The locational choice of entrepreneurs and its driving forces of home bias

Hometowns are special places created by the connection between people and places in the process of living and growing up, and thus carry a rich sense of geography. In fact, place identity is a core concept in human geography, and hometown identity is an important dimension of it. As China is a transitioning country with a strong hometown preference and a large floating population, there is a pressing need to answer the question of whether Chinese entrepreneurs prefer their homes or not when choosing their work locations. Moreover, the China-based study facilitates the examination of entrepreneurs' high need for emotional support and their commitment to family responsibilities, which compensates for the absence of non-economic factors motivating hometown preferences in existing studies. Based on data of the 2015 China Labor-Force Dynamics Survey, this paper provides the first individual-level empirical analysis of entrepreneurs' home bias in locational choice and its driving mechanism. Our study finds that entrepreneurs do have a strong home bias, and that this bias holds for both opportunity and necessity entrepreneurship. This finding holds true after excluding samples that may have contributed to the overestimation of home bias, i.e., excluding those in the same industry as their parents and those working in agriculture, fishing, and mining. In terms of the driving mechanism of economic factors, there is no empirical evidence to supporting that entrepreneurs prefer their hometown out of access to financial support from family and relatives, but entrepreneurs who prefer their hometown and place of longest residence do have more business opportunities. In terms of the driving mechanism of non-economic factors, the number of children living with the entrepreneur and parents over the age of 60 significantly contribute to the entrepreneur's home bias, while the number of friends hardly significantly increases it. This not only provides a scientific basis for the development of localized entrepreneurial talent policies, but also indirectly responds to the "war for talent" that has been raging in various cities in recent years.