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

Flora F. Gu, Kineta H HUNG, David K. Tse

Research output: Contribution to journalArticlepeer-review

449 Citations (Scopus)

Abstract

Guanxi refers to the durable social connections and networks a firm uses to exchange favors for organizational purposes. This study examines how and when guanxi operates as a governance mechanism that influences firm marketing competence and performance in the transitional economy of China. Drawing on social capital theory, the authors propose an integrative framework that unbundles the benefits and risks of guanxi and delineates the organizational processes to internalize guanxi as a corporate core competence. The authors surveyed senior executives in 282 firms in China's consumer products industries. The findings confirm guanxi's direct effects on market performance and its indirect effects mediated through channel capability and responsive capability. The authors also confirm that technological turbulence and competition intensity can be effective structure-loosening forces, thus reducing the governance effects of guanxi. The findings suggest that firms can improve market access and growth through guanxi networks, but managers need to capitalize on them from the personal to the corporate level. In addition, managers should be aware of guanxi's dark sides, which include reciprocal obligations and collective blindness. This study shows that personal networks are popular universally, but in China, they have unique, distinct ways of operation.

Original languageEnglish
Pages (from-to)12-28
Number of pages17
JournalJournal of Marketing
Volume72
Issue number4
DOIs
Publication statusPublished - Jul 2008

Scopus Subject Areas

  • Business and International Management
  • Marketing

User-Defined Keywords

  • China market
  • Guanxi
  • Personal connections
  • Social capital theory
  • Transitional economy

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