Small and medium enterprise theory: evidence for Chinese TVEs

The research analyses small and medium enterprises (SMEs), i.e. township and village enterprises (TVEs), operating in rural China over the last decade. It focuses on factors that affect the growth of TVEs run by Township and Village (TV), defined as collective, at provincial level. The paper examines SME theory and the role of human capital in the SMEs development. Following this, it analyses the development of Chinese TVEs and their role in the socio-economic development of rural areas and of the national economy. A panel analysis is then performed, using provincial panel data of collective TVEs over the period 1986-93, in order to capture the major determinants of provincial growth. The results of the panel estimations highlight some important features of TVEs run by TV sector, and provide empirical evidence in support to the positive role of clustering (measured through a new index) and human capital in the provincial growth of this sector. Copyright © 1999 John Wiley & Sons, Ltd.