Ganxi's Consequences: Personal Gains at Social Cost

Is guanxi ethical? This question is largely ignored in the existing literature. This paper examines the ethical dimension of guanxi by focusing on the consequences of guanxi in business, from ethically misgiving behaviour to outright corruption. Guanxi may bring benefits to individuals as well as the organisations they represent but these benefits are obtained at the expenses of other individuals or firms and thus detrimental to the society. As guanxi has an impact on the wider public other than the guanxi parties, it must be studied in the context of all stakeholders. It can be argued that guanxi is an inevitable evil under the current political and socio-economic systems in China. Its role and importance in business life will be diminished as the country moves towards an open market system.     

The China Market: Strategic Implications of Guanxi

This article examines the differing perceptions of the nature of guanxi –"personal connection"– among business executives in Hong Kong and the different ways in which they use it. In the process, it contrasts views of relationship marketing in China and the West and suggests that the importance of guanxi for success in China may be waning. It substantiates the view that personal links and absence of commitment are major elements differentiating relationship marketing in China from that in the West. Major disadvantages of guanxi are perceived as being the extra time and cost this approach involves. For western managers involved in the China market, the research reported here has three strategic implications. First, in some form or other, they need to include the guanxi approach in their relationships with Chinese partners; second, they should be aware that guanxi may not involve commitment; and, finally, they should mount sustained efforts to build up guanxi to give them a competitive edge in their search for an insider position in the China business arena, whilst being aware that guanxi cannot eliminate threats and competition.     

The Categories,Rules, and Demonstrations of Guanxi in Chinese Society

ABSTRACT

Purpose: Guanxi is one of the most important success factors in China. Because of differences in Eastern and Western relationships, it is essential to investigate the system of guanxi in China. Based on the differential mode of association (chaxugeju), the present study aims to construct a framework for the mechanism of guanxi in Chinese society.

Methodology/approach: A questionnaire survey of middle and senior managers was conducted to test the proposed hypotheses. A sample consisting of 212 middle or senior managers who worked in China and had direct interactions with business partners was used. The participants were mainly from firms in the pharmaceutical technology, telecommunication, and retailing industries.

Findings: Guanxi categories, guanxi rules, and guanxi demonstrations were found to be correspondingly related. Business partners who had family guanxi applied the rule of need and presented intimacy interactions, whereas partners who had acquaintance guanxi often followed the rule of favor and demonstrated higher levels of reciprocity. These two corresponding paths positively influenced the strength of guanxi: The partners were more willing to sacrifice self-interest for and provide high priority in resource allocation to each other. Business partners who had stranger guanxi used the rule of equity and built trust relationships, which had negative impacts on the strength of guanxi.

Practical implications: Because guanxi affects the performance of companies in China, maintaining guanxi networks with business partners is an important but challenging task for managers, especially for those from non-eastern cultures. The current study suggests that it is essential for managers to identify different types of guanxi (family, acquaintance, or stranger) by differential intimacy and distance, and to apply different rules when interacting with partners with different guanxi. To be specific, managers should follow the rule of need with business partners who have family guanxi, and their guanxi should be demonstrated as intimacy interaction. When doing business with acquaintances and friends, managers should mainly follow the rule of favor, and their guanxi should be demonstrated as reciprocity interaction. When doing business with strangers, managers should follow the rule of equity and emphasize trust. This correspondence also has an influence on how managers make decisions according to the strength of guanxi with different partners based on the guanxi type. In short, guanxi affects the degree of willingness to sacrifice self-interest for, and to prioritize resource allocations to, business partners.     

Guanxi and Salesforce Management Practices in China

Executives in 111 foreign enterprises selling within the People's Republic of China completed questionnaires examining the extents to which guanxi was recognized as a critical factor in salesforce marketing, and the influences of such recognition on their companies' local salesforce remuneration policies. The results suggest that businesses which did regard guanxi as important for Chinese salesforce marketing were more likely to employ behaviour-based than outcome-based reward systems. This finding is compatible with the proposition that the banking and recall of personal favours, network integration, willingness to rely on partners and other guanxi-related characteristics can lead to sales performances for which outcome-based remuneration systems may not be appropriate. Notwithstanding the influence of guanxi on the manners in which salespeople were paid, volatility in the business environments within which firms operated encouraged their managements to adopt more market-led approaches to remuneration. Differences in the perceptions of the role of guanxi held by managers in foreign firms based in Chinese commonwealth and in other countries were also investigated. It emerged that companies based in the Chinese commonwealth acknowledged the importance of guanxi to a greater extent than companies with headquarters in Western nations. The longer a company had operated in China the more likely it was to incorporate guanxi considerations into its local management systems.     

