Publication Type: Conference Paper/Unpublished Manuscript
Review Method: Peer Reviewed
Abstract: Max Weber had observed, nearly a century ago, that the strong lineage system inhibited the emergence of rational capitalistic business organization in China. Recently Martin White reevaluated the Weberian thesis from the perspective of social capita theory and argued that, rather than an obstacle, Chinese familism (including kinship ties) may have facilitated the economic growth in China over the last two decades. This paper attempts to empirically test the competing hypotheses by focusing on the relationship between kinship networks and the development of rural enterprises. Poisson regressions of the count of enterprises show that kinship networks, measured by proportion of most common surnames, significantly increase the number of rural enterprises, especially the number of private enterprises in Chinese villages. Firm-level productivity analysis, however, does not find any correlation between kinship networks and efficiency. I conclude that the lineage system facilitated founding of private enterprises by providing resources that were not available through formal channels; but the efficient operation of enterprises depends more on rational management and formal institutional support.