chinese entrepreneurs success factors

Chinese entrepreneursMotivations, success factors, problems,

and business-related stress

Hung M. ChuDepartment of Management, West Chester University, West Chester,

Pennsylvania, USA

Orhan KaraEconomics and Finance Department, West Chester University, West Chester,

Pennsylvania, USA

Xiaowei ZhuDepartment of Management, West Chester University, West Chester,

Pennsylvania, USA, and

Kubilay GokFaculty of Management, University of Lethbridge, Lethbridge, Canada

Abstract

Purpose – This article aims to investigate motivations, success factors, problems, andbusiness-related stress of entrepreneurs in small- and medium-sized enterprises and relates them tothe success of the Chinese entrepreneurs.

Design/methodology/approach – A total of 196 entrepreneurs in Beijing, Shanghai, andGuangzhou were randomly selected for a survey, which was analyzed to determine motivations,success factors, problems, and business-related stress by gender. Ordered logit models were applied tomotivation and success factors.

Findings – Results showed that 68 percent were male and 32 percent female. The average age of theentrepreneurs was about 32 years old and time devoted to their business was almost 45 hours perweek. Of the total respondents, 56 percent were married and 44 percent single. When asked to indicatetheir motives for business ownership, these entrepreneurs suggested that increasing income, becomingtheir own boss, and to prove that they can succeed were the most important reasons. Reputationfor honesty, providing good customer services, and having good management skills were reportedto be necessary conditions for business success. Friendliness to customers and hard work were alsocritical for high-performance enterprises. Among the problems encountered by entrepreneurs,unreliable/undependable employees were the most critical. Intense competition and lack ofmanagement training also proved to be great challenges for Chinese entrepreneurs.

Practical implications – Policy makers can strengthen its small business entrepreneurs bypromoting the factors that lead to entrepreneurs’ success, such as the ability to manage personnel andmanagement skills through business outreach services provided by universities, government agencies,and nonprofit organizations. In addition, the government has the ability to simplify the tax system,and reduce payroll taxes. Technical assistance in areas such as market research, human resourcesmanagement, and technological support should be provided to small business owners.

Originality/value – This study applied to Chinese entrepreneurs in addition to an extensiveanalysis of the factors that affect motivations, success, problems, and business stress.

Keywords Entrepreneurs, Small enterprises, Motivation (psychology), Business development, Stress,China

Paper type Research paper

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1756-1396.htm

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Received 9 September 2010Reviewed 10 October 2010Accepted 1 April 2011

Journal of Chinese EntrepreneurshipVol. 3 No. 2, 2011pp. 84-111q Emerald Group Publishing Limited1756-1396DOI 10.1108/17561391111144546

1. IntroductionEntrepreneurship has long been regarded as the source of job creation and an engine ofeconomic growth. For example, Japan’s six million small- and medium-sized enterprises(SMEs) employed 75 percent of the Japanese working population (Dana, 1998). Of thetotal 935,000 business establishments in Taiwan, 96 percent of SMEs provided jobs to78 percent of the island’s labor force (Lin, 1998). Lee (1998) pointed out that more than70 percent of all South Koreans work in firms that have less than 100 people. Micro andsmall enterprises (MSEs) are also the leading force transforming the economic landscapeof Africa. Ghanaian micro-enterprises which employed less than five people, accountedfor 70 percent of that country’s total workforce (Government of Ghana, 2003; The WorldBank, 2006). In 2003, Kenya’s private sector employed 3.2 million people and contributed18 percent to the country’s gross domestic product (GDP) (OECD, 2005). Findings fromAriyo (2005) showed that the Nigerian private sector provided employment to 50 percentof the Nigerian labor force and 50 percent of the country’s industrial output.

Recognizing the importance of entrepreneurial-led SMEs in providing socialstability and economic prosperity, China in 1978 adopted a policy of economic reformsthat turned a centrally planned economy into a market-oriented economy. This changeof direction allowed the rebirth of the private sector, which was banned when theCommunists took control of the country in 1949. Results of the economic reform havebeen startling (Anderson et al., 2003). For the last three decades, China enjoyed anun-precedent economic growth of 9 percent annually (Fung et al., 2006a, b; Gordon andLi, 1991). This astounding achievement is attributed to the re-emergence of the privatesector. In 1978, only 150,000 individual business households existed throughout China(Liu, 2003), but at the end of the 1990s, it was estimated that more than 12 millionprivate enterprises were in operation (Quanyu et al., 1997). In 2006, this numberexploded into 31,518,000 units. It is predicted that the rate of SMEs’ market entry willcontinue to be between 7 and 8 percent for the next five years, reaching a total of50 million by 2012 (iResearch Consulting Group, 2007). Chinese non-state enterprisesprovide 70 percent of tax revenue, and 90 percent of total employment for those whoenter the labor market for the first time and those who were laid off by state-ownedenterprises (Fung et al., 2006a, b). The China Daily (2008) reported that Chinese privateenterprises contribute 60 percent to the country’s GDP, and Garnaut et al. (2001)indicated that private enterprises account for 50 percent of all economic activities inChina.

In order to meet an increasing job demand for 50 million people entering theworkforce annually and an estimated three million workers laid off by the state runsector (Liao and Sohmen, 2001), China not only has to sustain the current level ofeconomic growth but also needs to find creative ways to further the development of itsprivate enterprises. Since entrepreneurs and small businesses are significantcontributors to economic growth and employment creation for nations, establishmentof small businesses and success of entrepreneurs are important. This study aimsat discovering the factors that motivate the Chinese to become small businessowners, the problems that they face, and the factors contributing to their success.The fact that small business establishments and job creation are important factors forthe economic development in all countries, several researchers investigated factors suchas motivation, success factors, and problems small business entrepreneurs face in manycountries (Kara et al., 2010). However, the evidence is mixed and non-conclusive with

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respect to the level of importance of those factors on the success of entrepreneurs(Kara et al., 2010). This study aims at contributing further evidence on this discussion.Therefore, this study tries to determine the level of importance of motivation and successfactors on entrepreneurs’ success by employing ordered logit model. In addition, thisstudy tests the significance of the motivation, success factors, and problems with respectto gender. More specifically, this study addresses the following research questions in thecontext of Chinese entrepreneurs:

RQ1. What are the motivation and success factors for Chinese entrepreneurs?How do they differ by gender?

RQ2. What is the impact of motivation and success factors on Chineseentrepreneurs’ perceived success?

RQ3. What are the problems faced by Chinese entrepreneurs? How do they differ bygender?

RQ4. How does business-related stress affect Chinese entrepreneurs?

RQ5. What is the level of support Chinese entrepreneurs receive from familyand friends? Is there a significant difference among male and femaleentrepreneurs?

The next section gives literature review, followed by research methodology sectionwhich discusses model, survey questionnaire, and sample and data analysis method.The section after that analyzes the data and provides results. The final sectionconcludes the study and offers recommendations.

2. The conceptual framework of the studyThe conceptual framework of this study claims that motivation that entrepreneursexhibit during startup is correlated to sustaining behaviors they exhibit later(Naffziger et al., 1994; Buttner and Moore, 1997). This implies that the stronger the levelof importance attributed to factors to start a business, the greater the determination toattain the mastery of knowledge, skills and abilities and other attributes needed tosucceed. We argue that perceived importance attributed to motivational factors willlater determine the direction, intensity, and perseverance of the success-relatedbehaviors of Chinese entrepreneurs to sustain their business. Kuratko et al. (1997)claimed that motivation leads to goal-directed behaviors and that existence of a set ofgoals motivate entrepreneurs to sustain their business development efforts. Theyidentified extrinsic rewards, independence and autonomy, intrinsic rewards, andfamily security as the important motivational factors for sustained ownership among234 entrepreneurs. The conceptual framework of this study also claims that theimportance attributed to the motivational goals influences Chinese entrepreneurs’resilience to overcome the problems they face while developing their business. We alsoargue that attainment of motivational goals influences a Chinese entrepreneur’ssatisfaction with their success and small business ownership and hence leads to moresustained entrepreneurial behaviors to develop and grow the business. The conceptualframework of this study also claims that the more Chinese entrepreneurs perceive thattheir effort lead to performance outcome they desire to achieve, the greater the level oftheir effort and resilience to overcome the difficulties they face. The greater amount

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of the rating they assign whether their business success meet their expectations,the greater the level of propensity to continue the entrepreneurial behaviors. Thefollowing sections present a review of the literature about variables in this study.

