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Institutional
Institutional entrepreneurs entrepreneurs
on opportunity formation on opportunity
formation
and exploitation in strategic
new industry 439

Two cases of solar energy industry

development in China
Xuanwei Cao
Department of Management, Xi’an Jiaotong-Liverpool University, Suzhou, China
Yipeng Liu
Institute for SME Research, University of Mannheim,
Mannheim, Germany, and
Chunhui Cao
School of Management, Xi’an Jiaotong University, Xi’an, PR China
Abstract
Purpose – The purpose of this paper is to examine the role of institutional entrepreneurship in
opportunity formation and opportunity exploitation in developing emerging strategic new industries.
Design/methodology/approach – The paper reviews the focal literature focussing on institutional
entrepreneurs’ role in opportunity formation with special attention to opportunities for institutional
entrepreneurs in emerging economy. A multi-method approach consisting of historical case studies
and event sequencing is applied to track the historical development of the solar energy industry in two
case contexts and to investigate the role of institutional entrepreneurs in this process.
Findings – Investigation of two cases illustrates that different types of institutional entrepreneur, as
represented by individual entrepreneurs and local government, in the context of massive institutional
change – such as the Grand Western Development Program and the Thousand Talents Program in
China – have varied effects on triggering and inducing institutional change and innovation to explore
and exploit opportunities in emerging new industries.
Practical implications – The significance of local context for the nature and scope of institutional
entrepreneurship in emerging economy is worthy of further research. The top-down process of
institutional innovation dominated by local government might cause myopic outcome and distortion of
market opportunities. Indigenous individual entrepreneurs with well-accumulated political capital and
strong perceived responsibility could be the main actors to introduce incremental institutional change
by combining bottom-up and top-down processes and promoting sustained new industry development
through creating and seizing institutional opportunities and market opportunities.
Originality/value – This paper illustrates the close relationship between institutional environment
and opportunity formation in emerging economies, contributes to the understanding of contextualizing
institutional entrepreneurs in different regional contexts and discloses the problems involved in local
government acting as an institutional entrepreneur.
Keywords Emerging economies, Opportunity, Institutional entrepreneurs
Paper type Case study
International Journal of Emerging
Markets
The work reported in this paper is part of a project funded by the National Natural Science Vol. 9 No. 3, 2014
Foundation of China (NSFC) to the Youth Scholar Research Project (Grant No. 70902021). The pp. 439-458
r Emerald Group Publishing Limited
authors are grateful to Keith Perks and two anonymous reviewers for their helpful and 1746-8809
constructive comments and suggestions on an earlier version of this paper. DOI 10.1108/IJoEM-09-2012-0109
IJOEM 1. Introduction
9,3 A number of “opportunities” have become available to entrepreneurs in China on the
crest of a wave of rapid development and the strong promotion of strategic new
industries. In the face of a new round of economic development, especially in what are
labelled “strategic new industries,” managers are keen to know how opportunities are
formed and how to seize and utilize the opportunities available in this “golden” period.
440 A recent study by Short et al. (2010) reflects that opportunities are being considered
by more and more scholars as an important issue in organization and management
research, such as in the fields of entrepreneur research, innovation and entrepreneurship,
leadership, strategy and organizational change. Although some scholars (e.g. Child et al.,
2007) have pointed out the need to strengthen research from the perspective of institution
entrepreneurship in exploring the related-transition economy, studies on opportunity
still pay little attention to the role of institutional entrepreneurship in opportunity
formation and exploitation in the context of transition economies such as China, where
the “red hat strategy” of local entrepreneurs has created much entrepreneurial activity in
exploring opportunities in the wave of a “large scale institutional transition” (Peng, 2003;
Chen, 2007).
In China’s historical transition process, many opportunities have been created,
discovered and exploited. Entrepreneurs have witnessed ebbs and flows of their
businesses and changes in their embedded institutions (Nee and Opper, 2012). For
instance, a longitudinal qualitative research project on the Yantian International Container
Terminal in China demonstrates the co-evolutionary dynamics of the organization and its
environments in the context of port development and highlights the importance of
managerial intention in creating and shaping the business environment (Child et al., 2013).
There has been a long tradition among organization and management scholars on
the question of “managerial intention” (Lewin and Volberda, 1999). While some of these
scholars from the strategic management fields have tried to argue for the enabling role
of management, regarding the actors as a determined power to escape the constraint of
institutions and to induce institutional change (DiMaggio, 1988; Beckert, 1999; Carney
and Gedajlovic, 2002; Dorado, 2005), others – mainly from the institutional school –
insist on the embeddedness of entrepreneurs in specific institutional environments
(Zucker, 1987). This perspective suggests that the willingness, action and rationality of
actors are all restricted by the institutional environment in which they are embedded
(Child and Tsai, 2005) resulting in the “paradox of embedded agency” (Seo and Creed,
2002). Though some scholars are turning their focus of attention to corporate strategy
in transition economies, combining the institutional and strategic perspectives (Peng,
2003), there is neglect of the enabling effect of institutions on actors and the enabling
role of entrepreneurs in emerging economies (Barley and Tolbert, 1997). According
to DiMaggio (1988), there has also been less exploration of endogenous sources of
deliberate change, defined as “institutional entrepreneurship.” From this perspective
entrepreneurs are constrained by the institutional environment in which they are
embedded; on the other hand, new institutional environments are formed by the actions
of entrepreneurs. Considering the changing landscape of institutions in emerging and
transition economies, it is interesting to investigate the dynamic interactions between
changing institutions and entrepreneurs as well as entrepreneurs’ enabling roles in
triggering and inducing institutional change.
Generally, strategic new industries possess the following characteristics. First
they have proactive planning objectives, aiming to establish sustained competitiveness
in the future. Second they have high growth rates. Third is the uncertainty and
potential risk in the early stages of the venture. Due to the significance of strategic Institutional
new industries in a nation’s economic development, they have the potential to exploit entrepreneurs
a large number of opportunities, offering an ideal platform to investigate institutional
entrepreneurs’ roles in exploring opportunities in this context. Therefore, an analysis on opportunity
of opportunity formation in strategic new industry would be of great value for both formation
theoretical research and management practice.
Our study makes several important contributions to the literature on institutional 441
entrepreneurship. First, we have examined the two types of institutional entrepreneurs
in different contexts, pointing out the problems of (local) government acting as an
institutional entrepreneur. Second, our detailed historical analysis of the solar energy
industry in the two representative cases may advance our understanding of the
relationship between institutional entrepreneurs and entrepreneurial opportunity
exploration and exploitation in different contexts in emerging economies.
The structure of the paper is as follows. The second part presents the theoretical
context of the research, including the review of institutional entrepreneurship and
opportunity literature. Based on this literature, a framework for exploring the mechanisms
of opportunity formation and utilization is presented. Further, a model of opportunity
formation and exploitation in the Chinese context is used to help improve our
understanding of the mechanisms of opportunity formation. The third part of the paper
introduces the methodology used in the study, including the research context and research
data. Following this, two cases are used to deepen our understanding of institutional
entrepreneurs in new industry development in different contexts. Finally, we present our
findings and conclude with a discussion of the implications of the research.

