Social entrepreneurship and sustainable development: The Yiwu case

Sustainable development is the ability to meet the present needs without compromising the ability of future generations to meet their needs (World Commission on Environment and Development, 1987; United Nations Commission on Sustainable Development, 2001). In 2015, the United Nations 2030 Agenda for Sustainable Development emphasized optimizing economic products and services to utilize better economic resources, environmental sustainability, social and economic stability, and competitive business advantage (United Nations General Assembly, 2015).

Over the past 2 decades, entrepreneurship has played an essential role in reducing poverty and enhancing sustainable development (Hart, 1995; Schaltegger and Wagner, 2011; Youssef et al., 2018). Research on entrepreneurship has been receiving increasing attention from management scholars. Accordingly, new research topics have emerged in studying entrepreneurship (Pacheco et al., 2010), such as green entrepreneurship, ecological entrepreneurship (Schaper, 2002), sustainable entrepreneurship (Dean and McMullen, 2007), environmental entrepreneurship (Meek et al., 2010), social entrepreneurship (Stenn, 2016), and entrepreneurship for the public good (Vedula et al., 2022). These seemingly different concepts explore the relationship between entrepreneurship and sustainable development from different theoretical perspectives and angles. For example, concepts like ecological entrepreneurship, green entrepreneurship, and environmental entrepreneurship mainly focus on environmental challenges (Cohen and Winn, 2007) and explore how to identify, evaluate, and utilize opportunities in market failures related to the environment (Dean and McMullen, 2007). Sustainable entrepreneurship emphasizes meeting the “triple bottom line” requirements, which refers to actions that identify, create, and exploit opportunities to develop new goods and services to protect and maintain the natural environment and communities (Patzelt and Shepherd, 2011).

Some argued that the primary purpose of social entrepreneurship is to develop the “double bottom line” of economic and social benefits (Patzelt and Shepherd, 2011). It mainly aims to satisfy social interests rather than to protect natural and community environments; thus, it does not necessarily constitute sustainable development (Hall et al., 2010). The literature on sustainable development mainly deals with sustainable entrepreneurship and pays little attention to social entrepreneurship. However, social entrepreneurship activities represented by Grameen Bank and The Green Belt Movement have positive and long-term effects on sustainable development, such as reducing unemployment and narrowing the income gap between the rich and the poor.

Most studies on sustainable development are conducted in developed economies (Shepherd and Patzelt, 2011), exploring issues such as the costs and benefits of environmental management. More than a decade ago, researchers in the developed world came up with different ideas about the trade-off between sustainability and poverty reduction. For example, Singer (2011) argued that people in developed economies need to make sacrifices to achieve environmental sustainability and poverty reduction in developing countries. However, Lomborg (2011) posited that such sacrifice is unrealistic, and the market should also have a role to play. There is no single conclusion to the debate, and common ground is to observe the increasing part of research and development (R&D) and innovation, such as increased research into generating green energy. Developing countries seem to be more hesitant in making a trade-off between economic sustainability and environmental sustainability spectrums. Literature on the Base of the Pyramid (e.g., London et al., 2014; Pansera and Owen, 2015; Sarkar, 2018) has studied economic sustainability but rarely discussed environmental sustainability. Researchers (e.g., Hall et al., 2010) have argued that social pressures, especially community pressures, have a crucial impact on sustainable development in developing countries, where economic growth is more important than environmental protection. Lacking innovative solutions and facing poverty, developing countries tend to place their economic development above environmental protection (Khavul and Bruton, 2013), exacerbating ecological degradation. The deterioration of the natural environment leads to fewer resources available to the public and then causes more poverty, and when the living environment is terrible, individual fertility motivation will increase instead because the survival of any given child is not guaranteed (Nerlove, 1991). With the increase of population comes the further deterioration of the environment, perpetuating a vicious circle.

When China started to implement ecological protection, its per capita gross domestic product (GDP) was less than 300 U.S. dollars, so the Chinese government’s primary goal was to develop the economy (Zhang and Wen, 2008). Many studies on sustainable development in China (e.g., Liu, 2018; Zhu et al., 2021) have explored environmental, geographical, and economic development. In an emerging economy like China, we believe that adding a social entrepreneurship perspective can enrich research on sustainable development.

Yiwu is a county-level city in Zhejiang Province of Southeast China. Once an impoverished agricultural county with an area of about 1,100 km² and lacking natural resources and policy advantages, Yiwu has become one of the top county-level economies in the nation in just 30 years. Moreover, Yiwu has achieved sustainable economic development and balanced social and environmental sustainability. As a result, the Yiwu model is widely regarded as a “miracle.” What factors explain how Yiwu has become a model city in sustainable development? In addition to economic entrepreneurship, what roles has social entrepreneurship played in this process?

In this study, we discuss the challenges and influencing factors of sustainable development in the different historical development stages of Yiwu. Specifically, utilizing a multilevel perspective (MLP) approach, we describe Yiwu’s sustainable development path, identify 3 major historical development stages of social entrepreneurship in Yiwu, and analyze the sustainable development transformation process of Yiwu. As a result, we make 3 main theoretical contributions. First, we contribute to social entrepreneurship theory by highlighting that it goes beyond the “double bottom line” doctrine. Second, we contribute to sustainable entrepreneurship by emphasizing the “triple bottom line” as part of what entrepreneurs do, namely including economic, environmental, and social impacts. Researchers (e.g., Ozanne et al., 2016; Hammer and Pivo, 2017) have provided theoretical justifications for “the triple bottom line” argument. For example, Ozanne et al. (2016) explored the tensions frequently faced by organizations that strive to manage the economic, social, and environmental dimensions and the roles of public policies. Hammer and Pivo (2017) also argued that the triple bottom line with the economic, ecological, and social value is related to the concept of sustainable development. We extend their studies by using a specific case of Yiwu in an emerging economy and adopting a multilevel theoretical framework, which has helped cast more light on the interdependent and interactive nature of social entrepreneurship across 3 levels. We are also contributing to the cross-cultural study of social entrepreneurship and sustainable development by obtaining a unique finding regarding the role of social pressures in influencing sustainable entrepreneurship in an emerging economy. Finally, we also contribute to sustainable development theory by highlighting the underlying connection between sustainable entrepreneurship and sustainable development.

