Abstract
We examined the following factors in this study of Chinese entrepreneurs’ success: entrepreneurial motivation, success factors, start-up challenges, business growth, the role of family and social network in reducing stress, and professional satisfaction. In this study, we examined Chinese entrepreneurs for their motivations to start a business, factors that support their success, problems that occur during start-up and growth of the business, the role of family and social network in creating a less stressful working environment, and the overall level of satisfaction with their profession. Results indicate that economic worries were the most important reason for starting one’s own business than career and personal motives. Chinese small and medium-sized enterprise(SME) owners cited honesty and customer relations as the other most important factors in their success. Additionally, Chinese entrepreneurs rated employee-related problems as the most critical problem among all problems we asked in the survey. Results also showed that the gender of the entrepreneurs we sampled was not a significant differentiating factor in identifying entrepreneurial motivations.
Keywords
Introduction
Empirical research findings indicate a positive correlation between economic growth and entrepreneurship (Audretsch & Keilbach, 2003; Carree et al., 2002; Schumpeter, 1950). Entrepreneurial activity is recognised as the engine of economic development, which contributes to overall economic output, and its function in employment creation is studied; for instance, 75% of the Japanese workforce work for small and medium-sized enterprises (SMEs) (Dana, 1998). Similarly, 78% of Taiwan’s workforce is employed by 96% of SMEs (Lin, 1998). SMEs employ 99% of the total labour force in the United Kingdom, which approximated 14. 5 million in 2013 (Rhodes & Ward, 2014). A significant portion of economic transformation in Africa can be attributed to SMEs. More specifically, SMEs in Ghana employ 70% of the workforce, even though each SME employs less than five people (Government of Ghana, 2003; World Bank, 2006). Also, the private sector in Kenya contributed 18% to its gross domestic product (GDP) by employing 3. 2 million people in the workforce (OECD, 2005). The Nigerian private sector produced 50% of its industrial output by employing 50% of the labour force (Ariyo, 2005).
Since the transformation of the Chinese economy into an open market economy by several legislations beginning late 1970s, entrepreneurial-led SMEs have provided social stability and economic prosperity for tens of millions of Chinese people. Because of this economic transformation, China has enjoyed unprecedented economic growth of 9% annually in the last three decades (Fung et al., 2006b; Gordon & Li, 1991). Economists have credited the private sector for this astonishing achievement (Anderson et al., 2003). In China, there were 150, 000 small businesses in 1978 (Liu, 2003). The number of small businesses increased to an estimated 12 million by the end of the 1990s. In 2006, the number of private enterprises more than doubled and exploded to 31, 518, 000 units. A significant contribution (70%) of the overall tax revenue and a significant portion (90%) of the total employment ismade by the private sector. This includes the people entering the labour force for the first time and those who lost their jobs at state-owned enterprises (Fung et al., 2006a). The news report suggests that 60% of GDP was from the private sector in 2008, and they provided 62. 1% of the fixed investment in 2012. Thus, the growth of the entrepreneurial sector is a crucial driver of China’s sustainable future economic performance, as in many other countries worldwide. Hence, we think it is essential to understand the motivations, success factors, and problems related to SMEs’ emergence, development, and growth. We also believe that an in-depth examination of the issues mentioned above in small business management helps researchers and policy makers understand the similarities and differences in entrepreneurs’ challenges across regional borders and increases the possibility of mutual learning (Su et al., 2015). For that purpose, our study reports a survey sample from among Chinese entrepreneurs in three different locations in China. We specifically examined the following three research questions in the Chinese business environment: (a) What factors motivate Chinese entrepreneurs to own their businesses? What factors contribute to their success? What problems do they have to overcome to grow and sustain their businesses? Is there any gender difference between male and female Chinese entrepreneurs regarding the motivation to start a business, success factors, and problems? (b) How do Chinese entrepreneurs perceive the role of family support and job satisfaction in coping with business-related stress? (c) Is there any gender difference between male and female Chinese entrepreneurs in social support from friends and family members? (d) What competencies and issues do they need to address to sustain and grow their businesses? We also believe that our study will contribute to the existing knowledge in the SME literature, which will help policy development concerning SMEs operating in many different countries. In the next section, we present a literature review, followed by a research methodology. We then present the methods employed in the study and the results. Finally, we present the conclusion and highlight the policy and practical implications of our SMEs’ findings.
Literature Review
Becoming an Entrepreneur
An existing body of research has examined what motivates entrepreneurs in different countries to start new businesses; for instance, in their study of Vietnamese small business owners, Swierczek and Ha (2003) found that challenge and achievement were more essential motivators than were necessity and security. Results suggested an intrinsic entrepreneurial orientation and a new emerging culture in Vietnam that includes greater risk-taking and proactive behaviour. Additionally, research showed that Romanian entrepreneurs rated financial security and income as more important than self-satisfaction and personal needs. The two strongest motivators were increasing income and obtaining job security (Benzing et al., 2005b). In contrast, what motivates entrepreneurs in India was to gain independence/autonomy, that is, to be their boss, based on a study of women entrepreneurs (Gnanadhas & Jesurajan, 2011). Krishna (2013) indicated that creating employment opportunities and gaining self-growth through work were the two most significant motivators among Ethiopian entrepreneurs.
Among entrepreneurs in China, Pistrui et al. (2001) found the following primary reasons to start a new business: the personal need for achievement, desire to contribute to an enterprise’s success, and desire for higher earnings. Other research suggests that Chinese entrepreneurs are motivated to work hard to gain independence at work and access better economic opportunities (Yueh, 2007). On the other hand, Mann and Thorpe (1998) found that Asian entrepreneurs, in general, cited ‘making more money’ as the most important extrinsic factor to start their own business, while non-Asian entrepreneurs cited gaining independence by owning their business as the most important reason.
