NORTH- The Benefitso f "Guanxi" The Value of Relationshipsin Developingt he ChineseM arket Howard Davies Thomas K. P. Leung Sherriff T. K. Luk Yiu-hing Wong Thee arly1 990sh aves eena radicalc hangein China'sp osi- thata ccruet o thee stablishmeonftg uanxio r theirr elativeim - tiona s a marketg, ivinga newu rgencyto then eedt o address portanceT. hiss tudyu sesd atag atherefdr omH ongK ong Chi- thatm arkete has longb eenr ecognizetdh atd oing nesee xecutivesx perienceind Chineseb usinespsr acticeisn or- businesisn Chinai s particularlyd ifficulta ndt hata keyd iffer- dert o identifyth eirp erceptionosf t hen atureo ft heb enefittsh at enceb etweeCn hinesea ndW esternb usinespsr acticesli esi n the arisef romg uanxai ndt heirr elativeim er esultsp ro- relativeim portancoef p ersonarl elationship(s" guanx3i in the videa rankingo fb enefitasn ds uggestth att hereis an underlying former,a s opposedto thes pecificatioann de nforcemeonftc on- structuroe ff ourf actors,w hichm ayb ec haracterizeadsp rocure- tractsi n thel oweverp, revious tudieso f thisi ssueh ave ment,i nformationb, ureaucracya, nd transaction-smoothing. tendedto f ocuso n thep erceptionosf Westerne xecutivesa,n d theyh aven oti dentifiedin anyd etailt hen atureo f theb enefits INTRODUCTION Addrescso rrespondetnocH eo warDda vies,D epartmeonftB usinessS tudies, It is nowa commonplactoen otet hat heP eople'Rs epublic HongK ongP olytechnUicn iversityH,u ngH orn,K owloonH, ongK ong. of China( PRC) is becominag majore conomipc ower,t hat IndustriaMl arketinMg anageme2n4t, 207-21(41 995) ©E lsevierS cienceI nc., 1995 0019-8501/95/$ 655A venuoef theA mericasN,e wY ork,N Y 10010 SSDI 0019-8501(94)00078-B
Sixty million "affluent" consumers,r ising to 200 million by 2000. its populationm akesu p approximateolyn e-fiftho f the McKinseye stimatetsh at hen umbeor f relativel"ya ffluent" world'sc onsumersa,n dt hati ts GNP mighto vertakteh at Chinesec onsumeris presentl6y 0 milliona ndw ill rise of the UnitedS tatesw ithina decadeo r so \[15\]. to moret han2 00m illionb y 2000\ [19\]w, hent heB eijing Neverthelesrse, lativellyit tlea ttentiohna sb eenp aidt o brancho f McDonald'sis reportetdo beo neo f thel argest Chinaa sa marketo, r to ther equiremenftosr e ffectivme ar- andm ostp rofitablien thew orld,a ndw henA vonh as1 5,000 kete ntrya nde xploitationp,e rhapsb ecauseth ec ountry salesladieins Guangdonpgr ovincea lonet, het imeh asc ome hasb eens eenla rgelya sa sourceo f low-coslta bora ndl and to takeC hinav erys eriously. fromw hicht o sourcep roductiodne stinedfo r elsewhere. 1992t o 1994,t hereforeh,a sb eena watersheidn which It is now cleart hatt hes ituationc hangedsi gnificantliyn it wasr ealizedth at heC hinesed omestimc arkeits already thec ourseo f 1992a nd1 993f or a numbeor fr rst, muchla rgetrh anh asb eena ppreciateadn, di t wasc onfirmed paramounleta deDr engX iaopingm adea highlyp ublicized thati ts recentg rowthw ould not be reversedb y major touro f rapidlyg rowinga reasin SouthC hina,g ivingh is changeisn policy. explicits upportto thep acea ndd irectiono fc hangein those At thes amet ime,t heg overnmenoft theP RC hasm ade areasa nde ncouraginogt herp artso f thec ountryto emu- furtherm ovest o reducec ontrolso n thee conomya ndt o latet heirs condlyt,h eF ourteentPha rtyC ongress, opent hev astd omestimc arketto foreignc ice heldi n October1 992,c onfirmetdh att hec ommitmentot controlsh aveb eenr elaxedfo r manyk indso f rawm aterial market-basreedf ormw ouldb em aintainedth, erebiyn creas- andc ommoditiecs,u stomsd utiesh aveb eenr educedfo r ingc onfidencteh atr apidg rowthr