The term “social entrepreneurship” was first coined by Ashoka’s founder, Bill Drayton, in the 1980s. Gregory Dees referred to social entrepreneurs as change agents in the social sector, who consider creating and maintaining social value as their mission (Dees, 1998). All economic entities and initiatives aiming to achieve social goals rather than to serve private interests are considered social entrepreneurship (Shaw and Carter, 2007). We first would like to clarify the differences among several vital concepts (e.g., Mair and Marti, 2006). Social entrepreneurship is usually considered a process or behavior; the social entrepreneur is the founder (i.e., person) of an initiative; the social enterprise is the tangible outcome of social entrepreneurship. In this article, we focus on the process of creating a city-regional economy based on social entrepreneurship instead of on specific social enterprises or founders. We believe Yiwu’s historical development is a process in which social entrepreneurship has played a key role, which is promoted from the bottom up by many people from all walks of life.

Scholars have defined and discussed social entrepreneurship from different perspectives. For example, Choi and Majumdar (2014) regarded social entrepreneurship as a “group concept,” which includes 5 aspects: social value creation, social entrepreneurship, social entrepreneurship organization, market orientation, and social innovation. Social entrepreneurship refers to the efforts to use entrepreneurship to solve complex social problems and achieve national growth and development (Dorado and Ventresca, 2013). The role of social entrepreneurship in development has also been emphasized. In this study, we consider social entrepreneurship as a process of integrating resources in an innovative way to explore and utilize entrepreneurial opportunities, realize social value, promote social change, and meet social needs (Mair and Marti, 2006).

Although its meaning varies with political, economic, and cultural backgrounds, social entrepreneurship also has 3 fundamental characteristics: (1) Sociality: Social entrepreneurship aims to create social benefits that the free-market system and government do not provide; (2) Innovation: Social entrepreneurship adopts innovative and sustainable approaches to overcome resource and situational constraints and complement existing social welfare systems; (3) Market orientation: While not for economic gain, social entrepreneurship also leverages, rather than resists, market forces. Social entrepreneurship begins with unsolved social problems and searches for novel ways to solve problems through opportunity assessment and openness.

Khavul and Bruton (2013) argued that the solution to the deadlock at the intersection of sustainability, poverty reduction, and environmental protection is to develop sustainable innovations that meet local needs. However, one constraint of this approach is that it relies on firms for the Bottom of the Pyramid market, but firms in developing countries may lack the necessary technology, funding, and human resources to carry out R&D. Businesses also face tensions in achieving sustainable development of the triple bottom line, such as a potential trade-off between maximizing profits and environmental protection. Policymakers may take ecological and social factors into account when making decisions but rarely consider all the different aspects because of a lack of awareness and understanding of the concept (Hammer and Pivo, 2017). Using the paradox method, Ozanne et al. (2016) argued that organizations could pay attention to the competing demands of the triple bottom line to different degrees over time to achieve an evolving, dynamic balance among the 3 objectives. In addition, macropolicies can promote a dynamic balance among 3 triple bottom line objectives. Based on this argument, we believe that understanding the spontaneous exploration of the triple bottom line of a region in a developing country like China can shine a valuable light on this interesting and important topic.

Furthermore, Al-Qudah et al. (2022) argued that, in addition to innovation, social entrepreneurship, through its core functions of poverty reduction, environmental protection, and sustainable growth, can also play a crucial role in encouraging the triple bottom line of sustainable development.

1. Poverty reduction. Traditional studies on poverty reduction are based on macroeconomic and sociological theories. Reducing poverty through entrepreneurship, especially social entrepreneurship, has become a research hotspot in recent years. Wu and Si (2018) highlighted the importance of sustainable development through entrepreneurship for poverty reduction, using sustainability as a critical factor to assess the success of poverty reduction. They mentioned that future research could extend the concept of sustainability beyond economic growth to other aspects such as environmental sustainability.

2. Environmental protection and optimization. Protecting and improving the natural environment is the premise of human survival and development. However, excessive pursuit of economic growth could cause significant damage to the natural environment. Environmental economics proposes that market failure causes ecological damage and pollution, which is also an economic problem (Cropper and Oates, 1992). Finding innovative ways to remove the obstacles to the effective operation of the market improves the Pareto efficiency of the market (Buchanan and Faith, 1981). It reduces environmental damage and pollution (Dean and McMullen, 2007). Social entrepreneurship, therefore, develops environmental sustainability and social welfare. Social entrepreneurs use innovative methods to create new governance, integrate resources, and protect environments. For example, the Alxa SEE Ecological Association, a nongovernmental organization for combating desertification in China, is committed to reducing desertification in Alxa.

3. Sustainable development. The concept of sustainable development was first proposed in 1972 at the United Nations Conference on the Human Environment and later developed in a report from the World Commission on Environment and Development (led by former Norwegian Prime Minister Brundtland). Sustainable development is the ability to meet the present needs without compromising future generations’ ability to meet their own needs (World Commission on Environment and Development, 1987). Many people interpret sustainable development as the “triple bottom line” based on these 3 dimensions. In 2015, the United Nations 2030 Agenda for Sustainable Development emphasized optimizing economic products and services to utilize economic resources better, enhance environmental sustainability, promote social and economic stability, and achieve competitive advantage (United Nations General Assembly, 2015). Sustainable development can reduce resource consumption, repair natural ecosystems, optimize economic structure, and improve social benefits. Sustainable development depends on the integration and balance of economic and ecological developments. The theory of environmental economics (e.g., Dorfman, 1993) posits that environmental degradation is caused by market failure, which also creates entrepreneurial opportunities. Therefore, social entrepreneurship provides a new perspective and venue to achieve sustainable development. Seizing these opportunities and comprehensively examining and overhauling the whole system, social entrepreneurs can solve environmental problems through systematic innovation and reform in the global economic and social system (Dean and McMullen, 2007). In this way, social entrepreneurship makes up for the shortcomings of economic entrepreneurship in protecting environments, contributing to sustainable development.

Social entrepreneurship and economic entrepreneurship have different attitudes toward “sustainability.” A critical issue in strategic management theory is how enterprises obtain a sustainable competitive advantage (Nickerson et al., 2007). Economic entrepreneurs do not want their economic value to spill over to other organizations or individuals (Santos and Eisenhardt, 2005). In contrast, social entrepreneurship focuses on solving problems occurring locally but with a global impact. Social entrepreneurs use opportunities to address market failures or solve fundamental social problems to achieve sustainability (Santos, 2012).