Research evidence shows that Turkish entrepreneurs, similar to their Chinese counterparts, indicated that securing their family’s financial security is the main reason to start their own business (Ozsoy et al., 2001). Research evidence also shows that the desire for flexibility, work freedom, and to be one’s boss were other critical factors. Cetindamar (2005) observed that gaining independence at work was the most important motivation for entrepreneurs working in technology-producing firms in Turkey. Cetindamar (2005) postulated that the creation of employment opportunities, high income, and personal satisfaction were other crucial concerns among Turkish entrepreneurs he surveyed for owning a small business company.
Achieving Success
An existing body of research evidence shows a widespread disagreement among the researchers regarding what contributes to entrepreneurial success. Nevertheless, our literature review showed that a large proportionof entrepreneurship research has mainly examined a set of factors related to (a) the psychological and behavioural traits of entrepreneurs, (b) the managerial skills and training of entrepreneurs, and (c) the external economic and physical environment.
Several research studies conducted by Benzing and her colleagues identified management skills as a critical factor for business success (Benzing et al., 2005a, 2005b, 2005c; Busch, 1989; Gosh et al., 1993; Huck & McEwen, 1991; Yusuf, 1995). Similarly, in a study that examined Jamaican small business owners’ success factors, Huck and McEwen (1991) identified management, planning/budgeting, and marketing/selling as the essential competency areas. Huck and McEwen (1991) referred to several specific competencies: maintaining financial records, networking skills, and establishing future goals and objectives. Similarly, South Pacific islanders considered good management skills, access to financing, personal qualities, and adequate government support as the most critical success factors (Yusuf, 1995). Additionally, Vietnamese entrepreneurs selected ‘friendliness towards customers’ as the most important success factor, with ‘a good product at a good price’ a close second (Benzing et al., 2005c), while Romanian entrepreneurs ranked friendliness towards customers, reputation for honesty, and good customer service as the top three success factors (Benzing & Chu, 2005).
An existing body of research evidence shows that the Chinese attribute their success to external factors more than they attribute to internal factors, and that people in eastern cultures often underscore the role of luck and fate as the factors leading to success. While many Chinese people believe in fate, Chinese entrepreneurs underline the role of luck in their business success more than fate (Liao & Sohmen, 2001). Researchers (Liao & Sohmen, 2001) identified that Chinese culture, social ties, and social networking play a vital role in the success (Yueh, 2007). Research conducted concerning the cultural foundations of leadership and management in the Chinese cultural context shows that ‘networks’ of interpersonal relationships (Quanxi in China) are extremely ‘important’ (Su et al., 2015). According to Fan (2002), there are two main types of interpersonal relationships (guanxi) : natural relationships (e. g., family) and acquired relationships (e. g., friends). In acquired relationships like guanxi, a connection means the continued exchange of favours and the obligation to respond to assistance requests (Tsang, 1998). It creates a social context where honouring the expectations for reciprocal obligations is critical to maintain social ties and stay connected. It is widely accepted that having social ties to friends at government bureaucracy or Chinese communist party ranks helps Chinese entrepreneurs’ success (Liao & Sohmen 2001).
The Chinese family values have been recognised for their unifying role in the Chinese societyfor centuries. According to Tsui et al. (2000), family is the basic social unit, and kinship is an individual’s most important social relationship in China. Family ties, which are characterised by unconditional loyalty, involve social obligations that are not based on reciprocity (Tsui et al., 2000). Family support seems extremely important during abusiness start-up process where capital financing opportunities are very stringent. The family invests in both financial and human resources when qualified nationals are unavailable for the job. Family members are willing to work for minimal compensation in exchange for a future gain (Liao & Sohmen, 2001).
Overcoming Problems
The problems faced by entrepreneurs in developing countries are often quite similar. First, entrepreneurs face an unstable and a highly bureaucratic business environment. The laws governing private enterprise, especially business registration and taxation systems, are overly complex and difficult to understand. The enforcement of the poorly designed contract and private property laws usually involve corruption and bribery, leading to added expenses for the SME owners. Danis and Shipilov (2002) found that Hungarian and Ukrainian entrepreneurs ranked level of taxation and high social security premiums as their most serious problems. In Slovakia, entrepreneurs complained about the burden imposed by socialised health care system’s high social insurance costs, governmental bureaucracy, and corruption (Ivy, 1997).
Numerous studies have documented that most SME owners in developing and transition economies complain about insufficient capital (Benzing et al., 2005b; Cook, 2001; Gray et al., 1997; Levy, 1993; Mroczkowski, 1995; Peel & Wilson, 1996; Spring & McDade, 1998). They often cannot meet the collateral requirements for commercial loans orface overpriced rates of interest. Research among small businesses in East African countries (Tanzania, Kenya, and Uganda) shows that the private sector is over-regulated with laws and regulations that duplicate each other at central and local levels. Entrepreneurs are often subject to lengthy and costly delays in clearance and approval processes (Macculloch, 2001). In Kenya and most of Africa, government officials are suspicious and sometimes hostile to profit-making. Entrepreneurs complain about long delays in getting approval for trade licenses and business registration. Complicated tax forms, massive government control, and outright misinterpretation of laws are common problems faced by small business owners (Pratt, 2001).
Entrepreneurs face obstacles in running their businesses successfully (Liao & Sohmen, 2001). The main obstacle is volatility in property rights. Businesses face uncited restrictions and court inconsistencies and deal with different layers of bureaucracy. The second hurdle is labour and technology. The primary source of investment comes from family most of the time, as highlighted in extant research (Chu & Zhu, 2010; Pistrui, 2003). Bank loans and other credit possibilities from financial institutions rarely exist. Attracting skilled and reliable employees is another obstacle faced by business owners. Although China is known to be home to a significant population, many workers are less educated peasants from the countryside. Qualified individuals seem to be less loyal as high bidders can quickly transfer to other firms in the labour market.
Stress and Business Ownership
Job stress has been defined as an internal state or a reaction to what a person believes to be a threat to him or her, whether it is accurate or imagined (Clark & Watson, 1991). Escalated job stress has been identified as the leading source for absenteeism, work-related injury, and reduction in productivity (Crampton et al., 1995; Roberts et al., 1997). The US economy accounts for US$300 billion and the EU 20 billion Euros for job-related stress.
