Self-Efficacy and Entrepreneurial

Intentions in The Peoples Republic of

China

Stefan Jacobus Marges
1354183
MSc. Student Management of Technology
Delft University of Technology
Abstract
The present paper discusses the notion of self-efficacy and its connection with
entrepreneurship: leading to the concept entrepreneurial self-efficacy (ESE). The concept of
ESE has been extensively described within the Western societies, but is rarely examined in the
Chinese societies. This exploratory paper intends to shine a light on ESE in the Peoples
Republic of China and will give an overview of the policy incentives of the Chinese government
to promote an entrepreneurial environment. Last, own experiences on this topic will be
described based on a 5-month exchange in Guangzhou, China.
Keywords: (Entrepreneurial) Self-efficacy, entrepreneurship, entrepreneurial intentions, China

Introduction:
The concept of self-efficacy can be explained as the conviction that one can successfully
execute the behavior required to produce the outcomes (Y. Chen & He, 2010) or in other
terms a persons belief in his capabilities to organize and execute the courses of action
required to manage prospective situations (Bandura, 1995). The construct of self-efficacy has
been the interest in theories of human behavior and seems to reflect individualistic Western
values. Also, Chen et al. (1998) describe the emphasis on the role of self-efficacy in the study of
entrepreneurship, leading to the concept of entrepreneurial self-efficacy (ESE) (Boyd & Vozikis,
1994; C. C. Chen, Greene, & Crick, 1998). ESE is defined as the strength of an individuals belief
that he or she is capable of successfully performing the roles and tasks of an entrepreneur
(Boyd & Vozikis, 1994). A country, which recently experienced an emergence of SMEs since the
rapid economic expansion, is the Peoples Republic of China (Zeng, Xie, & Tam, 2010), where
the SMEs are encouraged by their central and local governments to go global (Zhou, 2012).
What is interesting is the fact that the role of (entrepreneurial) self-efficacy is rarely examined
in Chinese societies (S. C. Chen & Elston, 2013), and on the first hand linked towards cultural
differences. Since the rapid emergence of entrepreneurship in the Peoples Republic of China
during its transition towards a market-driven economy, it is quite interesting to explore the link
between self-efficacy and Chinese entrepreneurship.

Deciding to become entrepreneur can be determined by both institutional environment as well
as personality traits. This exploratory paper is written with the goal to create insights into self-
efficacy and its implications for entrepreneurship in China on the one hand, and to create an
overview of the Chinese policy incentives to stimulate entrepreneurship in China. The present
research paper deals with the research question how is self-efficacy related to Chinese
entrepreneurial intentions and what is the role of the Chinese government in stimulating
entrepreneurial intentions? The research is conducted in two-fold: first the current state of the
literature around self-efficacy has been researched. Here the link between self-efficacy,
entrepreneurship and China in existing literature has been explored. The second part of this
research paper explores the Chinese governmental policy incentives for stimulation of
entrepreneurship in China.

Methodology / research approach
The methodology for conducting this research is based on a literature review with the key
words: (Entrepreneurial) Self-efficacy, China, Entrepreneurship, SMEs, Start-ups within the
literature databases based on the quantity of citations in Scopus, Science Direct and Google
Scolar. I decided to review the most cited papers around the topic combined with the highest
relevance around this topic.

Self-efficacy
As discussed in the introduction, the origin of the notion of self-efficacy is dating back to the
late 1970s as the major derivate of social cognitive theory following Bandura (1978). It is
defined as how people think, feel, and motivate themselves (Bandura, 1995). Bandura (1978)
defines the notion of self-efficacy as a combination of four major sources of information:
Performance accomplishments, vicarious experience, verbal persuasion and emotional arousal,
as can be reviewed in figure 1.

