CUHK Business School Research Finds Rural Migrants in China Likely to Start Larger Businesses | Taiwan News
HONG KONG SAR – Media OutReach – November 11, 2021 – Big cities are where dreams thrive. Their cosmopolitan allure, coupled with the sweet smell of financial opportunity, has resulted in waves of migration to population centers throughout human history. In the modern era, such a narrative continues to unfold rapidly in China, where there were an estimated 286 million rural migrant workers in 2020, representing more than a third of the country’s total labor force, and coinciding with a rapid increase in entrepreneurial activity. This coming together of two dramatic changes allowed a group of researchers to examine how urban migration has helped boost entrepreneurship in China, particularly through the prism of the role of universities in producing a constant supply of people. well-trained and innovative. Talent.
The study found that entrepreneurs who migrated from rural China to big cities like Shanghai took more risks.
One of their main findings is that in China, people who have migrated from rural areas and attended university in big cities are more likely to start larger businesses.
In modern China, the great urban migration began in the 1980s following the economic reforms instituted at the time. Millions of rural migrants have flocked to cities, like Shenzhen and Dongguan, for factory jobs. Entrepreneurship was considered relatively less common among rural migrants. Nevertheless, some of the most famous Chinese entrepreneurs had rural roots. For example, Liu Qiangdong, the founder of JD.com, was born in a small village in Jiangsu Province and then went to study at a university in Beijing. Another example is Ma Huateng, also known as Pony Ma, who founded one of Asia’s most valuable conglomerates, Tencent. Mr. Ma was born in a small town in Guangdong Province and went to school in Shenzhen, where he founded the multinational conglomerate.
“Migrating from the countryside to the city can be a difficult task for individuals, not only due to the physical distance, but also the large cultural gap they would likely encounter when moving,” says Willow Wu You, professor. assistant in the management department of the Chinese University of Hong Kong School of Business (CUHK). “But in a sense, this is something that has helped spur the boom in private entrepreneurial activity in China and allowed the country to maintain the growth it has seen in recent years.”
Migration and risk taking
While most existing migration research studies focus on the variety that crosses international borders, Professor Wu and his research partner Professor Charles Eesley of Stanford University have examined the effect of urban migration in a country on entrepreneurship in their study on regional migration, entrepreneurship and university. Elders. The two academics conducted a survey of former Tsinghua University students and analyzed the entrepreneurial experience of 283 business founders among these alumni. They found that entrepreneurs who migrated from rural China to the country’s major cities took more risks and that with access to better entrepreneurial opportunities and resources that come with moving to an urban environment, they are likely to create bigger companies.
In the study, researchers examined whether rural migrants were indeed at risk by asking them directly for their views on concerns about starting a business in the survey. They found that rural migrants were less averse to risk than city dwellers, both among entrepreneurs and non-entrepreneurs. Among non-entrepreneurs, only 36.1 percent of rural migrants considered entrepreneurship too risky, while 45.8 percent of city dwellers expressed similar concerns. Among entrepreneurs, the percentage is 7.4% for rural migrations and 19.0% for city dwellers. In addition, the results of the study show that urban migration is positively and significantly associated with the probability of starting larger businesses.
The role of universities
The researchers sought to explain this phenomenon through the role of universities, noting that they are universally valued for their important role in providing the talent needed to drive business and innovative performance. They postulate that if entrepreneurship is the force and the continuous process of change that drives innovation, as Austrian economist Joseph Schumpeter put it, then universities are a crucial channel through which this force can be directed to produce the most benefits for an economy. “If entrepreneurship represents the winds of creative destruction as Schumpeter suggests, universities can play a role in directing these winds through their influence on regional migration,” said Professor Wu.
According to Professor Wu, in addition to providing social support to rural migrants, the universities these migrant students have attended allow them to become anonymous and reinvent themselves by creating new connections in the urban areas where they settle. In doing so, migrant entrepreneurs become more willing to take risks as they have less worry about the stigma attached to failure, which can happen if they start businesses in their hometown.
The universities that migrant students attend allow them to become anonymous and reinvent themselves by making new connections in the urban areas where they settle, the researchers say.
Overall, the study finds that rural migrant entrepreneurs tend to start larger businesses due to their risk-seeking attitude and access to better entrepreneurial resources in cities. Unlike previous management research which suggests that entrepreneurs tend to start their businesses close to home, the study shows that the likelihood of starting a larger business is higher among university graduates who have migrated from rural areas than among university graduates who have migrated from rural areas. non-migrant university graduates. Specifically, entrepreneurs who chose to start tech startups in science parks were likely to form companies with the highest number of employees (i.e. in the top 25%). Entrepreneurs who choose to set up their businesses in special economic zones hire the second highest number of staff (that is, between the richest 50 percent and the richest 25 percent).
The study notes that universities have an important role to play in promoting entrepreneurship by redistributing talent by providing college education opportunities to rural students. In particular, the risky attitude of alumni and the social network resources provided by universities are crucial for the success of rural migrant entrepreneurs.
Regional policy implications
Staying in town or returning home is a common question faced by many students who have moved from small towns to big cities to pursue university studies after graduation. Professor Wu says their findings raised an important question: whether to encourage migrant students to return to their hometowns or to stay in an urban setting to try and succeed in their careers.
Further, she explains that universities in urban areas, along with interconnected businesses and institutions, attract highly talented and at-risk migrants and import them in the form of students, who then benefit the areas where the universities are located. But, as talented migrants are only attracted to a few large cities, smaller towns would suffer from the slowdown in the growth of entrepreneurship. For policy makers, the research findings provide useful implications on how to promote economic growth through the mobility of talent.
The majority of people likely to become entrepreneurs live outside major innovation hubs like Shenzhen. The current policy orientation is either to keep these entrepreneurial spirits in the regions where they originate or to reduce migration from rural to urban areas. The first rural migrants supported economic growth by providing cheap labor.
“But, as the results of our research show, rural migrants can also become very successful entrepreneurs. That is why policies that can promote some kind of inter-regional mobility can be more beneficial for local economies,” said the Professor Wu, adding that tailoring university curricula and courses to simply support rural migrants can help more of them become successful entrepreneurs.
You (Willow) Wu & Charles E. Eesley (2021) Regional Migration, Entrepreneurship and Former University Students, Regional Studies, DOI: 10.1080 / 00343404.2021.1934432
This article was first published on the China Business Knowledge (CBK) website of CUHK Business School: https://bit.ly/3EXYvdM.
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