Comparison of entrepreneurial activities in the USA and China

Table of Content Page 1 Introduction 3 2 Comparison of entrepreneurial activities in USA and China 4 2.1 Culture 4 2.2 Government policies 6 2.3 Funding and financing 9 2.4 Education and training 10 3 Conclusion 11 Bibliography 13

1 Introduction Entrepreneurship is one of a major factor influencing the economy of countries in terms of international trade, infrastructure, employment and living standards as well as capital growth. It also reflects the effectiveness of government policies. Entrepreneurship relates to national policies (taxation, regulations, ease of doing business), entrepreneurship financing (banks, government support), economic circumstances (economic freedom), marketing (competitiveness), public agency assistance (government support), and expertise etc.. The level of entrepreneurial activity not only interacts with the factors above, but also with cultural or geographical factors and regulations. Personality characteristics, behavior and motivation are also the major elements, which should be taken into consideration. There are many determinants of being or becoming self-employed which are dealt with in the literature, such as employment status, minority behavior, immigrant behavior, family firm effects and attitudinal effects (Freytak/Thurik 2006, 6). The assignment compares the level of entrepreneurial activity between the U.S. and China as these locations have contrasting characteristics regarding all these different aspects of entrepreneurial activity. It discovers and compares the reason how some of them – cultural factors, government policies, funding & financing and finally education & training – are influencing entrepreneurship in these countries.

2 Comparison of entrepreneurial activities in USA and China According to GEM Report 2014 (Singer/Amorós/Moska 2015, 35f.), the early-stage entrepreneurial activity (TEA) was 13,8% in the US and 15,5% in China. All the factors mentioned above have major effect on the TEA levels. 2.1 Culture Culture is ‘the customs, institutions and achievements of a particular nation, people or group' (Oxford English Dictionary 2015). Culture has a significant influence on people’s and nation's attitude and behavior, personality's characteristics and motivation, perception, psychology as well as living style. It consists of history, tradition, literature, education, philosophy, social structure and society etc.. In GEM Global Report 2008, it states that each individual has different levels of fear of failure, perception towards entrepreneurship as well as willingness to take risks. As all countries have different historical backgrounds, people's attitude and behavior differ in various countries because of the different environments in which they have grown up (Bosma et al. 2009, 47).
The U.S. is one of the top leading countries in the world with a population of more than 300 millions people (U.S. Census Bureau 2013). It combines many different nations and thus mixes with all different cultures. US people have high acceptance of various innovations, cultures and risks as they are a multi-national country and as a result create a welcoming and open acceptance atmosphere and environment for all different kinds of business innovation. In the United States, people are open-minded with high motivation and positive perception of risk. Success in individual pursuits is admired, as are choice, pursuit of seemingly impossible dreams, impatience with time, acceptance of mistakes and intrigue with what's new (Duening/Hisrich/Lechter 2010, 495). Since U.S. people have all these positive characteristics, it does help and encourage the entrepreneurial activities in the country.
China is one of the fastest growing countries in the world with more than 1.3 billion people (World Population Review 2014). People in China feel very connected with the Confucian culture, which asserts obedience and respect for parents and ancestors (Weiming 2014). Therefore, Chinese people strongly respect age and hierarchy, and also put their families in the very first priority. They also believe that hard work and a successful business are the signs of reputation. People's attitudes focus on the exact instructions from the top levels of management. They ignore creating any unnecessary innovation and ideas themselves to reduce the chance of making mistakes, as their attitudes are extremely passive and collectivistic. They just obey, respect and sustain the management system - or the government - without any questions.
