HONG KONG SAR - Media
OutReach - 11 November 2021 - Big cities are where dreams thrive.
Their cosmopolitan allure, together with the sweet smell of financial
opportunity, have driven waves of migration to population centres throughout
human history. In the modern era, one such narrative is continuing to rapidly
unfold in China, where there were an estimated 286 million
rural migrant workers in 2020, accounting for more than one-third of the entire
working population in the country, and coinciding with a rapid rise in
entrepreneurial activity. This coming together of two dramatic shifts has
afforded a group of researchers an opportunity to look at how urban migration
has helped to drive entrepreneurship in China, especially through the prism of
the role of universities in churning out a steady supply of well-educated and
innovative talent.
The study found that entrepreneurs who migrated from rural
China to big cities such as Shanghai were more risk-taking.
One of their key findings is that,
in China, people who migrated from rural areas and attended university in big
cities are more likely to set up businesses that are bigger in size.
In modern China, the great urban
migration kicked off in the 1980s as a result of economic reforms instituted at
the time. Millions of rural migrants flocked to cities, such as Shenzhen and
Dongguan, to take up jobs in factories. Entrepreneurship was considered
relatively less common among rural migrants. Nonetheless, some of the most
famous Chinese entrepreneurs had rural roots. For instance, Liu Qiangdong – the
founder of JD.com was born in a small village in Jiangsu province and later
went to study at a university in Beijing. Another example is Ma Huateng, also
known as Pony Ma, who founded one of Asia's most valuable conglomerates,
Tencent. Mr. Ma was born in a small town in Guangdong province and went to
school in Shenzhen, where he founded the multinational conglomerate.
"Migrating from the countryside
to the city can be a challenging task for individuals not only because of the
physical distance, but also the large cultural gap they would likely experience
upon relocating," says Willow Wu You,
Assistant Professor in the Department of Management at The Chinese University
of Hong Kong (CUHK) Business School. "But in a sense, it's something that
has helped to drive the rise of private entrepreneurial activity in China and
allowed the country to maintain the growth it has experienced in recent years."
Migration and Risk-taking
While most existing migration
research studies focus on the variety that crosses international borders, Prof.
Wu and her research partner Prof. Charles Eesley at Stanford University looked
at the effect of urban migration within a country on entrepreneurship in their
study Regional Migration, Entrepreneurship and University Alumni. The two scholars conducted a survey among university
alumni from Tsinghua University and analysed the entrepreneurial experience of
283 business founders among those alumni. They found that entrepreneurs who
migrated from rural China to big cities in the country were more risk-taking,
and with the access to better entrepreneurial opportunities and resources that
comes with relocating to an urban environment, they are likely to establish
bigger companies.
In the study, the researchers
examined whether the rural migrants were indeed more risk-taking by directly
asking their opinions on the concerns of starting a company in the survey. They
discovered that the rural migrants were less risk averse than urban dwellers,
among both entrepreneurs and non-entrepreneurs. Among non-entrepreneurs, only
36.1 percent of rural migrants considered entrepreneurship too risky, whereas
45.8 percent of urban dwellers expressed similar concerns. Among entrepreneurs,
the percentage is 7.4 percent for rural migrations and 19.0 percent for urban
dwellers. In addition, the study results show that urban migration is
positively and significantly associated with the likelihood of founding larger
companies.
The Role of Universities
The researchers sought to explain
this phenomenon through the role of universities, noting that they are
universally well-regarded for their important role in supplying talent that are
needed to drive business and innovative performance. They posit that if
entrepreneurship is the force and process of continuous change that drives
innovation, as famously stated by the Austrian economist Joseph Schumpeter,
then universities are a crucial channel through which this force can be
directed to produce the most benefit for an economy. "If entrepreneurship
represents the winds of creative destruction as suggested by Schumpeter,
universities may play a role in directing those winds via their influence on
regional migration," Prof. Wu says.
According to Prof. Wu, apart from
providing social support for rural migrants, the universities that these
migrant students attended allow them to become anonymous and reinvent
themselves by creating new connections in the urban areas where they settle. By
doing this, migrant entrepreneurs become more willing to take risks because
they have fewer worries over stigma from failure, which may happen if they were
starting businesses in their hometowns.
According to researchers, the
universities that migrant students attend allow them to become anonymous and
reinvent themselves by creating new connections in the urban areas where they
settle.
Overall, the study finds that rural
migrant entrepreneurs tend to build larger companies because of their
risk-seeking attitudes and the access to better entrepreneurial resources in
cities. Contrary to earlier management research that suggest entrepreneurs tend
to create their companies close to home, the study shows that the likelihood of
building a bigger firm is higher among university graduates who migrated from
rural areas compared to non-migrant university graduates. Specifically, entrepreneurs
who chose to start tech startups in science parks were likely to form companies
with the largest number of employees (i.e. within the top 25 percent).
Entrepreneurs who chose to start their firms in special economic zones hire the
second largest number of staff (i.e. between the top 50 percent and the top 25
percent).
The study notes that universities
have an important role to play in fostering entrepreneurship by redistributing
talent through providing college education opportunities to rural students. In
particular, the risk-taking attitude among the alumni and the social network
resources provided by universities are crucial to the success of rural migrant
entrepreneurs.
Regional Policy Implications
To stay in the city or to go back
home is a common question faced by many students who moved from small towns to
major cities for college education upon graduation. Prof. Wu says their
findings raised an important question of whether migrant students should be
encouraged to return to their hometowns or to remain in an urban setting to try
to be more successful in their careers.
Furthermore, she explains that
universities in urban areas, together with interconnected businesses and
institutions, attract highly talented and risk-taking migrants and import them
in the form of students, which then benefit the areas that the universities are
located. But, as talented migrants are being attracted to just a few major
cities, smaller cities would suffer due to lower growth in entrepreneurship.
For policymakers, the research findings provide useful implications in how to
promote economic growth by talent mobility.
The majority of people who have
potential to become entrepreneurs live outside the big innovation hubs like
Shenzhen. The current policy direction is either to retain these
entrepreneurial spirits in the regions where they hail from or to bring down
migration from rural regions to urban areas. Earlier rural migrants supported
the economic growth by providing low-cost labour.
"But, as our research finding
shows, rural migrants can also become very successful entrepreneurs. That's why
policies that can promote some sort of interregional mobility may be more
beneficial for local economies," Prof. Wu says, adding that adapting
universities programmes and course content to provide support to rural migrants
may help more of them become successful entrepreneurs.
Reference:
You (Willow) Wu & Charles E. Eesley (2021) Regional migration,
entrepreneurship and university alumni, Regional Studies, DOI: 10.1080/00343404.2021.1934432
This article was first published in the China Business Knowledge (CBK)
website by CUHK Business School: https://bit.ly/3EXYvdM.
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