Guanxi free essay sample

The Chinese Cases Liang-Hung Lin ABSTRACT. Being different from the Western concept of ‘‘relationship,’’ Chinese concept of ‘‘relationship,’’ that is, guanxi profoundly in? uences Chinese society in commercial activities, business ethics, and organizational behaviors. Moreover, ? rms can develop their networks of guanxi to gain competitive advantages. Highlighting the cultural and organizational antecedents of guanxi, namely Confucianism and organizational ethical climate, this study examines the in? ence of these two antecedents on guanxi and makes comparisons of guanxi, Confucianism and organizational ethical climate between Taiwan and Mainland China. The results show that Taiwan, where preserves more Confucian culture, tends to put much emphasis on guanxi than Mainland China, especially with respect to mianzi. Concerning ethical climate, Taiwan tends to have instrumental, and law and code ethical climate. KEY WORDS: guanxi, Confucianism, organizational ethical climate Introduction Chinese guanxi has been a popular issue in the ? ld of social science since 1980. Western managers and scholars also ? nd that even though guanxi in Chinese society and ‘‘relationship’’ in Western society seem to have similar literary meaning, they are actually different in expression and result (Xin and Pearce, 1996). In Chinese society, guanxi is one of the disciplines in life and has profound in? uence on commercial activities, business ethics, and organizational behaviors. It is thus regarded as the central notion of understanding Asian society and business behaviors (Boardman and Kato, 2003; Luo, 2002). In addition, it supports two or more than two organizations dealing with resource transactions and distribution, or sustains behaviors resulting from mutual contact and interaction. Yeung and Tung (1996) pointed out that guanxi refers to a general form of social networks and has the implication of ‘‘gate/pass’’ and ‘‘connection. ’’ In other words, a network of guanxi is established in the connection between two independent bodies, the purpose of which is to promote mobility of individual or social transactions between two sides. Moreover, both sides have to be driven by bene? ts and con? rm the continuance of guanxi when doing business with each other. Guanxi is emphasized by Chinese society, in which roles and bene? ts are subtly related to each other or even dif? cult to be separated. Analyzing the effect of guanxi on modern Chinese society, Yang (1994) regarded guanxi as a key factor in driving Chinese government to operate. Moreover, people usually use guanxi to control others and distort the laws. Yan (1996) then indicated that guanxi is established by the development and maintenance of network relationships to help one get through all kinds of dif? culties in life. Kipnis (1997) even precisely pointed out that the formation of guanxi in Chinese society involves complex social and affectionate networks within peers, families, or friends and these networks consist of three elements, namely mianzi, affect and reciprocal favor. Furthermore, guanxi is one of the major dynamic characteristics in Chinese society. It not merely refers to a very special relationship between two people, but also implies an endless exchange of favors (Alston, 1989). Thus, the existence of guanxi between people usually relies on three elements: (1) sharing identities and status with others in a group or mutually having an association with the same person; (2) actual connections and frequent contact between people; and (3) getting close to someone by direct interpersonal interaction. In addition, guanxi is considered as interpersonal networks of reciprocal bonds. Liang-Hung Lin According to the above descriptions, it can be seen that interpersonal relationships in China are very abstract and are established by cultural-rooted criteria (Tsui and Farh, 1997). Xin and Pearce (1996) considered that guanxi is a general and important element of culture and society in Eastern society. At the same time, it is also the key force which promotes relationships between people or organizations. To those Chinese ? rms, guanxi is closely tied to life. The development of guanxi can be regarded as a competitive advantage to face competitions and overcome resource shortage. It thus becomes the vital source of social capital (Lin, 2007) and commercial activities in Chinese society. Concerning organizational behavior, guanxi represents informal relationships and networks which are established through favor exchanges. It roots in Chinese traditions and predominates the commercial activities in China and East Asia (Lin and Ho, 2009; Lovett et al. , 1999). Following the previous studies of guanxi, this study contributes to organizational ethical literature by answering one question: Where does guanxi come from? In order to properly elucidate guanxi in Chinese culture, this empirical study aims at highlighting the cultural and organizational antecedents of guanxi, that is, Confucianism and organizational ethical climate. The in? uences of Confucianism and organizational ethical climate on guanxi will be hypothesized and examined in the following sections. (Alexander and Rudd, 1981). While ‘‘face’’ represents an identity at individual level, mianzi in Eastern society represents a positive social value that one successfully earns from others in speci? c social interaction. It is also the self-image which is praised by society (Goffman, 1972). In their Politeness Theory, Brown and Levinson (1978) brought up two kinds of face, namely