Although extant research indicates that business owners experience stress (Akande, 1992; Buttner, 1992; Rahim, 1996), research supporting this notion is limited. Jamal (1997) reported that entrepreneurs often experience highs tress levels because their work lives always face highly demanding tasks. It is widely accepted that small business owners often work more than 12 h per day (Jamal & Badawi, 1995). These extended hours may be a significant source of stress among small business owners.
Since stress can create adverse consequences on workers, managing and controlling stressis critical. A few studies on stress reduction methods pointed out that the opportunity to interact with co-workers may help alleviate stress (Karasek & Theorell, 1990). Research evidence showed that social support reduces the level of stress experienced by small business owners (Parkes et al., 1944). However, Mack and McGee (2001) could notfind support for the assertion that social support decreases stress among business owners. The evidence on the relationship between social support and stress has, thus, been inconclusive.
Research conducted by Latack et al. (1995) and Karasek (1990) suggests that controlling the situation may help a person better cope with stress. It is believed that small business owners have more control over their work environment, and, therefore, they are expected to experience less stress. Also, the attraction-selection-attrition theory points to another possibility that perhaps people who pursue a career in entrepreneurship perceive less stress than others. Therefore, even though the entrepreneurial business environment is prone to job stress, the entrepreneur herself/himself may perceive less job-related stress than generally thought (Baron et al., 2013). Mixed results in this domain suggest that further studies are needed. Hence, this study examines the level of stress experienced by SME entrepreneurs in the context of China.
Research Methodology
We have used a cross-sectional research design and exploratory factor analysis, widely used in entrepreneurship research (Coviello & Jones, 2004). The cross-sectional design allows for collecting data quickly. Coviello and Jones (2004) have identified that this method is reliable and valid provided language adaptation and consistent meaning are ensured. SPSS software is used for data analysis.
Sample and Subjects
Two Chinese experts collected the data during the period September 2007–May 2008. Face-to-face meetings were conducted with a majority (90%) of the participants, and the remaining data collection was made through an online survey system (Question Pro). The participants were randomly selected from telephone directories of Beijing, Shanghai, and Guangzhou. Non-profit organisations, government-owned enterprises, and any business that had its transactions on the street were disregarded.
Instrumentation
Chu and Katsioloudes (2001) originally developed the survey instrument used in this study. Since then, researchers have used this instrument for small business surveys in several countries. The original version of the questionnaire was in English. We then translated it into Chinese and checked for inter-translator consistency for current research. The survey items related to motivation are similar to those suggested in the work of Robichaud et al. (2001) and Kuratko et al. (1997). The evidence shows that survey instrument has the necessary level of reliability. Guttman split-half coefficients were relatively high for the items related to motivation, perceived success, and problems faced. ‘Cronbach’s alpha’ and split-half coefficient for the motivation items were 0. 800 and 0. 697. For perceived success, Cronbach’s alpha was 0. 886, and the split-half coefficient was 0. 691. For problems faced, Cronbach’s alpha was 0. 888, and the split-half coefficient was 0. 774. Cronbach’ salpha, referred to as ‘the reliability coefficient’, is the typicalestimate for internal consistency of items in a scale. Hence, the survey instrument is well suited for Likert scales such as those used in this study (Gleim & Gleim, 2003). Although a popularly accepted view is that Cronbach’ salpha scores should be above 0. 700 (Nunnally, 1978), Simon (2008) indicates that acceptable scores are between 0. 600 and 0. 800. Streiner and Norman (1989), on the other hand, believe that an ideal score should fall between a minimum of 0. 700 and a maximum of 0. 900 to ensure against a high level of item redundancy. Hence, we conclude that our study data satisfy the necessary reliability requirements.
We conducted Harman’s single factor test to assess common method bias (Podsakoff et al., 2003). The total variance explained by a single factor turned out to be 33% for motivation construct items, 38% for success construct items, and 41% for problem construct items. Since no single factor accounted for most of the variance, we are confident that our decision to divide the data into several factors is appropriate.
The data analysis results showed that the Kaiser–Meyer–Olkin (KMO) measure of sampling adequacy and Bartlett’s test of sphericity scores satisfied their respective thresholds for the three sets of variables. More specifically, KMO was 0. 683 for the motivation construct, 0. 844 for success, and 0.822 for problems faced. In general, a KMO statistic that is above 0. 700 is satisfactory and below 0.500 is unacceptable. Bartlett’s test is a measure of how the correlation matrix is an identity matrixthat implies non-factorability. The results of Bartlett’s test yielded evidence allowing us to reject the non-factorability hypothesis. Consequently, we used principal component analysis (PCA) with varimax rotation (Hayton et al., 2004). We checked the number of factors for consistency between PCA with no rotation, PCA with varimax rotation, and principal axis factoring (PAF) with varimax rotation, and all three methods yielded the same number of factors for each variable set.
Measures and Demographics
The research objective was explained, and all the participants completed a five-page self-report questionnaire. Variables are measured in the following ways: motivation success and challenges were measured on the ordinal scale; gender and education on a nominal scale; and the number of employees, hours worked, and age were measured using an interval scale. A higher mean score on a variable indicates a higher importance.
A 12-item Likert scale was used to measure the motivation to start a business, and a 17-item Likert scale for business success, and the respondents rated accordingly. On the Likert scale, respondent rated the reasons for starting a business on a five-point Likert scale as follows: 5 was “extremely important”, 4 was “very important”, 3 was “mildly important”, 2 was “not very important”,and 1 was “unimportant”. The following scale anchors were used to measure the 17 items for perceived problem, 5 represented ‘very serious’, and 1 represented ‘not a problem’; for business-related stress, 5 represented ‘very high’, and 1 represented ‘nonexistent’; for business-related satisfaction, 5 represented ‘Very satisfied’ and 1 represented ‘very dissatisfied’ . We measured family support with 1 item where 5 was ‘Very substantial’ and 1 was ‘Very Low’. We measured the construct business success that met expectations using one item where 4 represented ‘More than I expected’ and 1 represented ‘Did not meet my expectations’.