2. Theoretical context
2.1 Institutional entrepreneurs
Different research directions have been explored by scholars from strategic
management, institutional theory, regional economy, environment management in an
attempt to solve the problem of regional innovation and sustainable development.
Despite the different insights from these disciplines, a common theme is the emphasis
on a macro-level perspective on “planned” change, focussing on the up-down method in
stimulating regional economic development, which reflects the logic of the “planning
school” in management science. However, relatively little has been done to explore
enabling implications of the entrepreneur perspective in transition economy. McMillan
and Woodruff (2002), state that “much of the task of devising the new ways of doing
business in transition economies has been taken on by entrepreneurs.” In fact, in
rapidly changing dynamic environments, more and more management issues should
be considered by following the logic of the “emerging” power of actors in organizations.
Recently, related research on institutional entrepreneurs has increased research
interest in the field of management, organization and institutional theory (Greenwood
and Suddaby, 2006). The role of the institutional entrepreneur has been suggested
to solve the paradox of institutional change (Child et al., 2007). These studies have
disclosed the possible potential role of institutional entrepreneurs in emerging
industries. The organizational literature on emerging industries has emphasized the
need for institutional entrepreneurs – actors who give the new activity legitimacy and
determine its patterns of behavior. People and organizations act as “institutional
entrepreneurs” – actors who create technical and cognitive norms, models, scripts and
patterns of behavior consistent with their identity and interests, establishing them as
a standard and legitimate to others (Déjean et al., 2004).
IJOEM Institutional entrepreneurship refers to the ways in which individuals or organizations
9,3 create and develop new institutional norms and rules that redefine appropriate social
behavior (Child et al., 2007). Greenwood and Suddaby (2006) define institutional
entrepreneurs as “organized actors who envision new institutions as a means of advancing
interests they value highly yet that are suppressed by extant logics” and regard
institutional entrepreneurs as interest-driven, aware and calculative. Jain and George
442 (2006) suggest that institutional entrepreneurs as actors who actively mobilize resources
to create new institutional logics or transform existing logics or frameworks.
Compared with advanced countries with well-designed institutions, transition
economies have less stable institutional environments. Environmental jolts could
prompt institutional actors to engage in problematic search processes that can both
de-legitimate existing institutional structures and uncover alternative arrangements
(Sine and David, 2003). Therefore, in the specific historic context of the transition
economy there is great potential for institutional entrepreneurs to induce institutional
innovation and even the restructuring of institutions.
Using the concept of “sustainable and environmental entrepreneurship” which
explains how entrepreneurs seize the opportunities that are inherent in environmentally
relevant market failures (Dean and McMullen, 2007), we turn to the other side of the coin,
for example, the opportunities inherent in new rounds of environmental protection issues,
such as climate change, renewable energy exploration, recycling economic development.
In this paper we define the essence of institutional entrepreneurship as actors who
act with a “mindful deviation” from the previous path and make an intentional search
for new niches that might evolve into a new technological or market path.

