Entrepreneurship and Culture: Evidences from China

Jianhong MaSchool of Psychology and Behavioral

Sciences,Zhejiang University, Hangzhou, CHINA

jhma@zju.edu.cn+86 (0) 13958159647

Transformation towards market economy

Increase Rate of GDP from 1990 to 2011 (2012: China-7.8, Indonesia-6.0 )

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

3.80%

9.20%

14.20%14.00%

13.10%

10.90%

10.00%9.30%

7.80% 7.60%

8.40% 8.30%

9.10%

10.00%10.10%10.40%

11.10%

13.00%

9.00% 9.20%

10.20%

9.20%

Chart Title

• Some statistics from Ning Bo city

Corporate Life Cycle study in Ningbo

Age Distribution of SME in Ningbo

• During the last 30 years, there were, in average, 23 new companies registered, and 16 companies died everyday.

• The average age of companies in Ningbo is 4.9 Years

• About 60% are registered within 5 years.

Age Distribution of SMEs in Ningbo

0. 00%2. 00%4. 00%6. 00%8. 00%

10. 00%12. 00%14. 00%16. 00%

年龄

经济

主体

数量

百分

比

百分比

Distribution of SMEs

Age Above

30

Percentage

Lifetime of SMEs in Ningbo

Distribution of SMEs over Lifetime

0. 000%2. 000%4. 000%6. 000%8. 000%

10. 000%12. 000%14. 000%16. 000%18. 000%

寿命

百分

比

analysis based on cancellation of company registration data

Lifetime 30

-39Ab

ove 5

0

How to understand enterprenuership in China?

• 43 companies at the birth stage

• Average age: 4.70 with SD of 4.13

Theoretical Framework

Life Cycle Analysis of SM

Es

Analysis of internal mechanism for SME’s development

Analysis of external “ecological system” for SMEs development

Enterprise diagnosis & implications for organizational development

Ecological assessment of organizational environment & implications for police-making

1. Competitive SMEs and healthy development along life cycle

2. Improved regional investment situation

3. Regional economy development

External “Ecological System”Two Facets Environment Model: Linear Structure Analysis

Correlation Between Enterprise Development and Environment

Two Facets Environment AssessmentExistence Index

Development

Potential Index

Existence Index 1 .323**

Development Potential Index .323** 1

Resource supply

Basic Resource

01.Infrastructure (traffic, water conservancy, etc.) .104* .107*

05.Local culture and thoughts .143** .130*

15.Social Security System .091 .058Human Resource

07.Supply of general labors in labor market .059 .03808.Supply of technical & managerial talents .089 .111*

09.Local labor cost .079 .096Financial & Technical

16.Finance environment: approaches, institution .177** .133**

17.Techenics and education .054 .058

Order of Environment

Environment of Legal System

04.Public security .129** .193**

12.Administration .103* .07111.Law Environment: Perfection of law system .100* .136**

10.Protection of enterprise’s legal rights .144** .117*

Political Environment

18.Instructions and support from government .223** .173**

02.preferntial policy & investment incentives .048 .139**

Market Environment

13.Industrial associations and their functions .119* .05103. Trade order & management .143** .158**

06.Industrial Environment .132** .149**

Two Facets Environment Model

Assessment of resource by enterprises at different stage of life cycle (fitness of need)

Assessment of environment by enterprises at different stage of life cycle (fitness of need)

Government instruction is important!• Seeking distinctive economy

• Planning and construction of Economic Development Area

• Infrastructure

• Market;

• Human Resource Policy;

• Finance;

• Taxation system

• Security of the society

• Guild and associations

Vertical Democracy

• A new form of Democratic Decision-making System

• “China’s Megatrends : The Eight Pillars of a Modern Society” by John Naisbitt and his wife.

Horizontal democracy in the west

• When westerners think about a free, democratic society, they think about a horizontal structure, in which individuals have an equal vote and periodically elect their leaders.

• Most western democracies have this model in mind.

Vertical Democracy: balancing its top-down and bottom-up

• John: The West says the Chinese political system is authoritarian, but it is actually a new type of democracy. The essence of it is that it is vertical. We call it a vertical democracy, while Western democracy is horizontal.

• In the West, everybody has equal status, and there will be an election every few years. Somebody votes and others get voted in.