Results
Sample Characteristics of Chinese Entrepreneurs
Table 1 summarises the demographic characteristics of Chinese entrepreneurs in this study. The results indicated that male participants are slightly older (8 years) than women and a year older than the overall sample average at 32. 49. The results indicated that Chinese entrepreneurs were younger compared to entrepreneurs in Nigeria (Chu et al., 2008), Turkey (Chu et al., 2007), and Romania (Benzing et al., 2005b). Our findings indicate the respondents’ educational background: 7. 34% had a graduate degree, 3. 95% had completed some graduate work, 47. 46% completed college, 15. 82% had completed some college-level courses, and 21. 47% finished high school. Compared to the developing countries and small business owners in Romania, Chinese entrepreneurs are highly qualified (Benzing et al., 2005b).
The descriptive statistics showed that 68. 1% of the sample was male entrepreneurs, and 31. 9% was female entrepreneurs. This distribution of male versus female entrepreneursis consistent with a previous study of Chinese entrepreneurs describing modern women’s business participation (Pistrui et al., 1997). Chinese entrepreneurs invest less time (41. 83°h a week) in business when compared to other countries such as Vietnam, Romania, and Turkey (Benzing etal., 2005a, 2005c, 2009). We attribute this discrepancy in the number of hours spent in business to the higher numbers of employees working in a Chinese small business sector than the countries mentioned above.
The average age of the business was 5.61 years. Evidence demonstrates that 15.53% of the businesses are wholesale. Results also show that 59% of the entrepreneurs we sampled fall into the service industry, which alarms the private sector that focuses on serving the consumer market’s needs (Davis, 2000).
Sample Characteristics of SME Entrepreneurs.
Source of Advice.
Sources of Funds.
Table 3 documents the primary sources of funds for Chinese entrepreneurs. Because of the question’s confidentiality, 45. 5% of respondents chose not to respond to the question. The findings showed that 23. 5% of the entrepreneurs had funds from their friends, while 17% reported obtaining their funds from non-governmental organ is at ions or international lending agencies. It is interesting to note that Chinese entrepreneurs did not indicate private and state banks as a significant funding source. The findings showed that roughly 5. 5% of Chinese entrepreneurs in the sample reported private and state banks as funding sources, that only 1. 5% used their savings, and that 1% reported applying a credit cooperative for their start-up capital.
Motivational Factors of Chinese Entrepreneurs for Business Ownership
Mean Scores for Motivation.
The results further show that Chinese entrepreneurs ‘intention’ ‘to be my own boss’ is the third most important motive (mean score of 4. 23) to become an entrepreneur. The results also show that entrepreneurs indicated ‘making use of their experience and training’ as another motive for business ownership with a score of 3. 91. Hence, this study lends support for Pistrui et al. (2001) that Chinese business owners were eager to ‘make better use of their training and skills’ by becoming entrepreneurs.
We also examined whether gender differences influence the motivation to start their business. The results indicated that except for the motive ‘To build a business to pass on’ (p <0. 1), there were no other significant gender differences for any of the remaining 10 motives comprising the motivation variable.
Several studies explore the difficulties and bureaucratic and economic circumstances female entrepreneurs face in both China and other countries (Lewis, 2006). Those studies also were not able to find any significant gender differences in terms of entrepreneurship motives. Moreover, in a recent study of 183 female entrepreneurs using the same instrument, Chu and Zhu (2010) found that the highest-ranked motives were (a) ‘to increase income’; (b) ‘to prove that one can do it’; (c) ‘to be my own boss’; and (d) ‘making use of their experience and training’, similar to what we observed in this study. In a recent study, Zhu et al. (2015) investigated motivations, success factors, problems, and business-related stress of Vietnamese women entrepreneurs. Their findings also showed that the two most crucial reasons for business ownership were ‘increasing income’ and ‘beingone’s boss’ . Hence, this study further validates the extant research findings that there is no gender difference between male and female entrepreneurs regarding the motivation to own a business.
Factor Analysis for Motivation Variables.
The first factor includes those motives that are usually named as ‘job security’ or ‘internal career’ motives (Benzing et al., 2007; Stefanovic et al., 2010). Results showed that respondents gave a higher rating for the first factor ‘to provide jobs for family members’, ‘to be their own boss’, ‘to build a business to pass on’, and ‘to be closer to their families’ . We grouped these variables as ‘family motives’, which we consider as some of the driving factors for Chinese entrepreneurs to start their own enterprises.
The second factor referred to as ‘career motives’ includes motives ‘To prove I can do it’, ‘To gain public recognition’, ‘To be able to use experience and training’, and ‘For my own satisfaction and growth’ . Several different researchers classified these motives as ‘intrinsic motives’, ‘objective career motives’, or ‘social core’ (Benzing et al., 2007, 2009). Hence, we claim that experience and training might have motivated people to become entrepreneurs rather than working as employees in a firm where they were likely to have fewer opportunities to Seashore experience and human capital. With gaining public recognition through business ownership, the will to prove oneself might have been one of the drivers to decide to own an enterprise. The findings of our study show that Chinese entrepreneurs value personal motives only after extrinsic rewards.
The third factor comprised three motives: ‘To Maintain Personal Freedom’, ‘To Increase Income’, and ‘Job Security’. We grouped these motives as ‘Personal Motives’ and observed that Chinese entrepreneurs ranked these personal motives only after economic and career purposes.
Table 5 also summarises the mean score for each factor. It shows that the ‘motivation’ factor is defined by three main sub-factors, which we identified as ‘family motives’, ‘career motives’, and ‘personal motives’. Table 5 shows that study respondents ranked personal motive to start a business as the most critical motive, while they ranked career motive as the second most important motive for owning their business and finally, family motive as the least important motive for owning a small business.
Success Factors of Chinese Entrepreneurs
Mean Scores for Variables Contributing to Business Success.