negative and positive face. While positive face refers to the need of one’s value to be accepted or praised by related people, negative face refers to the public image which represents independence and self-suf? ciency. In order to enhance and extend feasible guanxi, it is indicated that mianzi must be maintained to a certain degree (Yeung and Tung, 1996). Park and Luo (2001) suggested that mianzi represents the social trend and imagined individual status which are in? enced by one’s social status and actual wealth. As long as strong mianzi is earned, one can take control of dynamics in social networks. In China, mianzi denotes one’s public image which is built by certain social roles and it deeply in? uences Chinese social life. Thus, ‘‘saving mianzi’’ closely relates to self-e steem. In Chinese society, if one loses mianzi, one cannot have a foothold or even live in society. In sum, mianzi is the key element of Chinese relationship dynamics and indicates a social status or reputation that one earns from his/her achievements in society. The exercise of mianzi can be viewed as a kind of impression management, being deliberately manipulated by an individual in order to create a particular impression on others. In other words, mianzi involves one’s status in Chinese social networks, the possibility to be accepted by society, as well as the special power one can enjoy. Thus, mianzi is important to one individual. Affect Yang (1994) considered affect as a type of social resource, which has the function of leverage in interpersonal transactions. This social resource includes not only the speci? aspect of money or commercial goods, but also the abstract aspect of emotion, showing one’s informal social responsibility toward partners. In the exchange of resources, ‘‘judgment of guanxi’’ is the major concern by Chinese (Hwang, 1987). Moreover, when one develops a network of guanxi in which affect is involved, one is at the same time constrained by this Literature review Characteristics of guanxi Based on Kipnis (1997), guanxi involves mianzi, affect and reciprocal favor, which are the characteristics of guanxi. Mianzi Not merely the product in Asian collective culture, mianzi is actually the concept generally existing in all cultures (Pharr, 1989). However, the extent to which mianzi is concerned, its external performance and its criteria for judgment between Western and Eastern society are very different (Brown and Levinson, 1978; Ho, 1976). In Western society, the concept of mianzi is close to that of ‘‘face,’’ referring to one person’s identity in a particular situation Cultural and Organizational Antecedents of Guanxi network. In Chinese society where guanxi and the exchange of guanxi are emphasized, affect is usually used by Chinese to maintain their guanxi with others (Hwang, 1987) and the criteria of guanxi exchange relies on the situation whether it abides by affect. Once one receives affect from others, even if it is paid back afterward, the complex of affect being given is still there. This concept of affect thus makes guanxi be seen as a long-term investment by Chinese society. Reciprocal favor Reciprocity in Western networks means that two sides must take the same value and reciprocate equally to each other. All the exchanges are in pursuit of the balance between costs and bene? ts (Powell and Goulet, 1996). The study by Park and Luo (2001) showed that in the principle of reciprocity, guanxi should be reciprocal. However, in Chinese society, it is reciprocal in the maintenance of guanxi, but not always in bene? ts (Jacobs, 1979). Hwang (1987) indicated that inter-reciprocity and inter-dependency of the corresponding roles make interpersonal guanxi a symbiotic system, in which guanxi of both sides is complementary instead of being equal. After adding affect and guanxi to reciprocal favor, originally simple behaviors of exchange has a subtle change. Moreover, the major concept of reciprocal favor lies in the consistency in quality, but not in quantity. Concerning the time of reciprocity, while reciprocal favor in Western society is considered to be immediate, short-term, or discharged within a certain period of time (Tsui and Farh, 1997), that in Chinese society involves ‘‘be my teacher for a day, be my teacher for a lifetime,’’ that is, the concept of lifetime reciprocity, or even reciprocity in afterlife, if one thinks favors are too great to be discharged in this life. Tsui and Farh (1997) considered that behaviors of reciprocal favor derive from affect, which implies an ideal network of guanxi. If one ignores the commitment of reciprocal favor, one will feel losing mianzi or even jeopardize his/her social networks. relations at that time, he thus devoted himself to developing Confucian doctrine, the ultimate concern of which was to establish order in society. In the doctrine, wu-lun not only established social rules, values, and hierarchical power structure, but also formed factional networks, all of which have profound in? uence on follow-up Chinese culture. Therefore, connections between people are usually emphasized above formal requirements and legal regulations (Luo, 1997). Confucians claim that when socializing with others, one should judge his/her role relation with others by two cognitive dimensions, namely closeness and pecking order. While closeness refers to having a near or distant relation, pecking order refers to having an inferior or superior status between individuals. After the judgment of these two dimensions, paying respect to those whom they honored is the sense