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Weekly UpdatesManufacturing and distribution activities represented another 30 percent of the sample. Most likely these sectors are examples of the tertiary markets that are developing to serve the retail and technology sectors. Another 12 percent of the businesses indicated that they service providers. Although some markets such as banking, telecoms and general distribution are off-limits to entrepreneurs other consumer service sectors are being developed. (37) Examples from this study include a small yet important level of professional services including finance, insurance, real estate and construction. Such specialty and boutique type of market sectors are likely to continue to develop.
Type of Business Organization
As Table Five indicates almost half, 48.2 percent of those businesses surveyed, were sole proprietorships. Another 39.3 percent were found to be limited liability companies (LLC). These findings indicate that most entrepreneurial-led SMEs were closely held private enterprises. Chinese culture has a tradition of being inward looking, with a basic instinct to distrust non-family members. (38) Even limited liability corporations that sold their shares on local stock exchanges tended to be closely held and family controlled where even majority shareholders if they were non-family shareholders, had little say in business operations. (39) The findings of this study tend to support this practice.
With a limited number of corporations (7.1%) and even fewer partnerships (5.4%) the findings of this study have identified a cultural orientation toward individual based business organizations. This inward orientation also tends to reflect the Confucian value system prevalent in Chinese society.
Method of Establishment
The vast majority (89.3 percent) of those entrepreneurs surveyed had originated their enterprises. These businesses represent new entrepreneurial-led start-ups. As Table Six illustrates another 8.9 percent of the entrepreneurs purchased their businesses from someone else. Only 1.8 percent inherited the business, which further suggests that this sample of Wuhanian entrepreneurs represents a new emergent urban entrepreneurial class.
The findings of this study suggest that Chinese entrepreneurs search for localized market opportunities and create closely held inward-looking sole proprietorships to serve them. Given the age of these enterprises (83.9 percent are less than 10 years old, while 41.1 percent are less that 6 years old, (see Table Three) it appears highly likely that these newly emerging SMEs will be facing growing competition as the private sector continues to play an increasing role in the Chinese economy.
Family and Enterprise Relationships
The foundation of the traditional Chinese society has been the family, often consisting of several generations united under a single roof. (40) The high percentage of households in which two adult generations co-resided allowed younger members more discretionary funds than their income might indicate. (41) As Table Five points out, the family plays an active role in enterprise formation and development. Of the total sample, 41 percent of the enterprises had at least one family member as an investor.
On the employment front, the family is active in enterprise development and operation. Almost 60 percent of all businesses in the sample have at least one family member employed full time in the enterprise. Approximately 29 percent have two or more family members employed on a full-time basis. On the opposite end, only 26.8 percent had part-time family employees, yet almost 20 percent did have one part-time family employee. What becomes evident from the sample is that family members contribute to both the financial and human resources of these entrepreneurial-led SMEs. The majority of these newly emerging SMEs relied on family participation in the normal operations of the business.
Although small entrepreneurial-led family run private enterprises can proliferate in China, their growth into more complex organizations may be held back by the disastrous legal inheritance of socialism. (42) Accordingly, the aspects associated with family business development represents an area for more in-depth analysis and future study.
Looking Back and Ahead
The development of a mixed "socialist market economy" calling for the blending of state and private enterprise presents a unique "living laboratory" in which to study the creation and development of entrepreneurial-led SMEs. Entrepreneur ship and the development of the private sector have been identified as a vital component of China's current socio-economic strategy.
Findings suggest that Mainland Chinese entrepreneurs located in the Wuhan area are motivated by the need for personal achievement, the desire to make a direct contribution to the success of an enterprise, and the desire for family security. The top ranking motive was found to be the desire "to have fun!"
Entrepreneurs were found to be approximately 37 years of age. The vast majority of entrepreneurs surveyed did not have much formal educational training beyond high school, yet had over ten years of work experience.
Women-led enterprises (27 percent of the sample) were discovered to be playing a central role in the emerging private sector. Female entrepreneurs tended to be approximately three years younger than their male counterparts. Women also were discovered to have slightly lower levels of education, and about eight years less work experience. The findings of this study suggest that women-led enterprises represent a unique socio-economic microcosm worthy of additional study and analysis.
In terms of entrepreneurial spirit and enterprise formation these findings suggest that there was a lag time between the idea of starting a business and actual enterprise creation. New venture creation was increased during the mid- to late-1990s when approximately 70 percent of the entrepreneurs surveyed actually started new enterprises.
The results of this study also confirmed that the overwhelming majority (87.5 percent) of new private firms were closely held sole proprietorships or limited liability companies. Eighty-nine percent of the entrepreneurs surveyed indicated that they had originated their enterprises. Only around 9 percent said they purchased the business. This suggests that there is truly a new and emergent class of entrepreneurs active in China.
The family was discovered to be playing a central role in support of entrepreneurial-led SME development. Forty percent of the businesses had at least one family investor, while approximately 20 percent had two family investors. Some 59 percent of these new enterprises had a family member employed full-time, while close to one-third (28.6 percent) had more than one family member working full-time. But only 26.8 percent of these enterprises had at least one part-time family employee.
This investigation provides only preliminary insights into the characteristics and attributes of Chinese entrepreneurs and their enterprises. Much more study is called for, especially empirical research related to entrepreneurs and private sector SME development. One thing seems certain: entrepreneurial-led family centered private SMEs will continue to play an increasingly important role in the development of China's "socialist market economy."
DAVID PISTRUI, Ph.D., is the Managing Director, Wharton Enterprising Families Initiative, an initiative under Wharton Entrepreneurial Programs, and a scholar in residence at Alfred University, Alfred, NY. Dr. Pistrui is an active researcher focusing on enterprise growth and the societal impact of entrepreneurship and family business. He is the co-author of groundbreaking work including, "Growth Intentions and Expansion Plans of New Entrepreneurs in the Former Soviet Bloc" (Ashgate, 1997), and "Entrepreneurial Orientation and Family Forces in the New Germany: Similarities and Differences Between East and West German Entrepreneurs" (Family Business Review, 2000). Dr. Pistrui serves on the Board of Directors, and is Vice President, of the Family Firm Institute (Boston, MA), and is Book Review Editor and has served as Issue Co-Editor of Family Business Review.
WILFRED VINCENT HUANG, Ph.D., is a professor of management information systems at Alfred University. His research interests are in entrepreneurship; database, data warehousing, and data mining; simulation and modeling; quality control and design. He has published articles in European Journal of Operations Research, International Journal of Computers and Industrial Engineering, Division Support Systems, and several proceedings at various conferences. He is also associate editor of the International Journal of Modeling and Simulation.
DOLUN OKSOY, Ph.D., is a professor of management systems and the J. Henry Smith Research Fellow at Alfred University. His research interests are in Six Sigma, data mining and data visualization, glass property analysis, and computational statistics. He has published articles in The Glass Researcher, Bulletin of Glass Science and Engineering, Family Business Review, Journal of The Family Firm Institute. He has also written many proceedings at various conferences. He has received grants from NSF, United Nations Development Program, NATO, Ford Motor Company, and the Center of Advanced Ceramic Technology.
HAROLD P. WELSCH, Ph.D., holds the Coleman Foundation Endowed Chair in Entrepreneurship and is the founder/director of the Entrepreneurship Program at DePaul University. Dr. Welsch is well known for his expertise in technology commercialization, privatization of centrally-planned economies, entrepreneurship career paths, formal and informal strategic planning, information seeking and decision behavior, ethnic entrepreneurship, and economic development via entrepreneurship.
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