The Allocation Of Entrepreneurship And Zombie Firms

"Zombie Firms"refer to those enterprises that have been in a state of long-term loss and have no hope of recovering but have not exited the market normally.The Chinese economy has achieved rapid development during more than 30 years of reform and opening up,demonstrating the advantages of developing countries and their economic vitality.However,at the same time,there are many problems emerging behind the rapid development.As China's economy has entered the "new normal",the economic growth rate has slowed down.A large number of traditional manufacturing companies and state-owned enterprises are facing non-performing loans and are in operational difficulties,becoming a zombie enterprise."Zombie firms"occupy a large amount of labor,capital,land,and other resources,distorting the efficiency of resource allocation,and at the same time they will also have a "crowding-out effect"on the entry of new enterprises and hinder the development of new industries.The government work report in 2016 clearly puts forward the goal of "cleaning up zombie companies" and ranks "capacity removal" as the top five tasks for supply side reform,demonstrating the government's determination to govern Zombie firms.For the formation of Zombie firms,the existing literature is mainly explained by government subsidies and banking financial institution support:On the one hand,the formation of Zombie firms results in the conspiracy of government and enterprises between local governments and enterprises.The government is forced by employment stability and tax growth pressures to continue to "transfusion" Zombie firms on the brink of bankruptcy in the form of subsidy policies or fiscal concessions.On the other hand,those companies that are insolvent cannot repay bank loans.Once they exit the market,they will cause a large number of bad loans in the bank to increase the bank's operating risk.Therefore,banks are also reluctant to assume systemic liability in the current period and they choose to operate in difficult,insolvent,or even apparently no repayment expectations.However,the operation of the enterprise depends on the main body of the operating enterprise and its self-development ability.The entrepreneur,as the decision maker of the enterprise's business activities,determines the business operation mode and the choice of innovation behavior.Entrepreneurship,as a key factor in corporate development and economic growth,can improve corporate performance through optimization of resource allocation,technological progress,and knowledge spillovers.However,entrepreneurship is not always productive but also has an unproductive side.Non-productive entrepreneurship brings benefits to enterprises in a period of time,but under the conditions of economic development from speed to quality transformation,it is impossible for companies to gain endogenous development capacity,which is not conducive to long-term business operations.Based on the above logical inference,this paper believes that the formation of Zombie firms has endogenous factors in the enterprise.Therefore,the issue studied in this paper is how the role of entrepreneurial spirit as an endogenous factor of the enterprise plays a role in the formation of Zombie firms.Discuss the mechanism of the relationship.Based on the analysis of existing literature and policy documents,based on the data from CEES,which a large sample empirical study was conducted on the relationship between the formation of Zombie firms and entrepreneurship.The study found that the formation of Zombie firms is the result of the configuration of entrepreneurial spirit in productive activities and non-productive activities.The productive entrepreneurial spirit has an inhibitory effect on the formation of Zombie firms,whereas non-productive entrepreneurship has contributed to the formation of Zombie firms.Further,this paper introduces the company's viability as an intermediary variable to study the mechanism of entrepreneurial influence on the formation of Zombie firms.Research finds that corporate viability plays a partial mediating role between entrepreneurship and Zombie firms.This analysis concludes that it is the government and financial institutions that are motivated by self-interest,and that they have the power to intervene in the allocation of resources to the market,which in turn creates a space for enterprises to carry out rent-seeking activities.Gaining protection and acquiring more resources in the market competition,with the help of "government hands" to intervene in the market,eventually led to the decline of viability,forming a zombie enterprise.Therefore,the policy suggestions proposed in this paper are:rationally plan the capital structure of the company and avoid over-indebtedness of the enterprise;strengthen the technological innovation of the enterprise,form the core competitive advantage of the product,establish a market-based exit mechanism,and weaken the assessment of the economic indicators of the local government.