2.2 Opportunity as a dynamic evolutionary process

A number of studies have shed light on entrepreneurs’ activities in opportunity
recognition and opportunity exploration. Currently, most research on opportunity focusses
on answering two types of question: what kinds of opportunities (e.g. market, new
technology or new product) entrepreneurs could identify, and how to seize opportunities
for business growth. From an epistemological viewpoint, this reflects a static perspective
on opportunity, making opportunity an objective entity. In this case, entrepreneurs are
supposed to scan the environment regularly in order to discover the potential of existing
opportunities. If entrepreneurs are comfortable with a certain degree of risk-taking,
they could develop these opportunities and achieve growth from them. However,
recently scholars are beginning to be concerned more with entrepreneurs’ capability for
opportunity creation whereby an opportunity should not be an objective entity. Rather,
in a fast-paced and uncertain environment, opportunity could be constructed subjectively
under varied managerial cognitive models. From this perspective the task for entrepreneurs
is to be clear about when and how to construct opportunities.
Considering the ambiguous understanding of opportunities, it is crucial to put more
emphasis on exploring the essence and source of opportunity. Thorough analysis of
opportunity is indispensable for our further understanding of the multiple linkages
among individual entrepreneurs, organizations and industries (Short et al., 2010).
As yet, little agreement exists about the definition and nature of opportunities.
Kirzner (1973) regarded opportunity as a possibility, by means of resource integration,
to satisfy market demand in order to achieve market value. Eckhardt and Shane
(2003) define opportunities as “situations in which new goods, services, raw materials,
markets and organizing methods can be introduced through the formation of new means,
ends, or means-ends relationships.”
 Others view opportunities as products of a creative process that is more gradual, Institutional
involving a synthesis of ideas over time (Dimov, 2007). Whereas some definitions focus entrepreneurs
on the chance to introduce innovative goods, services or processes (e.g. Eckhardt and
Shane, 2003), others are primarily concerned with the role of opportunities in creating on opportunity
new ventures (e.g. Baron, 2008). formation
Debate about the nature of opportunity largely comes from the differences between
two views, one holding opportunities as discovered, the other positioning opportunity 443
as created. In the first view, opportunity exists “out there,” waiting to be found. In the
second, “opportunities are made, not found” (Ardichvili et al., 2003). Other scholars
believe opportunity is the outcome of a gradual creative process. As the creative process
unfolds, opportunities emerge and are shaped (Dimov, 2007). Still other scholars hold
a position between the two, believing that some opportunities are discovered whereas
others are created.
To date, the presentation of opportunities as either concrete realities or enactment
of an entrepreneur’s unique vision have shaped the two dominant views of the
opportunity construct (Alvarez and Barney, 2007). “Discovered opportunity” scholars
place more stress on the independence of opportunity to individuals, which could be
“discovered, evaluated and explored” (Shane and Venkataraman, 2000). For example,
unpredicted demand or price differences in varied markets are objective opportunities.
“Created opportunity” scholars believe opportunities are outcomes which emerge from
collective social actions. For example, it is proposed that under highly unpredictable
situations, decision making could seize emerging opportunities.
If we understand the term “opportunity” as a noun, then it tends to perceive
opportunity from a static, objective perspective as an objective entity, which is
dependent on external environment and could be found out. When we understand
“opportunity” as a verb, however, the multiple stages in the process of opportunity
discovery/creation, evaluation, exploitation and utilization are included, with more
consideration of the dynamics of opportunities and entrepreneurs’ subjective enabling
power (Short et al., 2010). In this situation, an opportunity is created, with closer
association with entrepreneurs than with the external environment. Therefore, we
should not split the duality of opportunity’s objective entity and subjective creation
in different contexts. Thus, we would view opportunity as a dynamic interactive
evolution process composed of objective entity and subjective creation.
To fully understand the opportunity process, one must understand the temporal
dynamics of opportunities. As the creative process unfolds, ex ante possibilities can
only become ex post opportunities as the feasibility of particular possibilities is
evaluated (Dimov, 2007). Incorporating the role of time answers the call of scholars
such as Ford (2002, p. 645), who argues that “making time a more central aspect of our
theoretical language will promote better process descriptions that are likely to reflect
the experiences of organizational members more directly.” Time itself exists both as an
objective entity and individual subjective perception. In past research, time has often
been presented with other variables, such as industry age, corporate life cycle, new
product development speed, etc. These variables, in fact, could not directly satisfy
the requirements of researchers in observing dynamic longitudinal changes of
organizational phenomena. In this paper, we propose that time is important for the
formation of opportunities in the two aspects of managerial cognition and strategic
action. From the perspective of managerial cognition, appropriate timing of identifying
opportunity is crucial. Broadly speaking, entrepreneurs’ activities are evolutionary
processes, in which many opportunities evolve over time (Eckhardt and Ciuchta, 2008).
IJOEM During the dynamic evolving process, the timing selection of opportunity exploration
9,3 and opportunity exploitation has a significant impact on corporations’ knowledge
protection and competitive advantage. Strategic actions taken at a proper time could
not only develop and achieve the benefits of the identified opportunities, but also have
an impact on the current environment and corporation, creating more opportunities.
Therefore, we could say that an appropriate timing strategy is an aspect of
444 competitiveness for corporations (Stalk, 1988).
Recent research acknowledges that managerial cognition plays a significant role
in shaping opportunity and deciding the varied capabilities of seizing opportunities
among entrepreneurs (Baron, 2008; De Carolis and Saparito, 2006). From the
existing research, entrepreneurs’ managerial capabilities can be represented from
several dimensions, including avoidance of cognitive traps (e.g. sunk costs), capability
of identifying an environment, ability to predict the future and sensitivity to opportunities.
In this paper we propose that the role of managerial cognition in opportunity formation
could be reflected in the following ways. First of all, the timing selection for seizing
opportunities is an important part of managerial cognition. Entrepreneurs should
decide when to take strategic actions to create opportunities, as well as the transition
point at which to make the switch between opportunity exploration and opportunity
exploitation. Second, managerial cognition may impact on entrepreneurs’ interpretations
of the external environment. Entrepreneurs’ diversified managerial cognition will bring
different levels of attention to varied environmental factors with some paying more
attention to market demand, while others more concerned with the economic situation and
government policies. Therefore, the attention-based managerial cognition of entrepreneurs
impacts their perception and seizing of opportunities. Third, entrepreneurs’ managerial
cognition pays different levels of attention to internal advantages and disadvantages.
Their attention to and judgment of internal resources and capabilities could also impact
the shaping of opportunities. Generally, the three aspects of managerial cognition can help
entrepreneurs identify opportunities and judge whether there are possibilities to create
new opportunities through strategic actions. The consideration of managerial cognition in
opportunity formation fits has been used in recent studies of entrepreneurial interpretation
in opportunity formation (Barreto, 2012).
In view of strategic action, opportunity is a dynamic, evolving process in which
objective entity and subjective creation interact with each other, involving several
stages, from formation, evaluation and development to utilization. From the perspective of
opportunity creation scholars, opportunities are formed by the interactive process between
entrepreneurs and stakeholders (Companys and McMullen, 2007). This paper proposes
that strategic action could impact the formation of opportunities in the following three
ways. First, strategic action could impact the timing of opportunity formation, for example,
first-movers’ early marketing actions would promote the formation of opportunities in the
whole industry. Second, corporations co-evolve with the external environment. When an
organization adapts to the environment in which it is embedded, it impacts the specific
environment also through its interactions with the environment. In management practice,
a corporation could implement industrial policies through certain actions with industrial
associations, government and grassroots, advocating a favorable external environment
for the corporation to create new opportunities. Third, a corporate strategic action is in
some part an extension of managerial cognition. Through intended strategic actions,
entrepreneurs’ managerial cognition of internal and external factors of their corporation
could also be altered – e.g. in terms of technology, quality, operation and business model,
means keeping in alignment with market demand and creating opportunities.
 In sum, entrepreneurs have developed distinctive capabilities to exploit opportunities. Institutional
On the one hand, they use their special managerial cognition on certain issues, such as entrepreneurs
temporal orientation, uncertainty avoidance, etc. Their managerial cognition could have
impacts on strategic actions. With interaction between managerial cognition and on opportunity
strategic action, entrepreneurs could create and find opportunities. On the other hand, formation
entrepreneurs tend to pay different levels of attention to emergent opportunities. Thus,
different levels of attention could lead to different searching activities. This could lead to 445
differentiation among entrepreneurs with respect to opportunity exploitation. Figure 1
illustrates the mechanisms of entrepreneurs’ capabilities to grasp opportunities.

