This randomized trial examines how guanxi influences societal-level entrepreneurship, suggesting its complex effects.
Key Points
This study investigates how guanxi as an informal institution affects entrepreneurship at the societal level.
Utilized fixed effects analysis on regional panel data from provinces in China covering the years 1998 to 2010.
Explored how guanxi substitutes for and competes with formal institutions in relation to entrepreneurship.
Found an inverted-U-shaped relationship between guanxi and entrepreneurship, indicating that guanxi boosts entrepreneurship until a threshold, after which it hinders it.
Demonstrated that the development of formal institutions can lessen the negative effects of guanxi on entrepreneurship.