The changing role of guanxi in influencing the development of entrepreneurial companies: a case study of the emergence of pharmaceutical companies in China

“Guanxi” is a term in Chinese referring to the reciprocal nature of interpersonal relationships. Its attributes, which are specific to Chinese culture, have been the focus of recent literature. Whereas the impact of guanxi seems to be quite similar to that of general relationships, ties or connections, it is characterized by a number of different dimensions. In this paper, we studied 44 entrepreneurial companies in the pharmaceutical industry in China to examine these attributes in greater detail. We use a system dynamics model to simulate the influence of various guanxi variables – the strength, scale and structure of guanxi – on the development of entrepreneurial companies.     

Network capitalism: the role of human resources in penetrating the China market

In the West, there is growing awareness that connections can be pivotal to a firm's success in gaining competitive advantage in the global arena. This paper compares Western networking with guanxi (connections) prevalent in Confucian societies. Guanxi are built between and among people. Hence the effective deployment of human resources is critical to the success of building such relationships. Data from forty West European multinationals with operations in China were collected. Where relevant, these were compared with the findings of Hong Kong firms in China. Specifically, the paper examined (1) how large European multinationals perceive the characteristics of guanxi ; (2) the importance of guanxi for market entry and long-term success in China; and (3) how guanxi is built and maintained by European companies in China. While the European companies have been able to establish a presence in China, their moderate level of satisfaction with performance there may be attributable to their inability to build very strong and appropriate guanxi with the relevant authorities. This may stem from their use of expatriates to staff senior management positions and insistence upon sole or majority-equity ownership to allow for maximum control. The implications for international human resource management are discussed.     

On boundary spanners and interfirm embeddedness: The role of guanxi institution in China

Based on social embeddedness theory and institutional theory, we construct a research model that depicts how boundary spanners’ personal relationships affect dyadic embeddedness at the organizational level, under the varying influence of guanxi institution across different regions in China. We empirically test our model by analyzing data collected from 225 retail gas stations within the distribution network of a major Chinese petroleum company. Our analysis shows that boundary spanners need to first establish relational ties, which, in turn, influence interfirm dyadic embeddedness. Additionally, the results indicate that the informal institutions, such as guanxi in China, exert an indirect effect on personal trust through personal closeness. The informal institutions also moderate the effects of personal level trust on organizational level trust, which is a key linkage between personal relationship and interfirm embeddedness.     

私人关系影响客户关系质量的实证研究——以上海、苏州银行业为例

构建与维持长期、稳固的客户关系是关系营销的主要目标之一。本文以上海、苏州银行业为例,实证性地分析私人关系对客户关系质量的影响。研究结果发现：第一、营销人员与客户有关人员私人关系状态与客户满意度并不存在显著的相关关系,而关系意愿对客户满意度有显著的正向影响；第二、营销人员与客户有关人员私人关系越好,企业与客户间的信任度越高；第三、营销人员与客户有关人员私人关系越好,组织间的承诺度越高。最后探讨了结果的应用。     

Guanxi Management in Lean Production System—An Empirical Study of Taiwan‐Japanese Firms

While the emphasis in the West is on “what you know” refers to technological expertise, including the price and quality of tendered product or service, the emphasis in Confucian societies is on “who you know,” which refers to personal connections with the appropriate authorities or individuals. These connections are known in Chinese as guanxi, on which as the basis Chinese exchange a lifetime of favors, resources, and business leverage. This study seeks to study guanxi mechanism, the unique Chinese social‐cultural element and its impact on the managerial effectiveness of Taiwanese firms with lean implementation in practice, and an empirical study is constructed to verify our proposal. Results suggest that guanxi and its networks function as the lubrication that eases interpersonal conflicts and as the buffer in solving problems, which in turn upgrades the cooperative efficiency both inter‐ and intragroups. This article provides an inner view of cultural value, which offers insights that should prove helpful to academics in management and related disciplines as well as to practitioners engaged in Chinese production management.     

