16 Oct 2006  Report from the Field

Report from China: The New Entrepreneurs

When a delegation of Harvard Business School faculty visited Chinese entrepreneurs, they came away with something unexpected: the start of what could be a fundamental rethinking of how entrepreneurship works. Key concepts include:

  • At least in selected areas, entrepreneurs in China are thriving and opportunities are abundant in times of change, chaos, and uncertainty.
  • National, regional, and local governments continue to play a role in business formation, and can be helpful securing resources for entrepreneurs.
  • Studying China provides fertile ground for rethinking what conditions are necessary to foster a healthy entrepreneurial environment.

 

Travel Dates: June 11-18

Travel Party: Fifteen people, including nine faculty members.

Locations: The cities of Beijing, Hangzhou, and Shanghai. Companies and institutions visited include Tsinghua Science Park, Microsoft, Li-Ning, Gome, Beijing Genomics, Zhejiang University, Huawei, Wahaha Beverage, Shanda, Fosun, Focus, and Tsinghua University.

Purpose: Begin to comprehend some of the fundamental changes in the Chinese economic and social system, and how entrepreneurship is being facilitated to play a role in this. Also important: Make contacts that will be helpful in research and course-development activities at HBS.

Report:

Sean Silverthorne: What were some of the group's conclusions about entrepreneurship in China, at least in the areas you saw?

Dan Isenberg: Yes, it is important to take into account the fact that we only saw a select portion of the entrepreneurial activities in China, in particular in the major eastern cities Beijing, Shanghai, and Hangzhou.

First of all, it is impossible to grasp the scale of the transformation without seeing it with one's own eyes. The physical, economic, and social immensity of the change is impressive to say the least.

A second conclusion is that it is impossible to comprehend the vibrancy, energy, and enthusiasm without experiencing it firsthand.

Q: Although moving toward a more capitalist system, the government still plays a strong role in the economic environment of the country. Does that presence help or hinder entrepreneurial efforts there?

A: Time will tell, but I think in the short and medium run it is clear that the government is a major driving force. By the way, "government" is not a monolithic entity. There are national, provincial, and municipal governments. All are playing roles, but my sense is that the regional governments' roles are the most significant in terms of creating the infrastructure to support entrepreneurship—university programs, tax incentives, incubator programs, educational programs, and the like.

Q: Your travel group seemed very impressed with the high quality and education of workers there. Was that a surprise?

A: Again, bear in mind that we met a very limited and select group of people. I think different faculty had different reactions based on our initial personal expectations, but given the high quality of Chinese students that we have at HBS and that we meet in U.S. companies, I don't think we were very surprised. Impressed, yes, but not surprised.

Q: What's a "sea turtle" and why is it important in discussing the development of entrepreneurism in China?

There are many paths to successful venture creation, and viewing the phenomenon from a completely different perspective is enlightening.

A: We heard the phrase "sea turtle" a few times. These are the Chinese who spend significant time abroad and then come back to China to "lay eggs," that is, start new ventures. In addition to bringing with them insights, skills, attitudes, tangible assets, and contacts that are useful to their ventures, the government has created incentives to attract them back to China, and is more lenient or flexible regarding new venture formation.

Q: This was an unusual trip for HBS in that it involved quite a number of faculty, and faculty representing different disciplines. Was that cross-pollination of viewpoints and knowledge helpful?

A: Not only did we have a variety of faculty interested in entrepreneurship from different perspectives, we also had two prominent venture capitalists from the Boston area. As in any good case discussion, the different perspectives, questions, and insights were extremely enriching. After every company visit we would continue back on the bus to discuss and debate what we saw and how we interpreted it. And I think we formed stronger bonds among ourselves, including some new friendships that are already manifesting themselves in plans for research collaboration.

Q: The group almost to a person spoke about how the trip not only changed their perspective on entrepreneurship in China, but also how they think about entrepreneurship in general. Could you discuss that a little bit?

A: There is a popular song in Israel that goes, "The things you see from there, you cannot see from here." I think we developed a greater appreciation for the fact that there are many paths to successful venture creation, and viewing the phenomenon from a completely different perspective is enlightening.

As one example, we saw the powerful, and in this case positive, role of the government. We also saw that whereas a modern infrastructure really helps, a lot of entrepreneurship can occur without it, and then when successful, entrepreneurship itself creates, enables, and facilitates economic development.

There are a number of "chicken and egg" processes, or feedback loops here. I learned a saying in Chinese: "You can catch big fish in murky water." That means that the big fish are hiding when the water is clear, or they have already been eaten. Translation: There are big opportunities in times of change, chaos, ambiguity, adversity, and unclarity. China is certainly a "work in progress."

Q: What advice would you give HBS Working Knowledge readers who are thinking of creating new businesses or ventures in China?

A: Go there now. When there, listen, observe, learn. When you are ready to do business, form a network of trusted insiders to help you get things done there.

About the author

Sean Silverthorne is editor of HBS Working Knowledge.