Abstract: The number of registered firms is widely used as an indicator of economic vitality and entrepreneurship,ignoring the fact that registered firms may be unproductive and destructive.This paper is among the first to explore unproductive firms by analyzing the visit records of nearly 50000 randomly selected registered firms.Normal business activities require firms to be fully exposed to the market so that they can be contacted by their upstream,downstream,and peer parties.However,there are always firms engaged in unproductive activities that choose to hide their contact information and avoid exposure to the market.Due to the lack of data,little is known about unproductive firms,and even some basic facts are not clear,such as the percentage of unproductive firms and their causes.Using the number of registered firms as a measure of economic vitality or entrepreneurship can be biased if the difference between the number of registered firms and the number of firms engaged in productive activities is ignored.

The Enterprise Survey for Innovation and Entrepreneurship in China (ESIEC) 2023 sampled nearly 50000 registered firms from the China Business Registration Database.The field study shows that 35.2% of registered firms cannot be contacted by both address and telephone number.By matching the surveyed firms with other big data on economic activities,we find that the probability of an out-of-contact firm appearing in the blacklist of firms is 0.3% higher than that of contacted firms,and the proportion of those engaged in normal economic activities,such as posting online job vacancies,bidding for government projects,applying for trademarks and patents,is even lower.Finally,out-of-contact firms are more likely to be shell firms; their registered capital (in log form) is 14.1% higher than that of contacted firms,but their number of employees in social security (adding one and taking the log form) is 15.1% lower than that of others.Further analysis shows that out-of-contact firms are more likely to be in high-tech service industries with more industrial policy (as measured by the share of government consumption) and in regions with poorer business environments.

This paper contributes to the literature in two ways.First,this paper combines field study data with other big data to profile productive and unproductive registered firms in China.Since Baumol (1996) proposed a distinction between productive,unproductive,and destructive entrepreneurial activities,few studies have been conducted to analyze unproductive firms.Among the smaller body of literature,Desai et al.(2013) constructs a model of destructive firms; Sobel (2008) measures unproductive activities with the number of political and lobbying organizations in capital cities in the United States,and productive activities with patents; it finds that excellent institutional environments lead to a greater influx of entrepreneurial talent into productive activities. First, this paper enriches this strand of literature by offering stylized facts in the Chinese setting.Second,the findings of this paper could help scholars and officials to understand and properly utilize the registration database.Third,our finding indicates that industries with more policies tend to have a higher proportion of out-of-contact firms,highlighting the need for improved policy implementation.