Personal accomplishments, or personal mastery of experiences, involve the acquiring of
cognitive, behavioral and self-regulatory tools for creating and executing appropriate courses of
action to manage ever-changing life circumstances (Bandura, 1995). The second source of self-
efficacy is vicarious experience, or observational learning, where vicarious can be discussed as
through another, by role models. When seeing someone else with similar characteristics
succeed a threatening task by perseverance, one may belief that they too contain the
capabilities to succeed in mastering similar activities (Bandura, 1995), thus enhancing their
perception of own capabilities. The third source to influence self-efficacy, verbal persuasion, can
be regarded as a form of mental coaching: if someone is verbally persuaded that they posses
the capabilities to succeed, one may increase its effort and perseverance to succeed. The fourth
and last source of self-efficacy is emotional arousal, or physiological and emotional states,
where stress and tension are seen as poor performance and decrease the chance on success.
Also, ones mood can strongly influence ones self-beliefs. Reduction of emotional arousal leads
to a reduction of avoidance of threatening activities hence increasing ones self-efficacy (Y.
Chen & He, 2010).



Figure 1: Sources of self-efficacy (Bandura, 1995).

Regarding personal mastery, success on the one hand increases ones self-efficacy, where
failure on the other hand decreases it. The latter is especially magnified when the failure occurs
in the early phases of the establishment of ones self-efficacy (Y. Chen & He, 2010). The notion
of vicarious experience relatively influences self-efficacy when the compared role model shows
great similarities, the success or failure becomes more influential than when the compared role
model is perceived different. Verbal persuasion in turn, has limitations as to increase self-
efficacy, whereas unrealistic boosts, and the danger occurs that beliefs of self-efficacy rise to
unrealistic levels (Boyd & Vozikis, 1994), are likely to be disconfirmed if it lacks provisional aid
(Y. Chen & He, 2010). Emotional arousal can negatively influence self-efficacy if a person
creates his own spiral of thoughts of fear about his/her own incompetence and lift himself
towards even higher levels of anxiety.

It can be discussed that in the theory of self-efficacy, the performance of ones functioning is
facilitated by ones sense of behavioral control. If one believes that he/she can take action to
solve a problem instrumentally, they become more inclined to do so and feel more committed
to this decision (Schwarzer, Bler, Kwiatek, Schrder, & Zhang, 1997). But, it is also argued
that self-efficacy however, is not the same as positive illusions or unrealistic optimism because
it is based on hands-on experience and does not lead to unreasonable risk taking (Schwarzer et
al., 1997). To conclude this part, it is argued that people with a relatively higher self-efficacy
have more intrinsic interest in the tasks, are more willing to expend their effort (C. C. Chen et
al., 1998) and choose to perform more challenging or threatening tasks (Schwarzer et al.,
1997).

Self-Efficacy
Vicarious
Experience
Personal
Accomplishments
Verbal Persuasion
Emotional Arousal
Entrepreneurship
Within the current literature, there seems to be no consensus around the precise definition of
the entrepreneur. Two major contributions have been made to the understanding of the
entrepreneur: One view regarding the entrepreneur is the perspective of Schumpeter, related to
creative destruction (Schumpeter, 1934), while the other view of Kirzner emphasizes pursuit of
opportunities (Kirzner, 1973). Schumpeter defined the entrepreneur as an innovator, creating
new things, thereby disrupting the long-term market equilibrium and being the agent of change
with creative destruction (Schumpeter, 1934). Kirzner (1979) on the other hand, describes the
entrepreneur with superior by seeking for opportunities in the current markets and with his
knowledge of market imperfections, he uses these for his own advantage (Stevenson & Jarillo,
1990). The main difference in both views is whether the entrepreneur uses existing information
or introduced new information. Both views are from a rather macro-economical perspective, so
for the case of this research this scope should be narrowed down to a micro-level view on the
personality traits of the entrepreneur where the definition of entrepreneurship is defined as the
creation of a new enterprise (Low & MacMillan, 1988) and entrepreneurial intention as the
driving force of this entrepreneurial activity (Wu & Wu, 2008).

