Skip to main content
SpringerLink
Log in

Early international entrepreneurship in China: Extent and determinants

  • Published:
Journal of International Entrepreneurship Aims and scope Submit manuscript

Abstract

We use data on 3,948 Chinese firms obtained from the World Bank’s Investment Climate Private Enterprise Survey to investigate early international entrepreneurship (international new ventures) in China. The extent of early international entrepreneurship in China is significant: 62% of the exporting firms start export operations within 3 years. Foreign shareholders within the firm and an entrepreneur with previous exporting experience are noted to significantly increase the probability that a firm internationalizes early. We find marked differences in the behaviour of indigenous and foreign-invested firms, and between direct and indirect exporters. For example, for an indigenous firm the more foreign experience its entrepreneur has, the less likely it is to start exporting early. As far as indirect exporting is concerned, business networks are significant determinants of the extent of such exporting, but delays the internationalization process of indigenous firms. The more firms in China export, the more time their managers need to spend on government regulations, although perhaps counter-intuitively, this was not found to discourage exporting. Overall, the findings suggest that exporting by indigenous Chinese firms is often due to challenging or adverse domestic conditions.

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

Fig. 1

Similar content being viewed by others

Notes

  1. This goes against much of the perceived wisdom in international business studies such as that of the Uppsala process model of international trade which posits that firms go through various ‘stages’ in their internationalization process, and that older, larger firms are more likely to internationalize than young, small firms, because they have more resources and more experience (see e.g., Johanson and Vahlne 1977, 1990).

  2. In this paper, China refers to mainland China and does not include the territories of Hong Kong, Macau, and Taiwan.

  3. Colvin and Slevin (1989) propose a scale to measure EO. Due to lack of data we are unable to implement their measure in the present case. However, we do have information on the innovativeness and competitiveness of the Chinese SMEs, which may be used to proxy EO.

  4. Although we recognize the growing importance of outward FDI from China, this is currently mainly taking place through large state-owned enterprises whilst our concern is more with private sector firms. Indeed, our survey data covering 3,948 private firms do not contain a single firm with a direct physical presence in another country.

  5. Other determinants, which have been identified as important include the country’s competitive exchange rate, its large labour supply, low wages, and institutional encouragement for export-led growth (Adams et al. 2006: 120). See also Dollar (2008) for a discussion of the institutional support environment in China (such as the government’s significant investment in transport infrastructure) as a factor in the country’s export success.

  6. Outcomes are observed only for the firms that selected to export. If the factors that determine the choice/selection whether or not to export differ from those that determine the volume of exports, not taking the selection into account is tantamount to having the model subject to an omitted variable bias (Heckman 1979).

  7. The dataset contains information on the establishment date of the firm, as well as the date on which it first started exporting. This allowed us to calculate the age at which the firm first started exporting. We emphasize that not all exporting firms reported the date on which it first started exporting.

  8. As in Table 5, we can see that the regressions are statistically significant (as measured by the Wald χ2 test) and that the correlation coefficient (ρ) between the error terms in (1) and (2) is relatively large in at least two cases (columns 3 and 4). This indicates that it is appropriate in these cases to use the Heckman two-step estimator, and that estimating the outcome Eq. 2 with OLS would have resulted in biased estimates.

  9. The positive role played by prior experienced top manager/entrepreneur in INVs is also reiterated elsewhere in the literature (e.g., De Clerq and Bosma 2008; Zucchella et al. 2007; McNaughton 2003). The positive impact of having foreign ownership for ‘going global’ is consistent with Autio et al. (2005) who emphasize that being a part of a network is an essential foundation for firm internationalization and that it accelerates INVs learning process.

References

  • Acedo FJ, Jones MV (2007) Speed of internationalization and entrepreneurial cognition: insights and a comparison between international new ventures, exporters and domestic firms. J World Business 42(3):236–252

    Article  Google Scholar 

  • Acs ZJ, Terjesen S (2008) Born local: toward a theory of intermediated internationalization. Max Planck Institute of Economics, Jena, Mimeo

    Google Scholar 

  • Adams FG, Gangnes B, Shachmurove Y (2006) Why is China so competitive? Measuring and explaining China’s competitiveness. World Econ 29(2):95–122

    Article  Google Scholar 

  • Alon I, Lerner M (2008) International entrepreneurship in China: lessons from global entrepreneurship monitor. Paper presented at the Next Globalization Conference on Transnational Entrepreneurship, 30 April 2008. Wilfrid Laurier University, Waterloo, Available at: www.wlu.ca/documents/30218/ International_ Entrepreneurship.pdf

    Google Scholar 

  • Amiti M, Freund C (2007) China’s export boom. Finance Dev 44(3):38–41

    Google Scholar 

  • Amiti M, Freund C (2008) An anatomy of China’s export growth. NBER Books in Progress. National Bureau of Economic Research, Cambridge

