This chapter discusses the negative impact of relational embeddedness on entrepreneurship in a transitional economy. It examines how and when embeddedness influences entrepreneurial processes by using national as well as urban data from China. The chapter shows that embeddedness in kinship networks negatively affects self-employment. It suggests that entrepreneurs in transitional economies, such as China, may consider developing their skills in management as well as undertaking high-tech ventures because kinship networks are not as beneficial as expected. Taking the institutional context into account substantially contributes to our understanding of the role of embeddedness. The chapter argues, however, that such an examination is valuable because it addresses the boundary conditions of the embeddedness effects. It argues that political affiliation, as a unique form of institutional embeddedness, may mitigate the negative impacts of overembeddedness by extending individuals' political connections to those elites and thereby acquiring necessary information and resources.