Self-efficacy and entrepreneurship
The term that is often implicitly connected to self-efficacy in the existing literature is the notion
of uncertainty, such as initiating and persisting at behavior under uncertainty (Krueger Jr,
Reilly, & Carsrud, 2000). A similar remark can be made concerning the notion of
entrepreneurship: being entrepreneurial and spotting opportunities implies a high grade of
market and personal uncertainty. Being entrepreneurial, hence starting a new business, may it
with high or low uncertainty, is often depicted as a purposive and intentional career choice (C.
C. Chen et al., 1998). In existing literature self-efficacy has been linked theoretically and
empirically with many entrepreneurial phenomena (Krueger Jr et al., 2000), where Self-efficacy
is identified as a key contributor to entrepreneurial intentions (Y. Chen & He, 2010), leading to
the concept of entrepreneurial self-efficacy (ESE) (Boyd & Vozikis, 1994; C. C. Chen et al.,
1998; Luthans & Ibrayeva, 2006). Boyd and Vozikis (1994) developed the term ESE by
extending the model of entrepreneurial intentions of Bird (1988), proposing that self-efficacy
was a mediator for both level of entrepreneurial intentions as well as the likelihood those
intentions to result in actions. ESE is defined as the strength of an individuals belief that he or
she is capable of successfully performing the roles and tasks of an entrepreneur (Boyd &
Vozikis, 1994). ESE is not reducable to just skills or knowledge, but a personal belief and
confidence (Luthans & Ibrayeva, 2006). Following the existing literature, we can discuss the
level of ESE to be determined as the initial decision to start a business, the amount of effort
that will be expended to make it successful and the degree of persistence exhibited in the face
of adversity (Luthans & Ibrayeva, 2006).


Entrepreneurship in China: Literature review
As the research of this paper is targeted towards self-efficacy and entrepreneurial intentions,
the focus will be on the entrepreneurial intention towards the creation of something new. The
literature review in this section will give insights of the Chinese entrepreneur, where the
following research papers have been conducted, as defined in table 1.

Table 1: Research papers for the literature review in random order
Author Year Title
Y. Chen, Y. He 2010 The impact of perceived social environment on
students entrepreneurial intention:
A Chinese perspective
S.C. Chen, J.A. Elston 2013 Entrepreneurial motives and characteristics:
An analysis of small restaurant owners
M. Pruett et. al 2009 Explaining entrepreneurial intentions of
university students: a cross-cultural study
S. Wu, L. Wu 2008 The impact of higher education on
entrepreneurial intentions of university
students in China
D. Pistrui, W. Huang,
D. Oksoy, Z.Jing,
H.Welsch
2001 Entrepreneurship in China: Characteristics,
Attributes, and Family Forces Shaping the
Emerging Private Sector
G. Chen, J. Li, H.
Matlay
2006 Who are the Chinese private entrepreneurs?
A study of entrepreneurial attributes and
business governance
D. Holt 1997 A Comparative Study of Values among Chinese
and US entrepreneurs: Pragmatic convergence
between contrasting cultures

The study of Chen and Elston (2013) was conducted towards the entrepreneurial motives and
characteristics of Chinese small restaurant owners. Their research on hospitality and tourism
entrepreneurship was conducted in five cities in mainland and south China, and found that
three groups of motives exist: autonomy seeking, protection of family and financial reward (S.
C. Chen & Elston, 2013). Chen et al. (2006) employed a survey of a sample of private
entrepreneurs over the years from 1993-2004 and found a significant shift of origin from lower
class towards middle and upper class. Pistrui et al. (2001) conducted a survey in the city of
Wuhan, to capture the attributes and characteristics of entrepreneurs in Mainland China, and
found that the motivation is need for personal achievement and desire to contribute to the
success of an enterprise and family security. Holt (1997) performed a survey in the city of
Guangzhou among entrepreneurs and managers and concluded that Chinese entrepreneurs in
this city hold similar values as US entrepreneurs and show a sharp contrast with Chinese
managers. Wu and Wu (2008) researched the relationship between students education and
entrepreneurial intentions at the university of Shanghai and found that different educational
backgrounds offer plausible explanations for students entrepreneurial intentions. Pruett et al.
(2009) researched a similar topic, surveying more than 1000 students in Spain, USA and China
and found that Chinese students are much more concerned than American and Spanish
students with finding viable business ideas, fear of failure and lack of support from family and
friends (Pruett, Shinnar, Toney, Llopis, & Fox, 2009).