2.1 Literature reviewIn order to understand small business creation and factors contributing to the successand problems that hinder the success of entrepreneurs, several studies attempted toidentify motivation, success factors, and problems faced by the entrepreneurs.An analysis of literature in those areas is given in the following sections.

2.2 Motivation for business ownershipReasons for becoming a business owner differ from person to person, from one countryto another depending on economic, political, social, and cultural environment in whichentrepreneurs operate. Since understanding of entrepreneurial motives is crucial fordeveloping the measures helping them to grow, the following review of reasonsfor business ownership is necessary.

In a study of new business startups in 11 countries, Scheinberg and Macmillan(1988) revealed six motives leading people to become entrepreneurs. They include theneed for approval, the perceived wealth, the degree for communitarianism, the need forpersonnel development, and the need for independence. The findings also revealedmotivations for business ownership differ from one part of the world to another.American entrepreneurs rated the need for independence as the most important reasonfor starting a business. Italian business owners ranked communitarinaism high on thelist of motivators. Entrepreneurs in Australia and Great Britain, however, cited moneyas the reason for becoming business owners. The Scandinavians rated this same factorthe least significant. Findings from a study of Vietnamese entrepreneurs, Swierczekand Ha (2003) indicated that challenge and achievement are more significant and moreimportant motivators than necessity and job security. Results from a study by Benzinget al. (2005b) showed that the economic conditions and entrepreneurial orientationexisting in two parts of Vietnam affect entrepreneurs’ motivation for businessownership. Entrepreneurs in Ho Chi Minh City were motivated by personal satisfactionand growth, while business owners in Ha Noi indicated that creating job for themselvesand family were their prime motive. Compared with Ha Noi, Ho Chi Minh City not onlyhas a brighter economic landscape but its entrepreneurial tradition has also existedlonger, dating back before 1975. Mann and Thorpe (1988), however, suggested thatAsian entrepreneurs tend to think making more money is the most important forceleading to business ownership. On the other hand, White entrepreneurs are motivatedby a desire for independence associated with business ownership. In a study ofentrepreneurs in Kenya and Ghana, Chu et al. (2007a) found the two most importantmotivators were to increase income and to provide themselves with jobs. Results froma survey of Nigerian women entrepreneurs show that their main reason for engagingin business is to reduce poverty and to reverse their deteriorating economic condition(Woldie and Adersua, 2004). In congruence with the results of this study, Pingle (2005)indicated that in countries with entrenched poverty, people have few choices other thanself-employment.

Regarding the motive for business ownership among the Chinese, it has been saidthat every Chinese is a born businessman who desires to be his/her own boss.


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This consensus is reflected in a Chinese proverb supporting the entrepreneurial natureof the Chinese people: “It is better to be chicken’s head than a phoenix’s tail” (Liao andSohmen, 2001). Results from a study of Chinese entrepreneurs by Pistrui et al. (2001)revealed that the need for personal achievement, the desire to make a direct contributionto the success of an enterprise, and the desire for higher earnings are the primary motivesfor business ownership. Family security was also ranked high among motivatingfactors. Yueh (2007) suggested that Chinese entrepreneurs are motivated to work anddriven to look for better economic opportunity. In other words, the desire to earn moneyis a significant determinant found among Chinese entrepreneurs. Herberer (2003)concluded that the prospect of attaining high income and the improvement of livingstandards are the main reason for Chinese to become entrepreneurs. The 1949revolution, led by Mao Zedong, was thought to turn upside down the foundation ofChinese traditional society and elevated the role of women in the new society by makingthem equal to men in every aspect of life, including business ownership. Supporting thisstream of thought, findings from Kitching and Woldies (2004) indicated that economicfreedom and role models encourage women to start their own business, especially withenterprises that required little capital such as street vendors, tailoring or bicyclemending.

Learning more about entrepreneurs’ motives could help policy makers developappropriate programs fostering the creation of new business and helping the existingSMEs flourish.

2.3 Success factorsThere is no consensus among researchers on the factors contributing to businesssuccess, but a few variables are discussed more often in previous studies. They may begrouped into the following categories: the first category deals with the psychologicaland behavioral traits of entrepreneurs, the second concerns managerial skills andtraining of entrepreneurs, and the third focuses on external environment in whichentrepreneurs operate. Since managerial skills, training, and external conditions arethe factors that can be affected by policy makers, this study focuses on these variables.Relevant studies by other researchers also will be reviewed.

Studies conducted among entrepreneurs in developing countries (Benzing et al.,2005a, b; Chu et al., 2007a, b; Yusuf, 1995; Gosh et al., 1993) indicated a strongrelationship between managerial skills and environmental conditions. According toHuck and McEwen (1991), the three most critical success elements found amongJamaican entrepreneurs consist of understanding customers’ needs, access to capital,support of family, and networking with friends from former schools and colleges.Hard work as evidenced by long working hours is also regarded as a success factor.In another study of Kenyan small business owners, Pratt (2001) found that theavailability of capital, possession of business skills, previous experience, and familysupport are essential for business success. Since family members serve as reliablesource of employment and provide capital to new, private Vietnamese SMEs, they arecontributing factors to business success (Masurel and Smit, 2000). In their study offamily support to entrepreneur success, Pisturi et al. (1997) pointed out that familyplayed an important role in business success by direct support of business and throughthe development of social community, and economic networks. Kozan et al. (2006)suggested that business management training and financing were positively related to

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entrepreneurs’ ability to expand their business. Results from a study of Pakistani smallbusiness owners pointed out hard work, good customer services, and product quality,the three most important success ingredients (Coy et al., 2007).

It is widely believed that luck and fate are considered “keys” to success in China.According to Liao and Sohmen (2001), many people believe in fate but Chineseentrepreneurs give luck a greater role in their business success. Yueh (2007), on theother hand, suggested that social networking is a leading factor to business success.Although “guanxi” (relationship in English) or connections are normal in the Westernbusiness world, to some Chinese entrepreneurs, it implies corruption, bribery, andother “under the table” activities which ensure government help in achieving their goal.Regardless of the exact meaning of “guanxi”, it is a well-accepted fact that knowing theright people can bring success to Chinese entrepreneurs (Liao and Sohmen, 2001).Regarding the role of the family, one cannot emphasize enough its importance to agrowing business in an extremely low availability of funds at the initial phases ofSMEs in China. Family members are not only the source of startup funds, but also theemployees of the company where entrepreneurs’ wife and siblings are often asked towork when no reliable employees can be found. These kin are willing to accept minimalcompensation in exchange for future gain (Liao and Sohmen, 2001). Finally, thebusiness acumen which is considered to be a characteristic of successful entrepreneursseems to be more commonly observed among Chinese people. Given the low level ofbusiness training found among Chinese entrepreneurs, their success has beenintriguing and might be credited to the Chinese business acumen (Liao and Sohmen,2001). Whether or not Chinese entrepreneurs really have the business acumen ornatural “business instinct” is debatable but the results of an assessment of people in31 countries suggested that China appeared to be more entrepreneurial than theaverage (GEM, 2000).

2.4 Problems facing entrepreneursCompared to entrepreneurs in other developed countries, those in emerging nationsface more monumental challenges. First, they must deal with unstable and highlybureaucratic business environments. Second, the laws governing private enterprise,especially business registration and the taxation system are complicated and verydifficult to understand. Third, contract and property laws are often poorly designedand/or enforced. Other problems facing entrepreneurs in transition economies includeinadequate infrastructure, poor macroeconomic policies, limited access to financialcapital, corruption, and a lack of managerial experiences.