Rethinking guanxi and performance: Understanding the dark side of Sino–U.S. business relationships

Previous studies on guanxi (關係) have focused on how guanxi contributes positively to business relationships, without addressing the pivotal role that guanxi plays in managing the dark-side of business relationships. To address this knowledge gap, this study specifically investigates guanxi’s influence on conflict, opportunism, and switching intention in Sino–U.S. business relationships and examines how guanxi mediate the positive effect of performance as well as the negative effect of uncertainty on such dark-side constructs. Drawing on data from over 270 Chinese firms, the findings reveal that guanxi is undermined by relationship uncertainty but enhanced by performance, guanxi also reduces the dark-side of Sino-US business relationships. Chinese buyers’ guanxi with U.S. suppliers significantly lessens their switching intention, opportunistic behavior, and the perceived levels of conflict in Sino-US relationships. The findings explain how guanxi is employed as a tool to reduce the burden associated with the dark-side of business relationships and give relevant implications.     

Contingent effects of managerial guanxi on new product development success

A survey of new product development (NPD) managers finds both a linear, positive relationship between managerial guanxi and new product speed to market and an inverted U-shaped relationship between managerial guanxi and new product innovativeness. In addition, both transaction-specific investments (TSIs) and relationship commitment have a positive moderating impact on the relationship between managerial guanxi and new product speed to market. However, TSIs increase the damaging effect of managerial guanxi on new product innovativeness, whereas relationship commitment reduces such an effect. The results from this study can help business practitioners use guanxi to improve NPD performance under different contexts of inter-firm relationships.     

Is Guanxi Ethical? A Normative Analysis of Doing Business in China

This paper extends the discussion of guanxi beyond instrumental evaluations and advances a normative assessment of guanxi. Our discussion departs from previous analyses by not merely asking, “Does guanxi work?” but rather “Should corporations use guanxi?” The analysis begins with a review of traditional guanxi definitions and the changing economic and legal environment in China, both necessary precursors to understanding the role of guanxi in Chinese business transactions. This review leads us to suggest that there are distinct types of, and uses for guanxi. We identify the potentially problematic aspects of certain forms of guanxi from a normative perspective, noting among other things, the close association of particular types of guanxi with corruption and bribery. We conclude that there are many different forms of guanxi that may have distinct impacts on economic efficiency and the well-being of ordinary Chinese citizens. Consistent with Donaldson and Dunfee (1999), we advocate a particularistic analysis of the different forms of guanxi.     

家族企业社会责任与企业绩效:内部能力与外部关系的调节效应

文章利用浙江和重庆两地351家家族企业调查数据,在将家族企业社会责任区分为内部人责任、外部人责任和公共责任的基础上,实证检验了家族企业社会责任与企业绩效关系及内部能力和外部关系的调节效应.结果显示:第一,高内部能力(制造能力、吸收能力)家族企业内部人责任对绩效的影响更大;高吸收能力家族企业公共责任对绩效的影响更小;具有丰富外部关系(高密度、大范围关系网络)家族企业外部人责任对绩效的影响更大.第二,高内部能力家族企业中,内部人责任对绩效有显著的正向影响,公共责任对绩效有显著的负向影响.低吸收能力家族企业中,内部人责任对绩效有显著的负向影响;具有低密度关系网络家族企业中,内部人责任对绩效有显著的正向影响,公共责任对绩效有显著的负向影响;具有大范围关系网络家族企业中,公共责任对绩效有显著的负向影响.     

Informal interorganizational business relationships and customer loyalty: Comparing Guanxi,Yongo, and Wasta

Based on social exchange theory, this research explores if informal interorganizational business relationships in China (guanxi), South Korea (yongo), and Egypt/Jordan (wasta) affect customer loyalty in a business to business context. A conceptual model hypothesizes interrelationships among three underlying dimensions of informal relationships, reciprocity, affect, and trustworthiness, and with customer loyalty. The hypotheses were tested using survey data gathered from manufacturing companies in China, South Korea, Jordan, and Egypt. Structural equation modeling shows that guanxi, yongo, and wasta are positively related to customer loyalty across all four countries. However, there are some differences in the relationships among the three dimensions. Although reciprocity is positively related to affect in guanxi and yongo, this relationship is not statistically significant in wasta. Further, the items measuring the dimensions of trustworthiness and reciprocity are the same in guanxi and yongo, but these differ from wasta. Thus, managers need to be aware of subtle differences in how informal interorganizational relationships are developed and used in international business to business relationships.     