Overcoming the liability of smallness by recruiting through networks in China: a guanxi-based social capital perspective

We investigate the role of guanxi in Chinese entrepreneurial firms’ recruitment practices in attempting to overcome the liability of smallness. Combining insights from the social capital and guanxi literature, we theorize the guanxi-based social capital perspective and use it to analysis 96 in-depth interviews with multiple members (entrepreneurs, senior managers and factory workers) from 15 die-casting entrepreneurial firms in Guangdong province, China. We find that the use of guanxi in recruitment practice can overcome the liability of smallness because it makes the hiring process more convenient, improves firms’ attractiveness to jobseekers and enhances the person-organizational fit between new hires and firms. We discuss how Chinese entrepreneurs and their senior managers use guanxi strategically to achieve these advantages. On the other hand, our findings suggest that jobseekers can also use guanxi to increase their options, improve their bargaining power and distract firms’ attention away from hiring the most appropriate candidate for the job in order to undermine the effectiveness of Chinese entrepreneurial firms’ recruitment procedures. We explore the implications of these findings for academic research and managerial practice.     

How work-related capabilities influence job performance: a relational perspective

Employee relationships with supervisors can be based upon both work-focused activities and outcomes, as exemplified by leader–member exchange (LMX), and personal, non-work activities, as exemplified by Chinese guanxi. The purpose of this study is to examine the mediating role of supervisor–subordinate guanxi (SSG) and LMX in the relationship between the work-related human and social capital of employees and supervisors’ ratings of their job performance. Data were collected from 372 employees and 127 supervisors in a range of companies in China. The study demonstrates how human and social capital might play differing roles in influencing SSG and LMX. In particular, LMX partially mediated the relationship between human capital and job performance, and the relationship between social capital and job performance was fully mediated by SSG and LMX. The findings enrich understanding of how personal capabilities influence work and non-work relationships and assessments of job performance. The unique content of the Chinese construct of guanxi has implications for research and practice in modern organizations where the barriers between work and non-work are permeable and relationships include affective attachment as well as instrumental considerations.     

Employee-oriented HRM and voice behavior: a moderated mediation model of moral identity and trust in management

Abstract

This study examined how employee-orientated human resource management (EOHRM) is related to Chinese employees’ voice. Drawing on the trust literature, we developed and tested an integrative model that involves the mediating role of trust in management in the effect of EOHRM on voice behavior and the moderating role of employees’ moral identity in the EOHRM effects. Data were collected from 251 employees from a variety of occupations in China. Bootstrap-based regression analyses were used to test the research model. Results showed that trust in management partially mediated the relationship between EOHRM and voice behavior. The effect of EOHRM on trust in management and the indirect effect of EOHRM on voice behavior via trust were stronger in employees with higher rather than lower levels of moral identity. These findings suggest that organizations may promote employee voice by implementing HR policies and practices that focus on employees’ personal and family needs and consider employees’ moral identity.     

Effect of supervisor–subordinate guanxi on supervisory decisions in China: an empirical investigation

As China is becoming an important market and there are a lot of foreign ventures operating there, different lines of research have been providing useful information for foreign ventures to manage effectively in China. In this paper, we discuss one of the critical factors leading to successful management of Chinese subordinates, i.e. building and maintaining good guanxi (i.e., interpersonal connection) with them. We conducted an empirical investigation to illustrate (1) the supervisor-subordinate guanxi concept is different and unique when compared to other similar concepts in the Western literature such as leader-member exchange (LMX) and commitment to supervisor; (2) the supervisor-subordinate guanxi will affect the Chinese supervisor's administrative decisions; (3) guanxi can be measured by concrete behaviour/activities. Data on 189 supervisor-subordinate dyads were collected in the People's Republic of China (PRC). Results indicated that supervisor-subordinate guanxi is a distinct concept from LMX and commitment to supervisor. It also has additional explanatory power over supervisory decisions on promotion and bonus allocation after controlling for performance. Implications for foreign ventures and expatriates are discussed.     

Ethical Behavior and Regional Environments: The Effects of Culture, Values, and Trust

This article offers a theoretical framework and empirical analysis for explaining regional differences in the United States between culture, trust, and ethical behaviors in workplaces. Drawing on a branch of behavioral economics that uses “cultural cognition” to describe social factors influencing values and ethical decision making, we argue that an orientation toward a hierarchical or individualistic view of society erodes levels of generalized trust. A lack of generalized trust among citizens and workers is associated with employers’ illegal activity to impede union organizing activity, which we define as a violation of ethical standards. We tested our model at the US state level of analysis and found that trust mediates the relationship between social values of hierarchy and unfair labor practices. To conclude, we suggest connections between the theory and its implications for the impact of culture on a firm’s responses to workers’ exercise of their rights of collective action.     