Vertical democracy in China

• The Chinese believe that we are all born connected, and every individual is part of a whole. Harmony with others is the key to living in traditional Chinese society. Personal accountability is not as important as the quality of your relationships with the people around you.

• In this picture, politics is run not by rival parties or politicians but by consensus in a top-down, bottom-up process.

• In such a society, the leadership frames a broad concept for the society as a whole that incorporates bottom-up ideas, initiatives, and demands.

• Top-down and bottom-up initiatives are then established and encouraged to adjust flexibly as conditions and circumstances require, all in the context of an overarching common goal set by the leadership. This creates a vertical structure, with a constant flow of ideas and experiences up and down the hierarchy.

• In the eyes of the West, justification for governing a country stands or falls on who is elected; in the eyes of the Chinese, justification for governance rests more on accomplishments.

What Does Freedom Mean to a Chinese?

• For Americans, freedom means the opportunity to determine how they live, unfettered by arbitrary actions of others. This view is shared in most of the western world, where the rights of the individual are a major pillar of society.

• But freedom means different things to different people.

Cultural background

• Chinese thinking is very much influenced by two fundamental requirements: social order and harmony.

• Social order and harmony were central to the teachings of Confucius, who believed that only order could provide true freedom. This concept also prevails in team sports, where rules set the conditions for freedom in playing.

• Thus, an orderly society establishes the context within which people can act freely. In the Chinese way of thinking, order does not oppress people but defines room to maneuver.

The five-fold deontological harmonious interrelationships

• 1. Harmonious reciprocal relationship between caring parents and children of filial piety ( 父慈子孝 )

• 2. Harmonious reciprocal relationship between benevolent leaders and the led who are loyal( 君仁臣忠 )

• 3. Harmonious reciprocal relationship between caring husband and obedient wife ( 夫义妇听 )

• 4. Harmonious reciprocal relationship between good elder brother/sister and respectful younger brother/sister ( 兄良弟悌 )

• 5. Harmonious reciprocal relationship between trustworthy friends ( 朋友有信 )

• From this perspective, what the West understands as freedom of choice by the individual, with limited social and legal contexts established by each society, leads to continuing preoccupation with who is right and who is wrong. Indeed, many people in the West believe that contention and discord lead to breakthroughs, new ideas, and innovation. But conflict and disharmony, especially in such serious matters as governance, do not fit the Chinese mentality.

Framing the Forest and Letting the Trees Grow

• Following Government policy is important.

• Top Designing: “Socialist New Countryside” Project: Reduce the difference between city and country.

• Residents in countryside explain 50.32%

• Letting the trees grow gave freedom to set goals: bottom initiative ---- village decide how to do….

Internal Mechanism for SME’s LCD

Enterprise’s resource ：1.Human Resource2.Manufacturing Technology3.Capital Resource4.Products & Marketing Resource5.R&D Resource

Resource Management and Utilization ：1.Control2.Flexibility of Decision System

Index of SME’s growth ：1.Existence Index2.Development Potential Index

Phases of SME’s Life Cycle ：1.Birth 2.Survival 3.Development of Diversity4.Maturity 5.Decreas 6.Recover

An Enterprise Resource and Resource Utilization Model

Correlation between performance and enterprise’s resource

• Understanding Market from culture

Some paradox of Consumption in China

Paradox 1 • 中国已成为全球第二大奢侈品消费市场。 ( 安永《中国：新的奢华风潮 》， 2005 ； 81% 的世界奢侈品品牌都已进入中国市场 , Bain Consulting,”China’s Exloding Consumer Spending Power Skyrockets Luxurious Goods Sales”,2005; Affluent Chinese Consumers and Their Luxurious Consumption, Xiongwen Lu, 2006 )

Paradox 2 • 年轻消费者从众的同时追求个人主义 ( 《中国消费者行为报告》，卢泰宏著， 2005 年 2 月中国社会科学出版社 )• 中产阶级在趋同倾向下的自我炫耀 ( 中国的中产阶级与他们的消费文化 , 郁方 , 2004)• 女性消费者多重身份的角色冲突 ( 《中国女性社会角色冲突对消费行为的影响》 , 杨晓燕， 2001. ）

