4609 
6848New ventures will inevitably face liability of newness during the process of growing up, as a result, it becomes entrepreneurs’ main responsibility to find ways to improve new ventures’ operating efficiency and maintain their survival. In order to obtain the scarce production resources, many start-ups have adopted non-productive investment such as rent-seeking behaviors, but whether it is an effective way for new ventures to solve problems they face in the growth dilemma through non-productive investment? It is still an unanswered question. Based on the data of World Bank （2005）, we use entertaining expenses per capita as the proxy variable of non-productive investment, and find that: First, non-productive investment has a significant inverted U-shaped effect on new ventures’ operating efficiency, which means that moderate input of non-productive investment is conducive to the improvement of business efficiency, while being too dependent on non-productive behaviors will contrarily reduce new ventures’ business efficiency. Second, the deterioration of the institutional environment will significantly lower the operating performance of start-up companies, and weaken the absolute value effect of non-productive investment. However, it has strengthened the marginal effect of non-productive investment, which means that with the continuous improvement of the institutional environment, the non-linear effect of non-productive investment to the operating efficiency will be gradually flattened, and its marginal effect will decrease significantly. Third, the nature of property right plays a moderator role between non-productive investment and new ventures’ performance. Compared with non-state-owned start-ups, state-owned start-ups are more sensitive to non-productive inputs, that is, for the same non-productive input, it will bring a greater positive effect to state-owned start-ups than to non-state-owned start-ups. As the non-productive investment increasing and exceeding a certain critical point, the same non-productive investment will have a greater negative impact on the performance of state-owned start-ups.
/ Journals / Foreign Economics & Management
Foreign Economics & Management
LiZengquan, Editor-in-Chief
ZhengChunrong, Vice Executive Editor-in-Chief
YinHuifang HeXiaogang LiuJianguo, Vice Editor-in-Chief
Does Non-productive Investment Improve New Ventures’ Growth?
Foreign Economics & Management Vol. 41, Issue 01, pp. 57 - 72 (2019) DOI:10.16538/j.cnki.fem.2019.01.005
Summary
References
Summary
[1] Fan G, Wang X L. China's Marketization Index: a Report on the Relative Progress of Markets in various regions [R]. Beijing: Economic Science Press,2011.
[2] Huang J L, Li K W. Eat-Drink, Corruption and Firm’s Purchase Order [J]. Economic Research Journal,2013,(6):71-84.
[3] Li X C, Ye W P, Zhu K. Trapped in or Free from the Cage: The Relationship between Regional Guanxi Culture and Guanxi Strategy of Entrepreneurial Firms [J]. Management World,2016,(10):88-102.
[4] Li X L, Ma S, Deng X. Family Background of Civil Servants, Entrepreneurship and Rent-seeking Motives[J]. Economic Research Journal, 2015, 50 (5) : 89-103.
[5] Luo D L, Liu X L. Political Relations，Industrial Barriers and Enterprise Performance [J]. Management World,2009,(5):97-106.
[6] Wan H L, Chen X Y. Governance Environment, Rent-seeking and Transaction Costs of Enterprises: Evidence from Non-productive Expenditures of Chinese Firms[J]. China Economic Quarterly,2010,9(2):553-570.
[7] Wu X Y, Wang M, Li L X. Does High Housing Prices Discourage Entrepreneurship in China? [J]. Economic Research Journal,2014,(9):121-134.
[8] Wu Y P, Wang J. Institutional Environment, Political Network and Entrepreneurship: Evidence from Transitional Countries[J]. Economic Research Journal,2015,50(8):45-57.
[9] Yang C, He X G, Li Z Y. Family Structure and Rural Entrepreneurship: Empirical Analysis Based on CTVS Data [J]. China Industrial Economics, 2017(12):170-188.
[10] Yu W, Wang M J, Jin X R. Political Connection and Financing Constraint: Information Effect and Resource Effect [J]. Economic Research Journal,2012,(9):125-139.
[11] Yu M G, Hui Y F, Pan H B. Political Connections, Rent seeking, and the Fiscal Subsidy Efficiency of Local Government [J]. Economic Research Journal,2010,(3):65-77.
[12]Aidis R, Estrin S, Mickiewicz T M. Size Matters: Entrepreneurial Entry and Government[J]. Small Business Economics, 2012, 39(1):119-139.