2.3 Opportunities for institutional entrepreneurs in transition economies

Literature on entrepreneurship shows that the exploitation of economic opportunities
has become the focus of intense examination by entrepreneurship scholars. In the face
of new economic opportunities, the most valuable characteristic of entrepreneurship is
the identification of commercial opportunities and correspondingly leveraging
positions to exploit them. Institutional entrepreneurs could leverage new technological
and market niches by focussing efforts on collective action and promoting strategies to
establish stable sequences of interaction with other organizations to create entirely new
industries or associated institutions. Reinstaller (2005) argues that “policy entrepreneurs,”
unlike Schumpeterian entrepreneurs, are driven by a social rather than an economic
motive. They do not wish to capture economic value for themselves, but want to find new
avenues toward social improvement and in this way create social value.
Recently, scholars have turned their attention to the symbiotic relationship between
strategic management and entrepreneurship to facilitate understanding of firms’ wealth-
creating abilities and the multi-linkage among individual entrepreneur, organization and
industry (Ireland and Webb, 2007; Short et al., 2010). Considering the latest emerging
large-scale innovative and entrepreneurial activities in transition economies such as in
China, it is interesting to explore how entrepreneurs embedded in immature institutional
contexts recognize and exploit the opportunities that are created by institutional forces.
According to recent research on transition economies in the context of China (Child and
Tsue, 2001), “China remains a context in which governmental agencies continue to
exercise an active influence over strategic business decisions” meaning institutions matter
in certain contexts. Further, Peng (2003) argues that “institutional transitions throughout
emerging economies present a fascinating opportunity to integrate institutional and
strategic choice perspectives.” Peng’s insight into an institution-based view of strategy
suggests that institutional entrepreneurship should be interpreted as a combination of
both enabling aspects from institutions and entrepreneurship.

Attention Managerial
Cognition

Opportunity Opportunity
Entrepreneurs
exploitation formation

Searching
Strategic Figure 1.
Action The mechanism of
entrepreneurs’ capability
to grasp and utilize
Opportunity utilization opportunity
IJOEM Institutional entrepreneurship could play an important role in emerging fields by
9,3 “occupying ‘subject positions’, theorizing new practices and institutionalizing these new
practices” (Maguire et al., 2004). In transition economies, institutional to a large extent,
entrepreneurs play the role of “pioneer” and “leverage power” in many emerging fields
and new industry sectors. Considering the discontinuities and uncertainties of the
institutional context in transition economies, it is valuable “to study the interactions
446 between the micro actions of actors and emerging macro institutional structure” (Garud
et al., 2002). In fact, a recent study by Jain and George (2007) argues that initiatives
from entrepreneurs can potentially have a “path-defining” effect on industries’ evolution.
Institutional entrepreneurs, especially in emerging economies, could play a more
proactive role instead of acting as responsive agents to objective opportunities.
The study by Hoffman (1999) distinguished between three types of disruptive events
that can overcome institutional inertia: milestones, such as Earth Day; disasters, such
as pollution accidents; and legal/administrative events, such as parliamentary
hearings, trials and the release of environmental white papers. However, this study
ignored the enabling power of institutional entrepreneurs as opportunity creators
and path creators.
In an emerging economy context, such as in China, institutional entrepreneurs have
developed strong capabilities in opportunity-seeking. Generally, they have accumulated
capabilities in the three following ways. First, institutional entrepreneurs have good
relationships with local governments, and even positive participation in the political
system after adopting a “red hat strategy.” This is the case for many successful
entrepreneurs who have been nominated as committee members of the National People’s
Congress and Chinese People’s Political Consultative Conference (CPPCC). In this way
they gain access to better channels for government information such as industry
planning information in advance, and accumulate social capital, such as through
relationships with government officials from different departments. This could be a
favored condition for entrepreneurs to have the right timing for opportunity
identification and opportunity exploitation. This is similar to the old Chinese proverb
to have a good “Tian-shi,” the Chinese meaning of the right “timing” to come true:

P1. Due to their capability, of gaining information from the government, institutional
entrepreneurs have they can make an informed judgment of the right time to
enter a market. Therefore, they have better capabilities in opportunity formation
and exploitation.

