I know the title is puzzling – entrepreneurship is
associated with capitalism, not communism. But there is one big exception.
China, the world’s largest nation, has both a capitalist market and a state
controlled by the Communist Party. It wasn’t always this way. Before the market
transition under Deng Xiaoping, its economy was run according to communist
principles, and Communist Party members were trained to see these principles as
good and capitalist economies (meaning pretty much the rest of the world) as
fundamentally evil.
Those who were party members under the market transition were
suddenly told that communist rule is good and a market economy is also good.
That’s a tough combination to swallow and one that may have had some
consequences for their professional lives. A new paper in Administrative Science Quarterly by Christopher Marquis and Kunyuan Qiao looks at how party
members acted when they became entrepreneurs in charge of young and growing
firms. They studied the choice of internationalization, which is particularly
meaningful for entrepreneurs with a communist background because an
international firm has to interact with foreign countries that were previously seen
as evil.
As you might expect, entrepreneurs who were members of the Communist
Party before they founded their enterprises were less likely to
internationalize than entrepreneurs who weren’t, suggesting that the
association of foreign nations with evildoing had some effect on their business
decisions. Although this was expected, it is far from obvious: The same Communist
Party that created that association then led the market transition and
encouraged firm foundings to improve the economy. For many of these
entrepreneurs, the basic ideology they were trained in meant more than the party’s
updated instructions.
Other findings give hints on what could make Chinese entrepreneurs
behave less like traditional communists. Interestingly, two important ones involve
government actions. First, entrepreneurs who got involved in social networks
created by the government, such as industry associations, were more likely to
internationalize their firms. In social networks, people learn from and
influence each other, and these networks had exactly that effect. Entrepreneurs
learned more about how to internationalize and why doing so wasn’t evil, and
they acted on it.
Second, government corruption led to internationalization.
Firms that were exposed to greedy governments (usually local ones) and had
their resources taken away turned to internationalization as a way to get into
cleaner economic and political environments. Presumably, these entrepreneurs
learned that not all evil was foreign. Evil could be found domestically also,
so the difference between foreigners and locals perhaps was not as great as
they had been taught.
This study confirms that the Communist Party has a lifelong
influence on its members but shows that those influences can be weakened – by the
state. This is an interesting conclusion about what can occur when a party and
state are combined, and it should raise questions about how other sources of
influence on entrepreneurs combine.
