Asia Pacific Journal of Management

, Volume 27, Issue 3, pp 561–581 | Cite as

Can guanxi be a problem? Contexts, ties, and some unfavorable consequences of social capital in China

Article
First Online:

Abstract

Social capital is generally believed to enhance the effectiveness of organizations in certain cultural contexts. However, even with substantial social capital in place, China, during its economic transition towards market systems in the past decades, witnessed problems stemming from underdevelopment and organizational dysfunction. To address this paradox, we delineate a unique type of networks-based social capital in China: dense strong-ties accompanied by sparse weak-ties. Drawing on extant literature, a conceptual framework is proposed to reveal the dynamics of the unique social capital set-up in the Chinese context: first, a view of how the country’s social capital system was formed under conditions of resource scarcity, and of how it was further modified by its unique Chinese cultural contexts; and second, an examination of how Chinese social capital led to certain unfavorable societal and organizational consequences—namely, market fragmentation, state intervention, and rent-seeking activities. Theoretical and practical implications are discussed.

Keywords

Social capital Strong-ties and weak-ties Guanxi Chinese context 
This is a preview of subscription content, log in to check access.

References

  1. Acquaah, M. 2007. Managerial social capital, strategic orientation, and organizational performance in an emerging economy. Strategic Management Journal, 28: 1235–1255.CrossRefGoogle Scholar
  2. Adler, P., & Kwon, S. W. 2002. Social capital: Prospects for a new concept. Academy of Management Review, 27: 17–40.CrossRefGoogle Scholar
  3. Ahlstrom, D. 2010. Publishing in the Asia Pacific Journal of Management. Asia Pacific Journal of Management, 27(1): 1–8.CrossRefGoogle Scholar
  4. Ahlstrom, D., & Wang, L. C. 2010. Culture and entrepreneurial capitalism in East Asia: How history matters. In F. Lohrke & H. Landstrom (Eds.). History and entrepreneurship. Cheltenham, UK: Edward Elgar.Google Scholar
  5. Amiti, M., & Javorcik, B. S. 2008. Trade costs and location of foreign firms in China. Journal of Development Economics, 85: 129–149.CrossRefGoogle Scholar
  6. Aquino, K., & Reed, A. 1998. A social dilemma perspective on cooperative behavior in organizations. Group & Organization Management, 23(4): 390–413.CrossRefGoogle Scholar
  7. Aquino, K., Steisel, V., & Kay, A. 1992. The effects of resource distribution, voice, and decision framing on the provision of public goods. Journal of Conflict Resolution, 36: 665–687.CrossRefGoogle Scholar
  8. Baker, W. 1990. Market networks and corporate behavior. American Journal of Sociology, 96: 589–625.CrossRefGoogle Scholar
  9. Bischoff, I. 2007. Institutional choice versus communication in social dilemmas—An experimental approach. Journal of Economic Behavior & Organization, 62(1): 20–36.CrossRefGoogle Scholar
  10. Blau, P. 1964. Exchange and power in social life. New York: Wiley.Google Scholar
  11. Boisot, M. H. 1987. Information and organizations: The manager as anthropologist. London: Fontana/Collins.Google Scholar
  12. Boisot, M. H. 1995. Information space: A framework for learning in organizations, institutions and culture. London: Routledge.Google Scholar
  13. Boisot, M. H., & Child, J. 1988. The iron law of fiefs: Bureaucratic failure and the problem of governance in the Chinese economic reforms. Administrative Science Quarterly, 33: 507–527.CrossRefGoogle Scholar
  14. Boisot, M. H., & Child, J. 1996. From fiefs to clans and network capitalism: Explaining China’s emerging economic order. Administrative Science Quarterly, 41: 600–628.CrossRefGoogle Scholar
