environments for entrepreneurship development: Key dimensions and research implications. Entrepreneurship Theory and Practice, 18(4): 43–63.

    Google Scholar 

  • Granovetter, M. S. 1985. Economic action and social structure: The problem of embeddedness. American Journal of Sociology, 91: 481–510.

    Article  Google Scholar 

  • Granovetter, M. S. 1992. Problems of explanation in economic sociology. In N. Nohria & R. G. Eccles (Eds.). Networks and organizations: Structure, form and actions: 25–56. Boston: Harvard Business School Press.

    Google Scholar 

  • Gulati, R., & Westphal, J. D. 1999. Cooperative or controlling? The effects of CEO-board relations and the content of interlocks on the formation of joint ventures. Administrative Science Quarterly, 44(3): 473–506.

    Article  Google Scholar 

  • Hansen, E., & Allen, K. 1992. The creation corridor: Environmental load and pre-organization information-processing ability. Entrepreneurship Theory and Practice, 17(1): 57–65.

    Google Scholar 

  • Hebert, R., & Link, A. 1988. The entrepreneur: Mainstream views and radical critique. New York: Praeger.

    Google Scholar 

  • Hills, G. E., & Singh, R. P. 2004. Opportunity recognition. In W. B. Gartner, K. G. Shaver, N. M. Carter & P. D. Reynolds (Eds.). Handbook of entrepreneurial dynamics: The process of business creation. Thousand Oaks, CA: Sage.

    Google Scholar 

  • Hills, G. E., Lumpkin, G. T., & Singh, R. 1997. Opportunity recognition: Perceptions and behaviors of entrepreneurs. Frontiers of entrepreneurship research: 168–182. Wellesley, MA: Babson College.

    Google Scholar 

  • Holt, D. H. 1992. Entrepreneurship: New venture creation. Englewood Cliffs, NJ: Prentice-Hall.

    Google Scholar 

  • Honig, B. 1998. What determines success? Examining the human, financial, and social capital of Jamaican micro-entrepreneurs. Journal of Business Venturing, 13(5): 371–394.

    Article  Google Scholar 

  • Hoskisson, R. E., Eden, L., Lau, C. M., & Wright, M. 2000. Strategy in emerging economies. Academy of Management Journal, 43(3): 249–267.

    Article  Google Scholar 

  • Johnson, P. 1986. New firms: An economic perspective. London: Allen and Unwin.

    Google Scholar 

  • Jovanovic, B. 1982. Selection and the evolution of the industry. Econometrica, 50(3): 649–670.

    Article  Google Scholar 

  • Kaish, S., & Gilad, B. 1991. Characteristics of opportunities search of entrepreneurs versus executives: Sources, interests, general alertness. Journal of Business Venturing, 6: 45–61.

    Article  Google Scholar 

  • Kirzner, I. M. 1979. Perception, opportunity, and profit. Chicago: University of Chicago Press.

    Google Scholar 

  • Lane, D., Malerba, F., Maxfield, R., & Orsenigo, L. 1996. Choice and action. Journal of Evolutionary Economics, 6: 43–76.

    Article  Google Scholar 

  • Li, L., Lin, Z., & Arya, B. 2007. The turtle–hare race story revisited: Social capital and resource accumulation for firms from emerging economies. Asia Pacific Journal of Management, 25: 251–275.

    Article  Google Scholar 

  • Liao, J., & Welsch, H. 2005. Roles of social capital in venture creations: Key dimensions and research implications. Journal of Small Business Management, 43(4): 345–362.

    Article  Google Scholar 

  • Low, M., & Srivatsan, V. 1994. What does it mean to trust an entrepreneur?. In S. Birley & I. MacMillan (Eds.). International entrepreneurship: 59–78. London: Routledge.

    Google Scholar 

  • Markman, G. D., & Baron, R. A. 2003. Person-entrepreneurship fit: Why some people are more successful as entrepreneurs than others?. Human Resource Management Review, 13(2): 281–301.

    Google Scholar 

  • McEvily, S. K., & Chakravarthy, B. 2000. The persistence of knowledge-based advantage: An empirical test for product performance and technological knowledge. Strategic Management Journal, 23: 285–305.

    Article  Google Scholar 

  • Miller, S. M. 1996. Monitoring and blunting of threatening information: cognitive interference and facilitation in the coping process. In I. G. Sarason, G. R. Pierce & B. R. Sarason (Eds.). Cognitive inference: Theory, methods, and findings: 175–190. Mahwah, NJ: Lawrence Erlbaum Associate Publishers.

    Google Scholar 

  • Nahapiet, J., & Ghoshal, S. 1998. Social capital, intellectual capital, and the organizational advantage. Academy of Management Review, 23(2): 242–266.

    Article  Google Scholar 

  • Nohria, N. 1992. Information and search in the creation of new business ventures: The case of 128 venture group. In B. Eccles & N. Nohria (Eds.). Networks and organizations: 241–261. Cambridge: Harvard University Press.

