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Journal of Business Ethics (2006) 67:375392 Springer 2006 DOI 10.1007/s10551-006-9031-7
Guanxi and organizational dynamics in China: a link between individual and organizational levels
Yi Zhang
Zigang Zhang
ABSTRACT. Guanxi in China is a very ancient concept embedded in the Confucian concept of life and one that is a hot topic in that it is currently attracting increasing attention from both Western and Chinese scholars. One aspect of Guanxi which has been the subject of most of the research of late is the influence of Guanxi on firm performance. However, relatively few studies have examined how Guanxi at the individual level is transferred into a firm to influence its financial performance. This study first reclassifies Guanxi into obligatory, reciprocal, and utilitarian types at the individual level as a means to clarifying the confusion brought above from previous studies. It then provides a conceptual framework in which to systematically characterize the link between Guanxi at the individual level and organizational dynamics: that is, how is Guanxi at the individual level shifted to a firm and how does it affect organizational dynamics of that firm at the organizational level. Finally, it provides a deeper understanding of the financial implications of Guanxi to business firms in China.
KEY WORDS: China, Guanxi, Individual level, Link, Organizational dynamics, Organizational level
Introduction
Networking is a fashionable topic that has been receiving increasingly more attention this past decade from Western organizational theorists and strategic researchers (Gulati, 1998; Gulati et al., 2000; Jarillo and Ricart, 1987; Thorelli, 1986). However, Guanxi, which is an ancient Chinese form of networking that shares certain characteristics with modern Western networking, has existed in Chinas Confucian society for more than two thousand years. It was not until China opened its doors to the outside world at the end of the 1970s that it has been investigated in any great detail.
Guanxi refers to a network of informal interpersonal relationships and exchanges of favors established for the purpose of conducting business activities throughout China and East Asia (Lovett et al., 1999). It is foremost a cultural concept that implies interpersonal connections, but its underlying philosophy has dominated peoples social and economic lives for a long time. Its strengths are partly due to the fact that Guanxi is an intricate and...