The start of Chinese entrepreneurship
The Peoples Republic of China has been a Communist country since Mao Zedong claimed his
reign in 1949, during which capitalism was completely abolished and the market economy was
transformed into a socialist economy (Liao & Sohmen, 2001). With the launching of the Four
Modernizations reform program in 1978, Deng Xiaoping started the transition from a central
planned economy towards a market-driven economy. Holt (1997) discusses It would be
presumptuous to suggest that entrepreneurship is encouraged and equally nave to suggest
that the country is racing toward a free enterprise economy. What should be kept in mind after
reading this quote of Holt (1997) is that it is said more than 16 years ago; hence it is interesting
to view to what the Chinese government did since the economic transformation in 1978 to
create an entrepreneurial environment to stimulate entrepreneurship and how the institutional
changes affect entrepreneurial intentions.

Political Reform to create an entrepreneurial environment
In the Mao era, entrepreneurs were viewed as a low social status in the social system, where
their existence was either denied or downplayed by the Chinese Government that pursued a
central planned economy (Chow, 2002). The influences of institutional change in Chinese policy
were becoming noticeable in the 1980s, where the Chinese government created an increasingly
entrepreneurial environment. The township and village enterprises (TVE) were the first result of
the decollectivization during the economic reform in 1978, and can be seen as the beginning of
modern Chinese entrepreneurship (Liao & Sohmen, 2001). Now, entrepreneurial activity in
China can be divided into 2 groups (G. Chen, Li, & Matlay, 2006):
- Getihu, which is a small privately owned business of private individuals or households
and are not considered enterprises. These getihu are targeted towards low-end
industries such as small shops. Restrictions on these businesses were the maximum
number of seven employees and the raising of external funding (Liao & Sohmen, 2001).
The Getihu started because people were excluded from the governmental system, as
they had low social status. They regarded the business as means of subsistence.
- Siying qiye, or private enterprises, which are the profit making enterprises and are
required to have more than 8 full-time employees in an approved industry (Holt,
1997). This group started to exist after the government policy implementation on private
enterprises in 1988.

In order to stimulate economic growth and development, the Chinese government encouraged
the formation of rural enterprises and private businesses and at this time a growing amount of
Township and village enterprises (TVE) was noticeable. This can be considered to be the Xia
Hai (literally: go into sea) trend, where people were encouraged to start their own business.
This radically changed the ratio of gross industrial output from private businesses and state-
owned enterprises with the Private Company Act in 1988 (Holt, 1997). But although the
institutional changes in policies of China were in transition to favor an open-market economy,
still environmental barriers existed reducing the barrier to growth (Eesley, 2011), making
entrepreneurship a risky business. The institutional environment for entrepreneurs was
relatively weak (Eesley, 2011) in this period. But in 1992 the government changed by setting
the goals of economic reform towards development of a mix socialist market economy
(Pistrui, Huang, Oksoy, Zhao Jing, & Welsch, 2001), and Deng Xiaoping famous saying to get
rich is glorious led to a significant increase in entrepreneurial activity. SME development was
given a further boost in 1997 when, recognizing the importance of private enterprises to the
Chinese economy, the Fifteenth Communist Party Congress gave entrepreneurs equal rights as
state-owned enterprises and initiated the privatization of state-owned and collective SMEs
under the Let go of the small, keep the big (zhuada fangxiao) policy (Z. Chen, Sun, Newman,
& Xu, 2012). The SME Promotion Law, initiated in 2003, adopted the creation of local SME
support systems to provide financial and business support to private enterprises. The
implementation of this law had a number of challenges: There was a lack of guidance by
national government and a lack of knowledge by the local government (Atherton, 2008). In
2007, the introduction of the Law on Property Rights provided a further boost to the private
enterprise sector (Atherton, 2008), banning appropriation of business assets by the state (Z.
Chen et al., 2012).

Since the increasing role of the private sector in the Chinese economy, the government started
to lift the barriers on the development of SMEs (J. Wu, J. Song, & C. Zeng, 2008) hence
Chinas goal shifted towards the creation of a financial system to support SMEs and to shift the
focus towards SMEs (Zeng et al., 2010). Since the reform and opening-up, especially 1990s, the
Ministry of Finance (MoF) of China has been increasing fiscal fund inputs into SMEs and has set
up several funds with SMEs as the targeted beneficiaries (J. Chen, 2006).

