Property rights reform and the evolution of entrepreneurs' social networks

: a study of Wuxi City, Jiangsu Province, China

Abstract

This research presents an effort to examine the impact of property rights reform on the evolution of entrepreneurs’ social networks in the context of rural China. It attempts to uncover how and why institutional changes have led to changes in social networks. The issue of social networks is central in scholars’ examinations of China’s economic reform and its transitional society. Surrounding the usage of social networks, it was argued that the dual-track economic system and the immature factor markets in China caused a high degree of dependence on social networks, and on the other hand, the increasingly improving institutions could reduce the actors’ needs for social networks in economic sector. This research argues that the usage of social networks may have moved out of some domains, but have found new areas to flourish or are displayed in new forms. Based on this argument, this research, starting from the position of entrepreneurs, proposes three different patterns of social networks, i.e., in-group networks, official-centered networks, and market-oriented networks; and examines how the significance of different network patterns has been evolved under the context of institutional change by using data collected in Wuxi city, Jiangsu province, China. Property rights reform at enterprise level is considered a sign of institutional improvement. This research selects the property rights reform as an indicator of institutional changes. To examine the evolution of entrepreneurs’ social network, this study develops a dynamic approach. The approach tries to explore the complex interactions of individuals, institutions, and the broader external environment. In so doing, this study integrates theories at two levels of analysis. At the individual level, it develops empirical grounding for understanding goals pursued by the individuals. At the institutional level, it provides an analysis of the ways in which individuals pursue their goals with the incentives and constraints embedded in particular institutions. In terms of research methodology, this study employs both quantitative and qualitative approaches. For quantitative approach, survey method is used and a main research hypothesis is produced, that the significance of social networks would be changed with the direction of official-centered networks declining while market-oriented and in-group networks increasing. For qualitative research, interview and documentary methods are used. The analytical questions are: the history of enterprises, the relationship between township-village enterprises (TVEs) and local governments before and after the property rights reform, as well as how local officials adjust to the new conditions in stimulating the development of local economy. Findings show that statistically significant relations can be found between the property rights reform and the evolution of entrepreneurs’ social networks. Owing to such institutional change, the significance of official-centered networks was declining and those of in-group and market-oriented networks were flourishing. Official-centered networks were fading out of providing substantive resources, but they still matter in providing commercial information, most importantly in providing administrative services. Market-oriented networks serve as the main channel for flowing capital and information. The usage of in-group networks is always found in mobilizing capital at the beginning of starting a new business. In addition, findings also show that business size, entrepreneurs’ education, Party membership and the years of doing business have significant relations with the evaluation of official-centered networks.

Date of Award	3 Oct 2005
Original language	English
Awarding Institution	City University of Hong Kong
Supervisor	Yu Shek Joseph CHENG (Supervisor)