Becoming Global Billionaires from Mainland China: Theory and Evidence

71 Pages Posted: 16 Oct 2019

See all articles by Kezhou Xiao

Kezhou Xiao

London School of Economics & Political Science (LSE) - Department of Economics

Date Written: September 15, 2019

Abstract

The increase in the number of global billionaires from mainland China is a puzzle viewed from the standpoint of ``extractive institutions''. Guided by a proposed conceptual framework relating socio-political backgrounds of the billionaire entrepreneurs to their observable financing decisions, I show, under conditions of an open economy, grassroots billionaire entrepreneurs (e.g., Jack Ma) could attenuate political economy as well as financial frictions via capital injections from foreign venture capitalists. Building a unique database, I find, using a human equation, that (i) the politically unconnected billionaire entrepreneurs financed by foreign venture capitalists are more likely to float their companies outside mainland China (mainly in Hong Kong and the U.S), use offshore financing vehicles, and enter into innovative sectors; and (ii) the politically connected global billionaire entrepreneurs, however, are strongly associated with a record of state-owned enterprise (SOE) restructuring.

Keywords: political economy, entrepreneurship, venture capital, China

JEL Classification: G10, L26, O31, P26, O53, F63

Suggested Citation

Xiao, Kezhou, Becoming Global Billionaires from Mainland China: Theory and Evidence (September 15, 2019). Available at SSRN: https://ssrn.com/abstract=3465011 or http://dx.doi.org/10.2139/ssrn.3465011

Kezhou Xiao (Contact Author)

London School of Economics & Political Science (LSE) - Department of Economics ( email )

London WC2A 2AE
United Kingdom

HOME PAGE: http://www.spencerkezhouxiao.com

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