atesc ouldb ec ontinued, moret han2 00 typeso f consumearn d industriagl oods, Thirdly,i t becamecl eart hatt her eportedfi guresf or na- andt hea dministrativoer ganso f the stateh aveb eenr e- tionali ncomea, ndh encet hes izeo f theC hinesem arket, structureidn an attemptto expediteth ep rocesso f busi- are almostc ertainlyq uite substantiaul nderestimates,n essn no-foreigjno int ventureas ndw holly Fourthlyi,t hasb eens hownin thec ourseo f 1993a nd1 994 ownedf oreigne nterprisehsa veb eena ctivelyp romoted, that hep rogramo fa usteritmy easurepsu ti n placet o curb andt hea ttemptto accommodatthee G ATT requirements "overheatinhga" sn oth adt hee ffecot f reducing rowtha nd for membershihpa vel ed to thel iberalizatioonf imports maye venh aveb eena bandoned, andt her emovaol f furthers tructuraclo nstraintsJu. st as Finally,t hereh aveb eens omes pectaculadre monstra- theC hinesem arkeht asb ecomela rger,s o havet hef ormal tionso f thee xistencoef a largec onsumemr arketW. hen barrierst o businessb eenl owered. HOWARD DAVIES is Associate Dean of the Facultyo f Business THE DIFFICULTY OF DOING and InformationS ystemsa t Hong Kong PolytechnicU niversity. BUSINESS IN CHINA THOMAS KIM-PING LEUNG is Lectureri n Marketingi n the Despitet he abundanto pportunitiens ow presentedb y the Departmenotf BusinessS tudiesa t Hong KongP olytechnic China market,t he evidences uggestst hatd oing business University. in Chinac anb em ored ifficult hani s anticipatebdy many SHERRIFF TIN-KWONG LUK is Lectureirn Marketingin the foreignb tudies reportt hat foreignc ompa- Departmento f BusinessS tudies at Hong Kong Polytechnic nies commonlye xperiencea pprehensiona nd discourage- University. mentw hilec onductinbgu sinesws itht heirC hinesec oun- YIU-HING WONG is Lectureirn Marketingi n the Department terparts\ [12\M]. any frontlinep ractitionersh avec omplained of BusinessS tudiesa t HongK ongP olytechniUcn iversity. thatc reatinjgo intv entureisn Chinai s morec omplexa nd timeconsuminthga ni s necessar\y[4 \]F. oreignc ompanies 208
areo ftend ismayebdy t hel engthyn egotiatiopnr ocesas nd, bers,a nda rep articularliym portanitn respecot f market in particularb,y b ureaucratdice layst,h ed ifficultyo f iden- entryw, hereth eirs trategirco leh asb eenw ell-documented. tifyingt her eald ecision-makienr C hineseb usinesds eal- Mosto ft hen etworkinlgit eraturies relativelrye cenat nd ings\ [8\]a,n db yt hen umbeor fp renegotiaticoonn tacttsh at hasb eenla rgelyc oncernewdi tht heW esternb usinescso n- arer equired\[ 14\P].h ilipS tevensonB,u sinesDs evelopment owevert,h atis somewhairto nicb ecaushei storys ug- Manageor f theA ustralianfi rmB undyT ubing,f or exam- gestst hatn etworkst,r anslateads guanxi,h aveb eent he pie,h ase stimatetdh atc ompletintgh ep aperworakl onef or dominanfto rmo f transactiongaol vernancine C hinas ince theirj oint ventureto ok 18 monthso f effort\ [20\]. longb eforeth ec oncepwt ast akenu pb yW esternth eorists. Westernm anagemesncth olarhs avei nterpretetdh ise x- How-tog uidesto doingb usinesisn China\ [11c\]o mmonly periencien twod ifferenwt nea pproacha sb eent o refert o thei mportancoef guanxi( bestb rieflyt ranslated characterizthee n egotiatiopnr ocessin Chinaa s slowa nd as "personaclo nnections/relationshiipns C"h) ineseb usi- inefficienatn dt o attributteh ati nefficienctyo structuraclo n- n experienceAdm ericanG eneraMl anageor fa joint straintsp, oora dministratiomn,a nagemeintc ompetence, venturpea ckagincgo mpaniyn Nanjing\ [13o\]b servetsh at ideologicarli giditiesa, ndp olicyf actors\[ 7,8 , 10\].A n al- them ostc ommonco