In addition to the added expenses of corruption and bribery, Kiggundu (2002),Pope (2001) and Stevenson (1998) found that unfavorable institutional and regulatoryenvironments are critical problems encountered by entrepreneurs. Findings from astudy of more than 360 small business owners in 69 countries (Kisunko et al., 1999)indicated that the problems encountered by entrepreneurs were quite similar. High taxesand tax regulations are the most critical problems in South and Southeast Asia.Inadequate infrastructure, inflation, labor regulation, and laws governing the startingand operating a business were also considered as obstacles preventing entrepreneurs inthe region from achieving their goals. Lack of infrastructure, corruption, high tax, taxregulations, and financing were believed to be critical for MSEs in Middle East andNorth Africa. Central and Eastern European entrepreneurs cited high taxes and tax


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laws, financing, corruption, and inflation, the most important obstacles inhibiting theirbusinesses. Small business owners in Latin America suggested corruption andinadequate infrastructure, crime and theft, financing and tax regulations, the worstproblems encountered. The most critical challenges for SMEs in Sub-Saharan Africawere corruption, complicated tax laws, inadequate infrastructure, inflation, theft, andunavailable capital. Nigerian entrepreneurs reported that government officials oftenharassed them and extorted money from their businesses. Bad roads, water shortages,erratic electric supply, poor telecommunication systems were additional challenges thatentrepreneurs in Nigeria had to endure (Mambula, 2002). Difficulty in gaining access tobank credits and other financial institutions seemed to be the major obstacles hinderingthe process of Nigerian small business development. However, the most damagingproblem facing the state of Nigerian entrepreneurship may be the lack of governmentinterest in and support for MSEs (Ariyo, 2005). Results from a survey conducted inRussia revealed that more than 90 percent of managers paid “extralegal” for governmentservice or business license (Simon et al., 2002). It takes over two months to obtain abusiness license and paid up to 38 percent of per capita GDP in fees to set up a newbusiness in transition economies (Djankov and Murrell, 2002). In Vietnam, it requiresalmost six months and cost an amount of 150 percent of per capita GDP for a license for anew business (Djankov and Murrell, 2002). The absence of bank credits, courts, andother market institutions created great impediments for entry of new firms intransitional economies.

Despite efforts by the Chinese Government in fostering an environment conduciveto the development of the private sector, Chinese entrepreneurs still face considerablebarriers to opening and running their successful business (Liao and Sohmen, 2001).The first among them is the volatility of property rights in the country. Not only areChinese businesses subject to unpublished regulations and the caprices of courts, theyalso have to deal with different levels of bureaucracy from local, provincial to nationalgovernment with conflicting agendas. Access to resources such as funding, labor,and technology is the second important obstacle faced by entrepreneurs. Funding forbusinesses mostly comes from personal savings, family, and friends. Loans from banksand other financial institutions rarely exist. Attracting skilled and reliable employeesremains to be an obstacle faced by business owners. Although China is known as homeof a great labor pool, many of the workers are less educated peasants from thecountryside. Those who are university graduates may have some expertise but theylack experience. A few qualified individuals seem to be less loyal because the highbidders can easily lure them to a greener pasture. Finally, the low social statusassociated with merchants who are ranked at the bottom rung of society in the Chinesetraditional cultures, may still pose a challenge for entrepreneurship. Although peoples’attitudes are changing, until recently, business ownership still carried unfavorablesocial connotations. Given the multitude of problems faced, Chinese privateentrepreneurs still worry about their future survival and growth (Liu, 2003).

2.5 Business stressStress is perceived as part of business ownership, which is due to heavy workloads,excessive risks involved (Palmer, 1971), and a higher need for achievement byentrepreneurs (Brockhaus, 1982). A high level of stress may lead to absenteeism,accidents, increase in health care cost or decreasing productivity (Roberts et al., 1997;

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Crampton et al., 1995). Ivancevich and Matteson (1980) estimated the cost of stress-relatedissues to business in the USA more than 10 percent of gross national product.

As stress may result in adverse consequences for entrepreneurs, stress managementand control may be needed. Some studies on stress reduction found social support as agood medicine for alleviating stress (Rahim, 1996; Chay, 1993). However, Mack andMcGee (2001) concluded that social support mitigates work and non-work stress. Otherstudies asserted that individuals with high internal locus of control is likely to usesupport resources more effectively and therefore can reduce the level of anxiety comingfrom stress (Sandler and Lakey, 1982). Latack et al. (1995) found that an ability tocontrol the situation may help a person better deal with stress. In addition, if tasksperformed are more complex and interesting, workers seem to have less stress(Mack and McGee, 2001). Flexible rules and less rigid procedures reduce stress level(Nasurdin et al., 2006), but an organizational climate filled with extreme competitionand lack of interaction tends to be more stressful (Wong and Wong, 2002).

3. Research methodologyIn this study, we employed a cross-sectional research design to explore the relationshipsbetween the motivations, success factors, problems, and business-related stress of SMEowners in China. Cross-sectional research design is used widely by internationalentrepreneurship researchers all over the world (Coviello and Jones, 2004). Despite itsstatic nature to capture the underlying relationships between certain variables in a givenstudy (Coviello and Jones, 2004), nevertheless, this method allows researchers to measureand collect data on certain observations as quickly as possible. Since our studyinvestigates the perceptions about the motivations, success factors, problems, andbusiness-related stress among segments of the population of Chinese entrepreneurs, wedeemed the cross-sectional design is the most suitable approach to present suchperceptions among the segments of the population of interest. Owing to theseabovementioned feasibilities of the cross-sectional design, our study reports themeasurement of observations on study variables at a single moment in time. Coviello andJones (2004) postulated that this method can provide credible findings if researchers takethe necessary precautions to ensure the reliability and validity of data collectioninstruments by means of language adaptation and assurance of equivalence of meaning.The following section of this paper addresses the procedures we used to ensure thereliability and validity of our findings.

3.1 Instrumentation and data collectionThe survey instrument used in this study was originally developed by Chu (Chu andKatsioloudes, 2001) and has been used for small business surveys in a number ofcountries since 2001. The questionnaire was originally designed and written in English.It was translated into Chinese and checked for inter-translator consistency. Themotivation variables are similar to those suggested in the work of Robichaud et al. (2001)and Kuratko et al. (1997). Many problems in the survey are common to entrepreneurs inboth transition and developing countries. The reliability of the survey instrument wasdeemed satisfactory since the Cronbach’s a scores were found to range from 0.818 to0.853. Moreover, Guttman split-half coefficients were relatively high for the motivationitems, perceived success variables, and the problem items. The alpha and the split-halfcoefficient for the motivation items were 0.758 and 0.754, respectively. For the perceived


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success variables, the a was 0.850, and the split-half coefficient was 0.745. For theproblem items, the a was 0.837, and the split-half coefficient was 0.795. Hence, weconclude that instrument is highly reliable. The Cronbach’s alpha referred to as “thereliability coefficient”, is the most common estimate for the internal consistency of itemsin a scale. As a result, the instrument is well suited for Likert scales such as those used inthis study (Gleim and Gleim, 2003). Although a popular accepted view is that Cronbach’sa scores should be above 0.70 (Nunnally, 1978), some researchers indicate acceptablescores between 0.60 and 0.80 (Simon, 2008). Some other researchers, however, believethat an ideal score should attain a minimum of 0.70 and a maximum of 0.90 to ensureagainst a high level of item redundancy (Streiner and Norman, 1989). The followingsection presents a discussion of how we measured the variables in this study.

3.2 MeasuresAll of the study participants responded to a five page, self-report questionnaire,including a cover page explaining the purpose of the study. We measured the variableson different measurement scales. We measured the motivation variables, perceivedsuccess variables, and problems on ordinal scale. For instance, motivations andperceived success variables were measured on an ordinal scale ranging from 5 was“extremely important”, 4 was “very important”, 3 was “mildly important”, 2 was “notvery important”, and 1 was “unimportant”. We also measured the perceived problems onan ordinal scale using a Likert scale that ranges from 5 was a “very serious problem”, 4was a “serious problem”, 3 was a “problem”, 2 was a “minor problem”, and 1 was “not aproblem”. Gender and education were measured on nominal scale. We measured thenumber of hours worked, age, and the number of employees employed using intervalscale. A higher mean score on a variable would indicate greater importance. Next, wepresent a description of all of the variables used in this study.