Due to the economic development and globalization, people in China more and more start reflecting about the business world, its market economy and competition. Of course, the Chinese economic reforms in 1978/79 were also a crucial factor of this change. Young generations are not narrowed by the culture and family factors any more. They rather start accepting the global business world, education, infrastructure, profit and insecure jobs. They also understand the importance of innovation and creativity in today’s competitive economy. Hence, activities of private entrepreneurs in China are increasing (Bradshaw 2014). 2.2 Government policies
The government policies play a major role in creating and encouraging entrepreneurial activities across the country. Business regulations and business start-up requirements can be taxation policies, the strength of copyright and trademark protection, the degree of government support, or the extent of social benefits and of free trade. Stel et al (2006, 4) see low regulation as the central fact to enable the starting of a business to take place as quickly and cheaply as possible. Moreover regulations upon a business have to be minimized in number and severity whilst trading.
Regulation systems differ from one country to another. Some countries have heavy regulation systems in which, for example the procedure of establishing a new business or closing the business could be at higher costs and more time consuming. On the other hand low regulation systems are less complicated and would be more encouraging and attractive for entrepreneurial activities. So starting a business varies between countries – one will probably give advantages over others in terms of business creation. According to Stel et al. (2006, 5) decreasing start-up barriers would have a positive impact on nascent entrepreneurs. Therefore, start-up business requirements play a significant role in entrepreneurial activities. To make it clearer, if the requirements are not so demanding, people with innovative ideas would be more encouraged to establish their own business, which leads to a higher entrepreneurship rates.
‘One of the ways entrepreneurial economies motivate people to become entrepreneurs is by promising legal protection for their ideas’ (Dietrich/Krafft 2012, 525). Innovation, creativity and new ideas are essential elements when starting a business. Therefore, countries should provide a confident and secure environment to ensure entrepreneurs to flourish and to avoid their ideas of being stolen, copied or reproduced. Copyrights, patents and trademark protections are necessary and essential components to achieve this purpose. In this connection copyrights include ‘literary, dramatic, musical, artistic and certain other intellectual works' (U.S. Copyright Office 2012, 1). It protects original works of authorship that are fixed in a tangible form of expression (U.S. Copyright Office 2012, 3). Patent is a protection of any invention, which can be a product or a process that gives a new technical solution to a problem (IPOS 2013). In comparison to that a trademark is a sign, name or symbol that you can use to distinguish your business’ goods or services from those of other traders (IPOS 2014).
In the United States, for example the copyright law is governed by the federal Copyright Act of 1976. The Copyright Clause empowers the U.S. Congress ‘to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Investors the exclusive Right to their respective Writings and Discoveries’ (U.S. Copyright Office 2015). In other words, the copyright law in the U.S. tries to encourage the creation of art and culture by rewarding authors and artists with a set of exclusive rights, for example to make and sell copies of their works, the right to create derivative works, and the right to perform or display their works publicly. These are furthermore subject to a time limit, and generally expire 70 years after the author’s death (U.S Code, 2015).
Hence, securing such protections as copyrights is fairly straightforward in the United States. The protection is created the very moment your work is fixed in a tangible form of expression for the first time. From that moment on your copyright is automatically secured for your lifetime plus 70 years after your death. Furthermore entrepreneurs can easily access all these information online.
Copyright laws in China are not substantially different but certainly not identical either. In the 1980s, China became a member of the World Intellectual Property Organization (WIPO). Furthermore, China has signed onto both major international copyright treaties – the Berne Convention and the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement), which both set minimum standards for copyright regulations (Beam 2009). For the most part, China’s statutes resemble those in the United States: you cannot steal or profit from someone else’s work and if you do, the injured party can either alert the agency in charge of copyright regulation or sue you in court. But China is for example much more lax about enforcing copyright laws than the U.S.. A report by the International Intellectual Property Alliance found out that 90% of the DVDs distributed in China are unauthorized copies (IIPA 2009, 85). China therefore tops the U.S. Trade Representative's Priority Watch List, which calls the country's enforcement regime largely ineffective and non-deterrent. China doesn't criminalize copyright infringement that isn't for profit. So if you copy a DVD and distribute it to all your friends, you can't go to jail. American courts, by contrast, hand down criminal penalties even when piracy isn't commercially motivated (Office of the United States Trade Representatives 2009, 13).