ntrasbte tweeWn esterna ndC hinese ternativaep proach\[ 2\i]s to recognizteh att hee stablish- managemepnrta cticeli esi n thee mphasipsl acedo n writ- mento fp ersonalizetdru st hroughn etworkis particularly tenc ontractasn dp rocedureins thef ormerc, omparewdi th crucialt o thec onducot f businesisn hed aunting personarle lationshipins thel atterW. hereatsh ats tatement outcomees xperiencebdy Westernb usinesspeopaleri se is adequataes a briefd escriptioonf t hed ifferencebse tween fromt he needf or investmenint network-buildinagf,t er thet wo systemsc,o ntrastosf languagaen dc ulturem ean whicht het ransactinpgr ocessm ayb e quitee fficientA. s thati t is a poorm eantso conveyth ef ull meaninagn du biq- Thorelli\ [17p\]u tsi t: uity of thec oncepot f guanxi. Thes ameA mericane xecutivper ovideps erhaptsh eb est in Orientacl ulturest,r ustis a vitals upplementot contrac- descriptio\n[ forW esternersto\] d ateo f thep henomenon, tuala rrangemenits m; aye vent aket heirp n precon- tractuaclo ntexttsh ee stablishmeonftt rustf requenttlya kes in thef ollowingp assage\[ 13\]: moret imet hanW esterne xecutiveasr eu sedt o investing. To Chinesem anagergs,u anxis ladenw ithp owerfuilm pli- cationsT. o "lag uanxi"(l iterallyt o "pull"g uanxim) eantso geto n theg oods ideo f someonet,o storep oliticalc apital witht hema, ndc arriens on egativoev ertoneTso. " guag uanxi" NETWORKS AND THE PHENOMENON (literallyt o "worko n" guanxi)m eansr oughlyt he sameb ut OF GUANXI witha moreg enerale, ssi ntensivfee elinga ndu suallyc ar- desn egativoev ertone"sM. eiyoug uanxi("" withoutg"u anxi) A networkm ayb e described\[ 6\a] s: hasb ecomaen i diomm eanin"gi t doesn'mt atter.""G uanxi a modelo, r a metaphowrh ichd escribeas n umberu, sually gaoji ang"( guanxmi aderu inedm) eantsh er elationshihpa s goneb ad,u suallyb ecausoef a lacko f flexibilityo f those a largen umbero, f entitiesth ata rec onnectedIn. thec ase involved". Lisung uanxi"( "straighteonu t"g uanxi)m eans of industrial..n, etworktsh ee ntitiesa rea ctorsin volved to puta guanxbi acki ntop ropeor r normaol rder,o ftena f- in thee conomipcr ocessetsh atc onverrte sourcetos finished tera periodo fd ifficultyo ra wkwardnes" ug uanxi"(" to goodsa nds ervicefso r consumptiobny endu sersw hether haveg" uanxi)\ [whichis utterlyu nliket heA mericanid iom theyb e individualso r organizations. "to havea relationship"m\],e ansto havea ccestso needed Westernm arketinlgit eraturhea si ncreasinglsye ent he influence".Y oudes hig uanxi"(" whaot ned oesh aveo" r" the managemeonft n etworkass a ni mportanats pecot f strate- onet hingo ned oesh avei"s guanxi)i,s sometimense gative, gic behavioar ndt hen etworkinpga radigmas a "meanos f meanintgh ato neh asa ll theg uanxio nen eedsb, uts ome- understandinthge t otalityo f relationshipasm ongsfti rms thinge lsee ssentiaisl lacking". Guanxwi ang"(" guanxnie t") engageidn productiond,i stributiona,n dt heu seo f goods meantsh ew holen etworokf g uanxtih roughw hichi nfluence ands ervices\"[ 1\T].h ereis a belieft hatn etworkincga ne n- is brokered"G. uanxhi u"( "guanxfia mily"m) eanasp erson, hancea company'cso mpetitivpeo sitiona nda lsob ridge organizatioenv, eng overnmednet partmenotc, cupyinagf o- cal pointi n one'sg uanxin etwork. theg apb etweenb usinesspeopolef differennt ationsa nd culturess, timulatintgr adet hatm ightn oto therwistea ke Guanxis eemtso be thel ifebloodo f theC hineseb usiness placea ta ll \[16\N]. etworkse nhancceo mpetitivaed vantage communitye,x tendingin to politicsa nds ocietyW. ithout byp rovidinga ccestso t her esourceosf o thern etwormk em- guanxoi nes implyc annogt eta nythindgo neO. r, whatW est- 209