Due to their local roots and embeddedness, as well as regular interactions with local
actors from all walks of life, institutional entrepreneurs could create and enjoy favorable
geographical stickiness to facilitate their opportunity formation and exploitation in local
region. This is the second indispensable factor of old Chinese proverb of “Di-li” for
success of anything. Di-li has the meaning of occupying a favorable environment:

P2. Due to their familiarity with and embeddedness in the local region, institutional
entrepreneurs could create and enjoy strong social and even political
relationships in the local region. This advantage rooted in local region could
facilitate the formation and exploitation of opportunities.

Institutional entrepreneurs have well-accumulated social capital and social reputations in

their local region, which can be beneficial for opportunity formation and exploitation.
This is the third important factor according to the Chinese philosophy of “Ren-he,” Institutional
meaning harmonious inter-relationships among people. Based on the institutional entrepreneurs
context of an emerging economy, we put forward the following propositions to illustrate
the successful opportunity formation and exploitation of institutional entrepreneurs: on opportunity
formation
P3. Due to their strong capabilities and willingness to cultivate and utilize social
capital, institutional entrepreneurs have strong inter-relationships with people. 447
Harmonious human relationships could facilitate the formation and exploitation
of opportunities.

Within Chinese culture, indigenous entrepreneurs would tend to adopt the triangle of
harmonious relationship among timing (God’s time, Tian-shi), environment (external
favorites, Di-li) and people (good internal relationship, Ren-he) as preconditions for
opportunity formation and exploitation. We summarize the idea of opportunity
formation and exploitation in the Chinese context as illustrated in Figure 2.

3. Methodology
Scholars have emphasized that the study of entrepreneurship demands a rich, detailed
interpretive analysis of the particular context in which the phenomena occurs (Garud
et al., 2002). Ployhart and Vandenberg (2010) argue that researchers should place
more emphasis on exploring longitudinal studies to better understand the many
organizational phenomena that change both within and across levels over time.
Further Teece (2012) calls for more in-depth qualitative research through individual
corporate histories to understand the origins of capabilities. In this study, we utilize the
method of historical case studies with event sequencing.
It is acknowledged that historical case studies provide the opportunity to uncover
the stories behind the institutional evolution of many different phenomena (Nasra and
Dacin, 2010). We track the historical developments and use the historical event
sequencing method to investigate institutional entrepreneurship.
Finally we have integrated the story-telling approach into the historical event
sequencing method, hoping to uncover the underlying mechanisms of institutional
change by resorting to institutional work. In the pre-formation of institutions,
institutional entrepreneurs delegated the institutional work to entrepreneurs.
Timing
(Tian-shi )
(Opportune time)

Entrepreneur

Figure 2.
The necessary conditions
for opportunity formation
Environment People and exploitation in the
(Di-li ) (Ren-he) Chinese context
(Geographical convenience) (Harmonious human relations)
IJOEM 3.1 Research context
9,3 The selection of context and specific cases was guided by the phenomena and issues
we address in this paper. This study selected the solar energy industry as the research
context for three reasons: first of all, the solar energy industry is a high-opportunity
sector which has achieved rapid development in recent years in China. This indicates
that entrepreneurs who could create and seize opportunities have the effect of “path
448 defining” for new industry development; even to induce a revolution in a specific
industry. In the process of ebbs and flows in the solar energy industry, many
entrepreneurs pursued opportunities in the wave of the transformation of institutions
due to the increased dynamics and velocity. Second, in this phase of developing
strategic new industries, the solar energy industry presented a good example through
which to show how micro-level actions by entrepreneurs regarding opportunity
discovery and creation influence the transformation of industry developments and
institutional building at macro level in the context of the transition economy of China.

3.2 Research data

Considering the multiple levels of analysis in this research, data from different channels
should be collected for identifying “events, activities and choices” over time and revealed
who did what and when (Langley, 1999). In this study, data were collected at four levels to
illustrate the dynamic interactions of entrepreneurial opportunities at micro level and
transformation of institutions at macro level: these levels were individual entrepreneur,
firm, industry and institution. Entrepreneurial and firm-level data were collected through
historians’ accounts of the industry. Archival data from industry associations and official
statistics were collected to get information about the development of the industry.
Institutional-level data were mainly collected from related government ministries.