  15. Boissevain, J. 1974. Friends of friends: Networks, manipulators and coalitions. Oxford: Basil Blackwell.Google Scholar
  16. Burt, R. S. 1992. Structure holes: The social structure of competition. Cambridge: Harvard University Press.Google Scholar
  17. Chen, M.-J. 2001. Inside Chinese business: A guide for managers worldwide. Boston: Harvard Business School Press.Google Scholar
  18. Child, J. 1998. Trust and international strategic alliances: The case of Sino-foreign joint ventures. In C. Lane & R. Bachmann (Eds.). Trust within and between organizations: 241–272. New York: Oxford University Press.Google Scholar
  19. Coleman, J. S. 1988. Social capital in the creation of human capital. American Journal of Sociology, 94: S95–S120.CrossRefGoogle Scholar
  20. Coleman, J. S. 1990. Foundations of social theory. Cambridge: Belknap Press of Harvard University Press.Google Scholar
  21. Collins, R. 1980. Weber’s last theory of capitalism: A systematization. American Sociological Review, 45: 925–942.CrossRefGoogle Scholar
  22. Dawes, R. M. 1980. Social dilemmas. Annual Review of Sociology, 31: 169–193.Google Scholar
  23. Depner, H., & Bathelt, H. 2005. Exporting the German model: The establishment of a new automobile industry cluster in Shanghai. Economic Geography, 81: 53–81.CrossRefGoogle Scholar
  24. Deutsch, M. 1973. The resolution of conflict. New Haven, CT: Yale University Press.Google Scholar
  25. Deutsch, M. 1975. Equity, equality, and need: What determines what value will be used as the basis of distributive justice?. Journal of Social Issues, 31: 137–150.CrossRefGoogle Scholar
  26. Edelman, L., Bresnen, M., Newell, S., Scarbrough, H., & Swan, J. 2004. The benefits and pitfalls of social capital: Empirical evidence from two organizations in the United Kingdom. British Journal of Management, 15: S59–S69.CrossRefGoogle Scholar
  27. Edney, J. J., & Harper, C. 1978. The commons dilemma: A review. Environmental Management, 2: 491–507.CrossRefGoogle Scholar
  28. Fang, T. 2010. Asian management research needs more self-confidence: Reflection on Hofstede (2007) and beyond. Asia Pacific Journal of Management, 27(1): 155–170.CrossRefGoogle Scholar
  29. Fukuyama, F. 1995. Trust: Social virtue and the creation of property. London: Adamantine Press.Google Scholar
  30. Gao, S., Xu, K., & Yang, J. 2008. Managerial ties, absorptive capacity, and innovation. Asia Pacific Journal of Management, 25(3): 395–412.CrossRefGoogle Scholar
  31. Geertz, C. 1962. The rotating credit association: A “middle rung” in development. Economic Development and Cultural Change, 10: 240–263.CrossRefGoogle Scholar
  32. Granovetter, M. S. 1973. The strength of weak ties. American Journal of Sociology, 78: 1360–1380.CrossRefGoogle Scholar
  33. Hitt, M. A., Lee, H.-U., & Yucel, E. 2002. The importance of social capital to the management of multinational enterprises: Relational networks among Asian and Western firms. Asia Pacific Journal of Management, 19(2–3): 353–372.CrossRefGoogle Scholar
  34. Huang, Y. 2008. Capitalism with Chinese characteristics: Entrepreneurship and the state. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  35. Inkpen, A., & Tsang, E. 2005. Social capital, networks and knowledge transfer. Academy of Management Review, 30: 146–165.Google Scholar
  36. Judson, H. F. 2005. The great Chinese experiment. Technology Review, 108(11): 52–61.Google Scholar
  37. Kabanoff, B. 1991. Equity, equality, power, and conflict. Academy of Management Review, 16: 416–441.CrossRefGoogle Scholar
  38. Keister, L. A. 1998. Engineering growth: Business group structure and firm performance in China’s transition economy. American Journal of Sociology, 104: 404–440.CrossRefGoogle Scholar