3.2.1 Demographics. Respondents were asked for their age, gender (coded 0 forfemale, and 1 for male), education level (1 for no formal education, 2 for some gradeschool, 3 for completed grade school, 4 for some high school, 5 for completed highschool, 6 for some college, 7 for completed college, 8 for some graduate work, and9 for completed graduate degree) and the numbers of full time and part time employeeswere employed, the number of hours worked per week, and marital status, and ifmarried, the number of hours spouse work per week, and type of business (1 forretailing, 2 for wholesaling, 3 for service, 4 for manufacturing, 5 for agriculture, and6 for others), and the number of years spent in the particular business entity, and thenumber of years since as an independent businessperson.

3.2.2 Motivation to start a business. The motivation to start a business variable wasmeasured using a 12-item scale. The question asked the respondents to assess theimportance of the reasons for starting a business. Respondent rated the reasons forstarting 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”.

3.2.3 Perceived factors contributing to business success. Perceived factorscontributing to business success variable was measured using a 17-item Likertscale. Similarly, respondents were asked to rate each factor in terms of the importancein business success. This variable also was measured using a five-point Likert scale

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ranging from 5 was “extremely important”, 4 was “very important”, 3 was “mildlyimportant”, 2 was “not very important”, and 1 was “unimportant”.

3.2.4 Perceived problem factors. We measured the perceived problem factors using17 items measured on a five-point Likert scale ranging from 5 was a “very seriousproblem”, 4 was a “serious problem”, 3 was a “problem”, 2 was a “minor problem”, and1 was “not a problem”.

3.2.5 Perceived business-related success. We measured the perceived business-relatedsuccess variable using one item measured on a scale of 1-4 as follows: 4 was “verysuccessful”, 3 was “successful”, 2 was “average”, and 1 was “below average”.

3.2.6 Perceived business-related stress. We measured the perceived business-relatedstress variable using one item measured on a scale of 1-5 as follows: 5 was “very high”,4 was “high”, 3 was “low”, 2 was “very low”, and 1 was “nonexistent”.

3.2.7 Perceived business-related satisfaction. We measured the perceivedbusiness-related satisfaction variable using one item measured on a scale of 1-5 asfollows: 5 was “very satisfied”, 4 was “satisfied”, 3 was “somewhat satisfied”, 2 was“dissatisfied”, and 1 was “very dissatisfied”.

3.2.8 Perceived family support. This variable was measured using one Likert scaleitem ranging from 1 to 5 as: 5 was “very substantial”, 4 was “substantial”, 3 was“medium”, 2 was “low”, and 1 was “very low”.

3.2.9 Success met expectations. Finally, Chinese entrepreneurs rated extent to whichtheir business success met their expectations according to the one item which wasmeasured on a scale of: (4 – more than I expected; 3 – met my expectations; 2 –somewhat met my expectations; 1 – did not meet my expectations). We used thisinstrument to collect the data from a random sample of respondents after verificationof reliability estimates. Next, we present a description of the procedures we used toselect the businesses for our study.

3.3 Sample and subjectsData were collected with the assistance of two Chinese educational specialists fromSeptember 2007 to May 2008. The educational specialists were instructed to familiarizethemselves with different interview techniques and random sampling procedures. About90 percent of the data were obtained by face-to-face meeting with entrepreneurs,10 percent of the data were obtained by using an online survey system, QuestionProOnline Survey Software, with the assistance of a telemarketing expert. The potentialsubjects of the study were identified and randomly selected through the use of commercetelephone directories in the cities of Beijing, Shanghai, and Guangzhou. Nonprofitorganizations, government-owned enterprises, and any business that had its transactionsdone on the street were disregarded. Beijing is the capital of China, which is the centre ofnational politics, culture, transport, tourism, and international exchanges. Shanghai isgoing into the fast developing period with solid financial base and human resources,science and technology advantage. Guangzhou is the economic centre in Southern China.Regionally, Guangzhou is close to the metropolitan links composed of Hong Kong,Shenzhen, and Macau. Beijing, Shanghai, and Guangzhou geographically cover a big ofChina, from north to south. Because of the better economic infrastructure environment ofBeijing, Shanghai, and Guangzhou, many people moved from their hometown to thesecities to establish their business. So the survey conducted in Beijing, Shanghai, andGuangzhou would provide a better picture of SMEs situation in China today.


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3.4 Data analysisWe analyzed the data collected on the study variables using a variety of statisticalmethods. The results section presents descriptive, as well as the inferential statistics.We used SPSS and Limdep softwares for data analysis. We mainly used SPSS fordescriptive statistics and hypothesis testing involving gender differences about certainvariables, and significance of the correlations between study variables. We usedLimdep software mainly to estimate ordered logit models to investigate the impact andimportance of motivation variables and factors contributing to the success ofentrepreneurs. A means score for each item was calculated. A higher mean score on avariable indicates greater importance.

4. Results4.1 Sample characteristicsTable I shows that male entrepreneurs are approximately four years older than female,and two years older than the average age of the sample at 32.50. Chinese entrepreneurs,however, seem to be younger than those in Nigeria at 36.7 (Chu et al., 2008), Turkey at41.2 (Chu et al., 2007a, b), and Romania at 41.5 (Benzing et al., 2005a). Results fromthe survey also indicated that 7 percent of entrepreneurs obtained graduate degree,3.95 percent had some graduate work, while 47 percent of respondents completedcollege, 16 percent had some college level courses, and 21 percent finished high school.In general, the level of education attained by Chinese entrepreneurs is higher thanthose found in developing countries and comparable to small business owners inRomania (Benzing et al., 2005a).

Frequency %

Entrepreneurial characteristicsGenderMale 130 67.7Female 62 32.3Average age of entrepreneurs 32.49 yearLevel of educationNo formal education 2 1.13Some grade school 1 0.56Completed grade school 3 1.69Some high school 1 0.56Completed high school 38 21.47Some college 28 15.82Completed college 84 47.46Some graduate work 7 3.95A graduate degree 13 7.34Enterprise characteristicsAverage age of business 5.61Type of businessRetailing 36 17.31Wholesaling 35 16.83Service 119 57.21Manufacturing 14 6.73Agriculture 4 1.92

Table I.Sample characteristicsof SME entrepreneursin China

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Regarding the gender of the sample, 67.7 percent was male and 32.3, female. This istwo to one in favor of male entrepreneurs. Since the early days of the Communistrevolution, the role of women was elevated to be equal to men, and they wereencouraged to fully participate in all aspects of life including the economic activities.This finding is consistent with previous study of Chinese entrepreneurs describing theparticipation of modern women in business (Pisturi et al., 1997). Findings from thissurvey somewhat implied the effect of the one-child policy enforced by the ChineseGovernment. Since China is a country that has a strong cultural preference for boys,this policy might have severely upset the gender balance and its effect may be reflectedby the skewed sex ratio between men and women Chinese entrepreneurs. On the otherhand, this finding may indicate the influence of the Chinese traditional cultural normthat emphasizes the role of man as the breadwinner of the family (Liu, 2003). The timedevoted to business by Chinese entrepreneurs is 44.56 hours per week. This seemsto be much less than that found in countries like Vietnam, Romania, and Turkey(Benzing et al., 2005a, b, 2009; Chu et al., 2007a, b, 2008). This time discrepancy spent inbusiness may be attributed to the fact that the number of employees working in aChinese enterprise is higher than those working for businesses in other countries.

Table I also yields some interesting information on Chinese enterprises. Theaverage age of business in existence is 5.61 years old. Of the total number of businessessurveyed, 46.12 percent were established by the entrepreneurs themselves, 5.4 percentbought from another, and only 3.49 percent were inherited. The dominant type ofbusiness found in this survey is service with 58.16 percent as compared with 13.78 ofwholesaling business, the second highest rank of business types found in the sample.The prominent position of the service industry is indicative of the emergingentrepreneurial-led private sector which focuses on the consumer market (Davis, 2000).