4. Case I: indigenous individual entrepreneurs as institutional entrepreneurs

to push the development of the solar energy industry: the case of Tongwei
Group
Given worldwide concern regarding energy safety, the Central Government of China
is concerned about building the foundation for sustainable economic development
by “reinforcing resource saving and environmental protection.” On January 1, 2006
the “Renewable Energy Law” was issued in China. According to official statistics, the
usage of renewable energy in China in the near future will be at an annual rate of
25 percent and more than 30 percent of energy demand will depend on the supply
of renewable energy. In the government-issued “Mid- and Long-Term Development
Plan of Renewable Energy,” it is stated that China will invest more than 1,500 billion
RMB (Yuan) in developing renewable energy in the next 15 years. Undoubtedly, the
development of a renewable energy industry relates to the national policy.
In the background of the Grand Western Development Program actioned since 1999
with direct support from the Central Government of China, many entrepreneurs in
western regions pursued this historical opportunity by following the national policy
to develop new industrial sectors. With abundant natural resources, Sichuan Province’s
resources represent two-thirds of the resources in all western regions, with a
superiority in renewable energy, such as hydro energy, solar energy, biomass energy
and wind energy. Therefore, in the recently issued “Outline of the Mid- and Long-Term
Science and Technology Development Program (2006-2020),” Sichuan Province has
identified the stimulation and solidification of the renewable energy industry as a new
opportunity for industrial structure upgrade and regional sustainable development.
Shrivastava (1995) suggests that environmental technologies are a competitive Institutional
force and a tool for competitive advantage. Therefore, it is important to develop entrepreneurs
environmentally friendly technologies, especially in the renewable energy industry, in
order to improve regional competitive advantage on the one hand and regional sustainable on opportunity
development on the other. formation
Starting with and focussing its core business on agriculture, Tongwei Group – a
leading private enterprise in the area of feed and aquatic products was established in 449
1992 in Sichuan Province, western China – and has grown to be the world’s largest
aquatic feed manufacturer as well as a major livestock and poultry feed producer.
During Tongwei Group’s growth, its founder, Mr Liu Hanyuan, has been placed in a
number of roles – Standing Committee member of the CPPCC, Central Standing
Committee member of the China Democratic National Construction Association
(CDNCA), Board Chairman of Tongwei Group – and has also received wide social
recognition. Mr Liu has received many honors and awards, including China’s Top 10
Private Entrepreneurs of 2002 at the twenty-first Century BoAo Forum; The World’s
Most Successful Businessmen Under the Age of 40 by Fortune magazine; 2002, 2004
and 2005, Top 10 Businessmen in Sichuan, China’s Top 10 Economic Personage of
2003; December 2005, Asia-Pacific Most Creative Chinese Entrepreneurial Leaders
Award; December 2006, Economic Personage of the Year in China’s Feed Industry;
March 2008, officially selected standing committee member of the CPPCC during the
National People’s Congress and CPPCC.
In 2006, the Tongwei Group entered the polycrystalline silicon field after several
years’ preparation and planning. Before the financial crisis in 2008, the first stage
of the polycrystalline silicon project, with production capability of 1,000 tons, was
successfully finished and put into operation, with an astonishing speed from the
feasibility research to the highest standard of products. It marked the creation of a new
direction for the Tongwei Group and the realization of Mr Liu’s ambitious vision to
explore the creation of green gold from the new energy industries. Although in the
following years the external environment of the solar industry suffered a serious
slump, Tongwei Group has been continuing with cautious expansion of its solar
energy business from the southwest to the northwest and in the northeast in
many counties in China. Within five years, the Tongwei Group has grown to be a very
important player in the solar energy industry in China. It recently made a large
investment in Xinjiang, western China, for larger-scale involvement in the photovoltaic
industry, with predicted production capability of 50,000 tons of polycrystalline silicon,
three GW silicon pieces.
The Tongwei Group’s desire to diversify from feed and aquatic products to the new
energy field is based on the social responsibility of Mr Liu Hanyuan, who was born in a
rural village in Sichuan Province. After business success in feed and aquatic products
and accumulation of political capital, he feels a strong obligation to help improve the
living standards of people in rural areas in western China. In operating his business, he
made food safety a core part of his vision. In his later entry into the solar energy
industry, a driving factor for him was the perceived responsibility for national energy
safety. The shortage of energy supply for local farmers in rural areas, when the
western region in fact has abundant in energy resources for utilization such as
solar energy, planted the seed of a plan for investment solar energy technologies in
Mr Liu’s mind. In 2006, a wave of investment in solar energy swept China, but at that
time, Tongwei did not rush into the field immediately. Rather, the company maintained
a cautious observation and careful analysis before taking decisions and actions.
IJOEM The dual path of Tongwei Group has a close relationship with Mr Liu Hanyuan’s
9,3 personal status of “red hat” after his successful business operation in local regions in
the 1990s. His “red hat,” i.e. recognized political status in China in roles such as
member of the standing committee of CPPCC, made it possible for Mr Liu to put
forward his suggestions for developing the solar energy industry to the highest
decision-making circles. Also, his political status enabled him to gain broad access to
450 policy-making departments and wide connections with government officials, bankers
and professionals at both local and national levels. These in turn facilitated his
decision making and business operation with timely and accurate information as well
as favorable support from local government and even support from higher ranking
government officials in the Central Government.
Through submitting suggestions to CPPCC and other government departments,
Mr Liu got feedback and confirmation as to whether his judgments on investing in the
new energy field were good strategic decisions. Therefore, it is the political capital of
Mr Liu that helped him to make decisions at opportune times. In this process, due to his
broad social and political capital, the interactive involvement of opportune timing,
geographical convenience in the local region and good inter-personal relationships,
contributed to the formation and exploitation of opportunities in the solar energy field
in the western region of China (Figure 3).
Yet, as indicated in this case, it should be kept in mind that an entrepreneur’s
opportunity exploration and exploitation is rooted to a great extent in his personal
value. The sustainability of the perceived and exploited opportunity relies also on the
individual entrepreneur’s integrity and methods of operating the business.

5. Local government as institutional entrepreneur to pull the development

of solar energy industry: the case of Suntech Power
In economically developed regions in China, local government has abundant resource
endowments, including financial resources, human and political resources. Compared
with inland regions, these regions have more ability and space to introduce and launch
innovation from technological and institutional perspectives.
Our research highlights the role of local government as an institutional
entrepreneur in promoting new industry development, as well as the problems of
local government as an institutional entrepreneur. In the context of “large scale
institutional transition,” local government officers, under the dual pressures of political
performance which would determine those officials’ future promotion and functional
performance for regional development, make institutional innovations either out of
consideration of their personal interest or a combined consideration of personal and
public interest. The institutional innovation might begin by mimicking successful
practices and policies of advanced and model regions. It could also be ignited and
created by insightful leaders in local government. In China, government dominates in
the ownership of resources which makes it possible for an ambitious leader to leverage
resources to implement their innovative plans.
The new round of economic growth and industrial restructuring in many economically
developed regions in China relies on innovation from a cohort of repatriated entrepreneurs.
Many regions’ new industries were introduced first through the market exploration
searching of these expatriate entrepreneurs. Later, local government was mobilized to
conduct large-scale institutional changes to promote the development of new industries.
Among many of these kinds of examples, one well-known case is the solar energy industry
development in Wuxi in southeast China.
 Phase I: Phase II: Phase II:

