A Comparative Study On The Institutional Environment Of Entrepreneurial Activity Under Different Transformative Stages In China

Recently, the contextual research on entrepreneurial activity has become the hot topic in the entrepreneurship area, especially the research based on China's transformational economy. Starting from implementing the Open and Reform policy in 1978, China has gone through thirty years of economic transformation. During this time, the economic environment in China experienced great movements, and the entrepreneurial activities also exhibited different characteristics accompanying with the changes of institutional surroundings. The cost-benefit expectation of entrepreneurs upon entrepreneurial activity will be confined by certain social institutional circumstance, whose transformation would lead to the change of entrepreneur's behavior and affect the economic development accordingly. Therefore, the research on institutional environment of entrepreneurship has significant practical meaning. We can eliminate any structural obstacles against entrepreneurship by optimizing the environment and innovating the institution, and sequentially promote the entrepreneurship as well as the economic development. Unfortunately, the current research on institutional environment of entrepreneurship is far away from complete and requires further exploration.After reviewing relevant literature, we find out that most scholars just research the institutional environment of China from the cultural aspect, while the practice improves that many problems could not be explained by cultural dimension only. Regulation, Cognitive and Normative dimension should also be included. But these three angles origin from the western environment, thus their adaptability in Chinese context lacks theoretical and practical confirmation so far. At the same time, majority of present researches rest on the static approach, in defect of longitudinal comparison among various phases of institutional environment. Although some scholars did put forward several propositions referring to the effect of institutional environment on entrepreneurship in transformational economy, they didn't take empirical research to support these questions. Consequently, such empirical research in dynamic approach is a valuable and creative way, and that is exactly what this paper is attempting to do.Based on the context theory and institution theory, this paper advances its framework. First, it reviews the specific content and development procedure of context theory, indicating that the current study is an extension and application of this theory. Next, it summarizes the definition and components of institution theory, together with the conditions of institutional changes. Third, it combines the institutional environment with entrepreneurial activity, illustrating the connotation of entrepreneurial institutional environment and its impact on entrepreneurial orientation and enterprise performance. Last, it analyzes characteristics of China's transformational economy and reviews relevant domestic and foreign studies. From the unique aspect of phase-research, it compares and analyzes the entrepreneurial institutional environment of China in differing transformational stages.According to the process of Open and Reform policy benchmarks of this process and the results of case interviews, the author divides China's transformation in three phases: 1978——1988, it's the beginning time and private economy was illegal yet; 1989——1998, the private economy become legitimated, and its legal and economic position was assured in the constitution and the resolution of the Party; 1999——2008, private economy was promoted from the complementary role in the second phase to the "important component of national economy" role in the third phase. From then, the private economy developed at a fast rate, and gradually became the mainstay.As to the dimensions of institutional environment, this paper points out the drawback of uni-dimension. It refers to the three-dimension model proposed by other researchers, considers the special condition of China, and chooses to analyze the entrepreneurial institutional environment in Regulation, Cognitive and Normative dimensions. They mainly demonstrate the governmental support, personal entrepreneurial ability and the degree of social cognition toward entrepreneurship. This paper defines the three dimensions at first and lists specific items; then it deeply studies the entrepreneurial institutional environment in different transformation phases, and proposes three hypotheses:H1a:the Regulation environment in the third phase of China's transformational process is better than that in the second phase.Hlb:the Cognitive environment in the third phase of China's transformational process is better than that in the second phase.Hlc:the Normative environment in the third phase of China's transformational process is better than that in the second phase.On the basis of hypotheses, the author utilizes the survey approach to carry out the empirical research. Questionnaire design stage contains settling format, questions and scales, pilot interview and modification. Then almost 400 copies of questionnaires were handed out nationwide, and 281 effective ones were returned. It meant that response rate reached 70%, indicating a relatively successful survey. There are about 63 companies founded before 1999, accounting to 22.4% of the total samples. This results in some problems. Because of the limits of objective condition, many mature corporations, which were established in the early stage of transformation, have to use the retrospect method to recall the entrepreneurial institutional circumstance. Such means may cause some deviation. At last, conclusions were obtained from processing these data statistically. We discovered that all three hypotheses were passed. That is to say, the overall entrepreneurial institutional environment in the third phase of China's transformational process is better than that in the second phase.At last, this paper discusses the conclusions and gives the implications as well as future research directions. It has great importance to supplement the deficiency in the research on entrepreneurial institutional environment, to demonstrate the change rules of institutional environment in transformational economy and to extend the context theory of entrepreneurial activity. Furthermore, it will also provide more detailed theoretical and empirical evidence for future research on entrepreneurship in China.