Implementing supply chain information integration in China: The role of institutional forces and trust

This study investigates the effects of Chinese companies’ institutional environment on the development of trust and information integration between buyers and suppliers. Three aspects of China's institutional environment are salient: legal protection, government support, and the importance of guanxi (interpersonal relationships). This study uses structural equation modeling to analyze data collected from 398 Chinese manufacturing companies. Government support and importance of guanxi significantly affect trust, which subsequently influences two elements of information integration, namely, information sharing and collaborative planning. Furthermore, the importance of guanxi has a direct, positive impact on information sharing, and government support has a direct, positive effect on both information sharing and collaborative planning.     

Born Again? The Ethics and Efficacy of the Conversion Experience in Contemporary Management Development

This article notes how a religious tone has seeped into the discourse of contemporary management development. This religious analogy is explored through the evangelical Christian notion of ‘conversion’ and radical personal change. The expansion of such a mind-set into contemporary management thinking is related to the revival of the charismatic form of authority, in the writing of popular management gurus, such as Tom Peters. The search for new forms of ethical and social cohesion is considered. Next, this framework is applied to management development, with particular reference to one fairly mainstream, if intensive, programme. Through quotes from the managers involved, we illustrate how this programme employed emotional experience to remould individual personality and hence corporate culture in a way that mimics the religious conversion process. Finally, we question both whether a largely involuntary business organization has an ethical right to claim the ‘souls’ of its managers, and whether this is likely to be a realizable goal, in any case.     

An investigation on the attitudes of Chinese workers towards individually based performance-related reward systems

The study investigated the attitudes of Chinese workers towards individually based performance-related reward systems (IBPRRS). Participants were 106 white-collar workers employed in a Chinese new state-owned enterprise. In line with hypotheses, attitudes towards equality and equity-based rewarding were negatively and positively related, respectively, with attitudes towards IBPRRS. Also in line with expectations, both concern for loosing face (‘Mianzi’) and the belief that performance evaluations are affected by interpersonal relationships (‘Guanxi’) were negatively related to the attitude towards IBPRRS. However, in contrast to hypotheses, participants reported a more positive attitude towards equity than towards equality-based rewarding. Furthermore, in sharp contrast to the relevant hypothesis, the attitude of participants towards IBPRRS was positive. Ad hoc interviews with middle managers corroborated these findings and, furthermore, suggested that Guanxi and Mianzi were indeed impacting evaluations of performance, especially where there was an absence of objective performance criteria. The implication of the study is that although the views of Chinese employees towards IBPRRS are in principle positive, the cultural characteristics of China, and in particular Guanxi and Mianzi, must be taken into account for the successful design and functioning of such systems in the Chinese organizational context.     

The Interrelationship of Governance,Trust, and Ethics in Temporary Organizations

This study investigates the variety of ethical decisions of project managers and their impact from corporate governance and project governance structures. The roles of personal trust and system trust as a mechanism to steer ethical decision making in different governance settings is explored. Nine qualitative case studies in Europe, Asia, and Australia show that ethical decision making is contingent on trust, which in turn is contingent on the fulfillment of personal expectations within a given governance structure. The findings show the prerequisites for ethical decision making and the consequences of lack of trust. Further managerial and theoretical implications are discussed.     

Reconciling traditional Chinese management with high‐tech Taiwan

The traditional view of management culture among the overseas Chinese is that of an autocratic, paternalistic and centralised organisation with low levels of trust of ‘outside’ professional managers and employees. By contrast, the organisational culture associated with successful innovation and/or high technology is that of a decentralised organisation with high levels of employee autonomy. Existing research indicates that the overseas Chinese have become successful by sticking to the business sectors compatible with their preferred management culture, and that this holds true for Taiwan. What, then, explains the Taiwanese success in high‐technology ventures? This article offers initial evidence that management culture in Taiwan is adapting in order to enable industrial development in new areas. In‐depth interviews with 20 Taiwanese companies indicated that the change is being led by the high‐technology businesses. However, while many of these business culture changes are in a direction towards the organisational culture associated with high‐technology companies, it is also clear that a strong Chinese influence remains.     