The current research on entrepreneurship has explored corporate social responsibility on how to use green, clean, and low-carbon production methods to replace old industrial production methods and how to make a balance between “green” investment and income increase (Pacheco et al., 2010). Other scholars of entrepreneurship study achieving sustainability, protecting the environment, and solving market failure. Thus, new concepts such as green entrepreneurship and ecological entrepreneurship emerged. Social entrepreneurship does not necessarily involve sustainable development because it focuses on generating social benefits rather than protecting natural and community environments (e.g., Patzelt and Shepherd, 2011). Therefore, one theoretical gap in the existing literature on entrepreneurship and sustainable development lies in its little attention to social entrepreneurship, a gap we aim to fill in this study.

Some studies (e.g., Schaefer et al., 2015; Muralidharan and Pathak, 2018) on social entrepreneurship have somewhat discussed sustainability, but not in terms of the “triple bottom line.” Our comprehensive literature review has found rare literature that focused on exploring how social entrepreneurship can achieve sustainable development at the region or city level. Among the global challenges such as increasing poverty and resource shortage, it is of theoretical significance and practical value to understand the phenomenon of sustainable development at the city level in an emerging economy like China (United Nations Department of Economic and Social Affairs, 2013). In recent years, new technologies, especially digital technologies, have continuously developed into new, effective, and practical tools to solve social problems, bringing greater inclusiveness and promising hope to solve the problems and challenges of the 21st century (George et al., 2021). It creates a new venue for social entrepreneurship to promote sustainable development in a region or country.

In this study, taking an MLP, we conducted a longitudinal case study to analyze social entrepreneurship and sustainable development in Yiwu. This section elaborates the research background, data source, method, and analysis results of the case study.

Under the jurisdiction of Jinhua City, Zhejiang Province, Yiwu covers an area of 1,105 km². Yiwu is located in the southeast of China, in the middle of Zhejiang Province, with Guangdong and Fujian provinces in the south (Figure 1). It is 260 km away from Shanghai, the largest city and economic center in China, and 120 km from Hangzhou, the capital city of Zhejiang Province. A city trading with over 200 countries and regions worldwide, Yiwu has a population of 1.85 million regular residents in 2020, 15,000 foreign merchants, and more than 500,000 person times for foreign businesspeople purchasing in the Yiwu market every year. As to its terrain, Yiwu is surrounded by mountains from the eastern, southern, and northern directions of the city, with the middle- to low-height mountains and hills accounting for more than 90% of the total areas of Yiwu, which led to the lack of transportation arteries to effectively communicate with other urban areas, such as Hangzhou and Shanghai, and the high poverty of the city before 1980. Furthermore, Yiwu has less than half mu of arable land per capita, primarily hilly and unsuitable for farming. Once a very poor county-level city, Yiwu has grown into one of the 10 wealthiest county-level cities in China, with per capita disposable income of 71,210 RMB (around US$11,000) in 2020, ranking third among counties in Zhejiang Province. The GDP of Yiwu increased from 30.01 billion yuan in 2005 to 148.56 billion yuan in 2020, with an average annual growth rate of 10.8%. GDP growth slowed down in 2020 due to the COVID-19 pandemic, but overall growth remained stable (Figure 2). Yiwu is widely regarded in China as a miracle of the Chinese economy.

In terms of the ecological environment, to facilitate vertical comparison nationwide, the Chinese government has stipulated that the comprehensive index method is used to calculate the green development index to measure overall environmental performance. The indicator system of green development includes 7 aspects, namely, resource utilization, environmental governance, environmental quality, ecological protection, growth quality, green life, and public satisfaction, with 56 indicators as shown in Figure 3. The growth quality index mainly reflects the quality of economic development from the speed, efficiency, and structure of economic growth, reflecting the overall coordination and unity of green development. Environmental indicators mainly reflect the treatment of significant pollutants, hazardous waste, household garbage, sewage, and investment in pollution control. The resource utilization index mainly reflects the total amount and resource utilization efficiency of energy, water, and construction land. The green living index reflects the change in green living style and the improvement of the living environment. The environmental quality index mainly reflects the environmental quality of air, water, soil, and sea. The ecological protection index represents the protection and management of forests, wetlands, and other ecosystems. The green development of Yiwu ranked 32nd among 87 counties (cities and districts) in Zhejiang Province in 2016. In 2017 and 2018, it ranked eighth among 89 counties (cities and districts) in Zhejiang Province; In 2019, the green development index of Yiwu was 81.48, ranking first among 89 counties (cities and districts) in Zhejiang Province (Figure 4). This trend shows that Yiwu has attained excellent performance in areas from resource utilization, environmental governance, environmental quality, ecological protection, growth quality, and green life, to public satisfaction. Therefore, Yiwu offers a strong case for studying sustainable development with valuable practical and research value.

From an economic point of view, the sustainable development of a region requires advantages in natural resources, production factors, and related industries, but Yiwu has few resource endowments and is also short of natural resources. Its local market is small, with neither advantageous geographical location nor policy advantages in the province. Yiwu’s terrain situation, with the middle-to low-height mountains and hills covering the majority of the total areas of Yiwu, also led to a poor transportation network and broad poverty before 1978. Since 2000, economists have tried to explain the Yiwu phenomenon using economic growth theory, regional trade theory, and regional development theory but have obtained few convincing answers. For example, according to classical location theory (North, 1955), industrial location selection is related to 3 factors: fuel origin, raw material origin, and market, but Yiwu has no resource endowments, little coal reserve, and few other natural resources. The local market was small then; local people made a hard living, let alone consumed any industrial products in old times. In addition, because of its landlocked location, Yiwu did not have any favorable policy to grow its economy and society. This shows that Yiwu’s development path is unconventional and unique. Si et al. (2015) first identified the critical success factors and experience of poverty reduction in Yiwu: (1) history and culture: the unique local business culture that has grown from the agricultural era and the pursuit of small profits rather than profit maximization and (2) human resources: diligent and honest businesspeople and their positive attitudes and behaviors. The local poverty alleviation model is not based on the simple profit model of buying and selling in the past but on the creative “chicken feathers for sugar” business model. Farmers exchange goods to improve production conditions and make small profits. Yiwu made its fortune by trading small commodities, which then developed other industries. This new business model was subsequently used in other parts of China and many African countries.

