Local Tinkering, Institutional Change and the Rise of Tech Entrepreneurship in China

Entrepreneurship has often been thought as a key weakness of nonliberal economies and authoritarian polities. Yet China has created a vibrant tech startup sector that is now the world’s second largest and a major engine of the country’s economic and technological development. This paper traces how a political economy under single-party rule and originally hostile to private business was gradually transformed such that the state both supports and harnesses tech entrepreneurship. I argue that the source of these transformations lies in local tinkering that facilitated tech entrepreneurship by working around or gradually reorienting existing institutions. This involved local actors recombining available resources and enabled new activities in unexpected ways. These seemingly insignificant actions were selectively endorsed and promoted by the central state, and over time created new constituencies and facilitated institutional change. This incremental and interactive process is illustrated by the creation of hybrid startups, the repurposing of high-tech zones and the use of a peculiar corporate structure that allows startups to access foreign capital despite restrictions. The findings suggest paying more attention to micro level dynamics and actor’s creativity can improve our understanding of institutional change and diversity. They also show how an authoritarian system can broaden opportunities for private initiatives and how state and private actors can form mutually supportive relations in novel ways.