ENTREPRENEURIAL COMMITMENT, SACRIFICE, MOTIVATIONS AND GROWTH ASPIRATIONS OF CHINESE ENTREPRENEURS

Harold Welsch Department of Management DePaul University 1 E. Jackson Chicago, IL 60604 Phone: (312) 362 8471 Fax: (312) 362 5198 E-Mail: [email protected] Jianwen Liao Northeastern Illinois University David Pistrui Illinois Institute of Technology Dolun Oksöy Alfred University Wilfred Huang Alfred University

Abstract The switch to a free-enterprise from a central planning provided a once-in-time lifetime opportunity to investigate the nature and characteristics of emerging Chinese entrepreneurs. A large sample (222) provides substantial evidence that these entrepreneurs are highly committed and motivated in terms of goal achievement and entrepreneurial growth. In fact, they are willing to pay the price of making substantial sacrifices in their personal and professional lives, such as recreation, loss of savings, sporting events, undesirable responsibilities, working 60 hours per week and training costs. Evidence suggests Chinese entrepreneurs are willing to “bite the bullet” to achieve entrepreneurial success. Introduction As China evolves into an entrepreneurial market economy the question is raised as to whether the Chinese entrepreneurs are ready to take on the challenge of a free enterprise economy. The government has paved the road with significant changes and incentives to initiate business start-ups. These include privatization, changes in the law, tax and tariff breaks, stock exchanges, grants, low cost credits, project financing, relaxed mandatory central planning, decentralized decision making, competition and easing of market forces restrictions. Despite these structural/environmental enhancements, the big question mark is the Chinese entrepreneur himself (Liao et al, 2001). Is he poised to meet the challenges of entrepreneurship? Is he committed to a career of self-employment? Is he willing to make sacrifices and “bite the bullet” in order to achieve survival and growth of the enterprise? Is he motivated to achieve entrepreneurial success? These are questions which will be answered in this research. A general complementary question that will be addressed is whether we can apply our western entrepreneurship models to an eastern culture and what can we learn in the process. Also, can we take lessons learned from other privatizing economies (e.g., Eastern Europe) and apply them in an Asian context? HISTORY Historically, China had evolved from feudalism since 221 BC and had maintained its agricultural base through the communist regime. However, since the late 1970’s, the development of rural entrepreneurship has been associated with the emergence and development of rural township and village enterprises (TVE’s). “Appearing out of nowhere” in 1987 TVE’s have become an important force in China’s national economy. The term “TVE” appeared in 1984 in connection with the breakup of the people’s commune. Before they were recognized they were regarded as “illegal” and “unstandardized” (Fan and Kirby, 1996) being forced to stay outside the state planning system. However their rogue status turned out to be their greatest advantage having been guided by a marketing orientation from the outset and not part of the declining state owned enterprise system (Fan and Kirby, 1996).

Later historical accounts were provided by (Matthews and Qin, 1996; Zapalska and Edwards, 2001; Tsang, 1996; Gregory and Tenev, 2001; Busenitz and Lau, 1996; Tan, 1996; Spence, 1999; Leung, 2000; and Pistrui, et al, 2001). More recently, Matthews and Qin (1996) recounted three types of entrepreneurial ventures which have emerged: 1. Township and village enterprises (TVE’s) 2. Sino-foreign joint ventures and foreign wholly owned subsidiaries 3. Collective or privately owned joint ventures. TVE’s are an important sector of the modern Chinese economy and an important seedbed for the emerging new bread of entrepreneurs. Fan and Kirby (1996) characterize these entrepreneurs as founders of an enterprise, a member of the party, has a strong belief in the “cause”, possessing total commitment to the business, hard working, determined and a self-achiever, a strong sense of responsibility, able to identify and grasp opportunities, flexible, and having the ability to learn and improve and is a leader (p.74).Intrigued by these characteristics, the authors proceeded to document and measure some of these distinguishing attributes of Chinese entrepreneurs in the following sections. In addition to rural initiatives, the role of semi-private and private nonagricultural enterprises has been increasing rapidly in light industries such as manufacturing, service and merchant activities. These entrepreneurial initiatives have resulted from individuals’ ability to successfully exploit gaps in the industrial structure and to respond to substantial unsatisfied demand in sections previously repressed. With many opportunities beckoning, it is a now a question of whether Chinese entrepreneurs have the necessary motivation, desire and commitment to make significant sacrifices to grow their businesses. These questions are addressed in the following sections, i.e. what is the nature and types of commitment, motives, sacrifices and growth initiatives and how are they ranked in order of importance? SURVEY COMPOSITION The Entrepreneurial Profile Questionnaire (EPQ) was utilized to survey 222 entrepreneurs (76% male, with an average age of 36.8 years, 13 years of education and 10.8 years of experience) as a data collection instrument. The EPQ was designed to survey the effect of individual, societal and environmental factors on entrepreneurship by collecting a combination of demographic information and extensive details related to characteristics and orientations (Gundry and Welsch, 2001). A five-point Likert scale ranging from strongly agree (5) to strongly disagree (1) was provided next to statements which complemented the general background information. The EPQ was successfully piloted and validated through a series of studies in Romania, Turkey, Russia, Poland, the Czech Republic, Hungary, Lithuania, Estonia, Germany, Venezuela as well as South Africa, Mexico and the United States. The EPQ was professionally translated and edited into Mandarin, pre-tested and then retranslated to clear up ambiguities or idiosyncratic terminology.