Foreignc ompaniesa re oftend ismayed by lengthyn egotiations. i ernm anagersso onf ind,t hingsc anb ed onew ithougt uanxi benefittsh ata risef romt hed evelopmeonftg uanxia, ss een if onei nvestesn ormoupse rsonaeln ergyis, willingt oo ffend by thoseo n thei nsideo r thea reaso f activityin whichi t evenc losef riendsa ndt rusteda ssociatesa,n di s prepared is mosti is articlee xtendos urk nowledgien to sees uchP yrrhicv ictoriems elta wayli ke snowo n a hot thisa reab ye xaminintgh ep erceptionosf HongK ongC hi- dayw hileo nei s offo n a businestsr ipo r homele aveO. n nesee xecutivewsi thr espectto theb enefittsh atm ayb es e- theo therh and,w ith guanxia nythings eemsp ossible, curedf romt hed evelopmenant du tilizationo f networks. Froma na nalyticaplo into fv iew,t hec oncepotf network- ing is well-suitedto captures omeo f thek ey featureos f EMPIRICAL WORK guanxai sd escribehde n particularit, emphasizeths at networkas ren otd iscrete ventsin time,c oncerninsge lf- The empiricawl orkf or this studyi s basedu pona sur- liquidatingtr ansactionbs,u ta rec ontinuourse lationships veyc arriedo uti n 1992a sp arto fa nI nternationMala rket- ("relationaclo ntractingin" economiacn alysis\[ 18\]T).h at ing courser unb y twoo f thea uthorsA. s parto f thec lass- continuitrye quiretsh at" activitieus ndertakebny thep ar- work,t hes tudent(sw how erea ll practisinmg anagerws)e re tiesi n a relationshicpa nnobt e completewd ithout hea c- requiretdo developa na ppropriatseu rveyin strumenut,n - tivea ndr eciprocailn volvemenotf bothp arties"\[ 9\]T. he dert hes upervisioonf thea uthorsa, ndt hent o administer Westernc oncepot f networkingt,h ereforea,l so includes a mails urveyto a populatiocno nsistinogf H ongK ongC hi- then otiono f continuingre ciprocaol bligationth ati s so nese xecutivehsa vinge xperiencine C hineseb usinespsr ac- firmlyi nherenitn theC hinesec oncepot f t the tices. samet imei t shouldb e appreciatetdh atg uanxir elatesto Thes urveyto okt hef ormo f a questionnai(rien English personaln, otc orporater,e lationsa ndt hatt hee xchanges andC hinese)w, hichw asm ailedto 1,000H ongK ongC hi- whicht akep lacea mongsmt emberosf theg uanxni etwork nesee xecutiveTsh. er esponsrea tew as1 5% , providing1 50 aren ot solelyc ommerciabl,u ta lsos ocial,i nvolvingt he usableq uestionnaireosn which to baset he empirical exchangoef f avors( "renqing"a)n dt heg ivingo f faceC mi- analysis. anzi")o r socials tatusS. uche xchangense edt o beh andled As a startingp ointf or thes urveyf orm,e ache xecutive with sensitivitays Westernb usinessmeanre i n dangeor f was askedt o givea n importancrea ting,o n a scaleo f 1 overemphasizinthge gift-givinga nd wining-and-dining to 6, to a serieso f activitiesi,n cludingt hed evelopment componenotsfa guanxri elationshipth, erebcyo mingd an- ofg uanxiT. heya lmosut nanimous(ly9 8% ) confirmetdh at gerouslyc loset o crassb riberyo r to beingp erceiveads "personacl onnectionwsi th local Chineseo rganizations" "meaat ndw inef riends"w hichi s a Chinesem etaphofro r werea highlyr ated( 5 or 6) factori n theirb usinessli fe. mistrust. The surveyfo rmt henw ento n to list a serieso fb enefits hypothesizetod a risef romt hee stablishmeonftg uanxai nd IDENTIFYING THE BENEFITS OF GUANXI askedt hee xecutivetso givea ni mportancrea tingt o each of he list wasa rriveda t througha priorit heoriz- Whereatsh ei mportancoef guanxis well-established, ing, examinatioonf thee arlierli teraturea,n df ocusg roup ther esearctho dateh ast endedto focuso n establishing discussions. its