of benevolence and serving those who are dear to them is the sense of righteousness. As for the sense of decorum, it is the differential reaction which is made based on the relative degrees of natural affection and the relative grades of honor we have toward others. When this structure is carried out upon one speci? c role, Confucians then further make different requirements in accordance with different role in guanxi. Therefore, ‘‘between father and son, there should be affection; between sovereign and minister, righteousness; between husband and wife, attention to their separate functions; between old and young, a proper order; and between riends, ? delity’’ (Mencius/Teng Wen Gong I), in which guanxi between father and son, sovereign and minister, husband and wife, old and young, and friends, are called wu-lun in Confucianism and each guanxi should be established on the basis of benevolence. It should be also noticed that except for guanxi between friends, the other four contain a vertical differential relation between inferior and superio r. Being in? uenced by the tradition of Confucian culture, guanxi in a family can be considered as the most important one in Chinese society. Hwang (1987) even argued that familism is one of the most important characteristics in Chinese culture and also the basis of Chinese organizations. Park and Luo (2001) used the metaphor of spider web to describe Chinese social networks, where self is located in the center of networks and put others in a near or distant position of irregularly concentric circles, depending on the intimacy in between. On Confucianism and guanxi Confucius was born in the Eastern Zhou Dynasty (551–479 BC). Witnessing the con? icts of human Liang-Hung Lin the one hand, the concept of ‘‘locating self in the center’’ shows the characteristic of autism. On the other hand, others who are put in different circles will be treated differently. In his study of principles, philosophy, and meaning of guanxi, Luo (1997) suggested that guanxi is one of the major dynamics in Chinese society, being involved in or surrounded by general commercial activities. Moreover, its networks are the life blood of social macroeconomics and individual commercial activities. Thus, guanxi is generally regarded as one of the decisive factors in the business performance. Yeung and Tung (1996) studied the relation between guanxi and ? nancial performance of 19 ? rms in Mainland China and the results showed that if one ? rm wants to have a longterm success in Chinese society, guanxi plays an important role. Also, they indicated that guanxi is established in the connection between two independent bodies, the purpose of which is to promote the ? ow of individuals or social transactions. Both sides have to be driven by bene? ts, con? ming the continuance of guanxi in the process of transactions. Lovett et al. (1999) proposed that when technology is stable but environment changes rapidly, commercial transactions often depend on one’s guanxi instead of formal contracts. Chinese sense of guanxi integrates things both possible and impossible to be calculated and uses the weighted concept to depict the qualitative change process of integration. Therefore, guan xi can be seen as affections weighting bene? ts, the qualitative change process through combination of speci? c affections and general bene? s, producing a fermentative connection effect between people. The formation of this ‘‘affections weighting bene? ts’’ relies on the weighted effect. The term ‘‘weighted’’ in the formation of guanxi here refers to a similar to qualitative changing and fermentative reaction in chemistry. In Confucianism, guanxi is a kind of cultural logic, that is, considering guanxi as the performance of Confucian cultural essence and seeing this logic as the cultural essence of Chinese society in Greater China, including Mainland China, Taiwan, Hong Kong, Singapore, and so on (Cheung and Chan, 2005). Confucianism is also described as long-term orientation which refers to ‘‘the acceptance of the legitimacy of hierarchy and the valuing of perseverance and thrift, all without undue emphasis on tradition and social obligations which could impede business initiative’’ (Franke et al. , 1991, p. 167). High Confucian dynamism characterizes individuals who tend to put more emphasis on future oriented Confucian teachings (Yeh and Lawrence, 1995). In the aspect of short-term orientation, guanxi can immediately provide an individual access to the means of private pro? s and substitute a formal organization in order to support and reduce external threats and uncertainty. Nevertheless, in his application of resource-based theory to the analysis of guanxi network, Tsang (1998) argued that if guanxi network does not possess its own value, scarcity, and the characteristic of not being able to be completely imitated, it basically cannot provide any competitive advantages to enterprises. Moreover, these characteristics require correct detection and long-term cultivation of guanxi. Thus, the maintenance of guanxi needs long-term efforts of affection, trust, commitment and mutual bene? t investment. The idea of ‘‘long-term orientation’’ referring to longterm maintenance and cultivation of guanxi network is also supported by Tsang (1998). In order to strengthen guanxi, long-term investment of time in building affections by both sides is required. Yeung and Tung (1996) also mentioned that long-term interaction of bene? ts can establish dependency between two independent bodies within guanxi. Based on the above