Anatomy of Nascent Entrepreneurship in China A Preliminary…

Anatomy of Nascent Entrepreneurship in China A Preliminary… Anatomy of Nascent Entrepreneurship in China: A Preliminary 1Study from CPSED Project 2Dan Long, Jun Yang, Jiayong Gao Research Center of Entrepreneurial Management, Nankai University, Tianjin, People’s Republic of China Abstract: Chinese Panel Study of Entrepreneurial Dynamics (CPSED) is the first survey research program focused on the micro-level entrepreneurial activities in China. It takes a combination of stratified and random digital dialing sampling, and conducts longitudinal survey on nascent entrepreneurs to follow their entrepreneurial process. Preliminary analysis results of the first-wave survey show that nascent entrepreneurs are featured as young, educated and experienced. Most entrepreneurial activities are opportunity-oriented, which is primarily sought via systematic searching efforts. Most entrepreneurs start their businesses by making full use of entrepreneurs’ available resources or abilities. Saving funds, collecting information of target customers and markets, and analyzing and forecasting financial risks are three main activities most frequently undertaken by Chinese nascent entrepreneurs. Over 70% of the new ventures are involved in the tertiary industry. And most entrepreneurs create their businesses independently. Most new ventures are small businesses, and over half of which take the second-mover strategy and target at mature and developing markets. Only a small number of new ventures exhibit high growth aspiration and entrepreneurs tend to pay more attention on the controlling over their businesses. In order to promote the development of theoretical research and practice of Chinese entrepreneurial activities, this paper presents an overall deconstruction of Chinese nascent entrepreneurs and the pre-establishment activities of new ventures. Key Words: Chinese Panel Study of Entrepreneurial Dynamics (CPSED); nascent entrepreneurs; entrepreneurial opportunity; new venture creation 1. Introduction Chinese Panel Study of Entrepreneurial Dynamics (CPSED) is a pioneer survey research program as well as the first survey research program, which focuses on revealing the micro-level entrepreneurial activities in China. Using a combination of stratified and random digital dialing sampling, CPSED identifies nascent 1 This paper was sponsored by the National Natural Science Foundation of China (No.70732004). Source: CPSED database. CPSED is accomplished by Research Center of Entrepreneurial Management in Nankai University and directed by Professor Yu-Li Zhang 2 Dan Long, PhD candidate, Business School, Nankai University; Jun Yang, PhD, Assistant professor of Business School, Nankai University, Jiayong Gao, PhD, Professor, Tianjin Foreign Studies University 1 entrepreneurs from adults, aging from 18 to 64, and then conducts comprehensive telephone interviews on them. This program is aimed at identifying the factors that induce, impede and promote the occurrence and development of entrepreneurial activities, exploring regularities of entrepreneurs’ behaviors at the stage of pre-establishment of new ventures, and discovering the forming mechanism of high-end entrepreneurship and the nature of new ventures regarding entrepreneurship-orientation and resource basis. CPSED plans to identify 600 nascent entrepreneurs through random sampling among 8 cities in China. Besides this research plans to conduct three tracking surveys on the development of nascent entrepreneurs’ activities via tracking telephone interviews over the following 2 years. So far, CPSED have already identified 499 nascent entrepreneurs out of 36,954 random samples. And 293 of which have been successfully invited to finish the irst-wave telephone interviews. Using results of data analysis of these 293 valid f samples, this paper attempts to depict Chinese nascent entrepreneurs’ degree of activities, elaborate their characteristics and motives, draw conclusions on types of new ventures, and compare the behavior characteristics and differences of various entrepreneurial activities in the process of new venture establishment. It is necessary to note that despite the inspiring results gained from initial analyses, this paper can not include all of the theories and practical values involved in CPSED. 2. Background of CPSED The promoting effects of entrepreneurship on economic development, innovation and employment has attracted extensive attention and has been explained properly (e.g., GEM, 2007; Audretsch and Thurik, 2004; Lundström and Stevenson, 2005). At the micro level, however, there is still a lack of systematic and theoretical interpretation about issues such as the characteristics and traits of people who can undertake a new venture more easily, how entrepreneurial activities take place, and how to manage these activities (Reynolds, 2000; Davidsson, 2005). In China, entrepreneurial activity plays a vital role in promoting the progress of reform and opening-up. Chinese new ventures have gained a substantial increase and their effects on the development of economy and society is increasingly prominent as well. Research on micro-level entrepreneurial activity, however, fall far behind practice. And there is a lack of rational judgment and scientific understanding about the general laws of Chinese entrepreneurial activities and its distinctive regularities. It is the deficiency of precise and scientific first-hand information that hinders the development of entrepreneurial research in China and the dialogues and integration with international entrepreneurial research. CPSED meets with the challenges faced by entrepreneurial research in China, and CPSED identify the scientific and representative samples via random sampling. Meanwhile, CPSED portrays the entrepreneurial process of nascent entrepreneurs by means of tracking interviews on the basis of the research design of both U.S. PSED Panel Study of Entrepreneurial