The transition from necessity-based start-up to subsequent opportunity entrepreneurship : a case study of China

Entrepreneurship can be categorised as necessity- and opportunity-driven based on the motivation of the entrepreneurship (e.g., Reynold et al., 2001; Verheul et al., 2010). Extant studies have shown that opportunity entrepreneurship is more desirable than necessity entrepreneurship (e.g., Harding, 2003; Henrekson, 2004; Minniti et al., 2005) because opportunity entrepreneurship has a lower rate of business failure (e.g., Harding, 2003; Minniti et al., 2005), more income (Block & Wagner, 2007) and more positive effects on economic development (Acs &Varga, 2005; Acs, 2006). A shift of entrepreneurship away from a necessity driver to opportunity driver has therefore been observed in various contexts (Williams et al., 2006; Williams & Round, 2009; Williams &Williams, 2011). However, little research has considered how necessity entrepreneurship has transitioned to subsequent opportunity entrepreneurship, and what factors have determined this transition process. To overcome the deficiency in research, this study aims to investigate the factors that drive the transition process and the mechanism through which the transition process occurs. This research was based in China, in which rapid economic growth has been gained and more than 100 million people have been involved in various entrepreneurial activities (Guthrie, 2009). In addition, existing research tends to focus on developed countries while developing countries, such as China in which the cultural values and institutional environment is significantly different from developed countries, have been largely ignored (e.g., Chen & Francesco, 2000; Puffer et al., 2010). This research is therefore expected to account for this unique research setting. A qualitative method based on six case studies was adopted in the research. The data were collected through a triangular method by using in-depth interviews with the entrepreneurs and other related parties, and on-site observation. These data were thematic-analysed to generate propositions. The findings show that the entrepreneurs were forced to involve in necessity-based start-ups mainly by the difficulties faced by them in career development, financing and family matters while selfmotivations, business opportunities and available resources were the major factors that facilitated the transition process from necessity-based start-up to the subsequent opportunity entrepreneurship. The findings also suggested that the transition from necessity entrepreneurship to subsequent opportunity entrepreneurship involved a four-stage process, including the pre-venture stage, the necessity entrepreneurship stage, the transition stage and the opportunity entrepreneurship stage. By exploring the cases based on a culturally and institutionally different setting in China, this study suggests that, in addition to the economic environment and personal situations of the entrepreneurs, cultural and institutional factors also matter to their entrepreneurial activities. A mixed perspective is needed to take into account the complicated environment facing the entrepreneurs. This study contributes to the literature by taking into account the complicated environment factors of China and identifying the mechanism through which the transition process from necessity-based startup to subsequent opportunity entrepreneurship has occurred. This study also generates practical implications for both novice and veteran entrepreneurs in progressing to an advanced level of entrepreneurship. It is also suggested that favourable regulatory environment and government policies are needed in order to facilitate the development of entrepreneurship. However, this study was conducted in a culturally and institutionally unique setting of China. Therefore, the implications of the findings are limited to such a setting, and caution is needed when applying the findings to different settings. Opportunities for future research have been identified in this study. Given the limitations of a crosssectional method, a longitudinal study would provide additional insights for explaining the dynamism of the transition process. In addition, future research could include entrepreneurs failed in the transition process to provide an alternative perspective on the transition process. Further, future research based in different research settings are also suggested, which would help provide additional evidence to support the findings of this study.