perceiveidm portanced,e scribinigt , analyzingit s ori- Thosed iscussionpsr ovidedn umerouesx ampleosf the gins ande thics,a ndc ommentinogn its implicationfso r usem adeo f personacl onnectionws,h ichs uggestead s e- thee fficiencoyf t heC hinese conomiscy stem\[ 5\] ee x- ries of generahl eadingus nderw hicht hem ores pecific istingl iteraturhea sa lsot endedto drawo nt hep erceptions benefitos fg uanxmi ightb ei dentifiedT. hef irstc oncerned ofW esternex ecutive\[s3 \]a,s o pposetdo theC hineseN. one sourceos f blishedso urceos f markeitn tel- oft hep reviourse searchha sa ttemptetodi dentifyth es pecific ligencea rev eryl imitedi n China,s o thatm emberosf a 210
Networksh ave long been the dominant form in China. guanxin etworkc anb e an importants ourceo f information is controlledb y differenta uthoritiesa t differenta dminis- on markett rendsa ndb usinesso pportunitiesN. etworksa re trativel aterialsd ecreedt o be mosti mportantt o also a usefulm eanso f gatheringi nformationo n govern- the nationale conomya nd people'sli vesa re underu nified mentp olicies,e speciallyi mport regulationsa nd restric- statec ontrol, that is to say that they are managedb y the tions,w hich changer apidly, are rarely well codified,a nd StateB ureauo f Materialsa t bothc entrala nd local levels. canb e interpretedd ifferentlyin differentlo calj urisdictions. Materialst hata red eemedc omparativelyim portant o the When the "rule of man" is more importantt han the "rule nationale conomya nd specializedm aterialsp roducedo r of law, accesst o thep ersonb ecomesa n importants ubsti- usedb y individuals ectorsa re controlledb y the industrial tutef or accesst o thel aw. Many of theH ong Kong Chinese ministriesc oncerneda nd, finally,p roductionm aterialsn ot managersta kingp art in thes tudyw erea blet o pointt o ex- includedi n theo therc ategoriesi,n cludingb ricks, plaster, ampleso f apparentlyr igid regulationst hat provedt o be powere quipmenat re controlledb y localg overnmentsW. ith malleablef or thosew ith the appropriateg uanxi, theo verlappingin volvemenot f bureaus,m inistriesd, epart- The secondg eneralc ategoryo f benefiti dentifiedc on- ments,p rovinces,r egions,a nd municipalitiesi,t can be cerns sourceso f nder the traditionalc entral imaginedh ow difficult it can be to locates ourceso f re- plannings ystemin China all meanso f productionw ereu n- ecenty earsh ave seenv ery substantiacl hange der thec ontrolo f centralo r localg overnmentasn d theb u- as thee conomyis graduallym arketizedb, ut in them edium reaucraticm azeo f permission-seekinigs still extremely termt hath as simplym adel ife morec omplicateda s many complicateda nd important. For instance, production resourcesa re availablet hrougha varietyo f administrative, materialsa rec lassifiedin to threec ategoriese, acho f which legitimatem arket,a ndb lackm arketc hannelsA. s networks TABLE 1 Perceived Benefits of Gusnxi Mean Score Rank % Rating 6 % Rating 1 Sourceso f information Market trends 10 Governmentp olicies 3 = Import regulations 2 Businesso pportunities 5 Sources of resources Import licensea pplications 8 Approval of advertisement 15 Approval of applicationst o provincialg overnment 6 Approval of applicationst o central government 7 Recruitmento f labor 14 Securing land for joint ventures 12 Securinge lectricityf or joint ventures 11 Securing raw materialsf or joint ventures 13 Other areas Building up the company'sr eputation/image 9 Smootht ransportationa rrangements 3 = Smoothc ollectiono f payment 1 211