    Book  Google Scholar 

  • Autio E, Sapienza HJ, Almeida JG (2000) Effects of age at entry, knowledge intensity, and limitability on international growth. Acad Manage J 43:909–924

    Article  Google Scholar 

  • Autio E, Sapienza HJ, Arenius P (2005) International social capital, technology sharing, and foreign market learning in internationalizing entrepreneurial firms. In: Shepherd DA, Katz JA (eds) International entrepreneurship, advances in entrepreneurship, firm emergence and growth, vol 8. Elsevier, Amsterdam, pp 9–42

    Chapter  Google Scholar 

  • Boisot M, Meyer MW (2008) Which way through the open door? Reflections on the internationalization of Chinese firms. Manage Org Rev. doi:10.1111/j.1740-8784.2008.00116.x, Postprint

    Google Scholar 

  • Child J, Rodrigues SB (2005) The internationalization of Chinese firms: a case for theoretical extension? Manage Org Rev 1(3):381–410

    Google Scholar 

  • Colvin JG, Slevin DP (1989) Strategic management of small firms in hostile and benign environments. Strateg Manage J 10:75–87

    Article  Google Scholar 

  • De Clerq D, Bosma N (2008) An exploratory study of international commitment by Nascent and existing firms. J Small Bus Entrep 21(3):293–308

    Google Scholar 

  • Dollar D (2008) Lessons from China for Africa. WB policy research working paper 4531. World Bank, Washington

    Google Scholar 

  • Finkle TA, Thomas A (2008) Entrepreneurship in international markets. Proc ASBBS 15(1):970–973

    Google Scholar 

  • Fonseca R, Lopez-Garcia P, Pissarides CA (2001) Entrepreneurship, start-up costs and employment. Eur Econ Rev 45(4):692–705

    Article  Google Scholar 

  • Girma S, Yong Y, Görg H, Yu Z (2006) Can production subsidies foster export activity? Evidence from Chinese firm level data. Research Paper 2006/43. The University of Nottingham, Nottingham

    Google Scholar 

  • Heckman J (1979) Sample selection bias as a specification error. Econometrica 47:153–161

    Google Scholar 

  • Jantunen A, Puumalainen K, Saarenketo S, Kyläheiko K (2005) Entrepreneurial orientation, dynamic capabilities and international performance. J Int Entrep 3(3):223–243

    Article  Google Scholar 

  • Johanson J, Mattsson L-G (1988) Internationalization in industrial systems. A network approach. In: Hood N, Vahlne J-E (eds) Strategies in global competition. Croom-Helm, London, pp 287–314

    Google Scholar 

  • Johanson J, Vahlne J-E (1977) The internationalization process of the firm: a model of knowledge development and increasing foreign market commitment. J Int Bus Stud 4:20–29

    Google Scholar 

  • Johanson J, Vahlne J-E (1990) The mechanism of internationalization. Int Mark Rev 7(4):11–24

    Article  Google Scholar 

  • Klapper L, Laeven L, Rajan R (2006) Entry regulation as a barrier to entrepreneurship. J Financ Econ 82(3):591–629

    Article  Google Scholar 

  • Koopman R, Wang Z, Wei SJ (2008) How much of Chinese exports is really made in China? Assessing domestic value-added when processing trade is persuasive. NBER Working Paper 14109. National Bureau of Economic Research, Cambridge

    Google Scholar 

  • Li M (2001) Firm internationalization and economic performance: a conceptual synthesis and an empirical assessment of the Chinese experience. Adv Int Mark 11:179–196

    Article  Google Scholar 

  • Liu X, Xiao W, Huang X (2008) Bounded entrepreneurship and internationalization of indigenous Chinese private-owned firms. Int Bus Rev 17(4):488–508

    Article  Google Scholar 

  • Maitland E, Rose EL, Nicholas S (2005) How firms grow: clustering as a dynamic model of internationalization. J Int Bus Stud 36(4):435–451

    Article  Google Scholar 

  • Matthee M, Naudé WA (2008) The determinants of regional manufactured exports from a developing country. Int Reg Sci Rev 31(4):343–358

    Article  Google Scholar 

  • McDougall P, Oviatt BM (2003) Some fundamental issues in international entrepreneurship. Mimeo Available at www.usasbe.org/knowledge/whitepapers/mcdougall2003.pdf

  • McNaughton RB (2003) The number of export markets that a firm serves: process models versus the Born-Global phenomenon. J Int Entrep 1(3):297–311

    Article  Google Scholar 

  • Mengistae T, Pattillo C (2004) Export orientation and productivity in Sub-Saharan Africa. IMF Staff Pap 51(2):327–353

    Google Scholar 

  • Naudé WA, Matthee M (2007) The significance of transport costs in Africa. UNU Policy Brief No. 5/20067. United Nations University, Tokyo