The results in Table 6 showed that Chinese entrepreneurs ranked ‘Good customer service’ as the most important factor contributing to their success with a mean score of 4. 74, ‘Reputation for Honesty’ as the second most important factor with a mean score of 4. 73, and ‘Good General Management Skills’ as the third most important factor with a mean score of 4. 49. Additionally, Chinese entrepreneurs ranked ‘Charisma’, ‘Friendliness towards Customers’, ‘Access to Capital’, and ‘Hard Work’ as the fourth, fifth, sixth and seventh factors in their business success. Similarly, extant research on Vietnamese and Romanian entrepreneurs stated that honesty, management skills, and friendliness towards customers are the most critical success factors (Benzing et al., 2005a, 2005c). According to Zhu et al. (2015), Vietnamese women entrepreneurs consider friendliness towards customers and good location as the two leading success factors. Hence, our findings point to underlying similarities in entrepreneurs’ perceived success factors across countries regardless of their geographical location and differences in culture, religion, and political system. Finally, Chinese entrepreneurs also rated good managerial skills as a necessary human capital for business success with a mean score of 4. 49, which is in line with the studies conducted in Czech Republic (Papulova & Mokros, 2007) and in Vietnam (Chu & Benzing, 2004). The results in Table 6 also show that there is a significant difference in the mean gender score where Chinese male entrepreneurs significantly ranked the ‘Access to capital’ more important for their small business success than their female counterparts (p<0. 05). The findings in Table 6 also show a significant gender difference between Chinese male and female entrepreneurs in perceiving the role of ‘Previous business experience’ in their business success. Male entrepreneurs consider the factor ‘Previous business experience’ as more important in their business success compared to their female counterparts (p<0. 1). However, for the remaining factors comprising the success variable, there are no significant differences in gender mean scores between male and female entrepreneurs.
Factor Analysis for Success Variables.
As reported, we named the first factor as ‘Enterprise Characteristics’ related to the enterprise’s organisational and managerial structure and its mission and values entrepreneurs consider essential for their success. We observed that a reputation for honesty, good customer service, and good product at a competitive price were desirable for entrepreneurs. We like to stress that our grouping of the success factors differed from the way Benzing et al. (2009) grouped them when they examined Turkish entrepreneurs’ success factors. The five items that comprised the first factor collapsed under different factors (Benzing et al., 2009) ; for example, Benzing et al. (2009) grouped good customer service with social and political positions. Their results also showed that hard work was associated with previous business experience and family and ’ friends’ support. We attribute this result to the differences in cultural and entrepreneurial tendencies of the Chinese and Turkish entrepreneurs.
We named the second factor we extracted from 17-item success variables as ‘Stakeholder Characteristics’, since the stakeholders of an organisation use community involvement, political involvement, and government bureaucracy to increase their influence on the organisation system. We named the third factoras ‘Organizational Characteristics’, since this factor comprises items associated with a small business organization’s organizational characteristics. Finally, we named the last factor as ‘Financial Characteristics’ . The results showed that entrepreneurs who value external connections value personnel management and accurate record-keeping very high.
The findings in Table 7 show that Chinese entrepreneurs value financial characteristics and enterprise characteristics as almost equally important factors in their small business’s success with mean scores of 4. 21 and 4. 06, respectively. Finally, the third and fourth success factors had mean scores of 3. 77 and 3. 76, respectively. This suggests that Chinese entrepreneurs attribute their business career success to good enterprise characteristics and financial characteristics more than others. This finding is in parallel with the findings that people in Eastern cultures tend to show less tendency to self-serving bias than in the Western cultural context where people believe their business success lies in their effort and hard work.
Problems Faced by Chinese Entrepreneurs
Problems Encountered by Entrepreneurs.
As shown in Table 8, a sample of Chinese entrepreneurs disclosed ‘inability to maintain accounting records’, ‘unreliable/undependable employees’, and ‘too much competition’ as the three most important problems out of 16 problemsin our survey with mean scores of 3. 81, 3. 59 and 3. 53, respectively. Previous research showed that entrepreneurs perceive ‘unreliable/undependable employees’ and ‘not being able to recruit and retain good employees’ as the two most challenging problems to grow and sustain their businesses in many different countries. For example, respondents in Vietnam indicated that the voluntary turnover could have been prevented if qualified employees were selected for their business operations (Benzing et al., 2005c). In a more recent study, Benzing et al. (2009) found that Turkish entrepreneurs rated ‘unreliable and undependable employees’ as the most critical problem. Additionally, in another similar study conducted among Chinese women entrepreneurs, participants rated ‘unreliable/undependable’ as the highest source of the problem they face in owning a business enterprise (Chu & Zhu, 2010).
Given that China’s unemployment rate was 23% (Wolf, 2004), entrepreneurs indicate hiring and retaining reliable workers as a severe problem. This suggests that SMEs without adequate resources cannot offer competitive compensation, employee benefits package, and career advancement opportunities for employees. As a result, employees with sought-after human capital might be reluctant to join small business enterprises or engage in voluntary turnover when they can find better employment opportunities. This could also suggest weaknesses in the functional domain of human resource management in these SMEs.
Lau et al. (2004) stated that low labour cost is one of the competitive advantages for Chinese domestic firms. This strategy would result in a cutthroat competition, which is the second most crucial problem highlighted by Chinese entrepreneurs. This study’s findings also showed that lack of management training was an essential obstacle for Chinese entrepreneurs’ success, supporting a previous study conducted with Nigerian entrepreneurs (Chu et al., 2008). On the other hand, Turkish entrepreneurs ranked lack of management training as the 10th most crucial problem (Benzing et al., 2009) ; Venezuelan entrepreneurs rated it the 12th most crucial problem (Zimmerman & Chu, 2013) ; Ghanaian entrepreneurs rated it as the sixth most significant problem. Finally, Kenyan entrepreneurs rated it as the ninth most important problem (Benzing et al., 2007).
