When does Guanxi matter? Issues of capitalization and its dark sides

Document Information:
Title:	When does Guanxi matter? Issues of capitalization and its dark sides
Author(s):	Gu F F, Hung K, Tse D K
Journal:	Journal of Marketing, Jul 2008, Volume: 72 Issue: 4 pp.12-28 (17 pages)
Issn:	0022-2429

Keywords:	Buyer-seller Relationships, China, Chinese People, Corporate Strategy, Management Culture, National Cultures, Sociotechnical Theory, Supplier Relations, Vendor Relations
Article type:	Research paper
DOI:	10.1509/jmkg.72.4.12
Reference:	37AR422 (Permanent URL)
Abstract:	Purpose - To examine the influence of guanxi (interpersonal relationships for organizational purposes) on firms' marketing competence and performance in China. Design/methodology/approach - Deliberates on guanxi as a governance structure in China. Comments on recent guanxi studies suggesting its cultural significance regarding use for firm performance has waned. Draws on social capital theory in generating several guanxi-related hypotheses. Explores them and firms' corporate channel and responsive capabilities by Likert-style interviewing of senior executives in 282 Chinese business units across 48 categories of consumer products. Uses measurement scales adapted from the literature. Employs factor analysis, and ordinary least squares regression. Findings - Lists questions employed within tables covering measurement model results and moderating effects of market forces and firm capabilities. Concludes, inter alia, that: guanxi is flourishing and significantly impacts brand market share and sales growth; guanxi influences brand performance via channel capability (efficient/effective product delivery) and responsive capability (flexible response to environmental changes); guanxi can build firm competences; but, guanxi can have negative effects through required reciprocal obligations, and could induce collective blindness. Declares forces that loosen network structure (competitive intensity, technological turbulence) could undermine firms that rely too much on guanxi. Research limitations/implications - Seeks more comprehensive research. Practical implications - Suggests Chinese managers should understand guanxi as a culture-based governance structure that can be capitalized to their firms' benefits, but which also has potential negative effects. Originality/value - Shows that guanxi still operates in China and needs to be fully understood if it is to be employed to benefit firm performance.