n keeping with the Foundation’s emphasis on reducing world poverty by encouraging free enterprise, it is funding a groundbreaking research project on entrepreneurship in China. Based at Cornell University’s Center for the Study of Economy and Society (CSES), the three-year, $2 million program is aimed at better understanding the dynamic behind the rise of China’s entrepreneurial class, which, in the space of two decades, has gone from contributing one percent of China’s GDP to 70 percent.

The study, directed by CSES head Dr. Victor Nee, will address some of the questions that the Foundation has made it a priority to address. How is wealth created? How do ordinary people become involved in the creation of wealth for their own benefit? Just how does entrepreneurial activity serve as the engine for wealth creation? According to Nee, China is a superb place to start. The World Bank credits China with the fastest ever reduction in absolute poverty.

From a researcher’s point of view, China is an especially interesting case study because it is an anomaly. China once seemed a long shot for making a successful transition from a command to a market economy, says Nee. Other once-socialist states—Russia for example—should have outperformed China based on urbanization rates, education levels and access to raw materials. On top of that, Nee says, “there initially was tremendous resistance from the state to the idea that the private enterprise economy would be allowed to emerge as the dominant sector of the Chinese economy. The state favored state-owned enterprises, which, of course, had the best access to capital and had its interests protected by law and the Communist Party.” But the entrepreneurial spirit in China proved to be remarkably robust, broadly based, and irrepressible, especially in China’s eastern coastal provinces where entrepreneurship and capitalism had historic roots prior to the Chinese revolution. Consequently, today private enterprise contributes over 70% of the GDP of the Chinese economy.

Nee is leading an international team that includes scholars from Lund University, Beijing University and Stanford University. Last year, he spent three months in China and was especially heartened by the enthusiasm of Chinese colleagues, specifically those at the Center for the Study of Entrepreneurship and the Firm at the Shanghai Academy of Social Sciences. They are committing office space and staff to help collect data in a region that Nee calls the “epicenter of Chinese capitalism”. The Shanghai Academy’s offer amounts to what Nee calls “very exciting leverage that we got from the Templeton grant.”

The Templeton grant grew out of the Foundation’s support for a 2004 conference at Cornell marking the 100th anniversary of the publication of Max Weber’s The Protestant Ethic and the Spirit of Capitalism. As the leading research organization of its kind, the Center for the Study of Economy and Society was a natural choice to grapple with the Chinese phenomenon of entrepreneuship. Ultimately, CSES researchers plan on studying 1,600 firms and 800 entrepreneurs in the largest study of its kind.

One measure of the need for the Templeton-funded study comes in an anecdote from Sonja Opper, a Professor of International Business and Economics at Lund University who is part of Nee’s team. With completion of the study still two years off, Opper is already fielding queries on her findings from executives at the Swedish packaging behemoth Tetra Pak, which has extensive interests in China. “They go there and struggle to do business without fully understanding the norms of how business is done there,” Opper says. “We are the first doing a systematic study of emerging entrepreneurs.”

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