Private entrepreneurs' rational behavior: an empirical study in China transition economy

This paper explains Chinese institutional environment with which apportion, tax, fee, and the application of regulations are eminently malleable and open to negotiation, thus shaping private entrepreneurs behavior. We have found that (1) time and money investment in relationship, building both positively correlated with firm size and the more money invested, the longer the firm likely maintains; (2) political connections or participation of entrepreneurs does benefit the private enterprise; (3) private entrepreneurs are more likely to invest in unrelated field instead of growing to a bigger firm in the same industry. These findings are helpful to understand the behavior of China's private entrepreneurs.