Can High-Status Local Partners Lead to Success in Developing Economies? Managing Quality, Order, and Opportunism in Emerging Markets

Abstract

Developing economies present many challenges for foreign business-to-business (B2B) firms: unfamiliar cultures and exchange systems, in-group biases, state-driven forms of capitalism, and weak legal systems—each and all intensifying transaction cost economics (TCE) in channel development and the resulting relationships. Yet the right local partners can provide cultural wisdom, market centrality, and other long-term performance advantages, including strategic, organizational, and financial strengths (Luo 1998; Liu et al. 2014; Shi et al. 2014). The many risks and rewards in China’s markets make informed and successful partner selection imperative. And while guanxi capitalism (McNally 2011) presents many indigenous and highly successful enterprise networks to choose from, these are complex and sometimes unforgiving in foreign-local entry and performance relationships (Luo 2007; Liu and Gao 2014).