Entrepreneurship at earlier times has helped Yiwu reduce poverty and make a fortune. The research questions for the next phase include: How has Yiwu developed in the past 2 decades? Does social entrepreneurship play a key role in achieving Yiwu’s sustainable development? We will answer these questions in this case study.

The primary documents include archival statistics and records of governments, including the 2010–2016 Yiwu Yearbook, 2003–2020 Statistical Bulletin of Yiwu’s National Economic and Social Development, 2016–2019 Annual Evaluation Results of Developing Ecological Civilization in Zhejiang Province, and 2016–2019 Annual Evaluation Results of Developing Ecological Civilization in Zhejiang Province. These documents provided us with rich and valuable information, including social aspects (e.g., registered urban population, urban construction, and environmental protection, education and science and technology, number of doctors and beds in hospitals, fixed investments), economic aspect (e.g., GDP, total export volume and growth rate, per capita disposable income, a ratio of urban and rural disposable income, the market turnover of China’s small commodity city, Yiwu’s E-commerce development index), and environmental aspect (e.g., Yiwu’s green development index).

The MLP is now the mainstream method to analyze the case studies of sustainable transformation (Klein and Kozlowski, 2000; Geels, 2005). The MLP proposes the sustainable transformation of innovation development as the transformation of a sociotechnical system, which is categorized into 3 levels: (1) niche innovation at the microlevel, (2) sociotechnical regime at the mesolevel, and (3) sociotechnical landscape at the macrolevel. We believe that these 3 levels embedded in the MLP align well with the innovations occurring at the individual, business, and city levels in the social entrepreneurship and sustainable development of Yiwu across different decades.

Innovations may break conventional wisdom and usual practices at the microlevel or individual level. These innovations are often immature and do not match the existing mechanics or scenarios. The niche innovation layer provides a protected space for emerging innovations. In the case of Yiwu, these contributors at the microlevel include residents, businesspeople, and governmental officials, who developed unconventional thoughts and ideas that broke traditional thoughts and ways of doing things.

The second level is the sociotechnical regime at the mesolevel. The sociotechnical regime has locked-in characteristics and a path-dependent effect, leading innovation activities to develop in the direction of a given trajectory. This is a relatively stable dynamic equilibrium state. When a series of incremental innovations emerge and accumulate, the original equilibrium is broken, and a new regime is gradually formed. The sociotechnical regime will promote the development of the sociotechnical landscape upward and affect the development direction of the niche innovation layer downward. For example, in the case of Yiwu, many business firms, industries, and government officials could form into the sociotechnical regime at the mesolevel to be involved in social entrepreneurship and sustainable development in Yiwu.

The third level is the sociotechnical landscape at the macrolevel. The macrolevel sociotechnical landscape mainly includes the external environment, such as the economy and politics. When the sociotechnical landscape changes, top-down pressure will occur, breaking the balance of the original sociotechnical mechanism at the mesolevel. This provides opportunities for innovation and facilitates the formation of new mechanisms. In the case of Yiwu, the local municipal government and its different units make macrolevel industrial policies, rules, and regulations to develop the sociotechnical landscape and environments related to social entrepreneurship and sustainable development in Yiwu.

The MLP holds that the transformation of sociotechnological systems is not a linear process, and these 3 levels are not independent of each other. Instead, these 3 levels have nonlinear and dynamic process modes of interaction and coordinated evolution across different levels (Klein and Kozlowski, 2000; Geels, 2011).

In 2021, having collected most of the data, we started to conduct an event analysis (Van de Ven and Poole, 1990). We wanted to transform the raw data into a chronological sequence of historical events, reflecting how Yiwu’s social entrepreneurship and sustainable development evolved over several decades. Following the earlier work using a case study (Van de Ven and Poole, 1990; Eisenhardt and Graebner, 2007; Adewale, 2020), in this study, we defined an “event” as an observed and significant change in terms of activities, transitions, contexts, or outcomes related to social entrepreneurship and sustainable development in Yiwu. Then, we used the MLP method (Klein and Kozlowski, 2000; Geels, 2011) to analyze the social entrepreneurship and sustainable development process of Yiwu across different historical stages.

The economic, social, and environmental development of Yiwu at each historical stage is influenced by specific historical backgrounds, central and local government policies, and geographical conditions. The development history of Yiwu can be roughly divided into the following 3 stages according to its economic, environmental, and social conditions (Figure 5).

Historically, Yiwu was a poor county, with less than half mu (about 333 m²) of arable land per capita, primarily hilly and unsuitable for farming. Farmers in Yiwu had a tradition of using poultry feathers and dung to fertilize crops. Since the Qing Dynasty, people in Yiwu made “Yiwu green” with locally produced brown sugar to survive and develop. They exchanged the sugar load for the feathers of chickens, ducks, and geese, which they used to make into duck down and goose down and then sold for money. The farmers used the remaining poor-quality feathers to fertilize the fields. From 1949 to 1978, market-oriented production was politically prohibited in China, and China was in the planned economy period. The central government invested only 59.45 million yuan in Yiwu across 3 decades. In 1977, the GDP of Yiwu was only 120 million yuan (current year’s price), and the per capita GDP was only 208 yuan. Only 150 industrial enterprises existed, mainly agricultural product processing, with a total industrial output of 69 million yuan. Nevertheless, Yiwu farmers still secretly carried out the barter trade of “chicken feather for sugar” to support their families. Later, local farmers began to exchange small commodities for a little money.

At the end of 1978, farmers in Choucheng Town and Niansanli Town set up street stalls spontaneously, which gradually developed into a “road market” that operated at relatively fixed times and locations. At the beginning of the reform and opening up in 1978, the commodity economy gradually lifted its ban in some parts of China, and handicrafts and agricultural products entered the market. However, in Yiwu, small commodity trading was still regarded as opportunistic and “speculative profiteering,” strictly prohibited by laws and rules. Similarly, the products and services provided by peasants were also still not legally accepted by the system and regulations. Institutions usually result in incremental innovation, whereas radical innovation occurs in the niche market (Geels, 2002). Due to their small size under this specific history, system, and rules, nonlegitimate forms of commercial trade were in the niche market through concealment. The niche market provided limited resources, and transactions were not stable. Farmers personally participated on the spot and sold their goods or products. Not threatening the existing system, the niche market was once implicitly acquiesced to by local governments, which objectively had left room for Yiwu farmers to be involved in entrepreneurship activities.

