Entrepreneurship in China's Structural Transitions: Network Expansion and Overhang

Ruochen Dai, Dilip Mookherjee, Kaivan Munshi and Xiaobo Zhang

No 31477, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This research examines the determinants of entrepreneurship in the initial transition from agriculture to industrial production and the subsequent transition to higher value exporting in China. Using data covering the universe of registered firms over the 1994-2009 period, we find that individuals born in rural counties with higher agricultural productivity and population density had a greater propensity to enter domestic production in the first transition, but that this association was reversed in the second transition to exporting. This is despite the fact that revenues (and productivity) were increasing more steeply over time for firms drawn from denser birth counties in both activities. The model that we develop to reconcile these facts incorporates a productivity enhancing role for hometown (birth county) networks. We provide causal evidence, using shift-share instruments, that these networks of firms were active and that more densely populated rural counties gave rise to networks that were more effective at increasing the revenues of their members, both in domestic production and exporting. While this generated faster transition in the first stage, the incumbent (more successful) domestic networks drawn from denser counties created a disincentive to subsequently enter exporting. Our analysis identifies a novel dynamic inefficiency that could arise in any developing economy where (overlapping) networks are active.

JEL-codes: O11 O12 O14 (search for similar items in EconPapers)
Date: 2023-07
New Economics Papers: this item is included in nep-cna, nep-eff, nep-ent, nep-his, nep-sbm and nep-ure
Note: DEV
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w31477.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:31477

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w31477

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().