Without guanxi, one simply cannot get anythingd one. canf acilitates ortingm, appinga, ndl ocatingfa cilitiest, he then umbear ndp roportioonf respondenwtsh or atede ach focus group discussionsw ith managers uggestetdh at benefit" leasti mportant("1 )and" mosti mportant("6 ). guanxia lso yieldsb enefitsin respecot f securinga ccess As Table1 shows,s moothco llectiono fp aymenwt ass een to tangibler esourcesin the form of land, labor, raw as them osth ighlyr atedb enefiat ccruingto thee stablish- materialsa,n de lectricitya,s well as resourceisn thef orm mento f guanxi,f ollowedb y informatioonn importr egu- of rights,s ucha s importl icensesl,o cal governmenatp - lationsa ndr estrictionsa,n do n governmenpto he provals,a ndc entralg overnmenatp provals, benefitsr atedl easti mportancto ncernetdh e approvaol f Threea dditionabl enefittsh atw eres uggestebdy thef o- advertisemenrtes,c ruitmenotf labor,a ndt hes ecuringo f cusg roupsw eres moothintgra nsporatr rangemenstsm, ooth- rawm generalb, enefitcs oncernintgh es mooth ing collectiono f paymentsa,n db uildingu p thec ompany runningo f routinea ndf requenttr ansaction(ps aymenatn d reputatioann di s thesed id notf it easilyi nto any transportr)e ceivetdh eh ighesrta tingsf,o llowedb y benefits oft heo therc ategorieosf b enefitth eyw eres implyd escribed concerninign formationw, ith benefitsc oncerninagc cess as othera reas, to resourcebs eingp erceiveda s less important. For eacho f thea reast hes pecificb enefitsh ypothesized The categorieosf benefitu sedi n Table 1 werea rrived werel isted,a ndt her espondenwtse rea skedt o givet hem at a priorit hroughth ef ocusg roupd iscussionsa,n dt hey a ratingo n a 6-points caler angingfr om" leasti mportant" seemt o haves omem eriti n describingth eg eneranl ature (1)t o "mostim portant("6 ). Table1 showst her esultsT. he of theb enefitsth ata mores ophisticateadp proach firstc olumns etso utt hem eans coref or eachh ypothesized to identifyincga tegorieosf benefiits to usef actora nalysis benefita, ndt her ankingo f thatm eans s them eans to empiricallyd eterminteh ee xistencoef factorsu nderly- differo nlys lightlya ndt hereis a tendencfyo r ther esponses ing the structureo f the responsetso the 15 variables tob uncha roundth ec enteor ft hes cale,t het ablea lsos hows identifiedT. hata nalysiisd entifiefdo urf actorsh avinge igen- TABLE 2 Factor Loadlnga on Variables (for Ioadings I>4) Factor 1 Factor 2 Factor 3 Factor 4 Sourceso f information Markett rends .6692 Governmenpto licies .4401 .4424 Importr egulations .4854 .4528 Businesso pportunities .5877 Sourceso f resources Importl icensea pplications .5883 Approvalo f advertisements Approvalo f applicationtso provinciagl overnment .8922 Approvalo f applicationtso centalg overnment .6957 Recruitmenotf labor .5281 Securingla ndf or joint ventures .9048 Securinge lectricityfo r joint ventures .7591 Securingra w materialfso r joint ventures .6426 Othera reas Build up thec ompany'rse putation/image .5002 Smootht ransportatioanrr angement .4922 Smoothc ollectiono f payment .4311 .7192 212
Guanxi smoothst ransactions,p rovides informationa nd resources. valuesg reatetrh an1 , accountincgu mulativeflyo r % requirelso okingb eyondth et ransactioant handt o its im- of thet otalv ariancew, itht hef actorlo adingsa s shownin plicationsfo r thed evelopmenotf personarle lationships. Table2 . By bestowinfga vora ndf acet hroughco nsideraaten ds en- Examinationof Table2 suggesttsh att he four factors sitiveg ivingo f minorg ifts,h ostinga ppropriatdei nners, identifieedm piricallrye latere asonabclylo selyto thet hree and( mosti mportantlyg)i vingp ersonaal ttentiona, bus- categorietsh atw ereu sedi