Even though political reforms in the SME legislation, the institutional environment was hostile to
the Chinese entrepreneurs. The private business owners in China felt that they were
discriminated by the government as opposed to the Stated Owned Enterprises (SOEs) for
collecting resources (Young, 1989), leading to an important aspect in Chinese business: the
Guanxi. This is a cultural orientation of relationships or connections (Pistrui et al., 2001), by
repaying favors through an informal process (Holt, 1997). In other words, it means that a good
relationship with government is required for a successful entrepreneurial career, although it can
be regarded as a chicken and egg story (Liao & Sohmen, 2001). There are similarities with the
western networking, but the way to do this is quite different: high prices, good dinners and a
lot of cigarettes (Young, 1989).

Qualitative data on Chinese Start-ups
Quantitative information for an overview of the magnitude of the amount of start-ups in the
country varies in the literature, resulting in questionable data. This is also due to the fact that
the distinction between getihu and siying qiye was defined complicated in the administration,
again leading to variable data (Young, 1989). Chen and Elston (2013) mention that small-
business directories in China are not publicly available. Following Chen et Al. (2006), on the
other hand, there were 2,4 million private enterprises in China in 2002. Pistrui et al. (2001) then
again mention that there are more than 12 million private enterprises operating in China at the
end of the 90s, but does not differentiate between private enterprises and getihu. Holt (1997)
mentions in his research there were 7,8 million registered private companies in the year 1994.
Even though the numbers may vary, it shows that China experienced a substantial growth. In
the research of Pistrui et al. (2001), it was found that retail (35,7%) and computer hardware
and software (17,9%) are most common business activities.

Gaps in the current policy mix
Previous sections showed the transition of Chinese policy incentives for entrepreneurs. One of
the aspects that was found is the fact that Chinese entrepreneurs still feel the environment is
hostile with existing barriers, therefore the entrepreneurial environment is still not optimal. This
can also be translated towards the OECD and World Bank ratings.

Ease of doing business
China is ranked 96
th
place from a total of 189 on the global ease of doing business ranking
(World Bank, 2013). According to the OECD (2010), the indicator for barriers to
entrepreneurship in China is 2.89, which is more than double the OECD average indicator of
1.41 and EU area indicator of 1.26 (OECD, 2010). Most notably are the administrative burdens
to start-up and dealing with construction permits. The results however also show the regulation
and administrative opacity, or the transparency of the regulation system, is improving (OECD,
2010). This increasing transparency has a positive effect on the efficiency of rules and
procedures that enterprises must comply with. But then still, it takes 33 days in China to start-
up a business, compared to 11.1 days as OECD average (World Bank, 2013). There are still
elaborate and cumbersome systems of administrative approval (OECD, 2010). According to the
DB2014 ranking of the World Bank, China is ranked 158
th
in starting a business. Hence it would
be interesting to regard this matter compared to Western policy incentives, and to look if
implementation of certain western policy incentives for entrepreneurship could fill the gap of the
difficult start-up process in Chinas current policy mix.

Ease of starting a business
As discussed, the most substantial barrier for start-ups in China is the administration and costs.
If we compare this to The Netherlands, where the start-up takes only 4 days to complete, it
shows a large difference in time span. Another aspect that makes starting up in The
Netherlands easier and less risky is the abolishment of minimum capital requirements, where in
China a minimum capital requirement of 78,2 % of income per capita is required prior to
registration. This capital requirement is already substantially reduced from >1200% in 2004,
but lowering this even further could positively affect the intention to start-up a business as it
lowers the risk for the entrepreneur.