From 1978 to 1991, the Yiwu market initially formed. The growth of the market brought a “window of opportunity.” The administrative departments of industry and commerce within the local government were unable to effectively manage this market through traditional sanction means, such as fines, expulsion, and dissuasion. The relationship between government administrators and traders was compared to “cat and mouse.” Institutional entrepreneurship theory (e.g., Pacheco et al., 2010) indicates that entrepreneurs need to make significant changes to existing institutional arrangements, including organizing cultural and social arrangements, to promote economic activity and entrepreneurship. When the elements of social technology are tense, the existing system is plagued by internal problems that gradual changes cannot solve. Institutional problems may be exacerbated if the conflict between the “cat” and “mouse” cannot be effectively handled, and tighter supervision may continue and even worsen. Fortunately, the staff of the local administrative departments for the industry and commerce had direct contact with the vendors. They concluded that the small commodity market could develop into a legitimate circulation channel, offering additional space and room for the small commodity market to survive and grow.

Thus, in 1982, the Yiwu county government proposed a series of policies to develop the market and regarded small commodity dealers as legal and legitimate market participants. Many farmers joined the distribution team and gradually became professional businesspeople. In 1984, the Yiwu County Committee clearly defined the “four permissions,” namely, “allow farmers to do business, allow long-distance traffic, open urban and rural markets, and multichannel competition.” Legalizing commercial transactions means the change of social and technological mechanisms at the medium or mesolevels. The first generation of small commodity markets emerged as eras required and began to develop rapidly. The small commodity market gradually improved according to the preestablished development path based on the lock-in characteristics and path dependence effect (Martin, 2010). After several expansion stages, by the end of 1990, the Yiwu small commodity market had become China’s largest specialized market for small commodity wholesale.

At the environmental level, human resources had little impact on the environment, as Yiwu was mainly engaged in making agricultural products and trading small commodity goods. Due to the underdeveloped economy, the emphasis was on economic development and business prosperity. Only by accumulating enough financial capital could Yiwu continue to develop industry and modern agriculture and build a city. It was not until 1972, when China attended the United Nations Conference on the Human Environment, that the Chinese became aware of the idea of “environmental pollution.” In 1973, China held its first National Environmental Protection Congress and formulated guidelines for environmental protection.

At the sociotechnical landscape level, in the 1990s, the contraction of China’s economy and the Asian financial crisis slowed the expansion rate of Yiwu’s small commodity market, and the total transaction volume also declined. This pressure from the landscape level was passed down to the niche and the regime layers. Due to the external macropressure, the internal structure of small commodity production was constantly optimized. First, the education level of businesspeople, as participants at the micro/individual level, significantly improved. The proportion of businesspeople with a junior high school education increased from less than 10% in 1982 to 82% in the 1990s, and many converted from cargo dealers to modern businesspeople. Second, at the mesolevel of the regime (Klein and Kozlowski, 2000; Geels, 2011), the management model began to change, introducing the modern corporate governance of the shareholding system into the small commodity market. The development of the small commodity market shifted from government-led to enterprise-oriented, thus enabling existing and new niche innovations to scale up. Third, market circulation expanded, and the proportion of goods sold to other places increased, accounting for more than 90% of the total sales. These new developments and adjustments enabled Yiwu to develop further and form a cross-region commodity network called “Yiwu Business Circle.” In the 1990s, a wave of establishing industrial parks swept the country. Many cities adopted the approach of urban driving rural development, but according to the local situation, Yiwu still implemented its development strategy of “encircling the city from the countryside.” Each township was committed to improving the environment, attracting investment, and developing its industrial infrastructures. Yiwu’s traditional industries in light textile, small merchandise manufacturing, and food processing had developed a preliminary basis for further industrialization. Private merchants and entrepreneurs relied on their information advantages, such as knowing market trends and customer needs, to expand into the manufacturing industry. Since then, Yiwu has established several specific industries, such as clothing, forestry, jewelry, woolen spinning, printing, and toys—examples of new niche innovations quickly scaling up because of a more welcoming regime.

In 1999, Yiwu began its international expansion. In 2002, the first phase of the global trade city was built. It developed into the most significant modern commodity wholesale market globally in 2005. The outward orientation of the market continued to improve, and trade channels with dozens of countries and regions were established. Since 2001, Alibaba’s B2B model changed the way of trade in Yiwu, and the first group of online merchants took the lead in its growth. After the international financial crisis in 2008, “Taobao village” appeared in Yiwu. The “Yiwu International Trade City” was also further integrated with e-commerce. The internationalization of the Yiwu small commodity market constantly developed. In 2011, for instance, 444,000 overseas businesspeople from 209 countries and regions came to purchase commodities in Yiwu. This e-commerce development and internationalization in Yiwu provides many opportunities for poverty reduction and development. For example, in Qingyan Liu village in Yiwu, rent was the only source of income for most villagers in 2008. As business personnel moved away, there were more and more idle houses, undermining the village economy. Subsequently, the village seized the development opportunity of e-commerce and gathered more than 15,000 staff engaged in online sales and related industries from all over China and more than 3,200 registered online stores. Qingyan Liu village is also known as the “first village of online store” in China. Many e-commerce entrepreneurs, from Taobao and Tmall to cross-border e-commerce, start their businesses at low cost and become more and more affluent. For example, Tong Zhida realized that the annual sales of the online store in Qingyan Liu exceeded 10 million yuan and he became one of the 10 million online merchants in Yiwu. In 2015, Tong Zhida took a stake in a household products manufacturing factory, which mainly produces various bags (such as cosmetic bags, wash bags, and travel bags) and special protective equipment (such as protective masks). He participated in production management and realized the transformation and upgrading from online trade to online and offline integration. In addition to supplying domestic retail sellers, his products have established stable sales channels in ASEAN countries and Hong Kong, Macao, and Taiwan.