    Google Scholar 

  • North, D. 1990. Institutions, institutional change and economic performance. Cambridge: Cambridge University Press.

    Google Scholar 

  • O’Driscoll, D., & Rizzo, M. J. 1985. The economics of time and ignorance. London: Blackwell.

    Google Scholar 

  • Pennings, J. M., Lee, K., & Van Witteloostuijn, A. 1998. Human capital, social capital, and firm dissolution. Academy of Management Journal, 41(4): 425–440.

    Article  Google Scholar 

  • Peng, M. W. 1997. Firm growth in transitional economies: Three longitudinal cases from China, 1989–1996. Organization Studies, 18(3): 385–413.

    Article  Google Scholar 

  • Polanyi, M. 1967. The tacit dimension. London: Routledge and Kegan.

    Google Scholar 

  • Portes, A. 1998. Social capital. Annual Review of Sociology, 23: 1–24.

    Article  Google Scholar 

  • Rauch, A., Frese, M., & Utsch, A. 2005. Effects of human capital and long-term human resources development and utilization on employment growth of small-scale businesses: A causal analysis. Entrepreneurship Theory and Practice, 4: 681–698.

    Google Scholar 

  • Ren, B., Au, K. Y., & Birtch, T. A. 2009. China’s business network structure during institutional transitions. Asia Pacific Journal of Management, 26: 219–240.

    Article  Google Scholar 

  • Ring, P. S., & Van de Ven, A. H. 1992. Structuring cooperative relationships between organizations. Strategic Management Journal, 13: 483–498.

    Article  Google Scholar 

  • Ring, P. S., & Van de Ven, A. H. 1994. Developmental processes of cooperative interorganizational relationships. Academy of Management Review, 19: 90–118.

    Article  Google Scholar 

  • Roberts, E. 1991. Entrepreneurs in high technology: Lessons form MIT and beyond. New York: Oxford University Press.

    Google Scholar 

  • Robinson, P., & Sexton, E. 1994. The effect of education and experience on self-employment success. Journal of Business Venturing, 9(2): 141–156.

    Article  Google Scholar 

  • Ronstadt, R. 1988. The corridor principle. Journal of Business Venturing, 3: 31–40.

    Article  Google Scholar 

  • Salancik, G. R., & Pfeffer, J. 1978. A social information processing approach to job attitudes and task design. Administrative Science Quarterly, 23(2): 224–253.

    Article  Google Scholar 

  • Schultz, T. 1959. Investment in man: An economist’s view. Social Service Review, 33(2): 69–75.

    Article  Google Scholar 

  • Scott, J. 1991. Social network analysis: A handbook. London: Sage Publishing.

    Google Scholar 

  • Scott, W. R. 1995. Institutions and organizations. Thousand Oaks, CA: Sage Publications.

    Google Scholar 

  • Segrin, C., & Kenny, T. 1995. Social skills deficits among the socially anxious: Rejection from others and loneliness. Motivation and Emotion, 19: 1–24.

    Article  Google Scholar 

  • Sexton, D. L., & Upton, N. B. 1985. The entrepreneur: A capable executive and more. Journal of Business Venturing, 1: 129–140.

    Article  Google Scholar 

  • Shane, S. 2000. Prior knowledge and the discovery of entrepreneurial opportunities. Organization Science, 11(4): 448–469.

    Article  Google Scholar 

  • Shane, S. 2003. A general theory of entrepreneurship. Northampton, MA: Edward Elgar.

    Google Scholar 

  • Shane, S., & Venkataraman, S. 2000. The promise of entrepreneurship as a field of research. Academy of Management Review, 25: 217–226.

    Article  Google Scholar 

  • Shapero, A., & Sokol, L. 1982. The social dimensions of entrepreneurship. In C. Kent, D. Sexton & K. Vesper (Eds.). Encyclopedia of entrepreneruship: 72–90. Englewood Cliffs, NJ: Prentice Hall.

    Google Scholar 

  • Simon, H. 1976. Administrative behavior. New York: The Free Press.

    Google Scholar 

  • Singh, R. P. 2000. Entrepreneurial opportunity recognition through social networks. New York: Garland Publishing.

    Google Scholar 

  • Singh, J., Tucker, D., & House, R. 1986. Organizational legitimacy and the liability of newness. Administrative Science Quarterly, 31(2): 171–193.

    Article  Google Scholar 

  • Stinchcombe, A. 1965. Social structure and organizations. In J. March (Eds.). Handbook of organizations. Chicago, IL: Rand McNally.

    Google Scholar 

  • Su, Z., Xie, E., & Li, Y. 2009. Organizational slack and firm performance during institutional transitions. Asia Pacific Journal of Management, 26: 75–91.

