Business Environment and Dual-Track Private Sector Development
A void in the literature on the business environment is how it evolves over time. Focusing on China during its crucial two decades of transition (from the early 1990s to the early 2010s), this paper documents how the country's business environment and the characteristics of entrepreneurs evolved, along with the role played by local governments. Relying on multiple comprehensive data sets, the paper shows that many aspects of local business environments improved: infrastructure, development of the court system, and access to external finance. Meanwhile, the share of politically connected private firms remained large, and their advantage in accessing key resources increased. Under this dual-track private sector development, private firms became larger and more innovative and adopted more formal corporate governance mechanisms. Entrepreneurs became much better educated, with more diverse sectoral experience. Market competition increased over time, especially after China's World Trade Organization entry. The paper offers suggestive evidence that this dual track development had negative consequences, such as a lower tendency to innovate by politically connected firms.
| Main Authors: | , , |
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| Format: | Working Paper biblioteca |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020-02
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| Subjects: | BUSINESS ENVIRONMENT, PRIVATE SECTOR DEVELOPMENT, INNOVATION, ENTREPRENEURSHIP, LOCAL GOVERNANCE, POLITICAL CONNECTIONS, CORPORATE GOVERNANCE, MARKET COMPETITION, WORLD TRADE ORGANIZATION, |
| Online Access: | http://documents.worldbank.org/curated/en/327401582639640799/Business-Environment-and-Dual-Track-Private-Sector-Development-Chinas-Experience-in-Two-Crucial-Decades https://hdl.handle.net/10986/33393 |
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| Summary: | A void in the literature on the business
environment is how it evolves over time. Focusing on China
during its crucial two decades of transition (from the early
1990s to the early 2010s), this paper documents how the
country's business environment and the characteristics
of entrepreneurs evolved, along with the role played by
local governments. Relying on multiple comprehensive data
sets, the paper shows that many aspects of local business
environments improved: infrastructure, development of the
court system, and access to external finance. Meanwhile, the
share of politically connected private firms remained large,
and their advantage in accessing key resources increased.
Under this dual-track private sector development, private
firms became larger and more innovative and adopted more
formal corporate governance mechanisms. Entrepreneurs became
much better educated, with more diverse sectoral experience.
Market competition increased over time, especially after
China's World Trade Organization entry. The paper
offers suggestive evidence that this dual track development
had negative consequences, such as a lower tendency to
innovate by politically connected firms. |
|---|