Institutional opportunity Industry opportunity Create and seize market opportunity through shaping institutional change

Prepared to enter Submitted policy suggestions continuously to Made large scale

Broad ties The first production project
solar energy industry Central Government to develop solar energy: investment and expanded
with government of polycrystalline silicon
cautiously in 2006 Published the book Energy Revolution: Change in solar energy industry
with success in 2008 st
the 21 Century and sent a copy to Hu Jintao since 2010

Actions taken
(2002) (2002, 2004, 2005) (2006) (2008) (2009) (2010) (2012)
(Institutional
Entrepreneurs) China’s Top The World’s Most Asia-Pacific Most Creative Standing Committee Awarded as ‘Responsible Received reception of Xi Awarded
10 Private Successful Businessman Chinese Entrepreneurial Member of CPPCC Leadership’ in the first Jinpin and several other Global New
Entrepreneurs Under 40 (Fortune) Leaders Award and CDNCA Chinese CSR Forum high ranking officials Energy Top
from Central Government 500 Corp.

Note: Case: Tongwei

entrepreneurs
formation
Institutional

by institutional
actions taken
Critical juncture and
on opportunity

Figure 3.
451
entrepreneurs
IJOEM The story in Wuxi could be traced back to a contingent opportunity searching by a
9,3 returnee academic entrepreneur, Dr Zhenrong Shi. In 2000, Dr Shi came back to China
searching for possible investment in his technology for utilizing solar energy, after
decades of research in the field of photonic voltage in Australia. Carrying know-how
and experience in solar energy technology, he aimed at founding his own technology
venture in China. After several visits to different regions, he did not obtain much
452 support. When Dr Shi visited Wuxi, his idea inspired Mr Li, former Director of Foreign
Economics and Trade in Wuxi. After due diligence on Dr Shi in Australia, Mr Li was
able to assemble six million USD from State Owned Enterprises , e.g. Little Swan, to
co-invest with him in the Suntech project. It was not a formal investment vehicle but
rather an informal investment led by Mr Li. As an institutional entrepreneur, Mr Li
recognized and exploited opportunities (Shane and Venkataraman, 2000) that were
presented at historical critical junctures (Hall and Taylor, 1996). With generous policy
and such support, Dr Shi founded his company Suntech Power, manufacturing
materials for solar energy use. However, Suntech underwent a crisis and stocked many
inventories due to the delay in market demand in 2003. On the brink of a crisis, Mr Li
was determined to add another 20 million USD in investment to enable Suntech to
survive. In 2004, due to renewable energy laws in Europe, Suntech was able to take off
and leverage the high rapid market growth mainly driven by growth in the German
and Spanish markets. This success led to the next development phase of the firm,
going for an IPO in New York in 2005. The successful IPO of Suntech became a
gold-lettered signboard for Wuxi. The highest decision makers in Wuxi realized that
a new path could be created to achieve a new round of regional economic development
through introducing talent with advanced professional technological know-how and
industry experience. In 2006, the Minister of DoOCCP (Department of Organization of
Chinese Communist Party Central Committee), Mr Yuanchao Li, was encouraged and
inspired by the successful entrepreneurship story of Suntech during his inspection
of Wuxi, suggesting the successful experience of Wuxi should be spread to attract
and introduce overseas talent to boost regional development to become wider in
scope. Thus, the adventurous practices and “institutional innovation” of the Wuxi
government was granted a status and legitimized after being recognized by
high-ranking officers in Central Government. In this sense, a new direction was created
by the local government in Wuxi. Their experience and practices were labelled the
“530 Plan,” referring to the desire to introduce 30 Chinese expatriates with impeccable
credentials from overseas within five years to start up their corporations in
future-oriented industries. Thus, a series of “windows of opportunity” in developing
strategic new industries were leveraged and created through the efforts of local
government in inaugurating institutional change and innovation.
However, the image of Suntech was damaged when it received warnings from the
New York Stock Exchange in September 2012. In March 2013, Suntech was judged by a
local court in Wuxi to be bankrupt. The story of Suntech with a twist raised many
questions to be answered.
We adopted a narrative approach to explaining the historical sequence of events
surrounding one particular case, that of Suntech Power. Our decision to choose Suntech
Power story’s was made for several reasons: Suntech Power became the role model of
the technology entrepreneurs who applied for the 530 Plan; as a successful entrepreneur,
Dr Shi, the ex-CEO of Suntech Power, created the solar energy industry for Wuxi City
and its neighboring regions, and this led to the birth and development of the solar
energy industry in China; Dr Shi is one major actor who interacted with institutional
entrepreneurs during the institutional change process; and the bankruptcy of Suntech Institutional
offers a vivid case to examine the role of government as institutional entrepreneur. entrepreneurs
Figure 4 illustrated the process of institutional formation/disruption of institution
and the dynamic interactions between returnee technological entrepreneurs and local on opportunity
government as an institutional entrepreneur. formation
The case of Suntech disclosed the role of the institutional entrepreneur at different
stages. Although local government, as an institutional entrepreneur in an emerging 453
economy could push some institutional innovations such as providing favorable policies
to attract talent, it suffers from the risk of crippling distortions in the normal market
order. This is ironically unexpected in Hayek’s (1973) argument for “made order” through
top-down government intervention. When considering the pressures in the face of local
governments in order to outperform their competitors in political marketplace, the role of
local government as an institutional entrepreneur might be regarded as looking for
windows of opportunity through which to market their policy ideas to national decision
makers (Kingdon, 1984). Yet, to prove the effectiveness of their policy ideas, local
government usually pursue short-term performance. For example, local government
asked banks to offer start-up businesses credit, loan and subsidies in order to stimulate
the fast growth of the business. This kind of policy always focusses on a narrow aspect of
economic performance while ignoring capacity building in institutional development
with a long-term perspective, leading at best to short-term prosperity while creating the
problem of overcapacity later on. Overcapacity in the polycrystalline silicon industry in
Wuxi and other regions recently highlighted the short termism of local government
officials in the context of merit competition and pressures for GDP growth. This
top-down model of institutional entrepreneurship could promote rapid development
of a specific industry within a short time, but it could also trigger greedy expansion and
irresponsible management actions toward exploiting market opportunities before the
market collapses. The collapse of Suntech illustrates the paradox of local government as
an institutional entrepreneur.

