This study examines the emerging small-enterprise sector in China, with an emphasis on the problems that are shared with the small, informal sector in market societies and other former socialist states. Data for the study come from intensive interviews with entrepreneurs, large surveys that include the emerging self-employed and small-business sector, a 1993 survey of 1,440 private entrepreneurs, and a record of the continuing success or failure of these enterprises over the subsequent three years. The study provides a baseline model of the regional characteristics (economic development level, proximity to suppliers and consumers, etc.) that promote different types of enterprises. The study then delves into three theoretical debates. The first debate concerns the interplay between formal and informal sectors, with an emphasis on state-sector / private-sector interaction. This part of the inquiry will reveal the niches private enterprises can occupy -- ranging from more flexibly-specialized, lower labor cost subcontracting through simple avoidance strategies, where the formal sector produces high-volume, standardized goods and the informal sector produces low-volume, cheaper quality goods. The second debate concerns whether economies can grow in the absence of firmly established private property rights. Inspired by studies of the role of informal social network ties in peripheral East Asia and elsewhere, this study examines whether informal social ties provide predictability and reduce transaction costs in ways that partially substitute for firmly established private property rights. The third debate concerns the social origins of entrepreneurs. This study examines the role of blocked mobility in forcing individuals into different entrepreneurial paths. %%% The research will provide fundamental scientific insights into general questions of human adaptation to radical social change, exploiting the fact that China is presently undergoing rapid economic transformation. At the same time , it will assemble valuable information on socio-economic conditions in China that will be useful to policy makers, both in China and the United States.