Table II illustrates the type of advice that Chinese entrepreneurs seek beforestarting their businesses. About 47.57 percent stated that they consulted other businessowners while 43.78 percent asked their friends. Although other business ownersand friends provided advice to Chinese entrepreneurs before starting their business,many of them also said they asked legal advisor (36.22 percent) and friends(35.68 percent). Even though it is the lowest percentage, a substantial amount of advice(28.11 percent) also came from financial advisors, banks, and lending institutions.

Table III displays the source of funds for Chinese entrepreneurs. Because of theconfidential nature of the question, 45.5 percent of respondents chose not to respondto the question regarding the sources of funds to start their business. However, out of44.5 percent who responded, 23.5 percent indicated that their source of funds camefrom their friends. Non-government organization (NGO) or international lending

Before starting your business, from whom did youseek advice? (M circle more than one number) Frequency %

Other business owners 88 47.57Friends 81 43.78Legal advisor 67 36.22Family member 66 35.68Financial advisor/bank/lending ins. 52 28.11Other 14 7.57

Table II.Advice


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agency was ranked second at 17 percent. It is interesting to note that private and statebanks were not considered as major source of funds for Chinese entrepreneurs, at only3.5 and 2 percent, respectively. While only 1.5 percent used their personal saving tostart a business, 1 percent said they used a credit cooperative for their startup capital.

4.2 Motivation for business ownershipEntrepreneurs were asked to rank 11 reasons for business ownership. On a five-pointLikert scale with “5” being extremely important and “1”, the least important, it was foundthat the two equally important motives for owning a business are to increase income and toprove I can do it. This finding is in congruence with the results of a survey conductedamong 201 private entrepreneurs in Hunan province (Ran and Lang, 2000).

Almost 42 percent of the survey’s respondents indicated that their reason forbusiness ownership was to improve their living condition (Liu, 2003). In another studyof Chinese entrepreneurs, Pisturi et al. (1997) also found the desire for higher earningand a drive to fulfill the need for personal achievement being their primary motives. Asshown in Table IV, “to be my own boss” is the second most important reason forChinese to become entrepreneurs. Since entrepreneurs who live in Beijing, Shanghai,and Guangzhou are almost in daily contact with business people from Hong Kong,Taiwan, Korea, and East Asian countries, they may begin to have some admiration forthese successful visitors and decided to set up their own business to improve theirstandard of living (Liu, 2003). Entrepreneurs’ past experiences and training were alsomentioned as a strong drive for business ownership. This finding supports theobservation made by Pisturi et al. (1997) on their study of entrepreneurial motivationthat there was an eagerness among Chinese business owners to “make better use oftheir training and skills” by becoming entrepreneurs.

4.3 Success factorsOn a five-point Likert scale with “5” being extremely important and “1” being leastimportant, Chinese entrepreneurs ranked reputation for honesty the most importantvariable. As shown in Table V, good customer service, good general management skills,and friendliness to customers were also critical reasons for the success of a business.

The quality of honesty has long been regarded by Chinese as one of their traditionalcore values, but the Chinese society is experiencing an honesty crisis. A surveyconducted among 700 middle school students in Southwest China’s ChongqingMunicipality found that 90 percent were willing to “bypass honesty“ for the sake of theirown interest (Shan, 2005). The dishonest tendency found among students perhaps

Sources Number Percentage Percentage out of respondents

Friends 47 23.50 43.12NGO or international lending agency 34 17.00 31.19Family 12 6.00 11.01State bank 7 3.50 6.42Private bank 4 2.00 3.67Personal saving 3 1.50 2.75Credit cooperative 2 1.00 1.83Did not respond 91 45.5

Table III.Sources of funds

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Motivational factorsMean(all) SD

Mean(male)

Mean(female)

Gender meandifference Significance

To increase my income 4.28 0.82 4.21 4.35 20.14 0.332To prove I can do it 4.23 0.80 4.22 4.24 20.02 0.899To be my own boss 4.14 0.95 4.21 4.06 0.14 0.368To be able to use my pastexperience and training 3.88 1.14 3.83 3.94 0.14 0.567For my own satisfaction andgrowth 3.82 0.96 3.78 3.87 20.09 0.561To gain public recognition 3.74 1.16 3.67 3.81 20.13 0.449To maintain my personal freedom 3.18 1.29 3.12 3.25 20.13 0.513So I will always have job security 2.84 1.18 2.84 2.85 20.01 0.938To build a business to pass on 2.65 1.20 2.476 2.84 20.36 0.058 *

To provide job for familymembers 2.55 1.25 2.60 2.50 0.09 0.643To be closer to my family 2.17 1.25 2.03 2.30 20.27 0.166

Notes: Significance at: *95 per cent level (or a ¼ 0.05) and * *99 per cent level (or a ¼ 0.01);5 – extremely important; 4 – very important; 3 – mildly important; 2 – not very important;1 – unimportant

Table IV.Means score for

motivation of Chineseentrepreneurs

Success factorsMean(all) SD

Mean(male)

Mean(female)


Reputation for honesty 4.43 0.63 4.47 4.39 0.08 0.68Good customer service 4.42 0.63 4.45 4.39 0.06 0.74Good general management skills 4.37 0.74 4.41 4.33 0.07 0.622Charisma, friendliness tocustomers 4.39 0.74 4.28 4.49 20.21 0.122Hard work 4.065 0.78 4.10 4.03 0.08 0.678Access to capital 4.10 0.82 4.24 3.96 0.28 0.049 * *

Good product at a competitiveprice 3.36 0.87 3.30 3.41 20.11 0.691Previous business experience 3.89 0.88 4.00 3.77 0.22 0.149Ability to manage personnel 3.72 0.97 3.83 3.60 0.23 0.259Marketing factors including salesand promotion 3.83 1.00 3.89 3.76 0.10 0.57Maintenance of accurate recordsof sales/expenses 3.64 1.05 3.77 3.51 0.27 0.19Appropriate training 3.72 0.95 3.75 3.69 0.06 0.703Satisfactory government support 3.51 1.07 3.56 3.46 0.10 0.56Good location 3.37 1.07 3.37 3.36 0.01 0.953Support of family and friends 3.50 1.19 3.35 3.65 20.14 0.463Community involvement 2.95 1.19 2.84 3.06 20.22 0.303Political involvement 2.68 1.29 2.73 2.63 0.10 0.636

Notes: Significant at: *95 per cent level (or a ¼ 0.05) and * *99 per cent level (or a ¼ 0.01);5 – extremely important; 4 – very important; 3 – mildly important; 2 – not very important;1 – unimportant

Table V.Mean score for variablescontributing to business

success


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reflects a declining ethics among the Chinese, in general. The situation which createssome concerns for the authority might become a competitive advantage forentrepreneurs who can establish themselves as honest merchants in the public eyes.In similar surveys conducted among entrepreneurs in Vietnam (Chu and Benzing, 2004),and Romania (Benzing et al., 2005a), honesty, good management skills, and friendlinessto customers were also rated as the most critical success factors. The findings suggestsome degree of commonality among entrepreneurs across countries regardless ofdifferences in culture, religion, and political system.

Finally, good managerial skills as necessary ingredients for business success werealso rated very highly by Chinese entrepreneurs. This finding is in congruence with theresults from the studies of entrepreneurs in the Czech Republic (Papulova and Mokros,2007) and in Vietnam (Chu and Benzing, 2004).