At this stage, Yiwu achieved industrial upgrading and external improvement through innovation at the niche and sociotechnical regime layer, but the essential resources that support sustainable economic development were in short supply: Per capita arable land and water resources were still far below the national average. In 2005, Yiwu had to buy a permanent right to use 50 million cubic meters of water a year from the Hengjin Reservoir in Dongyang city. In addition, the shortage of power supply has a significant negative on the normal production and operation of enterprises. According to the Research on Ecological Environmental Load Capacity and Sustainable Development Strategy issued by Yiwu Municipal Environmental Protection Bureau in 2009, the air quality of Yiwu was poor, the annual acid rain rate was 98.4%, and the haze weather increased year by year (84 days in 2010 and 124 days in 2011). With the deterioration of the ecological environment, the environmental damage cost caused by Yiwu’s economic growth increased year by year, and the ability to pursue sustainable development decreased. Both government and enterprises realized that further economic development requires more efficient use of resources and improvement of the natural environment. In other words, landscape-level environmental stresses put pressure on the regime and its newly dominant enterprises to change, while also creating new opportunities for niche innovations aimed at relieving these stresses through new social entrepreneurship.

In the face of the upward pressure of resources from the niche level, a series of national and regional policies have emerged at the level of the sociotechnical regime and even the sociotechnical landscape. In 1992, the central government set sustainable development as a national strategy and put forward a series of policies to control air and water pollution. In 2002, the central government created the goal of building a resource-saving and environment-friendly society and set emission reduction of significant pollutants as a benchmark for economic and social developments. In 2003, the Yiwu municipal government approved the Action Program of Yiwu Urban-rural Integration, which required the overall planning of Yiwu’s environment, population, and industrial layout and optimized resource allocation. In 2007, the Yiwu Municipal government formulated the Planning of Yiwu Ecological and Environmental Functional Zones, setting up different forbidden and restricted access zones according to their environmental bearing capacities. Other government plans are subject to ecological zoning. Industry development needs to consider the bearing capacity of natural resources, and the industry needs to improve the living and production environment. For example, Yiwu has actively implemented the ISO 14000 environmental management standard to reduce the discharge of pollutants. Approval of new projects listed in the pollution control catalog has been suspended since 2003.

New forms of innovation emerged at the micro-niche level in response to development constraints brought by resource shortages and pollution and encouraged by policies. Several high-tech industries and products with low resource consumption and less environmental pollution have emerged in Yiwu, such as the pilot promotion of methanol gasoline, the construction of an intelligent power grid, and the development of high-tech industries, such as electronics-based medicine, and environmental protection. Many enterprises, such as Langsa Hosiery and Yinan Paper, have developed into circular economy enterprises. Take Yinan Paper as an example. Yinan paper industry has established sewage treatment and reclaimed water reuse facilities, which can reuse about 8,000 tons of wastewater every day. Yinan Paper’s parent company, Huachuan Group, has technology that turns municipal waste into ash and then machines it into standard bricks for urban construction. Huachuan Group and Yinan Paper have jointly formed a recycling industry chain from wastepaper recycling, household waste treatment, brick making from waste ash, and sewage treatment.

In 2006, Yiwu became the national model city of environmental protection and won numerous honors, such as National Sanitary City, National Garden City, and National Green Model City. In 2011, Yiwu won the title of “National Ecological City.” The number of days with good ambient air reached 328, accounting for 89.9% of the whole year.

In 2012, the 18th National Congress of the Communist Party of China (CPC) decided to promote ecological progress, call for giving priority to ecological civilization construction, and integrate ecological civilization construction into the whole process of economic, political, cultural, and social progress. The gradual change of the sociotechnical landscape exerts downward pressure on the sociotechnical regime level and influences the policies and directions of local governments. In the same year, according to the decision of the Yiwu Municipal Committee of the CPC on promoting ecological civilization, Yiwu began to strive to become a pilot city of ecological civilization in the nation.

Yiwu released China’s first green exhibition operation standard. The penetration rate of green booths in Expo 2019 Yiwu, Forestry Expo, and Decoration Expo reached more than 70%, with an annual growth of nearly a year. Yiwu’s afforest scale has expanded continuously. In 2019, Yiwu’s park’s green area was about 1,099.86 hectares. Yiwu Municipal government insists on green development and promotes the “three green projects” approach to ensure that the commodity market meets environmental protection requirements: (1) construct a green market and establish a strict green access system. Market competition becomes more rational and no longer adopts an excessive competition strategy but attracts customers with a more environmentally friendly, safe, and comfortable atmosphere; (2) increase the number of green channels; and (3) shift enterprises’ concept of production and operation from preferential prices to producing green, environmentally friendly, and safe products. As the quality of the ecological environment improves, this approach has generated 100 billion yuan of industrial clusters of green solar photovoltaics. The centralized treatment rate of urban sewage reached 96.7%, and the harmless treatment rate of household waste reached 100%.

Despite placing more value on protecting the ecological environment, Yiwu’s economy is still developing. In 2019, there were fewer on-site customers due to the COVID-19 pandemic. The sociotechnical landscape level changed during the pandemic crisis, and digital technology also brought new opportunities to exert downward pressure. Yiwu businessmen now try to use “livestream marketing,” “online orders,” and other innovative sales methods to increase sales at the niche level, and this is expanding across the city-region economy. In 2020, Yiwu Market launched the official “Yiwu Commodity City” website (www.chinagoods.com). Relying on 75,000 physical stores in the Yiwu market, the platform serves 2 million small, medium, and micro enterprises upstream of the industrial chain. In addition, Yiwu has constantly optimized its industrial structure to achieve industrial upgrading. In 2020, the added value of core industries of the digital economy exceeded the designated level, with the growth of the high-tech industry, equipment manufacturing industry, and strategic emerging industries increasing by 28.8%, 75.6%, and 12.0%, respectively. In 2020, e-commerce transactions reached 312.487 billion yuan, up 12.9% yearly. The “Yiwu Commodity City” platform represents the Yiwu market’s comprehensive online and digital trade ecology.