This study represents one of the first empirical investigations of private enterprise initiatives in central China. The study focused widely within one major urban area – Wuhan in the Hubei province. Wuhan is one of the economic, cultural and political hubs of central China and was one of earliest regions to be industrialized and one of the first cities in the Qing dynasty (1644-1911). With population of 7.3 million, and an area of 8,467 square kilometers, Wuhan serves as the capital of Hubei province. Utilizing information from the local chamber of commerce in combination with the Management College at China University of Geosciences in Wuhan, an extended series of in-depth survey interviews was administered during 2000. Within the chamber lists the participants in the sample were randomly selected. Two hundred twenty two entrepreneurs completed EPQs. The sample, which represents part of an ongoing data collection program, includes a collection from all industrial groups including retail, computer hardware/software, manufacture, distribution, service, professional services, finance/insurance/real estate and construction. INTENSITY OF ENTREPRENEURIAL COMMITMENT The visualization of a successful enterprise, combined with governmental, family and spousal support in addition to the right circumstances such as life stage, education, in a nutrient rich environment, can cause an individual to possess a certain ‘fire in the belly’, termed high ‘Entrepreneurial Intensity’. This level of commitment to the entrepreneurial endeavor can be characterized as the passion required for entrepreneurial success (Selz, 1992). It is further characterized by a single-minded focus to start a business and work toward its survival and growth, often at the expense of other worthy and important goals. The primacy of the individual in entrepreneurial research is competently discussed in Shaver and Scott (1991). Man, Lau, and Chan (2002) later contended that “being persistent and committed to the task will enhance performance of the firm in the long term” (137). They also reinforce the idea that the basic role played by the owner/manager is one of the major factors of SME competitiveness because of the concentration of decision-making power of the entrepreneur in an SME environment, thereby affecting the firm’s overall strategy. Entrepreneurial Intensity has its foundation in the Protestant work ethic (Weber, 1905) and the achievement motive (McClelland, 1961). It has a secondary base in commitment, Type A behavior, internal locus of control, diligence and determination. Despite religious pluralism in U.S. and European society, the strains of Protestantism has exerted a worldwide powerful influence on people’s thoughts and actions since before World War I. The main core asserts that spiritual salvation was to be attained through striving. More recently, the Protestant work ethic has evolved outside of its religious context to a point where spiritual values are set aside. In its lesser role, it assumes hard work is for the material benefits and personal recognition it affords. It has evolved into a form of a Type-A behavior. This behavior was seen among the Chinese entrepreneurs during early interview stages.