4.4 Problems facing Chinese entrepreneursAs shown in Table VI, unreliable/undependable employees, the stiff competition, and alack of management training were the three critical variables preventing entrepreneursfrom achieving their success. The problem of not being able to recruit and retain goodemployees appears to be the great challenge facing small business owners in manycountries. Vietnamese entrepreneurs indicated that their business ventures could bemore successful if they were able to hire enough good employees and have them remainwith the business (Benzing et al., 2005b). Given the fact that the unemployment rate inChina was at 23 percent of total labor force (Wolf, 2004), why were entrepreneurs unableto hire and retain reliable workers? Part of the answer may be that SMEs do not have

ProblemMean(all) SD

Mean(male)

Mean(female)


Unreliable and undependableemployees 3.71 1.06 3.67 3.75 20.07 0.680Too much competition 3.54 1.05 3.64 3.44 0.19 0.287Lack of management training 3.4 1.18 3.31 3.49 20.17 0.389Lack of marketing knowledge 3.33 1.11 3.25 3.41 20.15 0.422Inability to maintain accountingrecords 3.41 2.46 3.52 3.30 0.22 0.560Unable to obtain short-termfinancial capital 2.965 1.14 3.12 2.81 0.29 0.130Too much governmentregulation, bureaucracy 2.965 1.11 3.03 2.90 0.12 0.526Complex and confusing taxstructure 2.96 1.04 3.02 2.90 0.11 0.568Unable to obtain financial capital 2.965 1.14 3.03 2.90 0.12 0.526Weak economy 2.975 1.26 2.87 3.08 20.21 0.309Poor road transportation 2.995 1.79 2.91 3.08 20.17 0.548Business registration process 2.76 1.17 2.68 2.84 20.15 0.427Electricity problem 2.61 1.21 2.45 2.77 20.32 0.105Limited parking 2.47 1.18 2.41 2.53 20.12 0.502Foreign exchange limitations 2.36 1.22 2.28 2.44 20.15 0.422

Notes: 5 – very serious problem; 4 – serious problem; 3 – problem; 2 – minor problem; 1 – not aproblem

Table VI.Problems encounteredby Chinese entrepreneurs

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adequate resources to allow for good compensation, and opportunities for advancementexisting in MSEs are limited. As a result, good employees are reluctant to join smallenterprises and will be prone to leave when better jobs are available.

It has also been reported that many Chinese domestic firms considered the low costof labor one of their competitive advantages and focused on cost leadership forsurvival. This strategy would result in cutthroat competition (Lau et al., 2004), and it isthe basis for the respondents of this survey to suggest competition as the second mostimportant problem facing them. In supporting the findings of a previous study ofNigerian entrepreneurs (Chu et al., 2008), results of this study also show that lack ofmanagement training is an important obstacle to the success of Chinese entrepreneurs.The final report submitted by Middlesex University also cited the lack of managementskills as a major problem faced by entrepreneurs (CEEDR, 1998).

4.5 Stress, business success, and social supportAs shown in Table VII, Chinese entrepreneurs believed they were successful andexpressed great satisfaction with their success. They also indicated that their successlevel met their expected success. When asked if the support of family and friends

Mean(all) SD

Mean(male)

Mean(female)


1. How would you describe yourbusiness success?

2.8 0.71 2.81 2.79 0.01 0.907

(4 – very successful;3 – successful; 2 – average;1 – below average)

2. To what extent are you satisfiedwith your business success?

3.47 0.88 3.56 3.38 0.18 0.251

(5 – very satisfied; 4 – satisfied;3 – somewhat satisfied;2 – dissatisfied; 1 – verydissatisfied)

3. How well has your success metyour expectations?

2.285 0.93 2.38 2.19 0.19 0.216

(4 – more than I expected;3 – met my expectations;2 – somewhat met myexpectations; 1 – did not meetmy expectations)

4. As a business owner, how wouldyou rate the level of business-related stress?

4.285 0.71 4.21 4.36 20.15 0.190

(5 – very high; 4 – high;3 – low; 2 – very low;1 – nonexistent)

5. How would you rate the supportfrom family and friends?

4.17 0.90 4.07 4.27 20.20 0.169

(5 – very substantial;4 – substantial; 3 – medium;2 – low; 1 – very low)

Table VII.Mean score for success,

stress, and familysupport of entrepreneurs

in China


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contributed to their business success, the answer was very positive. These findingsare in line with the theoretical view that job performance leads to job satisfaction(McShane and Von Glinow, 2005). Empirical studies show that the support of familyand friends was significantly related to success and satisfaction (Chu et al., 2007a, b).This study’s results support those of previous findings.

With respect to the correlations between success, satisfaction, family support, andstress, some interesting results are emerged and are presented in Table VIII. Businesssuccess and satisfaction are strongly correlated. Similar conclusions on the correlationbetween entrepreneurs’ satisfaction and their perceived success are also found. Themore they feel their success is met, the more satisfied they become. The relationshipbetween business success and stress is also significant. However, there is no significantrelationship between family support and stress found in this study. Rahim (1996)suggests that social support is negatively associated with stress.

Table IX illustrates the correlation between education level and success, stress, andthe level of family support for each gender. For males, the correlation coefficient, 0.137,for education and success indicates a positive relationship although the relationship isweak. The higher the number of years of schooling completed, the higher the success.0.074 between education and stress shows small level of stress is associated witheducation. Even though the relationship is very weak, higher level of schooling is alsoassociated with higher level of family support. Similarly, substantial family supportalso leads to higher success, while higher success results in lower level of stress.For females, pattern is very similar to male case for the relationship between educationand stress and family support. However, the direction of the relationship is completelyopposite for education and success in addition to female success and stress and familysupport.

Q1 – business success Q2 – satisfaction Q3 – expectation Q4 – stress

Q2 – satisfaction 0.672 (0.000)Q3 – expectation 0.458 (0.000) 0.527 (0.000)Q4 – stress 0.140 (0.051) 0.024 (0.745) 20.050 (0.493)Q5 – support 0.249 (0.000) 0.205 (0.004) 0.245 (0.001) 0.045 (0.535)

Note: Pearson correlation coefficients with p-values in parentheses

Table VIII.Correlations of success,stress, and familysupport answers

Educationa (male) Education (female) Male success Female success

Male successb 0.137 (0.250) –Female success – 20.301 (0.275)Stressc 0.074 (0.424) 0.056 (0.693) 20.096 (0.357) 0.178 (0.90)Family supportd 0.085 (0.364) 0.221 (0.112) 0.120 (0.251) 20.034 (0.754)

Notes: The numbers in parentheses are significance level (two-tailed); aeducation is defined as thenumber of years completed; bsuccess is defined on a scale 1-4 as: 4 – very successful, 3 – successful,2 – average, and 1 – below average; cstress is defined on a scale 1-5 as: 5 – very high, 4 – high,3 – low, 2 – very low, and 1 – nonexistent; dfamily support is defined on a scale as: 5 – verysubstantial, 4 – substantial, 3 – medium, 2 – low, and 1 – very low

Table IX.Correlation betweeneducation and success,stress, and level of familysupport by gender

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4.6 t-tests for the gender differences for motivations, success, problems faced, stress, andfamily support variablesWe noted the descriptive differences in the perceived importance attributed to severalmotivational, success and problems factors by Chinese entrepreneurs. We reported thisinformation in Tables IV-VII. In order to understand how our study variables differacross male and female Chinese entrepreneurs, we also conducted independentsamples t-tests to explore the gender differences for the factors in several studyvariables. In general, the statistical analysis of the gender differences did not yieldevidence suggesting significant differences between the mean ratings of male andfemale entrepreneurs. Hence, findings of this study reveals that Chinese male andfemale entrepreneurs do not significantly differ in terms of the motivation to start abusiness, perceived factors that contribute to business success, and perceivedproblems they face as a business person. However, this study found that there is agender difference only in one of the 12 items comprising the perceived importanceattributed to motivation to start a business variable. Female entrepreneurs tend toperceive the opportunity “to build a business to pass on” more important source oftheir motivation to start a business than those male entrepreneurs. Other than thisfactor, there is no significant gender difference in terms of the factors perceived asimportant to start a business. This finding implies that both men and womenentrepreneurs have similar attitudes as far as the importance attributed to having abusiness to prosper and succeed in life.