Guanxi and distribution in China: the case of Ferrero Group

This paper aims to analyze how guanxi-based business relations impact on distribution choices of foreign companies entering China. In particular, it investigates the influence of guanxi on decisions regarding both the organization of distribution channels and the management of distribution channels. It emerges that from an organizational point of view guanxi-based business relations may favor interdependence, low integration in the channel relationships, and foster multichannel choices. From a management point of view, guanxi may reduce the control of local partners over channel, create coexistence between conflict and collaboration in the channels relationships, and favor unmediated communication. The authors examine the emblematic case of Ferrero, a well-known Italian multinational company, specialized in chocolate production, which began to develop its entry strategy in China more than 30 years ago.     

战略关系:理解私营中小企业竞争优势的新视角

我国私营中小企业有着很强的发展势头,但其自身也存在许多不足。本文认为,当前的主流战略管理理论并不能指导它们的发展,因此必须从交易和企业家个体去理解私营中小企业的发展,关注私营企业发展过程中的关键因素——关系。关系是非常特殊的具有中国特色的概念,将关系提高到战略层面来考虑,是理解私营中小企业构建竞争优势的新视角,为理解私营企业微观行为和宏观战略管理提供了思路,其后继的研究可集中在关系评估的量化以及关系拟合过程,私营中小企业关系实践的实证研究和关系管理技术的开发等三个方面。     

Is Interpersonal Guanxi Beneficial in Fostering Interfirm Trust? The Contingent Effect of Institutional- and Individual-Level Characteristics

Journal of Business Ethics - Despite the prevalent role of guanxi in conducting business in Chinese, it is unclear whether interpersonal guanxi fosters interfirm trust. Taking a contingency...     

Social Exchange in China: The Double-Edged Sword of Guanxi

We present two studies that examine the effects of guanxi on multiple social groups from the perspective of Chinese business people. Study 1 (N = 203) tests the difference in perceived effects of six guanxi contextualizations. Study 2 (N = 195) examines the duality of guanxi as either helpful or harmful to social groups, depending on the contextualization. Findings suggest guanxi may result in positive as well as negative outcomes for focal actors and the aggregate.     

It is not whom you know,it is how well you know them: Foreign entrepreneurs building close guanxi relationships

Within the growing body of Chinese entrepreneurship literature, guanxi is increasingly recognized as an important indigenous Chinese business practice with important implications for firm performance and success. Guanxi is defined as relationship or connection. China’s continued economic growth and forecasts of it becoming one of the world’s largest consumer markets present multinational corporations and foreign entrepreneurs alike with unprecedented economic opportunities. Thus, greater insight is required into how foreign entrepreneurs, as outsiders, establish and develop close guanxi relationships. Conceptualizing guanxi as a dynamic process, this paper explores the underlying interactions and processes foreign entrepreneurs engage in to establish and build a strong emotional connection and trust with their closest guanxi partner. Using an exploratory single case study approach, data from 15 foreign entrepreneurs operating legally registered small- and medium-size enterprises (SMEs) in Shanghai was collected and analyzed. In addition, self-administered structured questionnaires that utilize the McAllister trust scale were used to measure 20 foreign entrepreneurs’ levels of cognitive and affective trust toward their closest guanxi partner. Overall, the findings of the study provide an in-depth understanding of the complex interplay and functioning of third-party and anticipatory bases. In so doing, the study’s outsider perspective addresses a critical gap in the literature that yields initial yet important insights that contribute to a better understanding and appreciation of the inherent nuances and differences in relationship-building processes in cross-cultural settings. Furthermore, these findings bring to the fore the need to consider the ways in which this indigenous Chinese business practice may be evolving in the face of increasing internationalization.     

Globalization,Economic Development and the Reliance on Guanxi as a Job Search Strategy for Chinese Students

The concept of networking for business has been documented extensively in the international business literature. In particular, relationship networking, or guanxi, has become a much-studied phenomenon since the wealth-creation success of Overseas Chinese and their Mainland China counterparts became noticeable in the early 1990s. Relatively less well known is the use of guanxi as a job search strategy. In the wake of domestic economic reforms and increasing international economic pressures, young graduates are having to rely less on job placements arranged by their universities, and more on their own initiative. This is a report of the extent to which guanxi is a significant job search strategy among final year business students at Shantou University in Guangdong Province, China. With its exceptionally strong links with Overseas Chinese, Shantou is well placed to give its young people an advantage in tapping into the job opportunities created by international trade and incoming investments.     