Ease of obtaining financial sources
Following up on the need for minimum capital requirement, comes the issue of limited financial
sources for Chinese entrepreneurs. Earlier in this research paper the local government funding
was discussed where it stated that the local government increased funds for SMEs. But the
Chinese entrepreneurs did not raise a large proportion of start-up capital by means of
government funding. Chen and Elston (2013) found that only 3,8 % of the small-restaurant
owners uses funding from financial institutions. Also, G. Chen et al. (2006), found that only
0,4% of the start-up capital was provided by local governments. Also, Wu et al. (2008) mention
the fact that SMEs are discriminated in terms of access to external funding. At start-up, SMEs
mainly raise funds from the owners personal savings and the savings of immediate families and
friends. In the growth stage, SMEs have strong financial needs and gain access to
intermediated finance such as bank loans (Junjie Wu, Jining Song, & Catherine Zeng, 2008).
Chen and Elston (2013) claim that the availability of start-up capital from financial institutions
and capital markets would most probably stimulate small firm start-up and growth in China.
Specifically efforts by Chinese government to streamline loan procedures and build a good
credit system would be encouraging. Following Liao and Sohmen (2001), Venture Capital in
China started around 1998, to finance small businesses in later stages in order to grow, and
creating more opportunities for funding. But it was also argued, that due to the Confucianism
learning in China, people were reluctant to attract money from strangers. Besides, the
entrepreneurs were not accustomed to write business plans (Liao & Sohmen, 2001). Next, due
the lack of Chinese entrepreneurs stepping to a bank for loans might be due to a high
bureaucracy in the country. This issue is thus multi-layered and cannot be answered by just a
set of Western policies; it requires a broader solution, starting from better education towards
a more open-market economy.

Entrepreneurial self-efficacy in China
So far, the link between self-efficacy and entrepreneurship has been determined, resulting in
the notion of ESE. Now, ESE will be translated towards Chinese entrepreneurial intentions in
The Peoples Republic of China. As mentioned earlier, in existing literature the role of self-
efficacy is rarely examined in Chinese societies (S. C. Chen & Elston, 2013) hence the
development and actions of Chinese entrepreneurial intentions in the aforementioned literature
from the previous section will be translated in terms of ESE. The findings in the literature for
verbal persuasion and vicarious experience are accompanied by the researchers own insights
and experiences during his 5-month exchange project at South China University of Technology
in Guangzhou.

Personal Accomplishments
In the research of Chen and Elston (2013), they conclude that the surveyed business owners
were worried about failure and link this towards the fact that this could be a result of the lack of
sufficient formal education, as almost 85% of the respondents were aged between 31-50 for
whom this education was not common (S. C. Chen & Elston, 2013), which is also stated in other
researches, stating that in 1980s 50% of the entrepreneurs had only junior high school
education (G. Chen et al., 2006). Wu and Wu (2008) in turn, argue that students with
entrepreneurial education have a greater interest to start-up then students who had none. Chen
and Elston (2013) mention the fact that the decision to become a small-business owner may be
affected by relevant previous work experience in the sector, most of the respondents (90%) in
their survey stated that they had work experience in the restaurant sector before opening their
own (S. C. Chen & Elston, 2013), which we can argue as being personal accomplishments.

Vicarious Experience
Inspiration in the social environment has the positive impact on entrepreneurial intention
through the mediating role of ESE (Y. Chen & He, 2010). In the literature, there was no explicit
example of vicarious experience for Chinese entrepreneurs. But what in my experience may
play a role here is imitation. In Chinese villages and cities, a lot of clustered shops exist that sell
the same portfolio of products. Hence, it seems that if Chinese people see someone else in their
local social environment of friends or relatives doing good business with a specific type of shop,
they tend to imitate that and start a similar shop.

Verbal Persuasion
In their research, Pruett et a. (2009) found that Chinese respondents believed that their
families would actively oppose their pursuit of entrepreneurship (Pruett et al., 2009), which can
be discussed as a form of verbal persuasion. My own experience in this matter is that I heard
from my Chinese fellow student the issue of raising young children: This is not the main task of
the parents but rather of the grand parents, thus the children are raised by elderly values,
and by this different value, they tend to push younger graduates towards stable, less-risky jobs
at big companies (the iron rice bowl jobs) rather than to risky start-ups. But it seems that this
issue of raising children by grandparents is becoming less in the current generation.