  39. Kelly, H. H. 1983. The situational origins of human tendencies: A further reason for the formal analysis of structures. Personality and Social Psychology Bulletin, 2: 8–30.CrossRefGoogle Scholar
  40. Kenis, P., & Knoke, D. 2002. How organizational field networks shape interorganizational tie-formation rates. Academy of Management Review, 27: 275–293.CrossRefGoogle Scholar
  41. Kerr, N. L., & Kaufman-Gilliland, C. M. 1994. Communication, commitment and cooperation in social dilemmas. Journal of Personality and Social Psychology, 66: 513–529.CrossRefGoogle Scholar
  42. Kramer, R. M. 1989. When the going gets tough: The effect of resource scarcity on group conflict and cooperation. In E. Lawler & B. Markovsky (Eds.). Advances in group processes, 7: 151–177. Greenwich: JAI.Google Scholar
  43. Kraus, W. 1991. Private business in China: Revival between ideology and pragmatism. London: Hurt.Google Scholar
  44. Lee, D., & Tsang, E. 2001. The effects of entrepreneurial personality, background and network activities on venture growth. Journal of Management Studies, 38: 583–602.CrossRefGoogle Scholar
  45. Li, J. J. 2005. The formation of managerial networks of foreign firms in China: The effects of strategic orientation. Asia Pacific Journal of Management, 22(4): 423–443.CrossRefGoogle Scholar
  46. Li, J. J., Poppo, L., & Zhou, K. Z. 2008. Do managerial ties in China always produce value? Competition, uncertainty, and domestic vs. foreign firms. Strategic Management Journal, 29: 383–400.CrossRefGoogle Scholar
  47. Li, Y., & Si, S. 2007. Organizational learning approaches and management innovation: An empirical study in Chinese context. Journal of Current Issues in Finance, Business and Economics, 1(2/3): 1–10.Google Scholar
  48. Lin, N., & Dumin, M. 1986. Access to occupations through social Ties. Social Networks, 8: 365–385.CrossRefGoogle Scholar
  49. Luo, Y. 2000. Guanxi and business. Singapore: World Scientific Publishing.CrossRefGoogle Scholar
  50. Luo, Y. 2001. Determinants of local responsiveness: Perspectives from foreign subsidiaries in an emerging market. Journal of Management, 27: 451–477.CrossRefGoogle Scholar
  51. Luo, Y. 2003. Industrial dynamics and managerial networking in an emerging market: The case of China. Strategic Management Journal, 24: 1315–1327.CrossRefGoogle Scholar
  52. Mead, M. 1963. Sex and temperament in three primitive societies. New York: William Morrow.Google Scholar
  53. Messick, D. M., & Brewer, M. B. 1983. Solving social dilemmas: A review. In L. Wheeler & P. Shaver (Eds.). Review of personality and social psychology, 4: 11–44. Beverly Hills, CA: Sage.Google Scholar
  54. Mixon, F. G., Jr., & Ressler, R. W. 1998. Integrating the concept of rent seeking into the principles of economics classroom. Journal of Education for Business, 74: 24–27.CrossRefGoogle Scholar
  55. Moran, P. 2005. Structural vs. relational embeddedness: Social capital and managerial performance. Strategic Management Journal, 26: 1129–1151.CrossRefGoogle Scholar
  56. Nahapiet, J., & Ghoshal, S. 1998. Social capital, intellectual capital, and the organizational advantage. Academy of Management Review, 23: 243–266.CrossRefGoogle Scholar
  57. Nelson, R. E. 1989. The strength of strong ties: Social networks and intergroup conflict in organizations. Academy of Management Journal, 32: 377–401.CrossRefGoogle Scholar
  58. Nelson, R. E. 1997. Organizational troubleshooting. Westport, CT: Quorum Books.Google Scholar
  59. Ngo, T. W. 2008. Rent-seeking and economic governance in the structural nexus of corruption in China. Crime, Law and Social Change, 49: 27–44.CrossRefGoogle Scholar