Dynamics) program (Gartner, Shaver, Carter and ( Reynolds, 2004; Reynolds, 2007) and Australian CAUSEE (Comprehensive Australian Study of Entrepreneurial Emergence) program (Davidsson, 2008). It 2 effectively avoids survival bias and hindsight bias, assuring the validity of survey data. As an exploratory program, U.S. PSED program accumulates a large amount of valuable and precious experiences in research design and the implementation of survey research. In addition, the content of U.S. PSED survey focused on the depiction of the characteristics of nascent entrepreneurs and nascent entrepreneurial activities. In contrast, at the theoretical level, CPSED attempts to reveal the factors that induce, impede and promote the occurrence and development of entrepreneurial activities, exploring what nascent entrepreneurs do in gestation process, discovering where the high-potential new venture comes from, as well as the nature of new ventures regarding entrepreneurship-orientation and resource basis. Furthermore, at the practical level, this program also provides a basis and guidance for entrepreneurs concerning management of entrepreneurial activities as well as the entrepreneurial policies from government. Consistent with the Australian CAUSEE program, CPSED, therefore, makes improvement and breakthrough concerning the issues existing in the U.S. PSED program on the design of survey contents (Table 1). Table 1 The Comparison Between CPSED and PSED PSED I issues CPSED response More like a general social-economic survey The in-detail investigations of entrepreneurship Unclear level of analysis Venture level Focus on the description of entrepreneurial Focus on how the outcomes come from process Less contextualization Contextualized issues Exploration of too many aspects of Focus on fewer, theory-driven issues entrepreneurship CPSED emphasizes the critical elements instead of critical activities in terms of the survey contents. We hold that entrepreneurship is a behavioral process in which critical elements such as entrepreneurs, opportunities, and processes are in a dynamic match in certain social, political and economic environment in order to establish new ventures and shape their attributes (e.g., Timmons, 1999; Davidsson, 2005; Gartner, 1985; Low and MacMillan, 1988). This process starts from entrepreneurs’ identification of entrepreneurial opportunities and their decision-making on venturing. The possibility of the successful establishment of new ventures, moreover, could be increased by choosing appropriate behavior portfolios upon a certain matching between entrepreneurs and their venturing opportunities. The conceptual model is illustrated in Figure 1. 3 Entrepreneurial climate Entrepreneurs Process Outcome Opportunity Entrepreneurial climate Figure 1 The Conceptual Model of CPSED To entrepreneurs, variables such as entrepreneurs’ network, previous experience, entrepreneurial efficacy, and demographic characteristics are involved. Different from PSED, CPSED not only describes the entrepreneurs’ previous experiences, but also concentrates on finding out the nature and source of those experiences, which helps theoretically depict how the source, nature, and characteristics of entrepreneurs’ previous experiences influence entrepreneurs’ recognition of opportunities, entrepreneurial activities, and entrepreneurial outcomes. To entrepreneurial opportunity, variables such as innovation of opportunities, discovery of opportunities (systematic search vs. fortuitous discovery), and source of opportunities (individual creativity vs. imitation of existing ventures) are involved. The key issues which CPSED tries to explore include what entrepreneur/entrepreneurial team discovers what kind of opportunities in what way, and the relationship between characteristics of entrepreneurial opportunities and entrepreneurial behavior and/or entrepreneurial outcomes, etc. To entrepreneurial process, CPSED establishes the research design of longitudinal survey that can effectively depicts entrepreneurs’ behavior and its occurrence time during the entrepreneurial process, which helps to explain the impact of the sequence of gestation activities on the success of entrepreneurship. CPSED focuses on the types of entrepreneurial process, namely, effectuation and causation, as well as their behavioral characteristics, results and inspiration. At the same time, CPSED describes entrepreneurs’ behavioral characteristics of resource acquisition and entry strategy, etc, and tries to connect them with entrepreneurs, characteristics of opportunities, and result variables in order to answer the question how entrepreneurs launch entrepreneurial activities. To entrepreneurial climate, CPSED emphasizes the comparison between China and the United States and Australia. In addition, CPSED focuses on the impact mechanism of market structure, entrepreneurial climate, and munificence of environment on entrepreneurial behaviors and results from medium-level perspective. This research tries to answer the question that how environmental characteristics affect entrepreneurial behaviors and outcomes. The core issue of CPSED is to describe entrepreneurial outcomes in a dynamic way. Same as PSED, CPSED involves such variables as entrepreneurial efforts (success of 4 new ventures, giving-up new ventures, positive efforts, and negative efforts), desire for growth and expectation, and financial performance at the initial stage. In addition, CPSED emphasizes differences of new ventures’ properties caused by different entrepreneurial processes, and describes new ventures’ characteristics regarding entrepreneurial orientation and resources, which helps to explore the formation of high-end entrepreneurship and of new ventures’ properties based on entrepreneurial orientation and resources. As shown in Figure 1, the primary assumption of CPSED is that the crucial determinant of entrepreneurial outcomes is the interactive matching of essential elements such as entrepreneurs, opportunities, entrepreneurial processes, and entrepreneurial climate. Under some given conditions in which a particular entrepreneur matches with entrepreneurial opportunities, the rate of success can be enhanced if the entrepreneur follows proper processes. For example, facing an opportunity with low innovation, a nascent entrepreneur is more likely to succeed if he adopts the process with more planning; while facing an opportunity with higher innovation, an experienced entrepreneur is more apt to achieve success if he takes more flexible measures with less planning. Due to the fact that multi-round panel data have yet not collected, the preliminary analysis of this paper is unlikely to explore the matching and contingent relationships among the key elements. 