The findings of this study also revealed that there is no gender difference in terms ofthe importance attributed to factors related to business success, except the importanceattributed “to access to capital”. Chinese male and female entrepreneurs perceive thefactors related to their business success similarly. We found a significant genderdifference between male and female entrepreneurs in terms of the importanceattributed to “access to capital”. Male Chinese entrepreneurs attribute more importanceto access to capital than female Chinese entrepreneurs as a factor related to theirbusiness success. Otherwise, both groups have similar attitudinal tendencies in termsof the factors related to the business success. The statistical analysis also showed thatthere is no gender difference in terms of perceived problems encountered between maleand female Chinese entrepreneurs. Both groups tend to perceive the problemssimilarly, such as unreliable and undependable employees as the most serious problemand foreign exchange limitations as the least serious problem in managing theirbusinesses. We also tested for the gender differences for those variables that measuredthe perceived business success, satisfaction with business success, whether the successmet the expectations or not, perception of the business stress, and support from thefamily. Table VII reports the findings for the significance testing of gender differencesfor each variable. The study findings show that Chinese male and female entrepreneursdo not significantly differ in terms of the perceived business success; satisfaction withsuccess, extent success met their expectations, perceived level of stress, and perceivedsupport from family and friends. These findings imply that perceptual variablesare significant universal factors influencing entrepreneurial behavior of Chineseentrepreneurs (Langowitz and Minniti, 2007). Also, our research findings are consistentwith the finding that male and female entrepreneurs do not differ in terms of intrinsicrewards, extrinsic rewards, and independence and autonomy enjoyed in having one’sown business (Kuratko et al., 1997). Hence, this finding is consistent with our


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observation that Chinese male and female entrepreneurs are driven by similar goals instarting up a small business.

4.7 The ordered logit analysis of motivational factors to start a business and factorscontributing to business successIn order to further investigate the impact and importance of motivation variables andfactors contributing to the success of entrepreneurs, two ordered logit models areapplied to a sample of Chinese entrepreneurs participated in the study. Becauseentrepreneurs ranked the success factors in order (5 – extremely important, 4 – veryimportant, 3 – mildly important, 2 – not very important, 1 – unimportant), an orderedlogit model is the most appropriate model to use (Greene, 2008). To that end, for themotivation variables, we formulated the following model:

Successi ¼ b0 þ b1Educi þ b1Hworki þ b3EmpNumi þ b1Gendi þ b5Expi

þ b6MStai þ b7Stresi þ b8Fsupi þ b9Agei

þ bjMotivVari þ 1i; i ¼ 1; . . . ; 196; j ¼ 10; . . . ; 20:

ð1Þ

where Educ is education level completed, Hwork is number of hours worked, EmpNumis the number of full-time employees, Gend is gender, Exp is experience measured asthe number of years in that business, MSta is marital status, Stres is stress level, Fsupis the level of family support, Age is the age of the entrepreneur, and Motivvar is thefollowing motivation factors: to be my own boss, to be able to use my past experienceand training, to prove I can do it, to increase my income, to gain public recognition, toprovide jobs for family members, for my own satisfaction and growth, so I will alwayshave job security, to build a business to pass on, to maintain my personal freedom, andto be closer to my family. Finally, 1 is error term, assumed to follow logisticdistribution, and bs are coefficients to be estimated. The dependent variable called“Success” in the model is based on the responses measured on a four-point Likert scaleusing (4) very successful, (3) successful, (2) average, and (1) below average.

Similarly, we also formulated a second-ordered logit model to estimate the factorscontributing to the success of the Chinese entrepreneurs. The equation is given as:

Successi ¼ b0 þ b1Educi þ b1Hworki þ b3EmpNumi þ b1Gendi þ b5Expi

þ b6MStai þ b7Stresi þ b8Fsupi þ b9Agei

þ bjSucFaci þ 1i; i ¼ 1; . . . ; 196; j ¼ 10; . . . ; 26:

ð2Þ

where Educ is education level completed, Hwork is number of hours worked, EmpNum isthe number of full-time employees, Gend is gender, Exp is experience measured as thenumber of years in that business, MSta is marital status, Stres is stress level, Fsup is thelevel of family support, Age is the age of the entrepreneur, and SucFac is the followingsuccess factors: good general management skills, charisma, friendliness to customers,satisfactory government support, appropriate training, access to capital, previousbusiness experience, support of family and friends, marketing factors, good product ata competitive price, good customer service, hard work, location, maintenance of accuraterecords of sales/expenses, ability to manage personnel, community involvement, politicalinvolvement, and reputation for honesty. 1 is error term, assumed to follow logisticdistribution, and bs are coefficients to be estimated. The dependent variable called

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“Success” in the model is based on the responses measured on a four-point Likert scaleusing (4) very successful, (3) successful, (2) average, and (1) below average.

By employing Limdep software package, the ordered logit equations are estimatedby maximum likelihood method for the Chinese entrepreneurs. The estimates are givenin Tables X and XI. According to the tables, the models are satisfactory as x 2 andlog-likelihood diagnostics are acceptable in both cases. The ordered logit method doesnot produce familiar F-test and in the absence of a standard F-test, a likelihood ratiotest is conducted to examine the overall explanatory power of the model. The values ofx 2 test statistics with 20 degrees of freedom, 38.239 for the motivation factors and with26 degrees of freedom, 48.538 for the success factors, imply that the models fit well andthe independent variables are jointly significant. Similar to the F-statistic case,dividing the estimated coefficient by the standard error does not give the usualt-statistics. For that reason, we used the term z in tables to avoid any confusion.

In Table X, four variables are statistically significant at 10 percent level, namelynumber of hours worked, stress, family support, and to gain public recognition.Moreover, the level of family support is found highly statistically significant factorcontributing to the success of entrepreneurs. As in the case of Table X, Table XI alsoshows estimated variables, four of which are statistically significant. In addition tonumber of hours worked, stress level, and family support, a success factor, goodproduct at a competitive price, is significant factor. Since interpretation of the

Variable Coefficient SE P[jZj . z]

Constant 1.050 1.413 0.458Education 0.068 0.069 0.323Number of hours worked 20.013 0.008 0.089Number of employees 20.001 0.001 0.382Gender 20.286 0.341 0.402Experience 0.018 0.031 0.558Married or single 20.335 0.304 0.271Perceived business stress 0.625 0.217 0.004Perceived level of family support 0.522 0.169 0.002Age 0.002 0.018 0.929To be my own boss 20.045 0.164 0.782To be able to use my past experience and training 20.037 0.152 0.806To prove I can do it 20.229 0.203 0.258To increase my income 20.172 0.217 0.427To gain public recognition 0.311 0.147 0.035To provide jobs for family members 0.185 0.139 0.183For my own satisfaction and growth 0.016 0.160 0.921So I will always have job security 0.024 0.157 0.876To build a business to pass on 0.028 0.136 0.835To maintain my personal freedom 20.007 0.145 0.960To be closer to my family 0.000 0.151 0.998Mu(1) – threshold parameter 0.989 0.324 0.002Mu(2) – threshold parameter 3.743 0.221 0.000Mu(3) – threshold parameter 6.655 0.258 0.000

Notes: Dependent variable: perceived business success; log-likelihood function ¼ 2196.5137;x 2 ¼ 38.239; restricted log likelihood ¼ 2215.6333; degrees of freedom ¼ 20

Table X.Ordered logit model

estimates for motivationvariables


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estimated coefficients of ordered logit model is not straightforward as in the case ofregular regression (OLS), a coefficient indicates a change in the log of the odds ratio.Therefore, first we have to transform the coefficient by using the exponential functionto find antilog (eb), and then, we can employ the value computed from transformationto predict the odds ratio. Since we estimated the coefficient for family support as 0.522,which gives 1.69 as the odds ratio. This, in turn, implies that an increase in the familysupport from low to medium increases success level by 4,41,691 times, illustrating theimportance of the family support for Chinese entrepreneurs. Likewise, the odds fornumber of hours worked, stress, and to gain public recognition are 0.99, 1.87, and 1.39,respectively, in Table X. Therefore, to gain public recognition is a significant motivatorin success, which increases the success rate 1.39 times. Although it is not statisticalsignificant, the motivation factor of “to provide jobs for family member” rises thesuccess by 1.2 times. In Table XI, number of hours worked take the same value as inthe motivation case, while stress, family support, and good product at a competitiveprice have the odds ratios of 2.04, 1.54, and 0.82. Furthermore, charisma and

