Start–Up Capital and Chinese Entrepreneurs: The Role of Family

Abstract

This paper examines the formation of the initial capital structure of Chinese start–up firms. Contrary to the predominant view of Chinese family business, this study found that family funding is not the major source of start–up capital under certain conditions. Employing two surveys conducted separately in Hong Kong and the mainland of the People's Republic of China, it was revealed that Chinese entrepreneurs seek initial funding from their family rather than from outsiders only if they expected lower transaction costs and lower levels of family interference in the business. The implications of the findings for entrepreneurship of ethnic Chinese communities in East Asia are discussed.