3. Sampling and Method As said above, CPSED has basically followed the way PSED did sampling, but CPSED has done the sampling in provincial capital cities and Beijing, Shanghai Tianjin and Chongqing rather than in nationwide areas, which results from the fact that China is so vast in territory that sampling work at nationwide level involves too much time and financial input and the fact that entrepreneurship activities have rules to follow despite distinctive differences in different areas. As a result, it is convenient and cost-saving to do stratified random sampling according to entrepreneurship situation in Chinese cities, guaranteeing that the sampling is representative enough. 3.1 The selection of sampling area 3Based on CPEA, different cities are classified as following areas in GEM report on China: highly dynamic areas with CPEA more than 25, dynamic areas with CPEA between 15 and 25, less dynamic areas with CPEA between 7 and 12 and no dynamic areas with CPEA less than 7. From CPEA, the number of entrepreneurship enterprises within one certain area can be seen clearly, but it does not give a picture of how these enterprises have changed. The number of newly established private enterprises each year reflects, to a large extent, how dynamic nascent entrepreneurs are within a certain area. Therefore, we use the number of newly established private enterprises in 31 provinces, municipalities and autonomous regions in Chinese mainland between 2005 3 CPEA is the number of entrepreneurship enterprises in per ten thousand adults. The detailed method to calculate is: the enterprises established less than 42 months are considered as entrepreneur-ship enterprises, the accumulated new private enterprises in the past consecutive years are taken as all entrepreneurship enterprises within a certain area that year and the number is divided by the population aged between 15 and 64 in the area. 5 4and 2007 to show how dynamic potential entrepreneurship activities are within these areas. As the result shows, potential entrepreneurship activities in four regions, namely the East, the Northeast, the Middle and the West are different (F=3.909; P<0.05). The East is most dynamic with the mean of 6.71, the Middle with the mean of 3.72 and the Northeast with the mean of 3.17 are in the middle and the least dynamic is the West with the mean of 1.45, see the details in table 2. Table 2 Differences in Entrepreneurship Activities in China Regions mean Value of F Sig. Eastern China including: Beijing, Tianjin, Hebei, Shandong, Shanghai, Jiangsu, Zhejiang, 6.71 Fujian, Guangdong, Guangxi and Hainan Central China including: 3.72 Shanxi, Anhui, Jiangxi, Henan, Hubei and Hunan 3.909 0.019 Northeastern China including: 3.17 Heilongjiang, Jilin and Liaoning Western China including: Inner Mongolia, Chongqing, Sichuan, Guizhou, Yunnan, Xizang, 1.45 Shaanxi, Gansu, Qinghai, Ningxia, Xinjiang Source: China’s statistical yearbooks in 2007 and 2008 on the website of National Bureau of Statistics of China Table 3 Social Economic Index of Surveyed Cities Per Manufacturing Service city population GDP Agriculture export GDP industry industry Beijing 1.15 3.14 37058 0.5 2.23 5.92 3.47 Xi’an 0.54 0.51 27387 0.25 1.28 1.18 0.34 Tianjin 0.79 2.15 31550 0.49 2.16 2.93 3.52 Hangzhou 0.5 1.84 35113 0.67 1.84 2.4 2.56 Guangzhou 0.57 3.02 56271 0.56 2.51 5.03 3.62 Wuhan 0.61 1.43 24889 0.5 1.25 2.19 0.33 Chengdu 0.82 1.6 20626 0.81 1.41 2.3 0.32 Shenyang 0.52 0.88 15116 0.49 2.15 1.86 0.31 Total 5.50 14.47 ----- 4.27 14.83 23.81 14.47 Source: China’s statistical yearbooks in 2005 on the website of National Bureau of Statistics of China Based on stratified sampling method, CPSED divides China into the East, the West, the Northeast and the Middle according to how dynamic nascent entrepreneurships are. Because there are differences in entrepreneurship intensity among different regions, eight cities are selected to conduct surveys, namely Beijing, Tianjin, Hangzhou and Guangzhou in the East, Wuhan in the Middle, Shenyang in the Northeast, and 4 The reason why two years time is chosen is that: (1) PSED is to research on individuals involved in entrepreneurship in the past one year. (2) It takes about two years to establish a new enterprise and do statistics on operation. 6 Chengdu and Xi”an in the West. These eight cities are developed provincial capital cities/municipalities, whose index of social economic statistics occupy a large proportion in China, which can be seen in table 3. At the same time, the eight cities are located in different economic circles where they serve as growth engines respectively, taking the leading role in capital, technology, talents and markets. It can be inferred that to take the adults in the eight cities as sampling population can, to some extent, reflects the situation of entrepreneurship activities in the region, thus having much value in analyzing the law of China’s entrepreneurship activities. 