discussions, this study argues that in order to strengthen the value of guanxi and continue its development, the establishment of guanxi depends on not merely individually active efforts, but also long-term investment in maintaining mutual affections, trust, commitment, and reciprocal behaviors. In this way, guanxi can thus become an ef? cient operating mechanism, using the information transmitted by networks of guanxi to achieve effective economic purposes. Thus, this study proposes: H1: Confucianism positively in? uences guanxi. Organizational ethical climate and guanxi Chinese ethics emphasize relativity and business ethics are established in the general principles of Chinese ethics. Tsui and Farh (1997) were of the opinion that guanxi indicates the objectively Cultural and Organizational Antecedents of Guanxi common background or common experience between individuals. It also implies the differential treatment in interpersonal interaction. Concerning guanxi bases among members in a group, because they have different intensity and depth in interaction, guanxi bases and the centrality of interactive networks should have a positive relation. Different guanxi bases here refer to different guanxi elements of affectivity, normality, and instrumentality. Moreover, responsibility, unequal status and resources, and the concept of favor and reciprocation are also different. In addition, in the studies concerning business ethics and organizational behaviors, scholars argued that business ethical climate can actually be built. Victor and Cullen (1988) were thus of the opinion that although there exists a major climate type in an organization, it is impossible to have only a single type. Instead, ethical climate types differ according to different industrial properties and transactions. Furthermore, they categorized organizational ethical climate into ? ve dimensions. The ? rst one is caring ethical climate, emphasizing care and kindness in the interactive process between ? rm and individuals. Whether a ? rm cares about the bene? ts of its employees is included in this dimension. In a ? rm with instrumental ethical climate, employees, on the one hand, tend to pursue their own bene? ts. On the other hand, they are expected to enhance ? rm’s bene? ts without worrying about any consequences. A ? rm with independence ethical climate respects and allows its employees to perform based on their moral standards. Moreover, it pays attention to employees’ ability of distinguishing right from wrong and their own ethical policy without being in? uenced by others inside and outside the organization. In other words, employees tend to put emphasis on and develop their own guanxi in this climate. The fourth dimension of ethical climate is law and code. A ? rm with this climate expects its employees to comply with the laws or the professional ethics above any other considerations. In other words, employees’ behaviors are guided by the laws. Finally, if a ? rm has rules ethical climate, the rules and operating procedures are norms which are emphasized. In ? rms with the last two ethical climates, employees tend to de-emphasize and weaken their guanxi. Sinclair (1993) thought that organizational ethical climate in ? rms is one of the most important factors which in? uence ethical behaviors of employees. Thus, if one can understand the relationships between business ethical climate and ethical behaviors, one will know how to manage them. Wimbush and Shepard (1994) also argued that employees’ behaviors will change if business ethical climate changes. In view of serious damages to ? rms and society from unethical behaviors, managers can prevent employees from performing unethically through changing business ethical climate in ? rms. Furthermore, the formation of business ethics can help organizations establish ethical norms, making employees not only understand correctly ethical behaviors and ethical issues, but also have common cognition in prevention of unethical behaviors. Based on the above arguments, this study proposes: H2: H2a: H2b: H2c: H2d: H2e: Organizational ethical climate in? uences guanxi. Caring ethical climate positively in? uences guanxi. Instrumental ethical climate positively in? uences guanxi. Independent ethical climate positively in? uences guanxi. Law and code ethical climate negatively in? uences guanxi. Rules ethical climate negatively in? uences guanxi. Method Sample and data analysis method This empirical study examines the in? uences of Confucianism and organizational ethical climate on guanxi. Data ere collected from questionnaires of individuals with at least 1 year work experience in Peking, Shanghai, Nanking, Sian (big cities in China), Kaohsiung, and Taipei (big cities in Taiwan) from August to December in 2009. At ? rst, 250 questionnaires were distributed to Taiwan and 250 to Mainland China. After eliminating 30 invalid questionnaires, this study yields a sample of 470 questionnaires with 94% response rate. 49% of the re spondents are male and 51% of them are female. As for individual ages, 38% of the respondents are under 25, 33% of them are in the ages ranged from 26 to Liang-Hung Lin 35, 19% of them are in the ages ranged from 36 to 45, and 10% of them are in the ages above 46. Concerning educational background, the majority of the respondents have a bachelor degree (38%), 24% a college degree, 30% a high school diploma or under, and 8% a master or doctorate degree. As for capital, the majority of the respondents are in private ? rms (46%), 20% are in state-run ? rms, 22% are in foreign ventures, and 12% are in joint ventures. Variable de? nition and measure Dependent variable The dependent variable in this study is guanxi. Its aspects are based on the de? nition by Hwang (1987), Kipnis (1997), and Lee and Dawes (2005), considering that Chinese guanxi refers to the interaction between people and involves mianzi, reciprocal favor and affect: (1) mianzi: referring to individual behaviors which conform to social expectations, or respect, dignity and public image which are earned by one’s achievements in society. (2) Reciprocal favor: members in a group help each other when needed and favors can be repaid by reciprocation. (3) Affect: associations between people rely on long-term continuity. Guanxi in this study is divided into three dimensions: mianzi (4 items, a = 0. 