Variable Coefficient SE P[jZj . z]

Constant 0.824 1.453 0.5707Education 0.087 0.071 0.224Number of hours worked 20.014 0.008 0.059Number of employees 20.001 0.001 0.507Gender 20.401 0.345 0.246Experience 0.005 0.031 0.866Married or single 20.132 0.292 0.651Perceived business stress 0.711 0.217 0.001Age 20.003 0.019 0.885Perceived level of family support 0.431 0.194 0.026Good general management skills 0.014 0.186 0.939Charisma; friendliness to customers 0.314 0.248 0.205Satisfactory government support 20.218 0.174 0.211Appropriate training 0.129 0.199 0.516Access to capital 0.132 0.211 0.532Previous business experience 20.243 0.192 0.206Support of family and friends 0.101 0.169 0.548Marketing factors such as sales promotion 0.150 0.174 0.388Good product at a competitive price 20.193 0.093 0.039Good customer service 20.273 0.267 0.306Hard work 20.251 0.247 0.309Location 20.074 0.153 0.629Maintenance of accurate records of sales/expenses 0.154 0.172 0.373Ability to manage personnel 20.019 0.189 0.920Community involvement 0.213 0.172 0.216Political involvement 0.016 0.152 0.914Reputation for honesty 0.109 0.194 0.576Mu(1) – threshold parameter 1.019 0.334 0.002Mu(2) – threshold parameter 3.869 0.232 0.000Mu(3) – threshold parameter 6.916 0.276 0.000

Notes: Dependent variable: perceived business success; log-likelihood function ¼ 2191.364;x 2 ¼ 48.538; restricted log likelihood ¼ 2215.633; degrees of freedom ¼ 26

Table XI.Ordered logit modelestimates for successfactors

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friendliness to customers increases the success by 1.37 times. Other factors, such ascommunity involvement, maintenance of good records, marketing factors, appropriatetraining, access to capital and reputation for honesty, lead to an increase in success.

5. Conclusion and recommendationsThis study investigated the motivation, success, problem, and business-related stressand their importance on the success of Chinese entrepreneurs. Its findings revealinteresting information. Bulgarian entrepreneurs indicated that increasing income,proving that they can do it, a desire to be their own boss are the main motivationfactors for becoming business owners. Although male entrepreneurs rated provingthat they can do it as the highest motivation, female entrepreneurs ranked theincreasing income as the highest motivation factor. The study findings also show thatfamily business concerns such as expectations of earning more money inself-employment and the opportunity to pass the business on to children were otherimportant motivational goals in starting up small business ownership. Chineseentrepreneurs regarded a reputation for honesty as the crucial factor contributing totheir success. They also perceived good customer service, good general managementskills, charisma, friendliness to customers, and an access to capital as the leadingfactors to a higher level of business achievement. Female entrepreneurs indicated thatcharisma, friendliness to customers was the most important success factor while areputation for honesty was the most important for male entrepreneurs.

With respect to problems Chinese entrepreneurs face, undependable/unreliableemployees, competition, lack of management training, lack of marketing knowledge,and inability to maintain accounting records were cited as the most importantproblems. Again female and male entrepreneurs differ in the most important problem:lack of management training for female and undependable/unreliable employees formale entrepreneurs. Although Chinese entrepreneurs indicated that the level of theirsuccess met their expectations, they experienced high level of business-related stress,which was stronger for female entrepreneurs. In addition, they reported that thesupport of family and friends was very high, especially for female entrepreneurs.

Even though we observed descriptive differences in perceived importanceattributed to several motivational, success and problems factors, statistical analysisof the gender differences did not yield evidence suggesting significant differencesbetween the mean ratings of male and female entrepreneurs. Hence, findings of thisstudy reveals that Chinese male and female entrepreneurs do not significantly differ interms of the motivation to start a business, perceived factors that contribute tobusiness success, and perceived problems they face as a business person. However,this study found that there is a gender difference in only one of the 12 items comprisingthe perceived importance attributed to motivation to start a business variable. Femaleentrepreneurs tend to perceive the opportunity “to build a business to pass on” moreimportant source of their motivation to start a business than those male entrepreneurs.The lack of significant gender differences implies that both men and womenentrepreneurs have similar attitudes as far as the importance attributed to having abusiness to prosper and succeed in life.

These finding imply that policy makers can design similar training and developmentopportunities for Chinese entrepreneurs to successfully manage and develop and sustaintheir business. It is important that Chinese female entrepreneurs perceive factors in


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the social, economic, and business environment as important as the male counterparts.Hence, this also implies that opportunities for women to participate in economic activityare as accessible as male entrepreneurs in China.

Results of this study suggest that Chinese entrepreneurs are eager to establish theirown businesses for higher earnings and to prove their capabilities, if the rightcondition exists. Evidence also shows that there is a strong link between economicprosperity and entrepreneurship which requires a favorable environment to develop.Chinese policy makers have taken measures to provide microeconomic reforms, andintroduce macroeconomic stability, but more should be done, especially there-establishment of land ownership rights which allow collateral for entrepreneursto secure needed resources for opening and expanding their business. From the humanresources standpoint, Chinese entrepreneurs continue to face the issues of finding andretaining skilled workers. Perhaps more education and training might help alleviatethe problem.

While accelerating reforms and adopting the Western way of life is an importantavenue leading to the integration into the league of developed economies, an increasedexposure to the West may result in declining some of the Chinese traditional values.Chinese ethical norms which place a high value in honesty and mutual trust is erodingdue to the obsession of material possession, but the low status of merchants seen in thetraditional society has been changed. Successful entrepreneurs are respected andhailed as role models in the modern China. Business owners persistently pursued theirambition to become the “chicken’s head”, a dream that most Chinese strives to achieve.

The effects of globalization, downsizing, and economic instability have createduncertainty and reduced opportunities for career advancement in many privateorganizations, as well as those of state-owned enterprises. As a result, businessownership turns out to be a very attractive alternative. By creating jobs, increasingincome and providing economic security, private enterprises not only benefitentrepreneurs but continue to advance China’s economic prosperity, as well.

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Further reading

Djankov, S. and Nenova, T. (2001), Constraints to Entrepreneurship in Kazakhstan, The WorldBank, Washington, DC, March.

McMillan, J. and Woodruff, C. (2000), “Private order under dysfunctional public order”, MichiganLaw Review, Vol. 98 No. 8, pp. 2421-58.

About the authorsHung M. Chu is a Professor of Strategic Management and International Business at West ChesterUniversity of Pennsylvania. Dr Hung M. Chu has published his research results in such journalsas the Journal of Small Business Management, Journal of Developmental Entrepreneurship,Journal of Small Business and Enterprise Development, Journal of African Development amongothers. He has conducted research on entrepreneurs in many countries.

Orhan Kara is an Associate Professor of Economics at West Chester University ofPennsylvania and earned his PhD degrees at the University of Wisconsin-Madison and theUniversity of Wisconsin-Milwaukee. Dr Orhan Kara has published articles in economics, finance,and entrepreneurship in various journals and his research interests include entrepreneurship,trade flows, and human capital. Orhan Kara is the corresponding author and can be contactedat: [email protected]

Xiaowei Zhu is an Assistant Professor of Management at West Chester University ofPennsylvania. She received her PhD in Production Operations Management from the Universityof Wisconsin-Milwaukee and MA in Management Information Systems from the University ofIowa. Her research interests include supply chain management, outsourcing, mixed channel,and quality management. She has several papers published in leading journals, includingJournal of Business Research, Production and Operations Management, and International Journalof Production Economics. She is a member of the Institute for Operations Research andManagement Science, Decision Science Institute.

Kubilay Gok is a Faculty of Organizational Behavior and Human Resources Management inthe Faculty of Management at the University of Lethbridge of Alberta, Canada and earned hisPhD degree at the University of Wisconsin-Madison. Dr Kubilay Gok studies attribution theoryapplied to performance management and organizational failure, organizational citizenship,and leader-member exchange and leader reinforcement styles.


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