3.2 Identifying nascent entrepreneurs The subjects of survey of CPSED are nascent entrepreneurs, with structured interviews and follow-up surveys conducted. CPSED holds the same view with PSED in the United States that nascent entrepreneurs are those who have already initiated entrepreneurship activities and are in the entrepreneurship process, but have not yet formulated into a new enterprise. The two key criteria to judge whether he or she is a nascent entrepreneur are: First, they must have concrete actions not jut thoughts in mind. Second, the new ventures are still in the stage of preparation. To be more specific, CPSED conduct random sampling to select qualified subjects for follow-up survey. After the approval is got from the subject, follow-up structured interviews will be conducted every half a year during two consecutive years. The main criteria for CPSED to select nascent entrepreneurs are: whether having taken actions, whether having ownership and in what stage of entrepreneurship process. As can be seen in chart 2, We first ask the interviewee “Are you trying to start your own enterprise now with yourself or with other people?”, if the answer is yes, the next question is “Will you be the owner or one of the owners in the new venture?”, if the answer is yes, the next one is “Is your enterprise in the preparation stage or in the stage of running?” Those in the preparation stage are some subjects for the survey of CPSED. If the interviewee says he or she has not stared a new enterprise himself/herself or with other people, then the question will be “Do you have any plan to do so in the near future?”, if the answer is yes, then ask “Have you done something concrete in the past twelve months?” Those who answer yes will constitute the other part of subjects for the survey of CPSED. In Figure 2, subjects A and subjects B constitute the subjects for the survey of CPSED together. 3.3 Sampling and method Roscoe (1975) put forward basic rules to decide sample size: (1) Samples that are more than 30 but less than 500 are suitable to the vast majority of researches; (2) If samples are needed to divided into sub-samples, samples of each type must be at least 30; (3) In multi-variable researches, samples should be ten times or more larger than variables being researched. Sample size is determined by the overall size. More samples are, fewer errors will be in surveys, and samples can better reflect overall characteristics. As former studies have shown, when the overall size exceeds 100,000 people, if samples are taken in a scientific way, sample percentage between 0.01% and 1% or less can reflect the overall situation. 7 preparation Subjects A Is your enterprise Y in the preparation Will you be the stage or in the owner or one operation stage of running? Y Eliminated of the owners in the new enterprise?N Are you trying Eliminated to start your own enterprise Y now with your- Subjects B Have you done self or with Y something con- other people? crete in the past Do you have N twelve months? Eliminated Nany plan to do so in the near future? N Eliminated Figure 2 Steps and Criteria to Select Nascent Entrepreneurs Table 4 Percentage of Allocation of Samples in Surveyed Cities (Planed) City Number of adults Sample size Beijing 1058 112 Xi’an 528 56 Hangzhou 514 55 Tianjin 772 82 Guangzhou 770 82 Chengdu 838 89 Shenyang 548 58 Wuhan 622 66 Total 5650 600 In March 2009, we conducted pilot surveys in Beijing, Chengdu, Hangzhou and Shenyang, and the result is that the percentage of nascent entrepreneurs is about 5%. According to this ratio, in the eight cities being surveyed, about 2,820,000 qualified subjects constitute the whole body for survey. According to the principle of 0.02% sampling, 600 samples are selected for survey. In each surveyed city, based on the number of adults aged between 18 and 64 in each city and according to the population scale in each city, CPSED sets the percentage of surveyed samples for each city, leading to the allocation plan of samples in each city, which can be seen in table 4. In each surveyed city, CPSED selects 8 samples through household telephone interviews. Sampling frame is the people in the household with telephone. According to the criteria to select nascent entrepreneurs, it is needed to ask whether there are qualified subjects in the household (not limited to those who answer the phone). Then We select qualified subjects among those people to conduct telephone interviews. 4. Preliminary Results 4.1 Level of Nascent Entrepreneurial Activities CPSED involves 36,954 households in total, and among them 11,368 persons were interviewed on telephone, including 852 persons initiating entrepreneurship which accounts for 7.48%. In addition, the individuals with the entrepreneurship plan accounts for 5.68% (647). As for the nascent entrepreneurs, 10,858 interviewees have finished the selecting question，identifying 449 nascent entrepreneurs (among them 293 interviewees have gone through the first round interview). That means the index of Chinese nascent entrepreneurs is 4.14%, which reflects the proportion of entrepreneurs who have initiated entrepreneurship without establishing the nascent entrepreneurship yet. And from the index we predict that the degree of China’s future entrepreneurial activities is not optimistic. GEM Report in China 2007 by Qsinghua University indicated that the index of Chinese nascent entrepreneurs was 16.4%, ranking 6th in the world, which is far above the results from CPSED. It should be noted that the results from CPSED was quite close to the average index of global GEM. According to GEM Report 2007, entrepreneurial active degree has an inverse U-relationship with the economic That is to say, the development level (taking GDP as the measuring index). entrepreneurial activities in the least developed and the most developed areas are more active. In 2007, the average GDP per capita in China totals $2,640, ranking 104 in the world, standing the medium level in the world. So we can predict that the Index of Chinese entrepreneurial activities stand in the average level in the world. Index of Chinese entrepreneurial activities from CPSED is far below that of GEM. 4.2 The Characteristics of Nascent Entrepreneurs Who is