75), affect (2 items, a = 0. 78), and reciprocal favor (2 items, a = 0. 81). Question items of Guanxi Questionnaire (GQ) are designed with a 5-point Likert-type scale to know how employees care about mianzi (e. g. , the more respect we receive from others, the more mianzi we have); how employees enhance affect with business partners (e. g. , my business partners will sometimes give me gifts or souvenirs); how employees regard their business partners (e. g. I genuinely regard my business partners as good friends) (Lee and Dawes, 2005). Independent variables Independent variables, in this study, are Confucianism and organizational ethical climate. Based on two studies concerning cross-cultural valuing systems, namely Hofstede’s cultural dimensions (Hofstede, 1980) and the national Rokeach’s Value Survey (Ng et al. , 1982), Hofstede and Bond (1988) developed Chinese Values Survey (CVS) to examin e cultural values in 22 Asian and Western nations from a perspective of Chinese social values. In CVS, Confucianism as long-term orientation was found to boost the performance of national economics. This dimension, which represents a form of Confucian philosophy, comprises six 5-point Likert-type items, including ‘‘I am always careful not to do anything inappropriate,’’ ‘‘I never forget my goals even in the face of adversity,’’ ‘‘I avoid offending others,’’ and ‘‘I respect elders. ’’ This dimension has an a value of 0. 78. In measuring organizational ethical climate, this study uses a modi? ation of Ethical Climate Questionnaire (ECQ) (Victor and Cullen, 1988) to ask respondents to rate the importance of ? ve ethical climate dimensions, caring (7 items, a = 0. 77), law and code (4 items, a = 0. 81), rules (4 items, a = 0. 74), instrumental (7 items, a = 0. 75), and independence (4 items, a = 0. 75) on a 5-point Likert-type scale to measure individual perceptions of ethical t houghts. The caring ethical type includes high factor loading items such as ‘‘The good of all the individuals in the ? m should be the main priority’’ and ‘‘Efforts should be made to maximize the bene? t of others. ’’ The law and code type of ethics includes high factor loading items such as ‘‘Individuals should comply with the law and professional standards over and above other considerations’’ and ‘‘The law or ethical code of their profession should be the main consideration for working individuals. ’’ Rules type of ethical climate includes items such as ‘‘Individuals should follow ? rm rules and procedures’’ and ‘‘Everyone should follow the ? m rules and procedures. ’’ The instrumental type includes items such as ‘‘Individuals should do whatever is necessary to further ? rm interests, regardless of the consequences ’’ and ‘‘Individuals should protect their own interests above all else. ’’ The independence ethical type includes items such as ‘‘Firm employees should decide for themselves what is right and wrong’’ and ‘‘Firm employees should follow their own personal and moral beliefs. ’’ Control variables Control variables include three parts. Firstly, demographic variables: gender (male, female), age Cultural and Organizational Antecedents of Guanxi (under 25, 26–35, 36–45, and above 46 years old), educational background (senior high school or under, college, university, and master or doctor program), previously accumulated work seniority (1–5, 6–10, 11–15, 16–20, and above 20 years). Secondly, capital variables: state-run ? rms, private ? rms, joint ventures, and foreign ventures. Finally, environment variables: residence in Taiwan or in Mainland China. Reliability and validity of variables The questionnaire of this study, guanxi Questionnaire (GQ), is designed based on Lee and Dawes (2005), the scale of which was revised by Hwang (1987) and Kipnis (1997), Confucianism is based on national culture scale by Hofstede and Bond (1988) and Franke et al. (1991), and ECQ is designed based on Victor and Cullen (1988). After analyzing each dimension, items with factor points under 0. 6 are deleted, and the rest of the items are then named, respectively. As for guanxi, overall coef? cient is 0. 80, and Cronbach’s a in each dimension is all higher than 0. 75. As for ECQ, overall Cronbach’s a is 0. 79, and Cronbach’s a in each dimension is all higher than 0. 74. In sum, the variable dimensions in this study are in the range of effective reliability. Thus, the questionnaires of this study are revised from previous questionnaires with similar topic and based on literature, reasoning and theoretical background of which has reached certain degree of stability and internal consistence. To conclude, the questionnaires of this study are not only comprised of theory base, but also content validity. Analysis and result Table I shows descriptive statistics for variables.