Experimenting with Entrepreneurship: Government, Globalization, and the Rise of Tech Startups in China

This dissertation examines the institutional origins of China’s recent boom in technology startups and its contribution to the country’s advance in high-tech. The past few decades witnessed a major transformation of China’s political economy—from one that was hostile to entrepreneurship to one that actively supports and harnesses it, particularly that in technology. China’s tech startup sector—now the world’s second largest, just behind that of the U.S.—has become an important source of economic dynamism and played a key role in China’s advance in many cutting-edge technologies. These developments cannot be satisfactorily accounted for by theories in comparative political economy that consider the state and the market as being mutually exclusive or those that prescribe certain state structures as necessary conditions for economic development. To understand the rise of tech entrepreneurship and its impact on technological development in China, this dissertation draws from almost 100 field interviews in China and a variety of materials such as local gazetteers, memoirs, and listed company documents. I make three main claims in this dissertation. First, I argue that local tinkering of existing institutions and the embrace of transnational venture finance helped to foster entrepreneurship and forge new interests. This not only resulted in the removal of restrictive rules but also led to the creation of arrangements that combine the state and the market in new ways and render vibrant tech entrepreneurship and active state involvement mutually supportive. This finding contributes to the literatures on gradual institutional change and capitalist diversity and challenges works in comparative political economy that associate vibrant entrepreneurship with free market economies. Second, through detailed case studies of the integrated circuit and pharmaceutical sectors, I show how the Chinese state through experimentation increasingly relied on entrepreneurs—especially returnees—and became embedded in entrepreneurial networks, which helped to transform both sectors such that bottom-up discovery, specialization, and integration in global networks play a more prominent role. Leveraging local advantages and the opportunities created by globalization, entrepreneurs experimented with new products and business models and formed various kinds of relations with multinationals that transcended the hierarchical relations in the existing global production literature. I move beyond existing theories on development that stress state structures and strategies and show that the Chinese state’s embeddedness in entrepreneurial networks was created in the process of high-tech growth and that the sectors have often developed in ways unanticipated by the state’s industrial policies. Third, I argue the potential of tech entrepreneurship has been limited by the Chinese state’s continued pursuit of self-sufficiency and its inadequacies, particularly in market creation, regulatory capacity, and investment in basic research. By showing how concerns over the reliance on foreign technologies led to inefficient allocation of resources, I highlight the dilemma of pursuing high-tech development through participation in global networks of which a strategic competitor rests at the center. This argument also suggests that the demands on the state placed by high-tech are more arduous and comprehensive, especially for countries that strive for high degrees of autonomy