Table 8 also shows that Chinese entrepreneurs (male and female) differ significantly in perceived problems. The results show that male entrepreneurs perceive ‘Too much competition’ as a significant problem than their female counterparts (p<0. 1). Additionally, independent samples t-test results indicate that Chinese male entrepreneurs significantly differ from their female small business owners in considering short-term financial capital as a problem. Contrary to the female Chinese entrepreneurs we surveyed in this study, a sample of women entrepreneurs in Canada and India disclosed financial problems as the most critical obstacle they face during the start-up and operation stages (Das, 2001; Robichaud et al., 2010). Recently, Zhu et al. (2015) also found that Vietnamese women entrepreneurs’ most critical problems were competition and inability to retain high-quality employees. However, it is noteworthy to indicate that this study ranked the problems similar to a sample of women entrepreneurs surveyed by Chu and Zhu (2010). On the other hand, the findings in Table 8 show that female entrepreneurs perceived ‘Electricity problem’ as a problem that is more significantly encountered compared to their male counterparts (p<0. 1).
Factor Analysis for Encountered Problems.
The first factor comprised the following five problem items: ‘Lack of management training’, ‘Lack of marketing training’, ‘Unreliable/Undependable employees’, ‘Weak economy’, and ‘Inability to maintain accounting records’. The second factor is comprised of the following three problem items: ‘Limited Parking’, ‘Too much Competition’, and ‘Unsafe Location’. The third factor is comprised of five problem items: ‘Foreign Exchange Limitations’, ‘Electricity Problem’, ‘Complex and Confusing Tax Structure’, ‘Poor Road Transportation’, and ‘Business Registration Process’. Lastly, the fourth factor is comprised of the following three problem items: ‘Obtaining long-term capital’, ‘Obtaining short-term capital’, and‘Too much government regulation, bureaucracy’ .
The first factor mainly points to problems regarding training and not having a dependable workforce. We named this factor ‘Organizational Problems’. Benzing et al. (2009) stated that lack of business training was a critical Turkish entrepreneur problem. In asimilar study conducted among Ghanaian and Kenyan entrepreneurs, Chu et al. (2007) found that management and marketing training skills were among the underlying entrepreneurial problems. It is noteworthy to assert that business owners express their frustration about the turnover problem they experience in recruiting, hiring, and training new personnel, which account toabout 15%–20% of a personnel’s annual salary. Therefore, unreliable and undependable employees were a major problem for Chinese entrepreneurs we surveyed in this study. This study’s findings show that entrepreneurs who rated unreliable and undependable employees as critical also rated untrained employees as another critical problem they face. In a recent study, Zhu et al. (2015) found that both Chinese and Vietnamese women consider good management skills essential to achieve their goals.
Similarly, Cinar et al. (2018) suggested that the enhancement of ’ entrepreneurs’ human capital through skill and knowledge education and training is critical to support ’ China’s entrepreneurial growth. Unger et al. (2011) evidenced a significant but small relationship between human capital and entrepreneurial success. Their results indicate that human capital investments geared towards enhancing knowledge and skills are more critical than human capital investments geared towards enhancing education and experience for the ’ entrepreneur’s success. Moreover, they found that relationship is much stronger for human capital with high task relatedness than low task relatedness. While highlighting the needs for management training and development, the problems shown in staff retention and recruitment in this study point to a need for a broader approach to team and organisational building and human resource management. Hence, entrepreneurs are likely to need significant assistance to deal with these issues and develop teamwork involving all ’ employees’ interpersonal skills development. Hence, we recognise the critical role of entrepreneurial mentors and coaches in management training and development and emphasise that policy makers should adopt management training and development initiatives by employing entrepreneurial mentors and coaches.
The factor analysis results show that the second factor involved location al problems. Thus, we named this factor as ‘Location Problems’ . The third factor relates to environmental conditions like electricity provision and transportation. We named this factor ‘Environmental Problems’ .
The results show that the fourth factor involved finding short-term or long-term capital for the businesses. We named this factor ‘Financial Problems’ . Researchers acknowledge that obtaining capital is one of the critical challenges entrepreneurs must address while starting up their businesses in many countries. Duan et al. (2009) alluded to several significant challenges entrepreneurs face when finding the necessary financial resources to start their businesses. Firstly, it costs a premium for a small business company to get loans from a financial institution. Secondly, banks are reluctant to issue loans to those small business owners due to risks associated with the uncertainty and a lack of formalised management and organisational structure. European Union statistics showed that 7% of the European Union SMEs referred to the possibility of outright rejection when applying for bank loans (EC, 2013). Lastly, since SMEs are short-lived, they face a more significant risk premium in obtaining a loan; for instance, Duan et al. (2009) found that more than 50% of the SMEs phaseout of business in less than 4years, which predisposes financial institutions against lending long-term capital to SMEs. Thus, our study findings point to the critical role of financial inclusion in promoting ’ entrepreneurs’ formation and overcoming entry barriers associated with securing funds in China (Fan & Zhang, 2017). In a study employing data from 31 provinces and 19 industries in China during a period from 2005 to 2014, Fan and Zhang (2017) evidenced that financial inclusion influences ’ entrepreneurs’ formation positively and that this effect is heterogeneous across industries. Moreover, financial inclusion is often beneficial to entrepreneurs’ formations in sectors with lower entry barriers. In this regard, we highlight the Chinese government and state-controlled banking ’ sector’s role to remove the entrepreneurial entry thresholds stemming from credit lending challenges.
Stress, Business Success and Social Support for Chinese Entrepreneurs
Mean Scores for Success, Stress, and Support of Entrepreneurs.
The findings also indicate that a sample of Chinese entrepreneurs in this study reported a very positive view of support from friends and family members when asked whether they contributed to their business success. The mean score for family and friends support was 4. 16 out of 5, where 5 represents ‘very substantial’ support obtained from family members and friends. Earlier research also provided evidence similar to what we observed in this study that family and ’ friends’ support contributes to success and satisfaction in small businesses (Chu et al., 2007).
Correlations Between Success, Stress and Support.
We also examined the relationship between perceived business stress and whether their business success met their expectations. The findings show that higher levels of business-related stress were negatively associated with the perception that business success meets their expectations (r=−0. 05), suggesting that business-related stress leads to lower expectations.
