Entrepreneurial attention to deregulations and reinvestments by private firms: Evidence from China

Abstract

To increase the understanding of entrepreneurship in China and contribute to the view that deregulation facilitates the rapid development of the private sector in transitional economies, we examine the positive relationship between entrepreneurial attention to deregulation (formal institution at the country level) and reinvestment by Chinese private firms. We supplement this main aim by identifying two moderating factors: the entrepreneurs’ political connections (informal institution) and the regional institution development (formal institution at the regional level). We also explore how the interaction of political connections and regional institution development moderate the Bentrepreneurial attention to deregulation-reinvestment^ link. We find support for our hypotheses from survey data on 3,284 private firms in China. This paper contributes to the research on the relationship between institution and entrepreneurship in general and the association of deregulation and reinvestment in particular by considering two categories of institutional arrangements (formal and informal institutions; national and regional institutions) simultaneously and by exploring the antecedent of reinvestment from a fresh perspective—the attention-based view, highlighting the importance of Bnoticed^ or Bperceived^ deregulation that influences entrepreneurial decision-making.