nascent entrepreneurs is an important issue in entrepreneurship field. The scholars used to compare the difference between the entrepreneurs and non-entrepreneurs, between entrepreneurs and managers in order to find out traits of entrepreneurs based on psychological and behavioral science theories (Stevenson and Gumpert, 1985). However, their efforts were in vain owing to failing to reach a convincing conclusion. Our research concluded that the characteristics of Chinese nascent entrepreneurs tend to be younger, well-educated and experienced along with the fast marketing process. As illustrated in Table 5, among the 293 nascent entrepreneurs in this survey, males accounted for 70.0%. The average age of the nascent entrepreneurs was 31.4, among them the age group between 25 and 34 took up about 42.7%, followed by the age group between 18 and 24, which accounted for 27.1%. Nascent entrepreneurs in China possessed the characteristics of young age, and more and more young people 9 Table 5 Demographic Statistics of Nascent Entrepreneurs (%) Gender College Students and Higher Educational Background Male 70.0 Literature, History, Philosophy and Laws 8.5 Female 30.0 Economic and Management 26.2 Age Sci-Tech, Agriculture and Medical Science 44.1 18-24 27.1 Others 21.2 25-24 42.7 Occupation before Initiating Entrepreneurship 35-44 18.1 Farmers 3.8 45-54 8.3 Workers 8.9 Above 55 3.8 Employees 46.4 Average Age 31.4 Teachers 1.7 Education Unemployment 7.8 Junior High School 9.9 Researchers 1.4 Senior High School 24.2 Peasant 2.0 College 28.0 Students 17.1 Bachelor degree 33.4 Others 10.9 Graduate school 4.5 consider starting their own businesses as a career choice. The educational background of nascent entrepreneurs showed the trend of shuttle-form. That is to say, people with bachelor degree covered the largest percent of 33.4%, followed by people with three-year college education who accounted for 28%. The people with junior high school education covered 24.2%, in contrast, the nascent entrepreneurs with Master’s degree and higher degree accounted for very small percentage. Among the nascent entrepreneurs with college education, half of them majored in Science and Technology, Agriculture and Medical Science, covering 44.1%. 26.2% of the potential entrepreneurs major in economics and management. Concerning nascent entrepreneur composition, the employees in companies took a leading role, covering 46.4%, while students were the important part of nascent entrepreneurs, accounting for 17.1%. The involvement of college students made the nascent entrepreneurs more knowledgeable and younger. The nature of previous experiences and its richness extent have great influence on the progress and success of entrepreneurial activities. Entrepreneurs with the accumulation of knowledge and experience in work can find the opportunity of entrepreneurship (Fiet, 2008) and make best use of social network to overcome the liabilities of newness. Such knowledge from experience need years of accumulation and is forged based on behaviors and contexts, therefore this kind of experiences are valuable, scarce, hard-to-imitate, non-transactionable and irreplaceable. In sum, these experiences can facilitate the establishment of competitive isolation mechanism beforehand and afterwards and maintain the comparative advantage of new ventures (Westhead, Wright and Ubasaran, 2003; Barringer, 2005) . The mainstream study portrayed the characteristics of previous experiences of entrepreneurs as industry experience, entrepreneurial experience and management experience and so on.( Delmar and Shane, 2006; Ucbasaran, Westhead and Wright, 10 2009) CPSED showed that 229 nascent entrepreneurs had work experience before starting up new ventures, accounting for 78.2%, and only 64 nascent entrepreneurs had no working experience. As for the working years of nascent entrepreneurs, the majority had less than 5 years working experience, covering 54.9%. The nascent entrepreneurs with 6-10 years accounted for 19.0%; those with more than ten years’ working experience accounted for 26.1%. The 57% of nascent entrepreneurs had relevant industry experience. And 68% of them have 1-5 years work experience, 18.4% with 6-10years, only 13.2% with more than ten years’ experience in relevant industry. The nascent entrepreneurs with management experience reached 78.1%, among them, medium level managers ranked first, covering 37.8%, followed by low level managers, 27.6%, and high level managers, only 12.7% due to high opportunity cost and weak entrepreneurial consciousness. As for entrepreneurial experience, 218 out of 293 nascent entrepreneurs took their initiative, covering 74.4%, while only 75 entrepreneurs had entrepreneurial experience. Among those 75 people, 31 people had one-time entrepreneurial experience, accounting for 41.3%; 23 people had entrepreneurial experience twice, accounting for 30.7%; 18 people had entrepreneurial experience more than three times, accounting for 24%. It has been proved that not only entrepreneurial experience will affect the entrepreneurial activities, but also the nature of it will influence the performance of nascent entrepreneurship, especially the success or failure of the entrepreneurial experience. ( Ucbasaran, Westhead and Wright, 2009). In this study, among 75 nascent entrepreneurs with entrepreneurial experience, 39 people had successful experiences, covering 52%, and 43 had failure experience, covering 57.3%. In summary, Chinese entrepreneurs had rich previous experiences, and quite a large part of entrepreneurs had working experience, industry experience and entrepreneurial experience. In addition, more than half of them possessed 1-5 years’ relevant experience, and those people mastered the relevant knowledge and could make use of entrepreneurial opportunity and social network resources. Furthermore, those people had very low opportunity cost if they continued working for their previous enterprises. All those factors above impelled the potential entrepreneurs to quit their former jobs and chose to initiate entrepreneurship. 