Guanxi verses jugaad: Inside the minds of Chinese and Indian entrepreneurs

September 10, 2010

There is little doubt that both China and India and the respective cultures has given each society the ability to produce significant numbers of successful entrepreneurs – either at home or abroad. In fact, many of the technology related firms in Silicon Valley were started ether by Chinese (specifically Taiwanese) and Indian entrepreneurs. On the other hand, there also seems to be key differences between the Chinese and Indian entrepreneurial classes. For example: By-and-large, firms involved in offshore IT services and service outsourcing (Infosys, Wipro and Tata etc.) have largely been started by Indian entrepreneurs in India while Chinese entrepreneurs in China seem to achieve the most success in off-shore manufacturing and exporting (Haier etc).

Inside the minds of Chinese and Indian entrepreneurs
Hence, a recent Wall Street Journal article which profiled a new survey that was conducted by YouGov and released by the Legatum Institute of more than 4,000 entrepreneurs, business managers and aspiring entrepreneurs to shed light on the similarities and differences between the Chinese and Indian entrepreneurial classes, is well worth reading. According to the survey, Chinese and Indian entrepreneurs both shared the following similarities:

  • Both Chinese and Indian entrepreneurs are decidedly bullish with nearly half of all respondents believing that their societies are now much more welcoming of entrepreneurial activity that they were a decade ago.
  • Only one-third of Chinese entrepreneurs and one-quarter of Indian entrepreneurs believe that the global financial crisis has seriously impacted the prospects for new business. 

However, the survey also found that Chinese and Indians have two decidedly different entrepreneurial styles: 

  • When asked why they became entrepreneurs, the most popular explanation given by Chinese entrepreneurs was to earn more money while the majority of Indian entrepreneurs, like many Western entrepreneurs, said “being my own boss” was the most important reason.
  • When asked what other factors influenced their decision to become an entrepreneur, nearly half of the Chinese entrepreneurs gave an answer that was related to efforts by the government to promote and manage entrepreneurial enterprises while 23% also said what they learned in school influenced their decision (compared to just 9% in India). Chinese entrepreneurs also cited pro-business government decisions or pro-business messages in (the state-controlled) media at a rate three times higher that Indian entrepreneurs.
  • When asked about financing, just 25% of Chinese entrepreneurs relied on family resources to start a business compared with 49% of Indian entrepreneurs. Instead, Chinese entrepreneurs rely heavily on banks with 49% taking out bank loans (many no doubt at state-controlled banks) compared to only 27% in India.
  • When asked about what factors were important for starting a new business, Chinese entrepreneurs cited access to both information and knowledge as being more important than being creative. On the other hand, Indian entrepreneurs place nearly as much value on having certain internal personal qualities, such as creativity and risk taking ability, as they do access to financing.
  • When asked about the general policy environment for business, 93% of Chinese entrepreneurs cited guanxi, their networks and relationships primarily with the government, as the key to success in business. In sharp contrast, 81% of Indian entrepreneurs cited jugaad, their ability to improvise and find ways around prohibitive rules and/or institutions, as the key to success in business.

In other words, the survey seemed to reveal that Chinese entrepreneurs believe that they succeed because of their connections to the government while Indian entrepreneurs believe they succeed in spite of the government – which may explain why India has come to dominate offshore service outsourcing while China dominates offshore manufacturing outsourcing. Moreover, the survey also seemed to suggest that Chinese entrepreneurs believe that success depends on known external market conditions that can be manipulated while Indians believe that their success depends upon their own ability to adapt to ever changing market conditions.

The Wall Street Journal article concluded that the survey seemed to reveal that entrepreneurship may have less sustainability in China than in India because Indian entrepreneurs are able to succeed in spite of having to deal with dysfunctional governments and financial institutions while Chinese entrepreneurs rely heavily on government efforts to encourage their entrepreneurship. 

Hence, we would like to ask our readers, especially any Indian entrepreneurs, what they think: Does entrepreneurship in India have much more potential than in China – especially if the Indian government were to remove some of the barriers to doing business there? And since Indian entrepreneurs must rely on family and friends rather than faceless banks or the government, are they perhaps more careful about working out any kinks in their business models or business plans before they start a new venture? Moreover, are the families and friends of Indian entrepreneurs perhaps better able to evaluate their business ideas (and more importantly, the entrepreneurs themselves) before extending financing – assuring that only ventures that have the most likelihood of succeeding get financing? Feel free to post your comments below.


One Response to “Guanxi verses jugaad: Inside the minds of Chinese and Indian entrepreneurs”

  1. Chong on September 26th, 2010 4:22 pm

    I think both Chinese and Indian entrepreneurs will succeed in the near future. As both the economies mature, more money will flow into their countries and that would increase people’s risk taking capabilities.

Got something to say?