Time Allocation and Performance: The Case of Chinese Entrepreneurs

Abstract

This paper analyses the effect of time allocation on the financial performance of entrepreneurial firms. We apply the Lewbel estimator to a pooled data set of Chinese private manufacturing firms that are managed by their owners. Time is allocated between management, networking, and study activities. After accounting for endogeneity, we find an inverted U-shaped relationship between management hours and firm performance and between networking and firm performance. However, no relationship between time spent studying and firm performance is observed. We also find that the managing hours–performance relationship is particularly strong for companies managed by entrepreneurs who own more than 75% of share, for companies that are managed by owners with previous experience, for male entrepreneurs, and for smaller-sized firms.

Key Words:

• Time Allocation
• Owner-Manager Businesses
• China
• Entrepreneur

JEL codes:

• M21
• L26 O53

Acknowledgements

We thank Subasish Chowdhury and the Royal Economic Society 2013 conference participants for valuable comments and suggestions. We also acknowledge the helpful comments of two anonymous referees. This work was supported by the Royal Society of Edinburgh (RSE) and The National Natural Science Foundation of China (NSFC).

Notes

1. Glaeser, Laibson, and Sacerdote (2002) argue that people who invest in human capital are also likely to invest in social capital.

2. The results for levels of hours are available on request.

3. In addition to the logarithm of total sales, we have also experimented with the natural logarithm of the number of employees. The results are quantitatively similar to those reported in this work.

4. See also Fung, Xu, and Zhang (2007) for a description of the same data set.

5. We would like to thank an anonymous referee for this suggestion.

6. Ownership concentration could be another important characteristic to control for. Unfortunately, our data source does not report any plausible proxies for this factor.

7. The estimates are available on request.

8. The full results are available on request.