4.3 The Description of Entrepreneurial Opportunity Entrepreneurial opportunity is the starting point of entrepreneurial activities, and finding-out of entrepreneurial opportunity is the pre-condition for entrepreneurial activities. The type and source of entrepreneurial opportunity as well as ways of finding out opportunity directly influence the management of nascent entrepreneurship (Shane and Venkataraman, 2000). It is found that the type of entrepreneurial opportunity in China is dominated by opportunity entrepreneurship, accounting for 63.7%. Kirzner (1997) argued that opportunity derived from uncertainly defined market demand, or from the resource or capability unutilized. Chandler, Dahlqvist and Davidsson (2002) labeled “solving realistic problems” as the problem-driven, and labeled “making best use of recourses and capability at hand” as the redundant resources driven. According to CPSED, 54.6% of the nascent entrepreneurs found out entrepreneurial opportunities because they had available 11 resources, advantages and capability. 29.7% of entrepreneurial opportunity came from the need to solve realistic problems or fill the unsatisfactory demand gap. In addition, 15.7% of nascent entrepreneurs identified entrepreneurial opportunity by emulating other similar successful ventures. The type of entrepreneurial activities had no obvious impact on opportunity sources, see details in table 6. The differences in opportunity identifying have great impacts on the establishing speed, financial profits of new ventures (Dahlqvist et al; 2003). Scholars such as Kirzner (1997), Shane (2000) and Fiet (2008) classified ways of identifying opportunity into systematic search and fortuitous discovery. Systematic search means that the searchers search for unknown knowledge under the circumstance of knowing uncertainty in their searching process. Fortuitous discovery refer to the inspiration out of their accumulation of knowledge. The results of our research indicated that 77.0% of nascent entrepreneurs identified the opportunity by systematic search, and only 23.0% of nascent entrepreneurs did so by fortuitous discovery. Meanwhile, as for the types of entrepreneurship, different ways of identifying entrepreneurial opportunity had significant differences (p<0.05). And opportunity entrepreneurship was mostly realized through systematic search. (see Table 6) Table 6 Types of Entrepreneurial Opportunity, Source and Identification Types of Entrepreneurial Activity NDE ODE sig Solving realistic problems or meet 23.2% 30.6% Unsatisfactory Demand Source of Entrepreneurial Making Best Use of Available Resource 0.33 Opportunity 57.3% 54.9% or Capability Emulating Successful Enterprises 19.5% 14.5% Systematic Search 72.0% 28.0% Opportunity Discovery 0.018 Fortuitous Discovery Pattern 80.9% 19.1% NDE means Necessity-driven Entrepreneurship ODE means Opportunity -driven Entrepreneurship 4.4 The Description of Gestation Activities Like PSED in the U.S. and AUSEE in Australia, CPSED involved 14 entrepreneurial activities, focusing on the proportion of specific entrepreneurial activities by the nascent entrepreneurs. As table 7 illustrated, the first three activities of most Chinese nascent entrepreneurs were saving money for entrepreneurship, collecting information of the customers and market, and analyzing and predicting the financial risk. Registration, external financing, applying for patent/trade mark/copyright were the three activities finished least. On the whole, the nascent entrepreneurs had finished 5.3 activities on average. The smallest number of activities was 0, and the largest was 14, and the mode was 4. Besides, entrepreneurial activities of the nascent entrepreneurs took on the rule of “from general to specific” and “from external to internal”. That is to say, the nascent entrepreneurs usually collected information of the market and customers first, and then analyzed the potential risks, and then proceeded to the internal operating activities, such as purchasing raw materials, renting or purchasing assets. Besides, from the perspective of resource 12 input, Chinese nascent entrepreneurs were more prudent. Although 71.7% the nascent entrepreneurs saved money for starting up new ventures, the people who invested their own savings only accounted for 45.1%. This figure is lower than the proportion of activities like collecting customer-and-market information, analyzing and predicting financial risks, making entrepreneurial plan and contacting with the suppliers. Due to the variation and volatility of entrepreneurial activities and high dependence on context, different nascent entrepreneurs would finish entrepreneurial activities in quite different order and time under different situations, all of which posed a big challenge to scholars. Samuelsson and Davidsson (2009) suggested that the nascent entrepreneurs should be subdivided into two types: innovative entrepreneurship and imitating entrepreneurship. It’s found that innovative entrepreneurship accomplished more gestation activities than imitating entrepreneurship in given period. Liao and Welsch (2008) compared gestation activities in technical and non-technical entrepreneurship. They found that technical entrepreneurship had more activities regarding entrepreneurial plan, legality and resource acquisition rather market-related activities. This paper compared the difference of gestation activities between necessity-driven entrepreneurship and opportunity-driven entrepreneurship. We found no obvious distinction between them, and the mean was 5.7 and 5.1 respectively, and able 8) the mode was 5 and 4 respectively. (See T Table 7 Proportion of Entrepreneurial Activities Completion Incompletion Items Cases Weighted Cases Weighted saving money for Entrepreneurship 210 71.7% 83 28.3% Collecting Information of Customers and Market 199 67.9% 94 32.1% Analyzing and Predicting Financial Risk 199 67.9% 94 32.1% Entrepreneurial Plans 177 60.4% 116 39.6% Contacting Suppliers 137 46.8% 156 53.2% Input of Own Capital 132 45.1% 161 54.9% Setting up Teams 108 65.5% 57 34.5% Purchasing or Renting Large Assets 73 24.9% 220 75.1% Purchasing Raw Materials 67 22.9% 226 77.1% Marketing and Promoting 61 20.8% 232 79.2% Recruiting 56 19.1% 237 80.9% Registration 53 18.1% 240 81.9% External Financing 44 15.0% 249 85.0% Patent/Trademark/ Copyright Application 16 5.5% 277 94.5% 13 Table 8 The Comparison of Entrepreneurial Activities Standard Type of Sample Mean Min Max Mode Sig Deviation Total Sample 5.3 2.89 0 14 4 - Type of Entrepreneurial NDE 5.7 2.88 0 11 5 0.511 Opportunity ODE 5.1 2.88 0 14 4 NDE means Necessity-driven Entrepreneurship ODE means Opportunity -driven Entrepreneurship 4.5 What Types of firms are started? 