Is Entrepreneurship Missing in Shanghai?

Using a unique census dataset on all industrial firms (with more than 5 million yuan in sales), we document a phenomenon of missing entrepreneurship in Shanghai. Entrepreneurship is defined as private, new entrants in our paper. Specifically, in terms of business density, the size of employment and a host of other measures, the relative ranking of Shanghai was always near the bottom in the country. All these empirical findings took place against a backdrop of the presumably huge locational advantages of Shanghai - the substantial human capital, rapid GDP growth, and a long and stellar - but pre-communist - history of entrepreneurship. We propose a hypothesis that Shanghai adopted a particularly rigorous version of industrial policy model of economic development and this industrial policy proclivity may have led to the atrophy of entrepreneurship in Shanghai.