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Abstract
We test for the relative importance of guanxi (‘connections’) as a catalyst for entrepreneurship in urban China using survey data from five cities for the period 1996–2001. We find that guanxi with the Chinese Communist Party (CPC) is negatively correlated with the likelihood of being either a sole proprietor or an entrepreneur with employees. Family guanxi has no effect for sole proprietors, but is positively correlated with the probability of being an entrepreneur with employees. These findings add to the literature on entrepreneurship in China by differentiating the effects of various types of guanxi on various forms of entrepreneurship.
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Notes
1. Owing to our data, we focus on the distinction between sole proprietors and entrepreneurs with employees, as opposed to individual enterprises (eight or less employees) vs. private enterprises (more than eight employees and privately owned).
2. Chen et al. (Citation2008) offer a brief history of the growing acceptance of entrepreneurs by the CPC, culminating in Jiang Zemin's welcoming of entrepreneurs to Party membership in 2001.