中西方关系网络比较及对跨国企业的启示

关系网同时存在于中西方的社会实践并在商业活动中扮演重要角色,但迄今为止的研究较少针对性的探讨中西方关系网的差别及形成这些差别的本质原因。本文从社会架构和文化价值出发,分别分析了中国的guanxi与西方的networking,从四个方面分析得出了它们的差别及形成原因。在此基础上,本文进一步提出了对中外跨国企业如何善用所在国关系网络的启示。     

Exploring the connections among spiritual leadership,altruism, and trust in family businesses

The purpose of this study is to test the claim that the top manager family members’ altruism and trust with regard to other family members should be connected with these top managers’ spiritual leadership feature. Data are collected from the top manager family members, who are in charge of their family businesses in Beylikduzu Organized Industrial Zone. Many instruments’ items are used for spiritual leadership, altruism and trust. The scope of spiritual leadership is wider than those of altruism and trust; besides references to the family, spiritual leadership also includes references to the participants, their subordinates and their businesses. The participants’ spiritual leadership factors are powerfully and positively related with their altruism and trust with regard to other family members. If altruism and trust are posited to affect spiritual leadership factors, this effect is partly achieved. Only some items of altruism and trust can affect spiritual leadership feature. The literature points out that spiritual leadership is suitable for family businesses on the grounds that intra-family altruism and trust can be related with spiritual leadership feature. The current study proves this relationship. Such knowledge can be used for family business succession, mentoring and coaching applications in family businesses, conflict management towards the issues related with both the family and the business, and structuring family’s involvement in the business.     

Executive development in China: is there any in a Western sense?

A recurring theme in the literature on Chinese management has been the impact of culture and, in particular, the influence of values derived from Confucianism on Chinese management practices. The reforms that led to foreign direct investment (FDI), the problems of State-owned enterprises (SOEs), the social, political and economic changes and analyses of Chinese managerial styles and performance have been the major concerns. There has been less attention specifically paid to Chinese managers' characteristics and to managerial career patterns, which may be shaped by national culture and values. In contrast, in the West, there is a vast body of literature covering career theories and managerial growth, dealing variously with personal values and other factors, such as family upbringing, education, social background and employment structure, that have major impacts on managers' career pathways. This paper explores how far executive career development in modern China (PRC) corresponds to Western notions, and also tries to determine whether there are specific factors relating to Chinese executives' personal biographies and career paths. A pilot study was carried out to identify the variables that might shed light on career patterns and, if possible, to profile the Chinese manager. A number of emergent themes are described. They derive from the experience of individual interviewees who took part in the pilot research, which was conducted in Beijing and Shanghai and in which forty-nine managers in forty-two companies were interviewed. These pilot interviews revealed a complex interplay of biographical data and career themes. Of clear importance was the guanxi mechanism (direct or indirect personal relationship to solicit favours) which has no exact comparison in the West and which does not figure in Western career theories. A preliminary tentative Chinese executive career model has been developed.     

Moral judgment and ethical leadership in Chinese management: the role of Confucianism and collectivism

Moral judgment and ethical leadership are considered as two of the most important aspects in modern businesses in China. In this context the role of Confucianism and collectivism are highly significant in terms of increasing the path of development of Chinese society, culture, and economy. Confucianism and collectivism are together helping the country to a great extent to create a stronger society and culture by establishing a positive relationship with various issues related to moral judgment in the Chinese management system. The study explores the nature of Confucianism and describes the proposition that Confucianism leads to a strong perception in Chinese cultural context. The research also describes the role of collectivism in Chinese Management and develops the proposition that collectivism leads to a strong perception of Chinese management. By exploring the role of moral judgment, the paper develops the proposition that Confucianism and collectivism are positively related to Chinese management’s moral judgment. Finally, the study develops the proposition that Confucianism and collectivism are positively related to ethical leadership in Chinese management by describing the role of ethical leadership in Chinese management.     

中国乳制品企业的道德管理

中国乳制品企业自2008年频发质量安全事故,事故原因直指企业伦理道德。通过对当前我国乳制品企业的道德管理现状分析,找到改善和提升企业道德管理的途径。通过对大量资料的分析论证发现我国乳制品企业对道德管理不重视,观念落后,机制不健全是导致道德缺失的主要原因。企业应该系统建设企业文化,制定科学发展战略,重视供应链管理和质量控制,加强对企业的规范化管理,加快产品创新和升级以系统提升企业道德管理水平。