In terms of social construction, since 2017, to narrow the gap between urban and rural areas, Yiwu has built 10 high-quality rural roads with a total length of more than 280 km through various financing channels, such as state-owned investment and stock options. It has driven the joint development of 10 towns and 112 administrative villages. The wide usage of big data has promoted the informatization of government affairs and social management in Yiwu. The “Yiwu Netcom Office” platform, launched in 2018, is an online government service system integrating consultation, inquiry, reservation, handling, and other whole-process services. Yiwu residents can access online government services, such as getting birth certificates and collecting provident funds, through a facial recognition app installed on their phones. In 2019, more than 230 administrative licensing programs and more than 1,500 other government services were provided online, with an inclusion rate of 100% for all available services. The total number of administrative licenses collected online ranks first among all counties (cities and districts) in Zhejiang Province. In addition, digital transformation has covered all aspects of the social economy, improving the quality of public cultural services and intelligently responding to the needs of local people, environmental protection, public security, municipal and industrial, and commercial activities.

Yiwu has also increased investment and construction in the social sector to improve people’s life quality. In 2020, compared with 2019, investment in infrastructure increased by 10.9%, including 9% in transportation and 55.1% in ecological and environmental protection, urban renewal, and water conservancy facilities. Permanent urban residents’ per capita disposable income was 80,137 yuan, up 3.9%; permanent rural residents’ per capita disposable income was 42,158 yuan, up 6.7%. The ratio of disposable income between urban and rural residents decreased from 1.99:1 in 2015 to 1.90:1 in 2021 and continued to shrink steadily (Figure 6). This shows that not only is Yiwu generally getting richer, but the income gap is narrowing, which is conducive to social stability and shared prosperity.

In 2021, Yiwu was chosen to build a joint prosperity Demonstration Zone of Zhejiang Province and was required to set a model in 7 aspects: development, income distribution, public services, urban and rural development, culture, environment, and social governance. These aspects are consistent with the connotation of sustainable development and put forward new requirements from the macrolevel. As a result, the sociotechnical landscape at a macrolevel is enhanced, breaking the balance of the original sociotechnical mechanism at the lower levels and providing opportunities for innovation and facilitating new growth mechanisms (Klein and Kozlowski, 2000; Geels, 2005).

Social entrepreneurship in Yiwu aims to turn poor people into consumers and businesspeople through disruptive innovation. A critical part of this process is to change people’s mindsets and attitudes toward economic growth and provide incentives to find and seek potential customers and new business opportunities. Farmers in Yiwu are not only entrepreneurs but also consumers. The consumer-oriented process of entrepreneurship will be particularly prominent, mainly reflected in that the innovation targets satisfying low-end consumers and providing them with simple, cheap, yet convenient products and services. The positive attitude toward fighting against poverty, from engaging spontaneous and scattered “road market” to establishing a “Yiwu small commodity market,” has been internalized as the intrinsic entrepreneurial motivation of the Yiwu people, which encouraged them to get rid of poverty through entrepreneurship.

The Yiwu model cannot be simply summed up as economic entrepreneurship aimed at profit maximization but is also social entrepreneurship that explores and utilizes entrepreneurial opportunities to meet social needs. Entrepreneurs seek small profits rather than maximum profits through disruptive innovation. These out-of-poverty entrepreneurs have their unique target market, using family-owned factories to produce goods at minimal cost and sell them at a low profit. The Yiwu model not only meets people’s demand for “good quality but cheap” commodities but also provides more entrepreneurial opportunities for Yiwu people and enables the sustainable development of entrepreneurial activities. In this process, Yiwu peasants set up new entrepreneurship and factories to produce more and cheaper small commodities to be sold on the domestic and international markets. For example, Langsha Socks has become the world's largest sock industry firm, with product sales on 5 continents. Its founder Weng Rongjin is known as the “sock king.” With two-thirds of patents in the global drinking straw industry, Shuangtong Straw is known as the “global straw industry leader.” The company is now trying to introduce bio-based straws as part of its product offerings.

The sustainability of the Yiwu model is also reflected in its external influence. This model is not only economic entrepreneurship guided by a region’s own economic goals but, more importantly, social entrepreneurship to promote the shared prosperity of surrounding areas. It has helped Yiwu people reduce poverty and provided opportunities for people from other countries and regions to start their businesses. Yiwu’s large-scale internationalization began in 1991 when businesspeople from Pakistan, Indonesia, and other countries came to purchase different commodities. Since China joined the World Trade Organization in 2001, Yiwu’s internationalization process has accelerated. The rapid development of logistics systems and supply chains has accelerated Yiwu’s internationalization in recent years. Since the “Yiwu-Xinjiang-Europe” train opened on November 18, 2014, regular weekly 2-way operation has been implemented. The region has extended 9 international freight trains to Central Asia, Spain, Iran, Afghanistan, Russia, Latvia, Belarus, the United Kingdom, and the Czech Republic, making Yiwu the city with the most significant number of international railways container transport routes in the world. Five logistics distribution centers and 8 overseas warehouses have also been established, radiating to 35 countries. In 2020, Yiwu opened eWTP Cainiao, the first cross-border e-commerce China-Europe train in the Yangtze River Delta.

Yiwu has promoted industrialization, urban and rural integration, and internationalization through the strategy of “flourishing commerce and constructing the city.” The development of the Yiwu market has driven urbanization, which is inseparable from optimizing urban infrastructure facilities and functions, such as establishing an urban foundation and improving urban management. The development of the Yiwu market has led to the large-scale construction of road, rail, and aviation infrastructure. In marketization and urbanization, Yiwu has built a social security system covering urban and rural areas, developed the education and health industries in an all-around way, and improved residents’ living quality and welfare.

Since 1998, Yiwu has adhered to a unified development of urbanization and rural construction. In 2003, the city formulated and implemented the nation’s first “urban and rural integration program of action.” The city has carried out the “market driving rural development” policy and developed a small commodity processing industry in rural construction. Yiwu has guided capital to invest in agriculture to improve farmers’ income. Yiwu constructed public infrastructure through innovative fundraising mechanisms, such as government financial subsidies, farmers’ self-raising, and market-oriented funds operation. The city has 15,000 foreign businesspeople residing from more than 100 countries. Yiwu has implemented a series of policies to allow these foreign businessmen to enjoy the same treatment as locals in medical services, treatment, children’s education, housing, and other aspects.