Emotional Arousal
As discussed earlier, for the concept of personal accomplishments, success increases the self-
efficacy and failure decrease it, especially when the failure occurs in the early phases of the
establishment of ones self-efficacy. This failure can also be translated towards the concept of
emotional arousal. Here we can see two extremes of the spectrum: Where people from Anglo-
Saxon origin regard failure as a learning moment on the one hand, people in China regard a
failure as something negative: the collectivist orientation of Chinese society in which personal
failure not only affects the individual but also his or her group (Pruett et al., 2009).



Figure 2: Sources of self-efficacy for Chinese entrepreneurs


3: Conclusion
Deciding to become entrepreneur can be determined by both institutional environment as well
as personality traits. Both of these concepts have been regarded in this research paper.

One of the implicit findings of this research was to study the causes of entrepreneurship in
China, to determine whether entrepreneurship resulted out of necessity or in search for
something new. First, Chen et al. (2006) found in their survey of 1993, the occupation of
entrepreneurs was in the lower class (53%), such as industry workers or farmers with lower
education, leading to push factors as no chance to use skill as motivator to become an
entrepreneur. This is regarded as the group of getihu, what we can discuss this as
entrepreneurship out of necessity. Another group can be discussed the siying qiye, which were
legalized in 1988, and from 1997 onwards, this view dramatically shifted towards persons from
middle to higher class in charge of public and economic organizations (>40% in the survey) and
entrepreneurs were motivated by self-fulfillment (~50%) and higher income (20-30%) (G. Chen
et al., 2006). These pull factors showed the need for personal development and achievements,
thus can be regarded as entrepreneurship in search for something new.

The modern Chinese entrepreneur found its way in China after the first institutional reforms in
1978 but these businesses were limited by law and still opposed by local governments and state
owned enterprises, emphasizing the need for Guanxi, the Chinese way of networking. Further
change occurred in 1988, where the private enterprises became legal. China kept moving slowly
towards a transition to a market-oriented economy, hence creating an entrepreneurial
environment. Barriers for entrepreneurs are the difficult and long process of start-up, the need
for minimum capital requirements and of limited financial sources through the government. It
can be concluded that even though the SME in China has gained a large share in the economy,
they are still facing barriers to grow compared to the SOE. Hence the Chinese Government has
not yet been able to create a perfect entrepreneurial environment, yet.

The personal traits of these entrepreneurs of the siying qiye can be defined in terms of
Entrepreneurial Self-Efficacy as personal accomplishments by the fact that there exists more
fear for failure by people with no formal education experience with entrepreneurship while for
people with formal education and experience with entrepreneurship, this fear is lower. In terms
of vicarious experience it can be argued that Chinese people sometimes imitate a successful
business in their social environment. The fear for actively opposing family towards
entrepreneurship is considered negative verbal persuasion. Previous work experience in the
same expertise enhances self-efficacy while the personal failure and group failure decrease self-
efficacy.

4: Limitations, implications and further research
As this is just an exploratory literature research, there are a number of limitations to be named.
The first is that it must be noted that entrepreneurship is a multi-layered construct of which
self-efficacy is focused on entrepreneurial intention and where entrepreneurial behavior is
another step, this was also mentioned in (Y. Chen & He, 2010). The other limitation is the fact
that some papers are relatively dated. As the transition of China is relatively recent and still in
motion, a paper of 10 years ago concludes to different institutional changes as a paper of 2008.
Also the focus of the papers was all on low-tech industries, while China is also substantially
growing in the high-tech industries, but no relevant literature was found on this particular topic.
Last, China is a very big country with such different cultures and values hence generalization
would be unwise. My own experience was that in the South of China, entrepreneurs are more
as European business, but in the North people are more traditional and look to jobs in larger
companies.

A question that arose during this research was the influence of limited availability of financial
sources on the self-efficacy of Chinese entrepreneurs, and might be an interesting topic for
further research.

As mentioned, Schumpeter defined the entrepreneur in 1934, while in China the new
entrepreneur originated after 1978, showing the Chinese entrepreneur was lagging behind, but
this sector is developing rapidly as it can be observed that constitutional reforms in the country
are moving more and more towards an open market-oriented economy. But to become a
complete Western open market-oriented economy with a free entrepreneurial spirit, there is
still a long way to go, and this requires changes in not only the policies to stimulate
entrepreneurship, but requires institutional reforms in the whole system.

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