Type A behavior in its early characterization was identified by excessive and competitive drive and an enhanced set of time urgency. Later, additional components were identified such as intense sustained desire to achieve, an eagerness to compete, persistent drive for recognition, a continuous involvement in deadline activities, a habitual propensity to accelerate mental and physical functions, and consistent alertness. Price (1982a) had suggested that this behavior pattern is learned in open, competitive economies where upward mobility is possible. Success was thought to be a function of individual effort and that progress is best defined in terms of material or tangible achievements. Price (1982b) refers to “a powerful impelling culturally acquired concern of longing that incites one to unremitting action while it is also a dynamic quality marked by initiative, promptness of decision, abundance of concentrated energy and indomitable persistence in carrying through and undertaking toward accomplishment” (Furnham, 1990, p.326). Despite its European origins, it is believed that the Entrepreneurial Commitment/Intensity scale can be productively utilized to describe Chinese entrepreneurs. It appears Chinese entrepreneurs are very committed to establishing their business, ranking hard work, diligence and persistence to be prominent in their attributes. In fact, three of the four core values of the scale appear in the top 5 items on Table 1. It also appears that some element of communitarianism is also prominent, perhaps reflecting the social/socialism values still espoused by the government. Entrepreneurial commitment is further enhanced by ranking plans “to sell their business” in last place. It appears they prefer to stay an entrepreneur in the long run. _______________ Table 1 about here SACRIFICE Within Table 1 there also appear to be elements of willingness to sacrifice (e.g., “significant effort”, “whatever it takes”) for their business. Table 2 shows the results of the ranking of sacrifices Chinese entrepreneurs are willing to make as measured by opportunity costs they are prepared to incur. They are willing to pay the price of training, undesirable responsibilities, use all of their savings, as well as their recreational time to pursue their business. However, they draw the line at mortgaging the house or incurring conflict/wrath of their family, friends or spouse. Their marriage is the last thing they would sacrifice, again exhibiting a certain social consciousness or responsibility. _______________ Table 2 about here MOTIVES What motivates Chinese entrepreneurs? These answers have important implications in terms of what they are striving for, and the direction in which they expect to expend their energy. High earnings tops the list (Table 3), which is not surprising since the per capita income for China reflects its developing status. The second highest score as well number 9 (direct contribution to success) reflect an achievement motive based on a sense of accomplishment. This striving persistence reflects back to the commitment/intensity

variable and Type A behavior described in Table 1. However, it is surprising that earlier score reflecting sociability values and communitarianism are not as high here. In fact community, welfare of relatives and social influence (numbers 32,30, and 31) rank near the bottom of the list. This may reflect a shifting of priorities among entrepreneurs, perhaps reflecting the government pronouncement , “To be rich is glorious”. Few entrepreneurs had a “family tradition” of entrepreneurship to follow, since the government owned all businesses during the previous generation (number 38 of 38 items). Table 3 about here EXPANSION PLANS Overall, Chinese entrepreneurs were quite ambitious with respect to their willingness to grow their businesses (Table 4). In fact, they appeared to be in the category of “entrepreneur” rather than “small business” since all 18 items were in the upper one-half of the response categories. There was less than a one point difference (20% of the total scale) between the top (number 1) and the bottom (number 18). It appears these entrepreneurs were reaching (number 3) and seeking (number 1) new markets as well as adding new products/services (number 4) and expanding the scope of their operating activities (number 2). These initiatives are a sign of optimism that growth can and will occur based on their higher aspiration levels as well as on diligence, persistence and commitment to their enterprise. Table 4 about here Conclusion There is some question whether western-based entrepreneurship theories and measurements have any bearing on entrepreneurs operating in former centrally planned economies undergoing transition toward market driven economies, such as China. Tan (1996) has charged that western management theorists have rarely considered relevant issues that have emerged during the transition, leaving most of discussions to economic analysts and area specialists. However, as China joins the ranks of modern industrialized nations and engages in joint ventures, technology transfers, foreign affiliates as well as international trade, it can no longer claim that it is and isolated country or unique case were western economic or management theories are not applicable. Tan’s argument also flies in the face of the universality of entrepreneurship principles, i.e. opportunity recognition, start-up stages, growth strategies and ambitious, hard-working individuals striving for personal gain and economic development of the country. The Entrepreneurial Profile Questionnaire (EPQ) administered to these Chinese entrepreneurs clearly shows that they have the drive, enthusiasm, motivation as well as growth plans within the range of realistic expectations, and when combined with strategies characterized by innovativeness, proactiveness and risk taking can achieve a rate of growth in the private sector that is astonishing.

