Legitimacy and private entrepreneurship in China's transitional economy, 1978-1996

Abstract

A long-standing insight in social sciences holds that social values affect individuals' entry into entrepreneurship. This paper presents the first systematic empirical examination of how the legitimation of entrepreneurship at societal level dynamically shapes the entrepreneurial entry of individuals from different social strata. Analyzing a nationally representative life history data of the citizens of the People's Republic of China from 1978 to 1996, we find that high-status individuals (cadres and college-educated) are less likely to become private entrepreneurs before the field achieves full-fledged legitimacy, but they are faster in becoming private entrepreneurs as the field becomes more legitimate. We find that the entrepreneurial entry of individuals in regions with local entrepreneurial culture is less influenced by the regulative or cognitive legitimation processes at national level. Moreover, we find that cadres' entry into private entrepreneurship is amplified only by the regulative legitimation process at national level; Junior and senior high school graduates' entry into private entrepreneurship is amplified only by local entrepreneurial culture; college graduates' entry into the field is amplified by both the regulative and cognitive legitimation processes at national level and local entrepreneurial culture. The implications of the findings for entrepreneurship, neoinstitutional theory, and the market transition literature are discussed.