SMEs Entrepreneurial Dynamics within the Chinese institutional Framework

Dominant institutional-based perspectives on entrepreneurship suggest that entrepreneurship in transitioning economies face difficulties due to the inadequate institutions. However, existing studies of entrepreneurship have rarely accounted for specific institutional differences across industries. This paper adds an additional view to the institutional perspective of entrepreneurship in emerging economies by investigating the entrepreneurial response of Chinese SMEs to institutions’ influence in three industrial contexts. The findings suggest that despite extremely restrictive formal institutions, the informal institutions enable SMEs in real estate to be more entrepreneurial than SMEs in international trade and manufacturing sectors. The industrial dynamics of real estate require firms to compete intensively through forming informal networks with government officials who have direct impact on such a highly state-controlled industry. Theoretical discussions and recommendations are provided.