The sensitivity of compensation to social capital: Family CEOs vs. nonfamily CEOs in the family business groups

This study examines the role of CEO social capital, defined as external directorship ties held by the CEO, in determining family vs. nonfamily CEOs' compensation in a network-based business society and governance system. Using a sample of pooled data of family firms listed on the Taiwan Stock Exchange (TSE) from 2000 to 2002, the empirical results show that CEO social capital is an important determinant in setting nonfamily CEOs' pay level, consistent with the expectation of the contractual governance model. By contrast, as expected by relational governance model, family CEOs' social capital is not incentive-relevant. This study extends the literature on CEO compensation by documenting that in a market where guanxi and connections are considered valuable business tools, corporations will be willing to compensate professional CEOs for the social capital that they bring to the firm.     

On the Influence of Interpersonal Relations on Business Practices in Latin America: A Comparison with the Chinese Guanxi and the Arab Wasta

The connection between interpersonal relationships and business practices is currently an object of study in the field of international business. The authors have identified a significant body of research literature characterizing this phenomenon in China, where it is denominated as guanxi, as well as a recent interest of the academy in studying the Arab wasta (i.e., clout or influence). The authors argue that a similar phenomenon occurs in Latin America and identify patterns similar to those of guanxi and wasta in a cultural artifact called compadrazgo. The article offers insight for managers and individuals interested in doing business in Latin America. © 2015 Wiley Periodicals, Inc.     

管理者自恋会导致员工沉默吗:心理安全感与上下级关系的作用

员工沉默是近年来组织行为学领域关注的热点问题.本研究基于进化心理学理论和领导成员交换理论,构建管理者自恋与员工沉默关系的研究模型.通过两阶段的问卷调查,检验管理者自恋与员工沉默的关系、 心理安全感的中介作用及上下级关系的调节作用.研究结果表明:(1)管理者自恋与员工沉默显著正相关,员工的心理安全感在两者之间起部分中介作用;(2)上下级关系负向调节管理者自恋与心理安全感之间的关系,即上下级关系质量越高,管理者自恋与员工心理安全感的负相关关系越弱;(3)上下级关系显著负向调节心理安全感对管理者自恋与员工沉默之间关系的中介作用,即上下级关系质量越高,心理安全感的中介作用就越强;反之则越弱.     

The Cultural Roots of Guanxi: An Exploratory Study

This paper first describes the cultural roots and characteristics of guanxi in Chinese society. It then goes on to test some propositions about the perceived relationship between these characteristics and (i) Hofstede's conceptualisation of collectivism and power distance and (ii) the content and quality of formal institutions. The sampling frame used consisted of three groups of students –viz. Chinese Singaporeans, Non‐Chinese Singaporeans and Mainland Chinese, studying in tertiary institutions in Singapore. Our findings suggest that, while the perceptions of guanxi were positively and significantly related to Hofstede's culturally related variables, this was not so in the case of formal institutions. This latter result suggests that, in East Asian countries, guanxi may well be regarded as, at least, a partial substitute for formal institutions.     

‘Out With the Old’—An Evaluation of the Relevance of Traditional Chinese Cultural Beliefs in Today's China

This study evaluated the views of a range of 20- to 35-year-old Chinese respondents regarding the applicability and relevance—in today's modern China—of various traditional Chinese values such as trust, respect and guanxi, in regard to personal, social, business and consumer behavior contexts. It found that respondents felt that traditional values were still important at home and in social contexts but had perhaps become replaced in business by more Westernized and sharp-edged values. However, they also feel that it is still sometimes possible to form deeper and more traditionally conceptualized business networks and relationships and it is here that people still preferred to conduct more complex—and serious (and indeed often more lucrative)—business activities. In regard to the use of traditional values in Chinese consumer behavior, the situation is once again quite complex. When it comes to initially thinking about a consumer behavior issue, respondents feel that traditional values played no real part—but when it comes to actually deciding on a particular product or service to purchase, particularly in regard to a product (or service) which has a high level of brand equity/image, the situation is very different. Now respondents tend to make judgments about the product or service in a most traditional manner and way, thinking about issues of face, respect, trust and even guanxi, where it is almost possible for them to feel that they have formed a kind of relationship with some brands that will, in turn, guarantee them a certain level of face, image, status and respect.