The Role Of Trust In Rural Entrepreneurship In China

Promoting rural entrepreneurship to a higher level could lay a solid foundation for the transformation and upgrading of the agricultural industry and the high-quality development of rural economy.However,the imperfect formal system in the market economy transition stage and the instability of the system reform in rural areas lead to increasing uncertainty and risks in rural entrepreneurial activities,which seriously hinders the entrepreneurial vitality of rural entrepreneurs and has a negative impact on their business performance.As an informal system,trust plays an important supplementary role while formal systems are absent.Trust can not only reduce uncertainty and risks,but also promote cooperation and improve collaboration efficiency.As a result,it can increase the incidence and the success rate of rural entrepreneurship in this new era.Accordingly,considering trust in the rural entrepreneurship research has both important theoretical value and practical implication.Based on the Timmons Model,opportunity identification theory,resource-based view,and other multi-dimensional theories,this paper constructs a theoretical framework of trust to rural entrepreneurship from the perspective of entrepreneurial process.Specifically,this paper elaborates how trust impact rural entrepreneurs’ entrepreneurial selection,identification of opportunities,resource acquisition,and their entrepreneurial performance.This paper innovatively combines the micro data of the Chinese Family Panel Studies from 2012 to 2018 in rural areas across the country,and 890 field survey data from randomly selected rural entrepreneurs in Zhejiang,Anhui,Henan,and Shaanxi province to investigate the impact of trust on rural entrepreneurs’ entrepreneurial behaviors.This paper describes the main characteristics of rural entrepreneurs and their trust level firstly.Based on the descriptive statistical analysis,this paper then uses Probit,Lewbel-IV models to empirically test the influence of trust on rural entrepreneurs’ entrepreneurial selection.Next,this study employs the serial mediation model and hierarchical regression analysis to examine the direct impact of trust on rural entrepreneurs’ identification of opportunities,and the serial mediation effect which channels through entrepreneurial alertness and knowledge acquisition successively.After that,this study adopts Probit,IV-Probit model to explore how trust influences rural entrepreneurs’ venture capital,labor resource and information resource acquisition.Finally,this paper utilizes the moderated mediation model and Bootstrap method to verify the direct effect of trust on rural entrepreneurs’ venture performance,the mediating effect of entrepreneurial learning between trust and venture performance,and the moderation effect of external environment.The conclusions of this paper include the following five aspects.First,according to the data from the Chinese Family Panel Studies,the incidence of rural entrepreneurship across the country is about 8%,and there exists significant regional heterogeneity.Some provinces located in the Yangtze River Delta and Pearl River Delta regions are higher than other provinces,so the regional gap must be further eliminated for comprehensively improving the probability of entrepreneurship in rural area.According to field survey data,planting is the primary industry of rural entrepreneurs engaged in,followed by aquaculture and productive services.The number of opportunities identified by rural entrepreneurs is generally within 3,and the ability to identify opportunities measured by scale beyond medium level,and shows heterogeneity among industries and regions.In terms of venture funds,family savings are the primary source of funds for rural entrepreneurs,followed by funding and borrowing from relatives and friends,while the proportion of bank loans is pretty low.In terms of entrepreneurial information,the main sources of information for rural entrepreneurs are family members,friends and acquaintances,and only a small number of rural entrepreneurs obtain information from government departments.In terms of entrepreneurial performance,the median net income of rural entrepreneurs is about 120,000 RMB,which exceeds most farmers who do not start their businesses.The entrepreneurial performance measured by scale is at a medium level,and there is heterogeneity among the sub-dimension performance,in which survival performance is greater than personal performance,and which is better than growth performance.Overall,most rural entrepreneurs’ businesses are in the survival stage,and their performance still has a large room for improvement.In terms of trust level,the overall trust level of rural entrepreneurs is at the medium level.Among them,the institutional trust is greater than emotional trust and social trust,and there is significant regional heterogeneity in rural entrepreneurs’ trust level as well.Second,trust significantly increases the probability of rural entrepreneurs in selecting to start a business.The probability of rural entrepreneurs with an attitude of “most people can trust” engaged in venturing activities is 1% higher than farmers who with an attitude of “being more careful with others,the better”.Considering the fact that