[13]Alberti F G, Pizzurno E. Technology, Innovation and Performance in Family Firms[J]. International journal of entrepreneurship and innovation management, 2013, 17(1-3):142-161.
[14]Bertrand M, Djankov S, Hanna R, Mullainathan S. Obtaining a Driving License in India: An Experimental Approach to Study Corruption[J]. Quarterly Journal of Economics, 2007, 122(4):1639-1676.
[15]Bowen H P, Clercq D D. Institutional Context and the Allocation of Entrepreneurial Effort[J]. Journal of International Business Studies, 2008, 39(4):747-767.
[16]Cai H, Fang H, Xu L C. Eat, Drink, Firms, Government: An Investigation of Corruption from the Entertainment and Travel Costs of Chinese Firms[J]. Journal of Law & Economics, 2014, 54(1):55-78.
[17]Casillas J C, Moreno A M, Barbero J L. A Configurational Approach of the Relationship Between Entrepreneurial Orientation and Growth of Family Firms[J]. Family Business Review, 2010, 23(1):27-44.
[18]Delmar F, Shane S. Does experience matter? The effect of founding team experience on the survival and sales of newly founded ventures[J]. Strategic Organization, 2006, 4(3):215-247.
[19]Flannery M J, Rangan K P. Partial Adjustment toward Target Capital Structures[J]. Journal of financial economics, 2006, 79(3):469-506.
[20]Harper D A. Foundations of entrepreneurship and economic development[M]. Routledge, 2003.
[21]Haveman H A, Jia N, Shi J, et al. The Dynamics of Political Embeddedness in China[J]. Administrative Science Quarterly, 2016, 62(1):1-38.
[22]Heckman J J. Sample Selection Bias as a Specification Error[J]. Econometrica, 1979, 47(1):153-161.
[23]Hite J M, Hesterly W S. The Evolution of Firm Networks: From Emergence to Early Growth of the Firm[J]. Strategic Management Journal, 2001, 22(3):275-286.
[24]Knight J, Yueh L. The role of social capital in the labour market in China[J]. Economics of Transition, 2008, 16(3):389–414.
[25]Krueger A O. The Political Economy of the Rent-Seeking Society[J]. American Economic Review, 1974, 64(3):291-303.
[26]Lien D H D. A note on competitive bribery games[J]. Economics Letters, 1986, 22(4):337-341.
[27]Milanov H, Fernhaber S A. The impact of early imprinting on the evolution of new venture networks[J]. Journal of Business Venturing, 2009, 24(1):46-61.
[28]Murphy K M, Shleifer A, Vishny R W. Why Is Rent-Seeking So Costly to Growth?[J]. American Economic Review, 1993, 83(2):409-414.
[29]Olken B A. Monitoring Corruption: Evidence from a Field Experiment in Indonesia[J].Journal of political Economy, 2007, 115(2):200-249.
[30]Peng M W, Heath P S. The Growth of the Firm in Planned Economies in Transition: Institutions, Organizations, and Strategic Choice[J]. Academy of Management Review, 1996, 21(2):492-528.
[31]Robinson K C. An examination of the influence of industry structure on eight alternative measures of new venture performance for high potential independent new ventures[J]. Journal of Business Venturing, 1999, 14(2):165-187.
[32]Shane S. The Illusions of Entrepreneurship: The Costly Myth That Entrepreneurs, Investors and Policy Makers Live by [M]. New Haven: Yale University Press, 2008.
[33]Xin K R, Pearce J L. Guanxi: Connections as substitutes for formal institutional support[J]. Academy of Management Journal, 1996, 39(6):1641-1658.
[34]Zahra S A, Ireland R D, Hitt M A. International Expansion by New Venture Firms: International Diversity, Mode of Market Entry, Technological Learning, and Performance[J]. Academy of Management Journal, 2000, 43(5):925-950.
[35]Zhou W. Political Connections and Entrepreneurial Investment: Evidence from China's Transition Economy[J]. Journal of Business Venturing, 2013, 28(2):299-315.
Cite this article
Yang Chan, He Xiaogang, Jia Zhihan. Does Non-productive Investment Improve New Ventures’ Growth?[J]. Foreign Economics & Management, 2019, 41(1): 57-72.
Export Citations as:
For
ISSUE COVER
RELATED ARTICLES
