Social Capital, Financial Literacy, and Rural Household Entrepreneurship: A Mediating Effect Analysis

Abstract

In rural areas, entrepreneurship helps lift households out of poverty by alleviating unemployment and increasing income, and financial literacy plays an important role in promoting entrepreneurship. Social capital is a resource embedded in social relationships, the boundaries of which have been expanded by the development of information communications technologies (ICTs). This article aims to link social capital, financial literacy, and rural entrepreneurship through a partial mediating effect analysis. Using data from the 2015 China Household Finance Survey (CHFS), we analyze how social capital affects rural entrepreneurship and the role of local ICTs development in this effect while also accounting for reverse causality. We construct a social capital indicator, mainly referring to bridging social capital, and two financial literacy indicators to make the conclusions robust. The empirical results show that social capital promotes rural entrepreneurship by sharing financial literacy. Furthermore, the spread of ICTs enhances this mediating effect. Our study provides empirical evidence for encouraging entrepreneurship and promoting knowledge sharing and implies the importance of ICTs in promoting entrepreneurship in rural areas.

Digital literacy and subjective happiness of low-income groups: Evidence from rural China

“…First, the core independent variables are replaced. In this paper, principal component analysis is used to calculate digital literacy ( Zhao and Li, 2021 ). The principal component analysis model contains five indicators, and a total of one common factor is extracted using the principal component method.…”

Understanding the Relationship between Financial Literacy and Chinese Rural Households’ Entrepreneurship from the Perspective of Credit Constraints and Risk Preference

“…The independent variable of this study is financial literacy, which has not been uniformly defined by the academic community. Refer to Huston [ 24 ], Zhao and Li [ 7 ], and Lusardi and Mitchell [ 19 ] to judge their financial literacy from both financial knowledge and financial attitude. This study is consistent with Lusardi and Mitchell [ 19 ], which believes that the answers “I don’t know” and wrong answers represent two different financial literacy.…”

“…Previous studies have analyzed the influencing factors of entrepreneurial behavior and performance from both internal and external aspects. Among them, the internal factors mainly include the personal characteristics and social capital of entrepreneurs [ 7 , 8 , 9 , 10 ]. External factors mainly refer to the entrepreneurial environments, such as background factors such as policy system, economy, technology, and culture [ 11 , 12 , 13 ].…”

Does Digital Inclusive Finance Enhance the Creation of County Enterprises? Taking Henan Province as a Case Study

“…Entrepreneurial activity is the process of integrating various resources to create value, which inevitably requires financial support. The small number of financial institutions in counties, the uneven spatial distribution and the tendency towards "disappearing rural bank branches" [36], coupled with the slow marketization process and the lack of financial literacy of residents in counties [37,38], results in more severe financing constraints for entrepreneurial activities in counties compared to cities [39]. Traditional financial institutions are often reluctant to serve remote and poor populations [40] and have only a few branches in underdeveloped areas, which do not enjoy easy access to financial services such as lending and cash access.…”