EAST ASIA WORKSHOP: POLITICS, ECONOMY & SOCIETY
“ Experimenting with Entrepreneurship:
Peripheral State Actors,Transnational Communities and the Rise of Venture Capital-Backed Startups in China”
Yan Xu
University of Chicago, Political Science
May 1, Wed 12:00-1:30 pm
Pick Lounge, 5828 South University Ave.
Light lunch will be provided
Abstract
Tech entrepreneurship and state capitalism are usually seen as incompatible, partly because they are based on different financial institutions. But in China, tech startups backed by venture capital (VC) are thriving in a state capitalist economy, in spite of antecedent institutions that were hostile to entrepreneurship and VC and the state’s persistent interest in the developmental state model of favoring large incumbent firms. This paper shows how state actors that are relatively peripheral in China’s industrial and financial policymaking introduced experimentation that provided space for entrepreneurship and VC. These policy experiments were originally limited in scope and achieved mixed outcomes: while tech entrepreneurship thrived, state-run VC firms mostly failed. But vibrant tech entrepreneurship attracted foreign and returnee venture capitalists and entrepreneurs, who brought in practices from Silicon Valley and elsewhere, utilized foreign capabilities and institutions to overcome local obstacles and bred some of China’s most successful startups. These developments eventually led to policy changes and reorientation—including the opening of the domestic stock market to entrepreneurial firms and the massive amount of state capital directed to VC—that have significantly reshaped the institutional environment for VC and entrepreneurship. This narrative demonstrates how public initiatives can foster private risk-taking and suggests that capitalism in China emerged not merely from below but through a multi-faceted process.
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The East Asia Workshop is sponsored by the Council on Advanced Studies in Humanities and Social Sciences.