Agricultural specialization activates the industry chain: Implications for rural entrepreneurship in China

Abstract As one of the means of specialization, agricultural outsourcing is regarded as a breakthrough point for agricultural efficiency improvement and rural economic growth by many developing countries. From the perspective of the interest linkage across the entire agricultural industry chain, the potential entrepreneurial effects of agricultural outsourcing have rarely been discussed. The study innovatively treats a Chinese policy as a quasi‐natural experiment, uses cutting‐edge econometric methods to make rigorous causal inferences, and addresses the difficulty of quantifying agricultural outsourcing. We find that agricultural outsourcing significantly increases rural entrepreneurship activity, with an increase of 9.1% of the rural population working for rural private enterprises and rural self‐employed businesses. From the perspective of heterogeneity, the entrepreneurial effect of agricultural outsourcing is more impressive in nonmajor grain‐producing areas. In addition, agricultural outsourcing mainly promotes opportunistic entrepreneurship. Influencing mechanisms include industrial chain extension, off‐farm employment and credit access. Accordingly, we suggest that policymakers take agricultural outsourcing as a starting point to promote rural innovation and entrepreneurship to complete industrial upgrading and transformation. EconLit Citations: D13, L26, Q16.