The Chinese Entrepreneur: Success, Politics, and Confucius

Do successful Chinese business people choose to govern national life or preserve world peace? Professors Xu-Hong Li and Xiaoya Liang of the School of Management Fudan University share their research into the motivations behind Chinese entrepreneurs.

From the research paper by Li, X.-H. & Liang, X., 2015. A Confucian Social Model of Political Appointments among Chinese Private-Firm Entrepreneurs, Academy of Management Journal, 58, 2: 592-617.

A Puzzle

Business leaders, regardless of nationality and culture, often seek political connections to help their firms gain legitimacy and economic advantages. When legal and regulatory institutions improve and market-supporting systems develop, as they have been in China in recent decades, such incentives may be weakened. Indeed, standard theories and evidence in western countries suggest that successful business leaders should be less motivated to pursue political appointments because, once the economy and markets freed up, the economic benefits associated with these are not as important as before.

China is different. Data shown in Forbes on the 500 richest Chinese business people and the corporate leaders of listed private-owned firms in Shanghai and Shenzhen stock markets suggest the opposite trend: the number of successful private-firm entrepreneurs having PC (People’s Congress) or PPCC (People’s Political Consultative Conference) appointments has increased steadily in recent years. Why is that?

Professors Xu-Hong Li and Xiaoya Liang of School of Management, Fudan University, one of the foremost education institutions in Asia, decided to tackle the question by using a Confucian framework of values and thinking – still a strong influence in Chinese culture – and apply it to 166 private-firm entrepreneurs and a dataset of 1,323 Chinese publicly listed private companies. The question posed: do successful entrepreneurs go into politics for self-interest or the interests of the common good? Or put in a Confucian perspective, do successful business people want to ‘govern national life’ or ‘preserve world peace?’ Read on.

What makes us tick? Confucius says…

Western cultures are generally characterised by an underlying sense of self-fulfilment and individual achievement as the core focus for the development of our identity throughout life. ‘Success’ is judged by what you do, the wealth you accumulate, the achievements you reach and who you become. Confucian doctrine has a different view of the ultimate purpose of life. It forwards the idea that humans transit through four life stages, the ultimate goal in life – after cultivating oneself (xiu-shen, 修身), taking care of the immediate family (qi-jia, 齊家) or the firm (bringing order to the state, zhi-guo, 治國) – being to benefit the wider society and preserve world peace (ping-tian-xia, 平天下). The journey to ultimate success is a gradual dynamic process from an inner-focused sage [nei-sheng, 內聖] to an outer-focused king [wai-wang, 外王], from self-orientation to social-orientation. In short, your life or career ideals are incomplete if they fail to progress from cultivating the self to serving the universal world.

Why Chinese business people go political – or not   

Chinese private-firm entrepreneurs, as founder-owners, represent both their firms and themselves. Their dual roles mean that they focus both on enhancing firm competitiveness and achieving personal goals. Professors Li and Liang set the choice facing Chinese business people as being either pro-self – enhancing their own firms and careers – or pro-social, where motivation drives an entrepreneur to give benefit to collective and wider society. Both coexist and each may drive political pursuits in order to reach their goals. But although cultivated early in life, the two motives they may have different importance for different individuals and may be activated at various life stages. The less entrepreneurs embrace the Confucian doctrine of the common good, the more likely the pro-self motive will dominate. Moreover, during an entrepreneur’s pre-success stage, the pro-self motive will dominate the entrepreneur’s political connection-seeking behaviour because such connections will bring information, resources, and other economic benefits for their firm’s survival and success.

So what happens once personal and financial gain has been achieved? One hypothesis set by the researchers was that while business success may equip entrepreneurs with necessary means to act more freely, how they will then act depends on how deeply they embrace the Confucian doctrine of role transition throughout the different stages of their journey to becoming ‘complete’. But there is a catch in this. Confucianism teaches that people can achieve ‘kingliness’ – the highest state of individual success – through both ideal and pragmatic actions, the seeking of political appointments being at the core of these in ancient China. This leads to a second hypothesis – that after pro-social entrepreneurs gain success, their motives towards the common good will drive them to strive for political appointments that will allow them to influence policymaking and legitimately serve the larger community or society. Successful entrepreneurs are therefore more likely to spend resources and effort in pursuing political membership and/or posts.

Prof. Li and Liang’s research on 166 entrepreneurs and nearly 1,400 private companies suggests that the more successful the firm is, and the higher an entrepreneur’s sense of personal and business ambition, the weaker the business leaders’ desires to seek political appointments will be. Inversely, entrepreneurs with a low degree of self-oriented success and a higher degree of wanting to contribute to wider society were more likely to have political appointments when their firms were more successful. A Chinese firm’s success, therefore, does not relate significantly to PC/PPCC party membership

One belt, various roads

Li and Liang’s research effectively replaces an economic perspective by a social perspective in understanding and interpreting political pursuit, especially for private-firm entrepreneurs who have achieved business success. Indeed, this social lens might well encourage more successful entrepreneurs to recognize political appointments as a way to fulfill their pro-social needs. This can be positive in the sense that although private-business entrepreneurs have few opportunities to move from commercial to formal political hierarchical systems in current China, successful Chinese private entrepreneurs can participate in politics in a part-time capacity without giving up their business roles for social and economic improvement.

According to professors Xu-Hong Li and Xiaoya Liang, as private-firm entrepreneurs contribute more to the Chinese economy, it is imperative to proactively open more channels, beyond part-time PC or PPCC membership, and to encourage successful entrepreneurs to be involved in important political entities. In what they see as cynicism in current Chinese society, Li and Liang see an opportunity for the once dominant Confucian ideology to resurge – something that would motivate business executives to engage more in both CSR-driven activities linked to their businesses, politics and social/public welfare. As China continues to grow and its economy looks farther afield along the ancient trade routes, there might indeed be room for two roads in all this – on the one hand, both personal achievement and wealth, and on the other a commitment and contribution to the wider, more common good.

Professors Xu-Hong Li and Xiaoya Liang

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