Yiwu keeps improving the quality of public services and social security. The municipal government is striving to develop into a service-oriented government. Yiwu adheres to the principle of extensive coverage and sustainability and is gradually realizing a unified social security system covering both urban and rural areas. Yiwu has carried out medical and health system reform and established health service stations in both the countryside and the urban community, enhancing the accessibility of emergency response services.

In addition, social entrepreneurship has played a significant role in influencing Yiwu’s development policies and public strategies. For example, after reducing poverty through social entrepreneurship and accumulating a material and empirical base, Yiwu insisted on the development strategies of “feeding agriculture with industrial and commercial development” and “driving rural development with urban development.” In order to improve agricultural modernization, Yiwu took advantage of the “cascade effect” of the small commodity market to build the “Yiwu Agricultural Trade City”—the largest agricultural wholesale market in central Zhejiang. The Yiwu agricultural products trading system improves the commodity price rate and increases the flow of agricultural products. In addition, this provides abundant agricultural products for urban and rural residents in Zhejiang while creating more employment opportunities for surplus rural labor and laid-off workers.

The road to sustainable development is gradual and pertinent to local conditions. Unlike many cities in developed economies, Yiwu began its development as an agricultural economy. This was related to China’s national economic conditions at that time. China is a country whose agricultural economy has dominated for a long time. The success of Yiwu lies in identifying its unique development path by considering local conditions, historical traditions, and characteristics.

Yiwu mainly focused on economic development in its early development stage. Its economic power was limited, the overall quality of social development was low, and people were still in the stage of survival and building up entrepreneurship. Furthermore, commerce had lower pollution levels than the manufacturing industry. As Yiwu’s overall economy improved, industrial growth created more pollution. Due to the expansion of population brought by manufacturing and commerce, social development has gradually attracted the attention of the Yiwu people. In 2004, in response to significant environmental problems, the Yiwu municipal government issued the “Yiwu Ecological City Construction Plan” and set up a fund for pollution prevention and reduction. This was a major change in the regime in response to landscape pressures and has created further new openings for social entrepreneurship. In 2012, since the issuance of the “Decision of the Yiwu Municipal Committee of the CPC on Promoting Ecological Civilization,” Yiwu has begun to build itself into a pilot city of ecological civilization. The government has encouraged different investors to make environmental protection infrastructure jointly. Yiwu now takes many measures to develop an ecological economy, including seeking the improvement of manufacturing, low energy consumption, and no pollution of small commodity production. The city guides enterprises to carry out this technical transformation by developing the circular economy, strengthening water resources management, and increasing tree coverage. As a result, a positive pattern of economic and environmental development has emerged in Yiwu.

Based on exploring the historical backgrounds and development processes of Yiwu, a city in Zhejiang Province in China, we present unique findings regarding this city’s regional social entrepreneurship and sustainable development. Therefore, we make several theoretical contributions to the current literature on social entrepreneurship and sustainable development. Specifically, we provide a scientific categorization of different historical development stages of Yiwu in its social entrepreneurship and sustainable development. We add a valuable process model to social entrepreneurship and sustainable development in Yiwu by identifying the key behaviors and actions of residents, enterprises, and governmental organizations involved in the collective effort and coordination in achieving social entrepreneurship and sustainable development.

Second, we contribute to the social entrepreneurship and sustainable development theories. We expand the focus level from the organization level into the region/city level, based on a case study of Yiwu, thereby offering a fresh macroview of social entrepreneurship and sustainable development. Most current research has focused on the organizational and firm levels (Vedula et al., 2022). Prior research focusing on the organizational level of social entrepreneurship and sustainable development has explored resource mobilization (Belz and Binder, 2017), entrepreneurial process (O’Neil and Ucbasaran, 2016; DiVito and Bohnsack, 2017), and innovation (Youssef et al., 2018). However, the previous work has neglected the roles and behaviors played by the local governments and other institutional parties during the strategy-making process in enhancing social entrepreneurship and attaining sustainable development. In contrast, we pinpoint the local governments’ macro and structural behaviors and changes in their strategy making and identify an emergent framework of different process behaviors that create preconditions for their social entrepreneurship and sustainable development.

We track social entrepreneurship and sustainable development in Yiwu through objective statistics records and public archival data related to the city’s social entrepreneurship and sustainable development in the past few decades. We identify the key factors and experiences of social entrepreneurship in promoting sustainable development in Yiwu and contributing to research and practice in this essential growing field. More broadly, we answer the entrepreneurship calls for public goods scholars who have long advocated an inductive approach to casting more light on social entrepreneurship and sustainable development (Anand et al., 2021; Vedula et al., 2022). One next step is to conduct careful empirical examinations of our framework with larger samples and across types of firms and geographical locations, including in other provinces in China and other developing countries. Another future research direction is to use evolutionary multiobjective optimization (Coello, 2006; Gunantara, 2018), such as evolutionary algorithms, to conduct the quantitative analysis of striving for a balance among the triple bottom line requirement, including economic, social, and environmental dimensions. Research of this type will provide additional insights obtained by quantitative analysis and complement what has been found in the current case study.

The authors have no data accessibility statement to declare. The data used in this article comes from archival statistics and records of government, including the 2010–2016 Yiwu Yearbook, 2003–2020 Statistical Bulletin of Yiwu’s National Economic and Social Development, 2016–2019 Annual Evaluation Results of Developing Ecological Civilization in Zhejiang Province, and 2016–2019 Annual Evaluation Results of Developing Ecological Civilization in Zhejiang Province.

The authors thank the editors and reviewers for their thoughtful suggestions that improved the depth and interest of the manuscript.

The authors have declared that no competing interests exist.

Substantial contributions to conception and design: All authors.

Acquisition of data: YY.

Analysis and interpretation of data: All authors.

Drafting the article or revising: All authors.

Final approval of the version to be published: YY, YZ.

How to cite this article: Yan, Y, Si, S, Zhu, W, Zhang, Y. 2022. Social entrepreneurship and sustainable development: The Yiwu case. Elementa: Science of the Anthropocene 10(1). DOI: https://doi.org/10.1525/elementa.2022.00010

Domain Editor-in-Chief: Alastair Iles, University of California, Berkeley, CA, USA

Associate Editor: Yuwei Shi, University of California, Santa Cruz, CA, USA

Knowledge Domain: Sustainability Transitions

Part of an Elementa Special Feature: Social Entrepreneurship and Sustainability Transitions in China