Guanxi : the Chinese third arm

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School of Business | Doctoral thesis (article-based) | Defence date: 2007-05-25
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2007

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Organisaatiot ja johtaminen
Organization and Management

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Language

en

Pages

[166] s.

Series

Acta Universitatis oeconomicae Helsingiensis. A, 303

Abstract

In his dissertation Matti Nojonen explores the complexities of guanxi, interpersonal relationships, in commercialising China. This work demonstrates that guanxi still plays a central role in Chinese business, yet that role is a complicated and ambiguous one that manifests and embodies a number of indigenous building blocks of Chinese sociality, such as renqing (human feeling, or favor), mianzi (face, social reputation) and huibao (reciprocity). However, in the actual guanxi process, agents have to estimate outcomes and make their decisions based on very limited knowledge. Particular social, socio-psychological, institutional and regional circumstances shape the process and outcome. The findings of this study challenge the prevailing depiction in business research of the nature of guanxi practice as a smooth and ever-expanding process that has strategic importance to firm performance in China. This study argues that the establishment and utilisation of guanxi is complicated and contains a wide variety of risks and uncertainties. There is an ongoing prominent debate on the origins of rampant reliance on guanxi in China. This study takes a critical stance to the culturist approach, which attributes the emergence of guanxi to the traditional Chinese philosophies, mainly Confucianism. In contrast, this study illustrates that China’s reform of the state bureaucratic command system causes agents to rely on guanxi. The reform of China’s fiscal system created an environment where local regimes were gradually cut off from budgetary support by the central regime and they were given the initiative to generate their own fiscal revenues. Consequently, local regimes established hundreds of thousands of semi-private parastatal business organizations that were used to fill regional state coffers through fees, projects, licenses and trading various government resources at the emerging market. This devolution of central power coincided with the spatial liberation of markets and the privatization of firms. In addition, spatial reforms in different regions and sectors generated a host of institutional and procedural uncertainties that changed in a kaleidoscopic manner and forced agents to work through personal relationships. These reforms have led to evident differences in authority relations, procedural unpredictability and institutional power asymmetries that condition and force agents to create and rely on personal relations with state and semi-state organisations. Hence, as power asymmetry and circumstancial uncertainties force agents to rely on guanxi, the actual guanxi process leads agents into a new sphere of uncertainties which are related to guanxi itself. As a matter of fact, some particular constructions of guanxi can hinder or even restrict the economic performance of a firm. The increasing competition over resources can even drive individuals to engage in ethically or legally dubious business actions, which are also manifestations of guanxi. Due to the sensitivity of guanxi practices it is challenging to gain information on the topic, which affects the fieldwork process. The guanxi process is also guided by estimations of potential gain and socio-economic costs, long- versus short-term advantages and disadvantages and estimations on when the parties involved are likely to reciprocate and when and how to turn down a guanxi approach. Parties recognise these uncertainties; how transactions do not automatically lead to reciprocal favours, success or better performance, but are complex and can hinder business performance or even cause failure.

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Supervising professor

Tainio, Risto, professor

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https://urn.fi/URN:ISBN:978-952-488-132-6

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[diss] Kauppakorkeakoulu / BIZ