n theq wever, inesspersocna nd emonstratthee g oodf aitht hatf ormst he it alsos uggestas slightlyd ifferenste to f interpretabulen - basisf or a graduatl ransitionfr omo utsidetro insider. derlyingf actorst hatc ouldr epresentth ed atam orep ar- Onceg oodg uanxih asb eene stablisheda, numbero f ctor1 relatevs eryd irectlyto "procurement" benefitws ill accrueA. ccordingto theH ongK ongC hinese andv ariationin thatf actora ccountfso rt hel argespt ropor- insiders urveyeidn thiss tudyt, hem osti mportanbte nefits tiono f thet otalv ariancein thed actor2 appeartso arisei n respecot f thes moothru nningo f routineb usiness be well-characterizaesd a "bureaucracvya" riableb, eing operationisn, securinign formatioanb ougt overnmepnot li- highlyl oadedo nt hev ariablecso ncerninign formatioanb out cies,a ndi n securinagd ministratiavpep rovalsT. heser esults regulationasn ds ecuringa dministrativaep ctor needt o be qualifiedin a numbeor f he managers 3 relatews ellt o theo riginacl ategoroyf "" c- questionemd ayn oth aveh ada full viewo ft heirc ompany's tor4 is mored ifficult,b eingh eavilylo adedo nt o twov ari- useo fg uanxiD. ifferenrte spondenthsa, vingd ifferenbtu si- ablesr epresentintgh ee fficiencyo f frequenttr ansactions nessf unctionsa nd experiencems, ayh avea nsweretdh e anda nothe(rc ompanyre putatioann di mage)t hatw ould questionws ithc ompleteldyi fferencto ntextisn mind,s ome appeatro havel ittlei n commone, xcepitn sofara s reputa- beingc oncernewdi th marketings,o mew ith production, tiona ndi magem ayb e builto n reliabilityw ithr espectto somew ithf inances, omew itht hem aintenanocef e xisting paymentasn dt ransport, activities,o mew ithn ewd evelopmenstusc ha sm arkeetn try or negotiationosv erj ointv enture stablishmenFtu. rther workn eedst o be donei n ordert o controlt hec ontexitn MANAGERIAL IMPLICATIONS whichg uanxis verthelestsh, es tudyh as AND CONCLUSIONS helpedto developa vocabularwyi thw hicht o describteh e benefitas risingf romg uanxi,a ndh ast akena stept oward It is clearf romt hee xperiencoef bothW esterna ndH ong a fulleru nderstandinogf t hew aysi n whicht hem anage- KongC hinese xecutivetsh att heC hinam arkect annobt e mento fg uanxci anc ontributteo thee nhancemeonftc om- tacklede ffectivelwy ithoupt ayingd uea ttentiotno thec on- petitivea dvantage. structionan dm aintenanocef g oodg uanxiB. usinestsr ans- actionsw ith Chinesein dividualsa ndo rganizationnse ed to be approacheidn thek nowledgteh att heC hinesew ill REFERENCES placet hemi n thec ontexot f theiro wn guanxin etworks, whichm ayr equirem eetinogb ligationtso individualws ho 1. AnderssoPna, n,A nalyzingD istributioCnh anneDly namicsL: oosea nd TightC ouplingin DistributioNne tworksE, uropeaJno urnalo fM arketing haven o directi nvolvemenint them atteor n ence 26,4 7-68(1 992). thec ommonW esternc omplaintth att he" real"d ecision- 2. BrunnerJ,a mes,C hen,J iwei, Chao,S un,a ndZ hao,N anpingT, he Role makecr annobt ei China'sc ollectivisctu lture, of "Guanxi"in Negotiationisn theP acificB asin,J ournalo fG lobalM ar- the" real"d ecision-makmera yb et hen etworka s a whole, keting3 , 7-23( 1989). nots omem ysteriouasn du nseenin dividualA. t thes ame 3. BrunnerJ,a mesA ., andT aoka,G eorgeM ., Marketinga ndN egotiating Westernin theP eople'Rs eb n time, publico f China:P erceptionosf AmericanB usinessmeusinessmesnh oulda ppreciatteh att hey WhoA ttendethde 1 975C antoFna ir,J ournal ofI nternationaBlu siness themselvense edt o establishg uanxio f theiro wn, which StudiesF all/Winte6r,9 -82(1 977). 213
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