The role of informal capital on new venture formation and growth in China

The role of informal capital on new venture formation and growth in China This study examines the nature and role of informal capital used by micro-firms in the dynamic emerging market of China. Using a unique source of data for 260 urban entrepreneurs, this study provides empirical evidence that entrepreneurs’ personal savings and family funding are important sources of start-up capital. However, household income was found to be the most important funding source in driving firm growth over time. This research directly addresses the lacuna of studies on entrepreneurship in emerging economies and contributes to our understanding of the critical role informal capital plays in the Chinese entrepreneurial process. Overall findings suggest that informal capital is still predominantly used over formal capital sources for financing firm start-up, underscoring the slow transition in China from an emerging to a modern economy. Small Business Economics Springer Journals

The role of informal capital on new venture formation and growth in China

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Springer US
Copyright © 2015 by Springer Science+Business Media New York
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
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