When Polanyi Met Schumpeter: Social Trust and Entrepreneurship

Xu, Tao and Zhu, Weiwei (2022): When Polanyi Met Schumpeter: Social Trust and Entrepreneurship.

Abstract

This research identifies the causality between entrepreneurial behaviour and informal institutions of social trust within the context of China’s development. Revisiting the Polanyi-Schumpeter theoretical framework, entrepreneurship embedded in social relations interlinked by trust is a dynamo of sustainable socioeconomic progress. The institutionalised trust, however, was not clarified. With micro-individual data from the Chinese General Social Survey 2011–2021, our research employs the historical instrumental variable approach rooted in rice civilisation to tackle endogeneity. The results illustrate that social trust elevates entrepreneurial engagement by 32.65 and 10.37 percentage points in self-employment and business incorporation, respectively. Increased trust paradoxically hampers self-employment in the central due to insular networks and structured disparities. The findings indicate the nuanced role of social trust in facilitating and constraining entrepreneurship and its regionally contextual determinants. The research contributes to the knowledge and evidence of institutional endowments that mediate entrepreneurial agency and argues for synchronising formal and informal institutions in development.

• Item Type: MPRA Paper
• Language: English
• Keywords: trust; entrepreneurship; social relation; informal institution; development
• Subjects: L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L26 - Entrepreneurship; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business Administration; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M2 - Business Economics; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z13 - Economic Sociology ; Economic Anthropology ; Social and Economic Stratification

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