Can Western interorganizational governance mechanisms be applied to a guanxi‐based market?

Abstract

Purpose

The emergence of “interorganizational marketing” as a hot topic leads to one key question: can interorganizational governance mechanisms (socialization, incentives, and monitoring) offered by marketing theory be applied to China, an emerging economy characterized by the Chinese guanxi relationship? The purpose of this paper is to seek to answer this question by introducing the importance of guanxi roles and by illustrating how to apply proper governance mechanisms to roles activation in Chinese business practice. The paper finds that the answer is “yes” and develops a theoretical model to show such interactions.

Design/methodology/approach

The paper applies interorganizational strategies to interpersonal relationships. Guanxi was categorized into three categories – family members, helpers and business partners – which meet each of the three governance mechanisms (in addition to favoring exchange as a special and typical Chinese governance mechanism) in the model.

Findings

Through ex post role activation, the paper argues that guanxi is a dynamic balance and the ways in which various governance mechanisms can set roles will lead to the roles either changing (reinforcement or dilution) or switching (helper to business partner, and vice versa). It seems futile to implement external governance mechanisms on family ties (the main category of guanxi) that have been firmly rooted in Chinese culture. On the other hand, applying the four mentioned governance mechanisms could reinforce, maintain, or dilute helper and business partner roles, or even make it possible to switch from one to another.

Originality/value

The paper proposes a new concept regarding relationship marketing, namely the application of governance mechanisms to interpersonal relationships, which provides people doing business in China with a new perspective for reference.

Citation

Lu, R. and Ma, J. (2011), "Can Western interorganizational governance mechanisms be applied to a guanxi‐based market?", Asia-Pacific Journal of Business Administration, Vol. 3 No. 2, pp. 114-131. https://doi.org/10.1108/17574321111169812