Dynamic Effects of Path Dependence on Regional Entrepreneurship in Transitional China

Previous studies fall short when explaining the determinants of regional entrepreneurship in an unstable environment from a dynamic perspective. This study investigates the dynamic feedback effects of path dependence on the regional entrepreneurial activities in China. Using a sample of panel data related to 47,515,084 enterprises from 2000 to 2018, we estimate a set of panel models analyzing the effects of dynamic increasing returns and formal and informal institutional hysteresis on the new firm formation in Chinese cities. Our results provide evidence of positive relationships between peer effects from past entrepreneurial activities, past FDI and government intervention as well as the historical environment of the proportion of foreign-funded enterprises and SOEs in 1989 with the start-up rates. This study on regional entrepreneurship in the Chinese context develops a broader understanding of entrepreneurship in transition economies.