    Article  Google Scholar 

  • Tang, J. 2008. Environmental munificence for entrepreneurs: Entrepreneurial alertness and commitment. International Journal of Entrepreneurial Behavior and Research, 14(3): 128–151.

    Article  Google Scholar 

  • Tang, J. 2009. Exploring the constitution of entrepreneurial alertness: The regulatory focus view. Journal of Small Business and Entrepreneurship, 22(3), in press.

  • Tang, J., Tang, Z., Marino, L., Zhang, Y., & Li, Q. 2008. Exploring an inverted U-shape relationship between entrepreneurial orientation and performance in Chinese new ventures. Entrepreneurship Theory and Practice, 32(1): 219–239.

    Google Scholar 

  • Thornton, P. H., & Flynn, K. H. 2003. Entrepreneurship, networks, and geographies. In Z. J. Acs & D. B. Audretsch (Eds.). Handbook of entrepreneurship research: An interdisciplinary survey and introduction: 401–409. Boston: Kluwer Academic Publishers.

    Google Scholar 

  • Tsai, W., & Ghoshal, S. 1998. Social capital and value creation: The role of intrafirm networks. Academy of Management Journal, 41: 464–477.

    Article  Google Scholar 

  • Tsui, L. 1998. The effects of gender, education, and personal skills and self confidence on income in business management. Sex Roles, 38: 363–373.

    Article  Google Scholar 

  • Tyler, T. R., & Kramer, R. M. 1996. Whither trust?. In R. M. Kramer & T. R. Tyler (Eds.). Trust in organizations: Frontiers of theory and research. Thousand Oaks, CA: Sage Publishing.

    Google Scholar 

  • Uzzi, B. 1996. The sources and consequences of embeddedness for the economic performance of organizations: The network effect. American Sociological Review, 61: 674–698.

    Article  Google Scholar 

  • Venkataraman, S. 1997. The distinctive domain of entrepreneurship research: An editor’s perspective. In J. Katz & R. Brockhaus (Eds.). Advances in entrepreneurship, firm emergence, and growth: 119–138. Greenwich, CT: JAI Press.

    Google Scholar 

  • Vesper, K. 1996. New venture experience. Seattle, WA: Vector Books.

    Google Scholar 

  • Von Hippel, E. 1988. The sources of innovation. New York: Oxford University Press.

    Google Scholar 

  • Wasserman, S., & Faust, K. 1994. Structures of capital: The social organization of the economy. New York: Cambridge University Press.

    Google Scholar 

  • Watson, W., Stewart, W. H., & BarNir, A. 2003. The effects of human capital, organizational demography, and interpersonal processes on venture partner perceptions of firm profit and growth. Journal of Business Venturing, 18: 145–164.

    Article  Google Scholar 

  • Wayne, S. J., & Kacmar, K. M. 1991. The effects of impression management on the performance appraisal process. Organizational Behavior and Human Decision Processes, 48: 70–88.

    Article  Google Scholar 

  • Weick, K. 1996. Drop your tools: An allegory for organizational studies. Administrative Science Quarterly, 41: 301–314.

    Article  Google Scholar 

  • Xin, R. K., & Pearce, J. L. 1996. Connections as substitutes for formal institutional support. Academy of Management Journal, 39: 1641–1658.

    Article  Google Scholar 

  • Yang, J. Y., & Li, J. 2008. The development of entrepreneurship in China. Asia Pacific Journal of Management, 25: 335–359.

    Article  Google Scholar 

  • Young, R., & Francis, J. 1991. Entrepreneurship and innovation in small manufacturing firms. Social Science Quarterly, 72(1): 149–162.

    Google Scholar 

  • Yu, T. F. L. 2001. Entrepreneurial alertness and discovery. The Review of Austrian Economics, 14(1): 47–63.

    Article  Google Scholar 

  • Zimmerman, M., & Zeitz, G. 2002. Beyond survival: Achieving new venture growth by building legitimacy. Academy of Management Review, 27(3): 414–431.

    Article  Google Scholar 

  • Zukin, S., & DiMaggio, P. 1990. Structures of capital: The social organization of the economy. New York: Cambridge University Press.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Management, John Cook School of Business, Saint Louis University, 3674 Lindell Blvd, Room 406, St. Louis, MO, 63108, USA

    Jintong Tang

Authors
  1. Jintong Tang
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Jintong Tang.

Additional information

This research is supported by Beaumont Faculty Development Fund, Saint Louis University’s Office of the Vice Provost for Research. The author wishes to express her sincere appreciation to two anonymous reviewers and the special issue editor, David Ahlstrom, for their invaluable comments on earlier versions of this manuscript.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Tang, J. How entrepreneurs discover opportunities in China: An institutional view. Asia Pac J Manag 27, 461–479 (2010). https://doi.org/10.1007/s10490-009-9151-6

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10490-009-9151-6

Keywords

Search

Navigation