Changing entrepreneurial strategies to developing capitalist institutions: A look at Chinese technology entrepreneurs

Our understanding of institutional change and strategy is limited. Institutions will influence the types of strategies that result in higher performance in entrepreneurial firms. This paper shows that different strategies and firm characteristics will explain variation in performance as institutional change occurs. Exploiting variation in the institutional environment over time and across regions in China, this paper examines the impact of institutional change on the effectiveness of firm strategies. Unique data were collected through survey responses from alumni who graduated from a Chinese university. The results show that different factors determine firm performance during different stages of institutional reform. These factors differ from those identified in the literature using data from well-developed economy contexts. The results indicate a significantly strong role for entrepreneur-government connections in the less developed institutional environment and a shift towards factors associated with competition in the market. Most entrepreneurs do not find themselves in a developed economy and few scholars have looked at drivers of entrepreneurial performance in a developing country context (Gollin, 2002, p. 466). Many developing countries are currently attempting to encourage successful entrepreneurship by transitioning away from more centralized economic structures and implementing institutional changes (Hoskisson, 2000). Eesley (2010) shows that with institutional changes there are shifts in the type of person becoming an entrepreneur, but do the paths and strategies leading to success in entrepreneurship change as well? While there is growing consensus that institutions are important (North, 1990) and affect entrepreneurship (Aldrich and Fiol, 1994; Sine, Haveman and Tolbert, 2005), the relationship between institutional change and firm strategy is still unclear. This paper asks whether shifts in the institutional environment allow new paths to successful entrepreneurship to open up in society.