the average incidence of entrepreneurship in rural China is 8.2%,1% has significant economic significance.From the perspective of the sub-dimensions of trust,both emotional trust represented by the degree of trust in neighbors and social trust represented by the degree of trust in strangers significantly positively affects rural entrepreneurs’ entrepreneurial selection,and the marginal effect of social trust slightly greater than emotional trust.While institutional trust,which represents the degree of trust in local officials,negatively affects rural entrepreneurs’ entrepreneurial selection.In addition,control variables such as age,education level,family size,and family demographic structure are also important factors of rural entrepreneurs’ entrepreneurial selection.Specifically,education level,party membership,Han nationality,and financial investment experience have a significant positive impact on rural entrepreneurs’ business selection,while age,the proportion of elderly households,and total household income have negative effects on their business selection.Third,trust has a significant positive impact on rural entrepreneurs’ identification of opportunities,that means rural entrepreneurs with higher levels of trust have more advantages in identifying entrepreneurial opportunities.The acquisition of external knowledge plays a mediating role on the impact of trust on rural entrepreneurs’ identification of opportunities.In other words,rural entrepreneurs’ trust levels influence their acquisition of entrepreneurial knowledge and then have a positive effect on their identification of entrepreneurial opportunities.Entrepreneurial alertness plays mediating role between trust and rural entrepreneurs’ identification of opportunities,which means,the higher the level of trust,the higher the entrepreneurial alertness of rural entrepreneurs,and the more sensitive they are in identifying promising opportunities.In addition to two separate mediating paths of entrepreneurial alertness and external knowledge acquisition respectively,external knowledge acquisition and entrepreneurial alertness play a serial mediation effect in the influence of trust on rural entrepreneurs’ identification of opportunities as well.From the perspective of the size of the mediation effect,the effect size of entrepreneurial alertness is greater than that of external knowledge acquisition,which followed by the effect size of the serial mediation.Fourth,trust has a significant positive impact on rural entrepreneurs’ acquisition of entrepreneurial resources.In terms of obtaining venture capital,trust significantly increases the probability of entrepreneurs raising funds through relatives and friends.In specific,emotional trust and institutional trust can promote entrepreneurs to obtain venture capital through relatives and friends,and the marginal effect of emotional trust is greater than institutional trust.Interestingly,the influence of social trust is not significant.In addition,the impact of trust on rural entrepreneurs’ obtaining venture capital through either social relations or bank loans is not statistically significant.In terms of the availability of labor,trust can significantly promote the acquisition of labor in entrepreneurial activities,more specifical,both emotional trust and social trust have a significant positive impact on labor acquisition,and the marginal effect of emotional trust is greater than that of social trust,however the impact of institutional trust is not significant.In terms of the acquisition of entrepreneurial information,trust positively impact the acquisition of entrepreneurial information,in particular,emotional trust and social trust can positively promote the acquisition of entrepreneurial information,and the influence of emotional trust is slightly greater than that of social trust,yet the influence of institutional trust on the acquisition of entrepreneurial information is not statistically significant as well.Fifth,trust has a significant positive impact on rural entrepreneurs’ business performance,which means the higher the level of rural entrepreneurs’ trust,the better their performance.In terms of sub-dimensions,the positive effect of institutional trust is greater than emotional trust,which also greater than social trust.Besides,entrepreneurial learning plays a mediating role between trust and performance,in other words,trust promotes entrepreneurial learning,enhances rural entrepreneurs’ skills,and finally enhances their business performance by improving the acceptance of information and knowledge.Specifically,the mediating effect of entrepreneurial learning is the largest in the impact of emotional trust on entrepreneurial performance,followed by institutional trust,and the effect in social trust is the smallest.The entrepreneurial environment positively moderates the mediating role of entrepreneurial learning between trust and performance,but the moderating effect of entrepreneurial environment on the impact of entrepreneurial learning on performance does not been confirmed.Additionally,the role of trust in promoting rural entrepreneurs’ venture performance is not only heterogeneous in entrepreneurs’ gender,their entrepreneurial industries and type,but also influenced by the “Pattern Difference Sequence” of trust.