The pandemic may give rise to a new generation of entrepreneurs. Hard times foster grit. It also fosters risk tolerance. Those who experience hardship early in their lives become more open to risk-taking and hence are more likely to start a business. Hardship experienced in the formative years can indeed make one more entrepreneurial in adulthood.

How does entrepreneurship concern us? Creating businesses means creating jobs and livelihoods. Policymakers have long been interested in boosting entrepreneurship, a contributor to economic growth. But are entrepreneurs born or made? Should policymakers focus more on spotting those with entrepreneurial traits or nurturing more people to become entrepreneurs?

Many factors lead to one becoming an entrepreneur. Now we find that hardship plays a role too. Our research, conducted with Professor Yi Junjian from Peking University, was recently published in the journal Proceedings of the National Academy of Sciences of the United States of America (PNAS).

Finding a causal relationship between hardship and entrepreneurship is difficult. It is unethical, indeed inconceivable, to subject different groups of people to different levels of hardship and then trace their life outcomes over the years. But history provides a clue.

The Great Famine in China, which occurred last century, caused varying degrees of hardship across different regions. To find out the entrepreneurship status and risk attitude of those who grew up during the famine, we turned to the China 2005 mini-Census and the 2013 China Household Finance Survey (CHFS) respectively.

We found that in a county where the famine was more severe by one standard deviation, the number of entrepreneurs in that county was 10 per cent higher. This means that hardship conditioned some people to become more risk-tolerant and entrepreneurial.

Another interesting finding was that both men and women who experienced hardship were more risk-tolerant, but more men engaged in entrepreneurship than women. Out of 729,000 respondents in the mini-Census who fit our criteria, 4.9 per cent of men and only 1.9 per cent of women owned businesses or were self-employed. This could also be because of the gender norms at that time, when men worked outside while women took care of domestic chores. However, when the famine grew more severe, the likelihood of female and male entrepreneurship was higher by 17.1 per cent and 12.7 per cent respectively.

With shifting gender norms in society, would we see more female entrepreneurs in the future? This is a question to be investigated on another day. Still, our research suggests entrepreneurship as a way to revive the economy after economic recessions, natural disasters, terrorist attacks and now, the pandemic. Developing nations may also wish to allocate more resources to promote entrepreneurship to increase economic growth.

Early hardship leaves marks in one’s life. But it also increases one’s appetite for risk and, in turn, entrepreneurship. With the COVID-19 pandemic, we may see more entrepreneurs in the future. This could be the silver lining of the grey pandemic cloud.

The article is an abridged version of the one first published in SCMP.