6. Discussion and conclusion

This research has aimed to address two questions. As a response to the debate on “the
paradox of embedded agency” (Seo and Creed, 2002), and we propose that entrepreneurs –
even in the context of a transition economy, which has previously been identified as a
constraint to actors – could play an enabling role to a certain degree. On the other hand,
this study aimed to clarify our understanding to the importance of local context for the
nature and scope of institutional entrepreneurship in an emerging economy.
In the emerging economy context, institutions such as government planning,
related regulations, taxes, etc. could greatly impact the formation of opportunities in
developing new industries. An institutional entrepreneur who enjoys good connections
with government could have either a first-mover or follower advantage to explore and
exploit potential opportunities by investing in strategic new industries. This paper
contributes to an understanding of the relationship between institution and
entrepreneur and the relationship between opportunity utilization and entrepreneurs’
impacts on institutional change in an emerging economy.
As a response to Peng’s (2003) criticism that some research on institutional
transitions focusses on industry-specific changes while ignoring the significant
institutional transitions in emerging economies, our research observed the dynamic
linkage among individual entrepreneur, government and industry based on a broad
framework of institutional change in China. These were the significant institutional
 9,3

454
IJOEM

Figure 4.

entrepreneurs
by institutional
Critical junctures
and actions taken
Phase I: Phase II: Phase II:
Opportunities from institutional disruption Institutional innovation Lost opportunities with institutional lock-in

Suntech Suntech Suntech as star Repeated over Greed and Investment failure;
Dr. Shi Suntech in
high NYSE business; Solar investment in irresponsible Warning from
founded crisis Founding
growth IPO energy industry Polycrystallin investment in NYSE;
Suntech WXOCICC
as pillar industry e silicon capital market Bankruptcy

Actions taken
(2001) (2003) (2005) (2006) (2007-2009) (2010) (2012-2013)
(Institutional
Entrepreneurs) 6 Million USD Additional investment Disputes and conflict between Wuxi Wuxi 530 Service; Large scale Bailout plan
investment by of 20 Million USD local government and Dr. Shi 530 Thousand Talent Plan credit loan from from local
Wuxi local from Wuxi local State assets were commanded Plan state-owned government
government government to be exited from Suntech banks

Note: Case: Suntech

and industrial transition in the western regions under the Grand Western Development Institutional
Program initiated in 1999, as well as the recently initiated Thousand Talents Program entrepreneurs
initiated in 2008. In response to the recent call for research on contextualizing
entrepreneurship (Welter, 2011), our study compared two types of institutional on opportunity
entrepreneurs through ebbs and flows of the solar industry in two different contexts. formation
The present study explicated the variation in the roles of institutional entrepreneurs
between the top-down and the bottom-up context in promoting new industry 455
development. As illustrated in the case of the Tongwei Group, the chairman of the group,
as an influential entrepreneur deeply rooted in indigenous context in his hometown in
western China, has a strong feeling of responsibility to improve the welfare of people in
rural areas in western China with his ambitious vision to develop a solar energy industry.
With well-accumulated advantages on Di-li (i.e. rooted embeddedness in local region) and
Ren-he (i.e. harmonious inter-relationships among people), the indigenous entrepreneur
can leverage institutional change from the bottom up through his personal social and
political capital, such as forming regional industrial alliances and putting forward
suggestions for government policies and decision making by means of his political
status. The Tongwei Group’s move from aquatic feed industry to solar energy industry
shows the great potential of a committed individual entrepreneur as an institutional
entrepreneur to seize market opportunities and promote a new industry development.
Rather, in the case of Suntech, despite its pioneering role in developing the Chinese solar
energy industry, local government dominated institutional changes though may produce
effective policy implementation at local level could cause distortion of institutional
innovation and market opportunity exploitation. Driven by the dual pressures from
political and economic areas to achieve higher economic growth, local government could
play the role of institutional entrepreneur at a certain stage by setting up innovative
policies and making increased commitments to foster local “star” businesses. However,
this could trigger the risks of overproduction, overcapacity and overinvestment in the
new industry on the one hand; while on the other, in the top-down process of institutional
innovation, it could cause distortion in resource allocation, hinder government’s capacity
building on a full range of institutional work.
It is important to emphasize that the individual entrepreneur and local government
may not be mutually exclusive in pursuing institutional changes and innovations.
A well synthesized and integrated model of institutional innovation promoted
collectively from an individual entrepreneur as an institutional entrepreneur and
government as policy entrepreneur is worthy of further study to explore the dynamic
linkage and evolution among entrepreneur, institution and industry. Therefore, it
would be interesting to make further comparative study with other emerging
economies and “mature” economies in western capitalist countries to examine the triad
relationship among entrepreneur, government and industry.

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Corresponding author
Dr Xuanwei Cao can be contacted at: xuanwei.cao@xjtlu.edu.cn

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