DP17131 Serial Entrepreneurship in China

Author(s): Loren Brandt, Ruochen Dai, Gueorgui Kambourov, Kjetil Storesletten, Xiaobo Zhang
Publication Date: March 2022
Keyword(s): capital distortions, entrepreneurship, Serial Entrepreneurship
JEL(s): D21, D22, D24, E22, E44, L25, L26, O11, O14, O16, O40, O53, P25, R12
Programme Areas: Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=17131

This paper studies entrepreneurship and the creation of new firms in China through the lens of serial entrepreneurs, i.e. entrepreneurs who establish more than one firm, and their differences with non-serial entrepreneurs. Drawing on data on the universe of all firms in China, we document key facts about serial entrepreneurship in China since the early 1990s and develop a theoretical framework to rationalize the role of endowments, ability, and capital market frictions in their behavior. We also examine the key determinants of the sectoral choice for serial entrepreneurs' second firms. Quantitatively, serial entrepreneurs are more productive, raise more capital, and operate larger firms than non-serial entrepreneurs. Moreover, serial entrepreneurs with greater liquidity and whose firms have relatively similar productivity are more likely to operate these firms concurrently rather than sequentially. We also find that less productive serial entrepreneurs are more likely to switch sectors when establishing new firms, with the choice of sector influenced by considerations of risk diversification, upstream and downstream linkages, and sectoral complementarities.