53 out of 293, the total sample, has already started their nascent ventures (18.1%). From the perceptive of industry, nascent ventures are mainly distributed in wholesale and retail industry (39.2%), catering, hotel and restaurant (17.1%), and professional service (16.4%), which shows that more than 70% of nascent ventures in China are in the tertiary industry, while manufacturing industry only occupies 7.8%. From the perceptive of the nature of new ventures, about 64.2% of Chinese entrepreneurs created new enterprises independently, while the total proportion of both purchasing existing enterprises and investment by big enterprises was only 12.7%. From the perceptive of the ownership, 47.2% of new ventures were solo-owned by individuals, while 24.5% of new ventures took form of partnership. From the perceptive of registered capital, 41.9% of nascent ventures had registered capital of RMB100,000 or less, while those with registered capital of RMB500,000 or more made up 18.6%. In general, the minimum registered capital was RMB10,000, and the mode was RMB100,000 ( 20.9%). And 30.2% of nascent ventures were located in development zones, industry parks or entrepreneurial centers where they could enjoy favorable policies. This fact indicates that China policy to promote entrepreneurship is fruitful in recent years. In addition, the number of entrepreneurial platforms, such as incubators, have been well established, which would support the foundation of nascent ventures. Initial strategies of nascent ventures mainly center on the following issues: selection of product/market/technology, stability of the product focus, the timing of market-entry, and aggregation degree of the market (Feeser and Willard, 1989). Boeker (1989) examined the initial strategies of nascent ventures and the conditions under which those initial strategies were changed. He classified initial strategies into four types: the first-mover strategy, the second-mover strategy, the low-cost producer strategy, and the niche strategy. Based on his classification, our research found out that 57.7% of Chinese nascent ventures took the initial strategy of second-mover, (improvement of existing products and imitation of existing services and products), while 12.3% of nascent ventures adopted first-mover strategy (innovated products or services). In addition, 75.1% of products and services of nascent ventures had existed for five years. At the same time, nascent ventures mainly aimed at mature and developing markets, which made up 45.4% and 39.9% respectively, whereas only 13.0% of nascent ventures aimed at new markets. This is consistent with the conclusion by Aldrich and Martinez (2001): very few entrepreneurs could be called innovators, who really bring 14 Table 9 Characteristics of Nascent Ventures Industry (N=293) Nascent Entrepreneurship type(N=293) agriculture, forestry, animal husbandry 2.0% technical type 42.0% and fishery manufacturing industry 7.8% non-technical type 58.0% cartoon industry 1.4% Ownership form of nascent ventures (N=53) construction industry 3.1% Solo-owned by individual 47.2% production and supply of electric power, 0.7% partnership 24.5% gas and water real estate industry 0.3% limited corporation 13.2% wholesale and retail industry 39.2% stock companies 11.3% banking and financial industry 2.0% others 3.8% Registered capital of established nascent catering, hotel and restaurant 17.1% entrepreneurship (N=53) communication 2.4% RMB100,000 or less 41.9% advertising 0.3% RMB100,001- 500,000 39.5% professional service (clinic, law firm, 16.4% RMB 500,000 or more 18.6% accounting firm and education) others 7.3% mean RMB911,000 Forms of entrepreneurship (N=293) mode RMB100,000 Independently-created nascent ventures 64.2% maximum RMB18 million Purchasement of existing enterprises 8.9% minimum RMB10,000 Location of established nascent ventures franchising 21.2% (N=53) invested by big enterprises 3.8% located in incubators 30.2% Others 1.9% others 69.8% Table 10 Initial Strategies of Nascent Ventures Did the products or services Types of products or services exist five years ago? Innovated products or services 12.3% Yes 75.1% improvement on existing products 19.1% No 22.5% imitation of existing products or services 38.6% Not sure 2.4% Meet need for ignored products or services 15.0% Market cheaper products or services 13.7% new markets 13.0% Others 1.3% developing markets 39.9% mature markets 45.4% Others 1.7% new products or services, new raw materials, new mode of production, and new resources to markets. While most entrepreneurs are reproducers indeed, who only make little improvements on existing products or services, or even take the existing 15 products or services to fill market gap. According to the research, low-growth of nascent entrepreneurships is not due to the limitation of their capability, but to the entrepreneurs’ low growth motive. (Barringer, Jones and Neubaum, 2005). Our survey found out that, comparing with those high–growth nascent ventures, many entrepreneurs paid more attention to the control over their enterprises, with 59.1% of entrepreneurs tend to keep the size of the enterprises under control. When entrepreneurs were asked to anticipate turnover for one year later, the number of entrepreneurs was inversely proportional to the size of turnover. 