The Role of Regional Ownership Structure in Firm Formation in China: Effects of Related Versus Unrelated Variety

Utilizing a firm-level dataset from China’s manufacturing sector (2000–2013) and employing a negative binomial regression model with fixed effects, we find that both related variety and unrelated variety positively influence firm formation. The positive impact of related variety on firm formation is more pronounced in regions with a high share of state-owned enterprises (SOEs), whereas that of unrelated variety on firm formation is more pronounced in areas with a lower share of SOEs.

Further, a heterogeneity analysis uncovers significant regional differences in these relationships. Theoretically, this study introduces the role of regional ownership structure in the research on industrial variety and regional entrepreneurship, sparking new dialogues on how state involvement shapes firm formation dynamics in transition economies. Policy implications are given.