China's Rational Entrepreneurs: The Development of the New Private Business Sector

Citation

Millman, C. (2006), "China's Rational Entrepreneurs: The Development of the New Private Business Sector", Journal of Small Business and Enterprise Development, Vol. 13 No. 2, pp. 288-290. https://doi.org/10.1108/14626000610665999

This is an excellent book on Chinese entrepreneurship and a useful addition to the Routledge Curzon series on China in Transition. As the title suggests, the book provides both an introduction and a theoretical grounding to this important research topic in contemporary Chinese economic development. It becomes obvious, from the beginning, that the chapters included in the book and their order of publication are meant to provide a careful and gradual introduction to the topic under scrutiny, as well as keep the reader interested and motivated to read on. Furthermore, the selection of chapters and the structure of the book are chosen in order to benefit a wide range of readership including: entrepreneurs, policy makers, business observers, academics, researchers, students and representatives of western companies who are interested in distinguish between the business systems operating in contemporary China.

The text is organised in nine chapters, including a comprehensive introduction from the editor. Interestingly, and only going by their names, none of the contributors appear to be Chinese nationals. By the way of a possible explanation, the editor provides in the first chapter a detailed introduction to the research background and methodologies used throughout the book. She also clarifies how and where the data was collected and the overall characteristics of the database upon which five of the nine chapters are based. In chapter two, Gordon Redding expounds on how a western form of rationality was central to the evolution of western capitalism, and proposes the existence of an alternative approach in contemporary China. He re‐examines Whitley's (1992a, b, 1999a, b) theory of validity in capitalist systems as well as Boisot and Child's (1988, 1996, 1999) and Boisot's (1995) role of codification models as a cultural determinant of social infrastructures, in order to apply these to the recent Chinese developments in entrepreneurship. The author also reviews the comparative management field, and suggests that various societies come to different agreements in the process of interpreting reality and that these mental landscapes shape the behaviour of individuals in ways that can produce different economic structures and behaviours.

In the third chapter, Krug and Mehta address the extent to which observers can expect to see Chinese entrepreneurs behave like their counterparts in advanced industrial economies, such as western Europe, Japan and the US. The authors analyse existing modes of entrepreneurship in one particular province in China and suggest that entrepreneurial success in Shanxi relies considerably upon a system of alliances that coexist within an environment characterised by high levels of institutional and economic uncertainty. Interestingly, in chapter four, Krug and Polos challenge the dynamic view that entrepreneurship is a phenomenon specific to industrially developed nations, a theory that has for a long time been the domain of economic history and management science (see, for example, Shane and Venkataraman, 2000; Nelson, 1995; Nooteboom, 2000). The authors argue that economic circumstances have changed considerably during the last two decades, mainly due to internationalisation and the dramatic collapse of socialism in Europe. These changes have radically transformed emerging markets in general and transitional economies in particular. Furthermore, these and related factors have also provided Chinese entrepreneurs with good practice and tested strategies on how to cope with domestic economic uncertainty during the 1996‐1998 period.

Chapter five is dedicated to the reassessment of the traditional understanding of personal relations (guanxi) and networks in Chinese businesses, by viewing them as economic and not as social phenomena. Hans Hendrischke argues that business strategies based on networks are used by Chinese entrepreneurs as a way of coping with economic uncertainty and weak institutional settings. The author reviewed the experiences of entrepreneurs in both private enterprise and semi‐legitimate businesses created in the early 1990s by officials in the Chinese state bureaucracy. In chapter six Jane Duckett argues that in China, the institutional environment that accounts for the tendency of private businesses to form entrepreneurial alliances could also explain the creation of new state enterprises. However, given their close relationship with the state and the government's concerns with corruption, we need to question the legitimacy of these businesses as genuine forms of emergent entrepreneurship.

Chapter seven focuses upon local entrepreneurship in the Shanxi province, which is located in north China. David Goodman's rationale for choosing Shanxi as a case study for the investigation of local entrepreneurship is that it is that the area is dominated by agriculture and differs considerably from other, economically advanced coastal provinces such as Guangdong, Zhejiang, Jiangsu and the large municipalities of Beijing and Shanghai. In total, 6 broad categories of entrepreneurs in Shanxi have been identified from 210 interviews with local entrepreneurs. In chapter eight, and in contrast to previous contributors, Jacobs, Belschak and Krug view Guanxi as an aspect of social capital, which is shaped by culture and affects Chinese entrepreneurial activities in a variety of implicit and explicit ways. In the last chapter, Barbara Krug gives a personal account of her approach to empirical research in China. It appears that for western academics the choice of methodology is crucial when deciding to undertake empirically rigorous research in China. As a Chinese researcher working in the UK I can empathise with this perspective. I would suggest, however, that the inclusion in the research team of researchers of Chinese nationality would have significantly eased the challenges associated with cross‐cultural research in this country.

On balance, I enjoyed reading this excellent book, which provided me with many useful insights into entrepreneurship developments in contemporary China. I would highly recommend this text as selective reading for academics, students and business observers who are interested in a grounded theoretical approach to this important topic. I would particularly recommend this book to Chinese academics and students in this field of study, as an alternative and a potentially informative perspective on entrepreneurship and small business development.