The findings in Table 11 point to intriguing results. The findings show a strong correlation between business success and satisfaction, with a correlation coefficient of 0. 608, supporting our earlier observation that Chinese entrepreneurs had a very high perception of success and success-related satisfaction (r= 0. 608, p <0. 01). Table 11 also shows the relationships between expectation and business satisfaction (r= 0. 465, p <0. 01). The findings show that the more they meet their business-related expectations, the more satisfied they become. Likewise, the findings show that the more they perceive that they meet their business-related expectations, the more successful they consider themselves. Hence, we assert that satisfaction with business success and meeting business expectations lead to a more positive and satisfied attitude towards the experience of owning a business. Table 11 also shows that social support from family and friends correlated significantly with the perceived level of business success. Hence, our study lends support for the research evidence pointing to the role of social ties and social networking as a leading factor in business success (Yueh, 2007) and the role Chinese culture plays in the success of Chinese entrepreneurs (Liao & Sohmen, 2001; Su et al., 2015). The findings also show no significant relationship between stress experienced and satisfaction with business success, suggesting that entrepreneurial resilience and hardiness overcome the problems. Table 11 further shows that the relationship between stress and whether the ’ business’s performance meets its expectations is not significant, contradicting the assertions that high business performance expectations lead to higher stress levels. Moreover, our findings show that social support from friends and family members increases the satisfaction with business success. The findings show that social support from friends and family leads to higher business performance expectations.
Correlations Between Education and Success, Stress, and Level of Family Support by Gender.
The correlation between family support and success was significant (r= 0. 203, p <0. 05) for male entrepreneurs, providing evidence supporting the previous research that social network support affects business success (Alam et al., 2011; Brüderl & Preisendörfer, 1996). The results in Table 12 also show that the correlation between family support and business success is significant (r= 0. 294, p <0. 05) for female entrepreneurs, suggesting that female entrepreneurs also consider having the support of their friends and family members an essential factor in their business success.
Nuanced Examination of the Variables Across Entrepreneurial Sector and Business Type
This section of the results presents a more nuanced examination of whether this study’s primary findings differ across entrepreneurs in different sectors such as retailing, wholesaling, service, manufacturing, agriculture, and other sectors. We looked at the possible differences across entrepreneurs regarding motivations to start a business, business success, and business-related problems. For that purpose, we employed IBM SPSS Version 27 to run cross-tabulations and multivariate analysis of variance (MANOVA) analyses.
However, our cross-tabulation and MANOVA analyses within our sample point to minimal differences across business types, if any. First, we ran a cross-tabulation analysis of business type by the twelve items indicating different motivations for starting one’s own business and found that the responses were different for only one item—‘to be able to use my experience and training’ . This is very intuitive and unsurprising. There were no significant differences in any of the other 10 items (chi-square statistics). Second, we ran a cross-tabulation analysis of business type for the 16 items indicating different factors contributing to business success. The results indicated no significant differences in any of the 16 items (chi-square statistics) contributing to business success among entrepreneurs across entrepreneurial sector types we measured in this study. Third, we ran a cross-tabulation analysis of business type for the 16 items indicating different problems they may face in the process of starting and promoting their business. The results indicated no significant differences in any of the 16 items (chi-square statistics), indicating different problems they may face in the process of starting and promoting their business among entrepreneurs across entrepreneurial sector types we measured in this study.
We also ran a MANOVA analysis with business type and type of product and service provided as independent fixed-effect factors, age, and gender as covariates, and the 12 items of the questionnaire on motivation (Kuratko et al., 1997; Robichaud et al., 2001). MANOVA statistics revealed no significant multivariate effect and only one significant univariate effect—‘to use experience and training’ . Thus, we do not have any evidence of differences or a pattern of differences across business type in our sample. We further examined cross-tabulation differences across entrepreneur characteristics and did not find any differences except for marital status. There was no clear pattern of marital status differences across business types. While cross-tabulation looks for differences in response patterns (frequencies), MANOVA looks for mean differences. Our finding of minimal differences on both counts is interesting. However, we do have to underscore that we did not have adequate representation of entrepreneurs from all business sectors, with some smaller than others.
Furthermore, we examined the correlation between motivation to start a business and entrepreneurial success across business sectors. For that purpose, we first ran a correlation analysis between the 12 motivation items and an aggregated scale of business success (α= 0. 75). This business success scale is comprised of three items related to business success. The three items from our questionnaire are as follows: Q7—How would you describe your business success? Q8—To what extent are you satisfied with your business success? and Q9—How well has your success met your expectations? The correlation analysis findings between 11 motivation items and business success reveal that only 2 motivation items are correlated significantly with the aggregated scale of business success. First, ‘Gaining public recognition’ (r= 0. 18, p<0. 05) is significantly related to the three-item business success scale. Next, ‘Providing a job for family members’ (r= 0. 18, p<0. 05) is significantly correlated to the three-item business success scale. None of the other motivation items are significantly correlated to the three-item business success scale. This may indicate that the Chinese cultural value associated with ‘saving face’ may be at play in these two correlations. Chinese entrepreneurs motivated by public recognition and providing jobs for family members as strong motivations may not want to lose face. Consequently, they strive harder for success or perceive that they have higher levels of success, both consistent with saving face in the context of Chinese culture.
We also ran cross-tabulations and One-Way analysis of variance (ANOVA) between business type and three-item business success scale and found no significant business success differences across the different business sectors. As we noted earlier in this section, we did not find any differences in motivation across business types. Together, these results do not reveal any correlations between motivation factors and success in our sample. This is true for the entire sample as well as across different business types. This lack of a significant correlation between the motivation to start and own a business and business success might allude to the fact that business success entails a different set of factors that could influence their business success than the motivation to start and own a business. There is an abundance of research evidence pointing to social capital and guanxi’s role to overcome the barriers regarding access to private equity financing (Ahlstrom & Ding, 2014; Ahlstrom et al., 2018; Li & Matlay, 2016). Hence, social capital, knowledge creation, and access to finance are the most significant determinants of local entrepreneurial activity and success in the Chinese business environment (Lai & Vonortas, 2019).