Paradox 3 • 上海新婚夫妇婚礼费用平均高达 16 万，但其年均收入水平却不到 10 万；• 中国公众 2006 年在各时尚领域的消费平均金额为 15837.7元，其中，服装消费 7287.7 元，其次是珠宝（ 3212.9元）和化妆品（ 2256.4 元）。 《世界经理人》 2007.2• 中国消费者买车并不图实用，而是“让朋友喜欢我”

Low Family IncomeHigh Luxury Consumption

Conformity in consumptionInterest in personality

Restraining basic needs”Face” consumption

Understanding Consumers’ BehaviorDefinition of Consumer Behavior

• Those activities directly involved in obtaining, consuming, and disposing of products and services, with special emphasis on the mental processes that precede and follow these actions

• Mental processes important

• why we like or dislike it…

In the US, the Marlboro cowboy is usually shown alone

In Japan, the Marlboro cowboy is usually shown as part of a group…

Culture has an influence on consumer behavior

• US culture = importance of individual; not true in Asia

• Japanese consumers think a single cowboy looks “lonely” and “poor”

Culture is … A set of values, ideas, artifacts, and other

meaningful symbols that help individuals communicate, interpret, and evaluate as members of society

Blueprint of human activity, determining coordinates of social action and productive activity

A set of socially acquired behavior patterns transmitted symbolically through language and other means to the members of a particular society

Characteristics Influenced by Culture• Sense of self and space• Communication and language • Dress and appearance• Food and feeding habits• Time and time consciousness • Relationships• Values and norms• Beliefs and attitudes• Mental processes and learning Work habits and

practices

Culture Influences Pre-purchase and Purchase Activities • Culture affects what consumers think

they need and what they perceive as frivolous

• Culture affects how and how much they search for information

• Culture affects the importance placed on various attributes of alternatives

• Culture affects the purchase process--how consumers buy, what they expect, and even how they negotiate

Culture Influences Consumption and Divestment Activities

• Culture affects what consumers expect from a product

• Consumers’ expectations about form and function are influenced by culture

• Culture influences how consumers dispose of products--how much is consumed and whether or not consumers recycle products or packaging

Some important aspects of the Chinese culture:

• Culture based on the “roots”

• The Culture of the middle way (via media)

• The Relationship Culture

• The “He” (harmonious) Culture

• The Face Culture

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The behavioral differences of Chinese consumers during the consumption process:

• Preventive and conservative consumption (risk averse)

• More prudent than the westerns when making the purchase decision (in terms of information search and time span)

• The symbolic meanings of the products are different

• Higher price sensitivity (response to SP)

• The larger separation between the purchasers and the users

China behavior with Chinese characteristics:

Face consumption: The behaviors of gift-giving and gift consumption, etc

Relationship consumption: consumption with the public money, etc

“Root” consumption: The motive of holding their family and nationality, etc

The consumption of Women: The transformation from dedication to selfdom, etc

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Comparable consumption, Conspicuous consumption and Symbolic consumption

• Comparable consumption, which implies a significant premise that consumers purchase some products not because of their physical needs, but more of their psychological gap which comes from comparison with others.

• Conspicuous consumption, which is the consumer behavior of proving the payment ability of valuable products through purchasing and showing the luxury

• Symbolic consumption, which means that consumption has the symbolistic character. The consumption is not only physical but also symbolic.

The face consumption and relationship consumption

Relationship consumption

• In China, as the reasons of historic cultures, consumption based on relationship and public relationship, consumption with public money cannot be ignored in the consumption behaviors.

• The behaviors of gift-giving: what is remarkable in gift-giving is that, what gifts reflect is the degree of the givers show their respect to the receivers, not the economy situation of givers (they often present gifts beyond their economic capability).

The face consumption and relationship consumption

1. Involving ordinary people ， mass market.

2. Less income constrained, less price sensitive. Face is of more significance than loss of money.

3. The purchaser separate from the user. The “appearance” of the product is more important than its “utility”.

4. When an organization purchase the gift, what they care most is formality of the invoice instead of the price.

5. The core of the consumption value are face and relationship.

6. Highly regard the package and cultural connotation.

7. Highly correlated with the festivals and the objectives.

8. The status determines the level of the consumption, and the gaps among social classes lead to various levels of gift-giving.

9. The concept of “the middle may” lead to convergence of the consumption, and following the suit.

10. Reciprocity.

The face consumption and relationship consumption

• Thanks for Your Attention