The Impact of Government‐Business Relations on Entrepreneurship: A Study From China

ABSTRACT Improving government‐business relations is critical to fostering entrepreneurship. Using panel data from 282 Chinese cities over 2017–2022, this study empirically examines the impact of government‐business relations on entrepreneurship. The findings are as follows: (1) Government‐business relations stimulate both innovation entrepreneurship and business entrepreneurship, particularly when the relations are close. (2) For innovation entrepreneurship, this positive effect is stronger in non‐resource‐based cities, central cities, and transportation hub cities. For business entrepreneurship, the effect is more pronounced in port cities, cities with flat terrain, and cities with a better commercial credit environment. (3) Mechanism tests indicate that government‐business relations foster both types of entrepreneurship by enhancing market potential, reducing institutional costs and improving environmental governance performance. These findings not only enrich the theoretical understanding of the relationship between government‐business relations and entrepreneurship but also deepen insights into how institutional environments influence innovation and business, providing policy implications for local governments to optimise government‐business relations, improve the business environment, and promote innovation and business.