One of the reasons why the enforcement is that weak is because of the size of the People’s Republic of China. It is difficult to implement anti-piracy laws across such a vast territory, especially in rural areas with limited police resources (Beam 2009). 2.3 Funding and financing
To obtain funding is a first step when starting a business. Low cost capital, government funding support and easy access to bank loans would encourage entrepreneurial activities. This is also important as entrepreneurs and small businesses are essential for the recovery from the economic and financial crisis - which began with mortgages but has now spread to consumer loans and small business financing (Moseley 2010).
In the United States, lenders such as banks or other private investors became more cautious on lending money due to the experiences of the credit crunch. Banks have tightened their lending criteria and entrepreneurs need to look elsewhere for financing (Advani 2008). However, President Obama is committed to creating an environment where America’s small businesses and entrepreneurs, which are the engines of job creation, can grow and prosper. This happens by supporting them with tax relief, favorable treatment of investments, and rewards for hiring (The White House 2014).
In China, the government recognizes the crucial role entrepreneurs play in the country’s rapid growth and tries to encourage the entrepreneurial activity. It is hard to sort through the many funding options available, but through leveraging the global outreach of the Internet, start-ups in China also can receive the funding they need to get off the ground. Crowd-funding platforms are very well established in the western society but more and more become a significant source of investment and publicity in China as well. However, because of the Chinese legal restrictions, crowd-funding platforms cannot directly solicit funding from individuals. Instead, featured entrepreneurs upload their proposals and post tweets to gain support. Each time a member of the public re-tweets a message, the beneficiary is credited with money. As China’s entrepreneurs are barred from accepting direct donations form individuals and are effectively unable to secure bank loans, so to finance their operations entrepreneurs rely on their revenues as well as grants from official foundations, government contracts and personal loans (Pillsbury 2015). 2.4 Education and training
To become an innovative and creative entrepreneur, you have to be well equipped with the necessary skills and key competences. For example, entrepreneurship includes to plan and to manage projects in order to achieve objectives. Hence, it is essential to know more specialized knowledge and business skills.
Education for entrepreneurship is already high on the agenda in most states, as a wide variety of programs and activities exist. However, there is a need of promoting these initiatives more systematically (European Commission 2015).
The United States, operating under a democratic government that values free speech, follows an educational system that encourages students to express their opinions freely. Furthermore, personal expression is valued heavily. Many classes are based around discussion of the material, and teachers expect their students to engage in this dialogue, which promotes entrepreneurial thinking (Rybak 2009).
China in opposite, operating under an autocratic government, places more emphasis on obedience and respect. Chinese classrooms do not place the same emphasis on classroom participation than the U.S.. Class is generally based on the teachers lecturing and the students listening quietly. As China’s rapid development and prominence in today’s economy shows, the Chinese educational system produced many high-achieving individuals. However, some worry that China will be at a disadvantage if Chinese students miss out on the encouragement to think for themselves and express these thoughts freely (Rybak 2009).
3 Conclusion
In conclusion, entrepreneurs work under the constraints of their environment – the political economy and culture. But there are also other key factors to success like the personality, which relates to creativity, tolerance for risks, responsiveness to opportunities, leadership or the ability to take advantage of the rights afforded to the entrepreneur.
Most observers believe that China’s remarkable economic performance is due to primarily state-owned companies. While those organizations are key players for sure, the country’s entrepreneurs have long been overlooked. Working with limited resources and against intense competition, these small businesses play a major role in China’s unprecedented growth.
The perception of entrepreneurship in China compared to western countries like the United States is changing in the course of time. Although high-performing Chinese student are still most likely to choose careers in finance or government, entrepreneurship is gradually gaining prestige. And thanks to the increasing visibility of entrepreneurs, such as Jack Ma of Alibaba, entrepreneurship is becoming an acceptable and desirable career path – just like in the U.S..

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