37.2% of the entrepreneurs anticipated their turnover to be RMB100,000 or less, while only 9.1% anticipated their turnover to be more than RMB5,000,000. In addition, 88.3% of nascent ventures aim at domestic market only, and would have no export revenues one year later. As to the number of employees, 84.3% of entrepreneurs expected to employ less than 20 employees one year later. 62.2% of entrepreneurs expected personal income to be RMB100,000 or less one year later. The figures above suggest that only a few nascent ventures have a strong desire for high- growth, while most stress stability. That is because the probability of growth and failure increase rapidly as a result of increased complexity and risks of management due to the expansion of business. So once a new venture grows out of control, it would fail soon. This shows risk-avoidance of the nascent entrepreneurs. TOne Year Later able 11 Development Expectation of Nascent Ventures Expected size Number of employees the larger the better 39.9% <20 84.3% Keep the size under control 59.1% 20-100 14.2% Do not know 1.0% >100 1.5% Expected turnover: mean 20 ?RMB100,000 37.2% median 6 RMB110,000- 500,000 25.0% mode 10 RMB510,000 -1,000,000 18.6% maximum 1000 RMB1,010,000 -5,000,000 10.1% minimum 0 >RMB5,000,000 9.1% Expected personal income Mean RMB 42,070,000 ?RMB100,000 62.2% Median RMB 250,000 RMB100,001- Mode RMB 1,000,000 500,000 27.4% maximum RMB 400million RMB500,001- minimum RMB 5,000 2,000,000 9.1% The proportion of export revenues in total turnover > RMB 2 million 1.3% None 88.3% mean RMB260,000 <5% 2.1% median RMB100,000 5%-15% 3.2% mode RMB100,000 15%-25% 1.1% minimum RMB5,000 >25% 5.3% maximum RMB500,000 16 5. Conclusions and Discussion From this research, it has been suggested that entrepreneurial activity in China in the future is not satisfactory, with the index of nascent entrepreneurs 4.14%. Nascent entrepreneurs in China tend to be younger and better educated, with the average age of 31.7. They are mainly between 25 and 34 years old, and 61.4% of nascent entrepreneurs have received higher education; 46.4% of nascent entrepreneurs used to work in companies. Most nascent entrepreneurs have work experiences, and about half of them have been employed in relevant industries. 78.1% of nascent entrepreneurs have managerial experiences, and most of them are middle managers. And 25.6% of nascent entrepreneurs have entrepreneurial experiences. As for the nascent entrepreneurs’ work years, 5 years is a turning point, and more than half of them have less than 5 years’ relevant work experience. Opportunity entrepreneurship is the main entrepreneurial type in China, which makes up about 63.7%. 54.6% of entrepreneurs find entrepreneurial opportunities because of their rich resources, advantages or capabilities. 29.7% of entrepreneurial opportunities come from the needs for solving practical problems or satisfying the unmet needs. In addition, 15.7% of entrepreneurs identify entrepreneurial opportunities as they have discovered the success of other similar enterprises. From the ways of opportunity discovery, 77% of nascent entrepreneurs identify tunities through systematic search. And the patterns of oppordiscovering opportunities are different significantly according to the types of entrepreneurial opportunities, and opportunity entrepreneurships are mostly identified by systematic search. or entrepreneurial activities, Chinese nascent entrepreneurs have completed 5.3 F activities on average, and the first three activities are saving money, collecting information for customers and markets, analyzing and predicting financial risk. And the last three activities are registration, external financing, patent/brand/copyright application. For the characteristics of nascent ventures, 70% of nascent ventures are in tertiary industry. Creating ventures independently is the major selection of the nascent entrepreneurs in China, which makes up about 64.2%. The size of 53 established nascent ventures is relatively small, with 41.9% have RMB100,000 or less registered capital. 57.7% of established nascent ventures adopt second–mover strategy, and mainly aim at mature and developing markets. Only a few nascent entrepreneurs have a strong desire for growth, and 59.1% of entrepreneurs pay more attention to their control over the firm. This paper deconstructs Chinese entrepreneurs and activities at the stage of pre-establishment of nascent ventures, and explores the behavior rules of entrepreneurial activities in China. The findings provide a theoretical basis and data support for making entrepreneurship policies and enhancing entrepreneurship environment in China. However, further researches are needed to be made as follows: First, heterogeneity of nascent entrepreneurs should be further studied. In terms of experience, we need to further study whether experience, types of experience, years of experience and the nature of experience have effects on the process of nascent entrepreneurships. And theoretically, the relationship between entrepreneurs and 17 entrepreneurial performance should be studied. Second, for entrepreneurial opportunity identification, we need to further probe the relationship between entrepreneurs and entrepreneurial opportunities, and further study the differences in innovativeness, entrepreneurial activities, and nascent entrepreneurship performance, etc., based on different opportunities identifying means. Finally, we need to pay significant attention to the timing and order of entrepreneurial activities, and study how different entrepreneurs launch entrepreneurial activities based on different entrepreneurial opportunities, and try to associate entrepreneurial activities with the variables like initial strategy and growth expectation. 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