    Google Scholar 

  • Naudé WA (2008) Entrepreneurship in economic development, WIDER Research Paper RP 2008/20. United Nations University, Helsinki

    Google Scholar 

  • Naudé WA (2009) Rushing in where angels fear to tread? The early internationalization of indigenous Chinese firms. J Chinese Econ For Trade Stud 2(3):163–177

    Article  Google Scholar 

  • Naudé WA (2010) Entrepreneurship, developing countries and development economics: new approaches and insights. Small Bus Econ Journal 34 (1): 1-12. 10.1007/s11187-009-9198-2

  • Oviatt BM, McDougall P (1994) Towards a theory of new international ventures. J Int Bus Stud 24(4):45–64

    Article  Google Scholar 

  • Oviatt BM, McDougall P (2005) Defining international entrepreneurship and modelling the speed of internationalization. Entrep Theor Prac 29(5):537–554

    Article  Google Scholar 

  • Park A, Yang D, Shi X, Jiang Y (2008) Exporting and firm performance: Chinese exporters and the Asian financial crisis. International Policy Centre Working Paper. www personal.umich.edu/∼deanyang/papers/ parkyangshijiang_expprod.pdf

  • Peng MW (1997) Firm growth in transitional economies: three longitudinal cases from China, 1989-96. Organ Stud 18(3):385–413

    Article  Google Scholar 

  • Peng Y (2004) Kinship networks and entrepreneurs in China’s transitional economy. Am J Sociol 109(5):1045–1074

    Article  Google Scholar 

  • Riding A, Ensign P, Belanger B (2007) Financing Canadian SME exporters. Industry Canada, Ottawa, Available at: www.ic.gc.ca/eic/site/ic1.nsf/eng/ 03260_3.html

    Google Scholar 

  • Shane S, Venkataraman S (2000) The promise of entrepreneurship as a field of research. Acad Manag Rev 25(1):217–226

    Article  Google Scholar 

  • Shaw V, Darroch J (2004) Barriers to internationalization: a study of entrepreneurial new ventures in New Zealand. J Int Entrep 2(4):327–343

    Article  Google Scholar 

  • Tan J (2001) Innovation and risk-taking in a transitional economy: a comparative study of Chinese managers and entrepreneurs. J Bus Venturing 16(4):359–376

    Article  Google Scholar 

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

    Google Scholar 

  • Westhead P, Wright M, Ucbasaran D (2001) The internationalization of new and small firms. A resource-based view. J Bus Venturing 16(4):333–358

    Article  Google Scholar 

  • Witt MA, Lewin AY (2007) Outward foreign direct investment as escape response to home country institutional constraints. J Int Bus Stud 38(4):579–594

    Article  Google Scholar 

  • Wright RW, Etemad H (2001) SMEs and the global economy. J Internat Manag 7(3):151–154

    Article  Google Scholar 

  • Yamakawa Y, Peng MW, Deeds DL (2008) What drives new ventures to internationalize from emerging to developed economies? Entrep Theory Pract 32(1):59–82

    Google Scholar 

  • Yeung HWC (2004) International entrepreneurship and Chinese business research. In: Dana L-P (ed) Handbook of research on international entrepreneurship. Edward Elgar, Cheltenham, pp 73–93

    Google Scholar 

  • Yiu DW, Lau C, Bruton GD (2007) Institutional venturing by emerging economy firms: the effects of firm capabilities, home country networks, and corporate entrepreneurship. J Int Bus Stud 38(4):519–540

    Article  Google Scholar 

  • Zhao A, Li H (1997) R&D and export: an empirical analysis of Chinese manufacturing firms. J High Technol Man Res 8(1):89–105

    Article  Google Scholar 

  • Zhou L (2007) The effects of entrepreneurial proclivity and foreign market knowledge on early internationalization. J World Bus 42(3):281–293

    Article  Google Scholar 

  • Zucchella A, Palamara G, Denicolai S (2007) The drivers of the early internationalization of the firm. J World Bus 42(3):268–280

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. World Institute for Development Economics Research, United Nations University, Helsinki, Finland

    Wim Naudé

  2. Centre for Business Interdisciplinary Studies, Faculty of Business and Law, Auckland University of Technology, Auckland, New Zealand

    Stephanié Rossouw

Authors
  1. Wim Naudé
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Stephanié Rossouw
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Wim Naudé.

Additional information

We are grateful to three anonymous referees and the editor for their useful comments and suggestions on an earlier draft. All errors and omissions remain our own responsibility.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Naudé, W., Rossouw, S. Early international entrepreneurship in China: Extent and determinants. J Int Entrep 8, 87–111 (2010). https://doi.org/10.1007/s10843-010-0049-7

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10843-010-0049-7

Keywords

Search

Navigation