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Business creation, innovation, and economic growth: Evidence from China’s economic transition, 1978–2017

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  • Jian, Jianhui
  • Fan, Xiaojie
  • Zhao, Shiyong
  • Zhou, Dong

Abstract

Using a panel of China’s 31 provinces over 1978–2017, we examine the effects of entrepreneurship on economic growth in the context of China’s transformation from a centrally planned to a market-oriented economy. We divide entrepreneurship into two types: business creation and innovation. Our panel data estimation results show that both types of entrepreneurship have significantly positive effects on growth rate of China’s GDP per capita over the sample period. Specifically, annual growth rate of GDP per capita will increase by 0.75–1.625 percentage points if business creation entrepreneurship increases by ten percentage points. Innovation has a lag impact on economic growth. Annual economic growth rate will increase by 0.05–0.188 percentage points if innovation in the last period increases by ten percent. When business creation entrepreneurship increases by one standard deviation, annual growth rate will increase by 1.53–3.32 percentage points; and when innovation entrepreneurship (last period) increases by one standard deviation, annual growth rate will increase by 0.03–0.12 percentage points. The results are robust even when we control for different sets of independent variables. China’s transition and development experience show that a strong government does not conflict with the role of entrepreneurs and free markets.

Suggested Citation

  • Jian, Jianhui & Fan, Xiaojie & Zhao, Shiyong & Zhou, Dong, 2021. "Business creation, innovation, and economic growth: Evidence from China’s economic transition, 1978–2017," Economic Modelling, Elsevier, vol. 96(C), pages 371-378.
    • Handle: RePEc:eee:ecmode:v:96:y:2021:i:c:p:371-378
    DOI: 10.1016/j.econmod.2020.03.019
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    4. Xiong, Jiacai & Yang, Zelin & Wang, Xin & Chan, Kam C., 2023. "Does dialect diversity affect entrepreneurial activities? Evidence from China," Economic Modelling, Elsevier, vol. 128(C).
    5. Fandi Yang & Peng Yuan & Gongxiong Jiang, 2022. "Knowledge Spillovers, Institutional Environment, and Entrepreneurship: Evidence from China," Sustainability, MDPI, vol. 14(22), pages 1-27, November.
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    7. Rolando Rubilar-Torrealba & Karime Chahuán-Jiménez & Hanns de la Fuente-Mella, 2022. "Analysis of the Growth in the Number of Patents Granted and Its Effect over the Level of Growth of the Countries: An Econometric Estimation of the Mixed Model Approach," Sustainability, MDPI, vol. 14(4), pages 1-12, February.

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    More about this item

    Keywords

    Business creation; China; Economic growth; Entrepreneurship; Innovation;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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