Table 1 Entrepreneurial Intensity of Commitment Mean 1) I would like my business to make a significant contribution to the community by developing a successful business. There is no limit as to how long I would give a maximum effort to establish my 2) business. 3) My business is the most important activity in my life. I would rather own my own business than earn a higher salary employed by someone 4) else. 5) My personal philosophy is to do “whatever it takes” to establish my own business. I would go to work somewhere else only long enough to make another attempt to 6) establish my own firm. 7) I would rather own my own business than pursue another promising career. 8) I would be willing to make significant personal sacrifices in order to stay in business. Owning my own business is more important than spending more time with my 9) family. 10) I will do whatever it takes to make my business a success. 11) I plan to eventually sell my business.

4.04 4.03 3.69 3.49 3.31 3.3 3.29 3.15 2.72 2.49 2.25

*denotes core values of the scale Table2 Sacrifice Mean

1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20) 21)

Willing to acquire additional skills at significant personal expense. Attending to a variety of undesirable responsibilities in my business. Use of all my savings. Lost time in another profession. Significant recreation time. Willing to take on any task in my business. Lost time with the family. 60 hours of working per week. Watching my favorite TV program. Risk of total failure in the business. Attending my favorite sporting event. My position in the eyes of my friends. Quality time with my children. Willingness to take on additional debt. Borrowing on my assets. Conflict with the family. Mortgage my house. The wrath of my family. Sending my children to a better college/school. Give up my friends. The break up of my marriage.

3.98 3.9 3.78 3.7 3.65 3.65 3.64 3.63 3.59 3.51 3.45 3.41 3.18 3.16 3.13 3.09 2.87 2.63 2.53 2.32 2.19

Table 3 Motives 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20) 21) 22) 23) 24) 25) 26) 27) 28) 29) 30) 31) 32) 33) 34) 35) 36) 37) 38)

Desire to have high earnings To achieve a personal sense of accomplishment. To have fun. To make better use of my training or skills. To be my own boss, to work for myself. To keep learning. To have considerable freedom to adopt my own approach to work. To give myself, my husband/wife and children security. To make a direct contribution to the success of a company. To have greater flexibility in my personal and family life. To achieve something and get recognition for it. To be challenged by the problems and opportunities of starting a business and making it grow To take advantage of an opportunity that appeared. It was a time in my life when it made sense. Needed more money to survive. To control my own time. To achieve a higher position for myself in society. To be able to work with people I chose. To be innovation and be in the forefront of technological development. To work in a desirable location for me and my family. To be able to develop an idea for a product or a business. To be respected by friends. To contribute to the welfare of my ethnic group. To have an element of variety and adventure in my work. To increase the status and prestige of my family. To become part of a network of entrepreneurs. To be able to work with people I like. To have the opportunity to lead, rather than be led by others. It was the only thing I could do. To contribute to the welfare of my relatives. To have influence in my community. To contribute to the welfare of the community I live in. Not to work for unreasonable boss. Frustrated in previous job. To have access to fringe benefits. To follow the example of a person I admire. To escape unsafe working conditions. I wanted to continue a family tradition.

Mean 3.83 3.67 3.63 3.61 3.57 3.54 3.52 3.47 3.44 3.44 3.43 3.37 3.32 3.31 3.25 3.1 2.97 2.97 2.97 2.96 2.96 2.91 2.84 2.83 2.82 2.81 2.81 2.67 2.63 2.58 2.56 2.55 2.52 2.47 2.42 2.31 2.23 2.06

Table4 Expansion Plans 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16) 17) 18)

Selling to a new market. Expanding scope of operating activities Researching new markets. Adding a new product or service. Expanding advertising and promotion. Adding specialized employees. Expanding distribution channels. Acquiring new equipment. Computerizing current operations. Adding operating space. Seeking professional advice. Replace present equipment. Redesigning layout. Expand current facilities. Upgrading computer systems. Seeking additional financing. Offsite training for employees. Redesigning operating methods.

Mean 4.2 4.18 4.14 3.99 3.98 3.93 3.9 3.81 3.78 3.74 3.72 3.71 3.63 3.59 3.58 3.46 3.36 3.28

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