Similarly, by employing a sample of 263 Chinese prefecture-level municipalities from 2008 to 2015, Lai and Vonortas (2019) found that new technology-based start-ups are significant predictors of the regional stock of human capitaland the presence of risk finance, suggesting the unique role of technology-based firms in promotingsustainable growth in regional entrepreneurial ecosystems. They further evidenced that presence of research-intensive universities also has a strong positive impact on regional entrepreneurial ecosystems. In other words, these factors that we garnered are consistent with the perspectives that advocate the presence of the entry thresholds as the key motivating force for an individual crossing the threshold to start a business venture (McCann & Folta, 2012; Sarkar et al., 2018). McCann and Folta (2012) defined the entry threshold as the level of expected performance required by the individual to trigger entry into the entrepreneurial process. They the orised that individuals have different required thresholds, and entry is determined by whether performance falls above or below the threshold (McCann & Folta, 2012, p. 796). They showed that individuals with more diverse human capital are more likely to start a business venture, and that general human capital as represented by prior managerial experience has no influence on an individual’s decision to start a business venture.
Discussion and Conclusion
This study examined the factors related to Chinese entrepreneurs’ motivation, success, and problems in three metropolitan areas in China. Results suggest that career motives were the driver of Chinese entrepreneurs’ decisions to start their businesses. Personal motives follow economic motives, and family motives were the third group of reasons for owning a small business company. We also observed that honesty, good customer service, reputation for honesty, charisma, essential friendliness towards customers, and good management skills contributed to business success as perceived by the sample of Chinese entrepreneurs in this study. Contradicting the cultural values, which playa more significant role to external factors in explaining Chinese society’s success, Chinese entrepreneurs consider their business success stemming from effective management of financial characteristics. This suggests that entrepreneurs have an internal locus of control and, therefore, attribute both their successes and failures to their strong efforts or lack of solid leadership. This observation is consistent with the attribution research findings examining the nature of the self-serving bias in Eastern cultures, where the tendency to claim the credit for success and blame others for failures is minimal. We also observed that honesty, good customer service, charisma, hard work, and appropriate training were grouped among the success factors, suggesting that programmes that influence potential entrepreneurs might prepare them to manage the process more effectively. These initiatives can prepare entrepreneurs to respond to the supply and demand issues in their product and service markets. This might potentially help sustain small business companies themselves and, therefore, increase the expected life span of SMEs.
The study provided several problem areas for the start-up, growth, and sustenance of small business companies in the Chinese business environment. We think that identifying these problem areas is helpful for policy makers to focus their attention on prioritising urgent problems that they need to address. In this regard, our study identified four sets of problem areas where policy makers can adopt strategies to improve the conditions. Our findings highlight the need for more proficiency in human resource management; for instance, our findings highlight the importance of finding and retaining qualified employees. Policy makers could work with higher education institutions to design training programmes to train interested citizens with the necessary knowledge, skills, and abilities. Further, policy makers should prioritise management training and development by employing entrepreneurial mentors and coaches from a pool of experienced and successful entrepreneurs. This pool of entrepreneurial mentors and coaches should be comprised of individuals with local, regional, and national exposure to the challenges faced in successfully starting up and promoting a small business enterprise.
Our findings also indicate that the second and third group of problems Chinese entrepreneurs reported arise from the economic, geographic, legal, and trade environment where they operate. The problems they named include infrastructure problems such as electricity, parking lot, and transportation; economic problems such as foreign exchange limitations, legal system concerning the tedious business registration process, and complicated tax structure; and finally, the intense competition they face in their product and service markets. Our results suggest that policy makers can take the initiative to simplify the confusing tax structure and to deliver educational programmes to train small business owners concerning how to keep and maintain accurate accounting records.
In this study, the fourth group of problems we identified concerns Chinese entrepreneurs’ financial difficulties in starting up and growing their businesses. Because of the globalisation of financial institutions in many countries, it is now much more comfortable for SMEs to access various short-term and long-term financing options. Chinese entrepreneurs are no exception to this. However, we still think that the government can provide incentives through tax cuts and subsidies to entrepreneurs directly or through financial institutions that provide SMEs loans. This would help both the establishment and growth of small business firms through capital investments and increase their innovative capacity.
Like all other cross-sectional studies, this study also suffers from several limitations. Hence, we caution the generalis ability of this study’s results to a different context other than these three locations in China or contexts beyond China. A fruitful avenue for future research is to examine how the differences in motives influence small business entrepreneurs’ success. The factor analysis showed that the factor structure of the economic, career, and personal motives has a high reliability. Whether these motives vary as a function of individual characteristics such as internal locus of control, optimism, confidence, and risk-taking behaviour is another possible future research interest for researchers.
Additionally, the effect of culture on entrepreneurial orientation is yet another future research venue to explore. Extant research suggests that SMEs’ financial constraints are among the significant challenges faced by Chinese entrepreneurs (Fan & Zhang, 2017; Wonglimpiyarat, 2015). While we pointed to the need to remove the entrepreneurial entry thresholds stemming from credit lending challenges, future research in particular sectors should raise more specific issues of problems and needs regarding aspects of funding and investment readiness, especially if private equity is needed, as is the case with technology and bioscience businesses. The average age of SMEs in our sample companies was five and a half years. Therefore, we encourage future research to examine the differences in challenges and problems faced at different time stages in company life.
In this study, cross-tabulation and MANOVA analyses did not yield significant findings across business-type entrepreneurs regarding their motivations to start a business, business success, and business-related problems encountered. The only exception was a cross-tabulation analysis of business type across the response categories of an item indicating the measurement of the motivation to start and own a business—‘To use experience and training’ . Hence, our findings allude to another limitation of this study: we did not have adequate representation of entrepreneurs from all business sectors, with some smaller than others. Hence, future research should target a sample of entrepreneurs with adequate representation from all the business sectors for more robust findings on the measures of interest we examined in this study.
