Ethnic entrepreneurship, initial financing, and business performance in China

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44 Scopus citations


Access to external financing is a major obstacle for starting a new business across various country contexts. Ethnic minorities, in particular, tend to face more extreme financial constraints, although the linkages between ethnicity, finance, and entrepreneurship have never been previously studied in China. Relying on a new proprietary dataset, this paper compares ethnic-based differences in external financing from both formal and informal sources used to start a new micro-enterprise or a small-and-medium-sized enterprise (SME) and the implications on post-entry business performance in China. The main results show that Han households tend to rely more on initial formal financing, but not initial informal financing, to start a new business. Furthermore, Han-operated businesses tend to perform better than their minority-operated counterparts, although this performance gap disappears given similar access to initial external financing.

Original languageEnglish (US)
Pages (from-to)697-712
Number of pages16
JournalSmall Business Economics
Issue number3
StatePublished - Mar 15 2019
Externally publishedYes


  • China
  • Entrepreneurship
  • Ethnicity
  • Firm profits
  • Formal finance
  • Informal finance

ASJC Scopus subject areas

  • General Business, Management and Accounting
  • Economics and Econometrics


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