Impact of ethnicity and self-employment on initial financing and business performance in entrepreneurship in China

Pages151-166
DOIhttps://doi.org/10.1108/JCEFTS-06-2019-0033
Publication Date07 October 2019
AuthorBismark Kusi Appiah,Zhang Donghui,Shapan Chandra Majumder
SubjectEconomics,International economics
Impact of ethnicity and self-
employment on initial nancing
and business performance in
entrepreneurship in China
Bismark Kusi Appiah and Zhang Donghui
School of Economics, Shandong University, Jinan, China, and
Shapan Chandra Majumder
Department of Economics, Comilla University, Comilla, Bangladesh
Abstract
Purpose The purpose of the current study is to analyze the inuence that is caused by ethnicity and
volunteer self-employmentin entrepreneurship on the initial nancing and business performance of Chinese
enterprises.The increasing trend of entrepreneurship hasraised certain ethnic challenges in entrepreneurship
owing to globalizationand now there are several minority groupsthat are running their households in China.
So, the currentstudy aims to assess whether the minority-operated and majority-operatedrms have different
access to initialnancing and different business performance.
Design/methodology/approach The data are collected from 25 Chinese enterprisesabout the current
variables, and the relationshipsare tested. This study has used the ordinary least of square (OLS) regression
model to examinethe ndings.
Findings The purposivesampling is used in the current study because the purpose of the present research
is to understand and study the role of ethnicity and self-employment in initial nancing and business
performance of Chinese enterprises and so the data was collected from related enterprises. This study has
used the ordinaryleast of square (OLS) regression model to examinethe ndings.
Originality/value The current ndings have signicantimplications in theory and practice. This study
will be a great addition to the literaturebecause the self-employment has never been examined before in such
models to assessthe role of forceful or volunteer self-employment in entrepreneurship,and so, it will open new
doors of researchfor future researchers.
Keywords Ethnic entrepreneurship, Initial nancing, Self-employment, Business performance
Paper type Research paper
1. Introduction
Increasing challenges and ethnicity in enterprises and rms have raised various concerns
for initial nancing and business performance. These challenges have raised the need for
empirical studies through which differentfactors can be identied and explained to play an
important role in determining initial nancing and business performance of enterprises.
Entrepreneurship in China has increasedlargely after the countrys trade liberalization, and
there are many new entrants in the Chinese market with new enterprises (Ahlstrom and
Ding, 2014;Naudé and Rossouw,2010). People of different races and cultures have startedor
expanded their businesses to China with the aim of generating large revenues and having
access to large markets. However, there is always a challenge of nancing associated with
JEL classication L26, J15
Impact of
ethnicity and
self-
employment
151
Journalof Chinese Economic and
ForeignTrade Studies
Vol.12 No. 3, 2019
pp. 151-166
© Emerald Publishing Limited
1754-4408
DOI 10.1108/JCEFTS-06-2019-0033
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1754-4408.htm
any new enterprise because the initial nancing has a great potential to determine the
success or failure of a business (Gompers etal.,2010;Jennings and Brush, 2013). Although,
past studies have attempted to identify different aspects of nancing with respect to
entrepreneurship, there are a very few studies aboutthe determinants of initial nancing in
entrepreneurship (Brutonet al., 2015;Guangrong and Enyan, 2011;Lerner et al., 2012). Very
few past studies, which have examined the determinants of initial nancing in
entrepreneurship,have considered the role of ethnicity and volunteer self-employment in the
initial nancing of an entrepreneur. Therefore, it can be said that the contribution of
ethnicity and volunteer self-employment to the initial nancing in entrepreneurship has
been largely ignored in existing literature. The current paper attempts to fulll this gap in
the literature on entrepreneurshipand initial nancing.
In addition to the gap in literature regarding the determinants of initial nancing in
micro enterprises, the literatureprovides limited details and insights about the phenomenon
through which the initial nancingcan affect the business performance of the enterprises.In
the modern era, ethnicity has increased the challenge in initial nancing and business
performance becauseit is suggested that the minority-operated enterprisestend to face more
challenges regarding initial nancing and business performance compared to majority-
operated enterprises. So, chancesof better performance are higher for the majority-operated
enterprises because of having increased initial nancing (Howell, 2019). The increasing
trend of entrepreneurship worldwideis also raising these ethnic challenges. Figure 1 shows
the entrepreneurshiptrend in China, USA and Japan.
A factor which is much more important in this phenomenon is the issue of self-
employment because voluntary or involuntary self-employment can cause different effects
on initial nancing and business performance. Entrepreneurs of transition economy, who
adopt self-employment willingly for the sake of increased protability, are more likely to
accomplish better business performance as compared to those who adopt self-employment
by necessity because the enterprises having insight to generate prots with self-
employment tend to have a positive attitude toward self-employment. There is ample
literature which suggests that raisingnance and capital is one of the biggest challenges in
the establishment of small businesses (Agwu and Emeti, 2014;Jennings and Brush, 2013).
Although the challenges of nance for ethnic minorities exist across different countries
worldwide, empirical studies addressing these challenges and studying the determinants
and the consequences of these challenges are scarce and very limited, especially in the
context of China. There are very few studies found in the existing literature that have
analyzed the initial nancing to be a great challenge and that have conducted comparative
analysis of this initial nancing for ethnic minorities and non-minorities. Very few studies
that have analyzed and compared the access to initial nancing in ethnic entrepreneurship
Figure 1.
Entrepreneurshipin
the worldsthree
largest economies(%)
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