  60. Ouchi, W. G. 1980. Market, bureaucracies, and clans. Administrative Science Quarterly, 25: 129–141.CrossRefGoogle Scholar
  61. Park, S., & Luo, Y. 2001. Guanxi and organizational dynamics: Organizational networking in Chinese firms. Strategic Management Journal, 22: 455–477.CrossRefGoogle Scholar
  62. Peng, M. W., & Heath, P. S. 1996. The growth of the firm in planned economies in transition: Institutions, organizations, and strategic choices. Academy of Management Review, 21: 492–528.CrossRefGoogle Scholar
  63. Peng, M. W., & Luo, Y. 2000. Managerial ties and firm performance in a transition economy: The nature of a micro-macro link. Academy of Management Journal, 43(3): 486–501.CrossRefGoogle Scholar
  64. Peng, M. W., & Quan, M. J. 2009. A micro-macro link during institutional transitions. In L. Keister (Ed.). Work and organization in China. Oxford: Emerald Press.Google Scholar
  65. Pfeffer, J., & Salancik, G. 1978. The external control of organizations. New York: Harper & Row.Google Scholar
  66. Poncet, S. 2005. A fragmented China: Measure and determinants of Chinese domestic market disintegration. Review of International Economics, 13: 409–430.CrossRefGoogle Scholar
  67. Putnam, R. D. 1995. Bowling alone: American’s declining social capital. Journal of Democracy, 6: 65–78.CrossRefGoogle Scholar
  68. Ren, B., Au, K. Y., & Birtch, T. A. 2009. China’s business network structure during institutional transitions. Asia Pacific Journal of Management, 26(2): 219–240.CrossRefGoogle Scholar
  69. Reuters. 2005. China environment chief resigns over toxic spill. Reprinted in UNEP, The environment in the news. Dec. 5, 2005.Google Scholar
  70. Si, S., & Bruton, G. D. 2005. Knowledge learning, cost economizing, and competitive positioning: IJV motivation in emerging economies. Journal of Business Research, 58: 1465–1473.CrossRefGoogle Scholar
  71. Si, S., & Hitt, M. 2004. A study of organizational image resulting from international joint ventures in transitional economies. Journal of Business Research, 57: 1370–1377.CrossRefGoogle Scholar
  72. Si, S., Wei, F., & Li, Y. 2008. The effect of organizational psychological contract violation on manager’s EVNL. International Journal of Human Resource Management, 19: 933–946.Google Scholar
  73. Stack, C. B. 1974. All our kin: Strategies for survival in a black community. New York: Harper & Row.Google Scholar
  74. Tjosvold, D., & Poon, M. 1998. Dealing with scarce resources. Group & Organization Management, 23: 237–255.CrossRefGoogle Scholar
  75. Tsang, E. W. K. 1998. Can guanxi be a source of sustained competitive advantage for doing business in China?. Academy of Management Executive, 12: 64–73.Google Scholar
  76. Tullock, G. 1967. The welfare costs of tariffs, monopolies, and theft. Western Economic Journal, 5: 224–232.Google Scholar
  77. Tyler, T. R., & Kramer, R. M. 1996. Whither trust?. In R. M. Kramer & T. R. Tyler (Eds.). Trust in organizations: Frontiers of theory and research: 1–15. Thousand Oaks, CA: Sage.Google Scholar
  78. Walter, J., Lechner, C., & Kellermanns, F. W. 2007. Knowledge transfer between and within alliance partners: Private versus collective benefits of social capital. Journal of Business Research, 60: 698–710.CrossRefGoogle Scholar
  79. Wank, D. L. 1999. Commodifying communism: Business, trust, and politics in a Chinese city. New York: Cambridge University Press.Google Scholar
  80. Weber, M. 1946 (1922). From Max Weber: Essays in sociology. New York: Oxford University Press.Google Scholar
  81. Wilkins, A., & Ouchi, W. G. 1983. Efficient cultures: Exploring the relationship between culture and organizational performance. Administrative Science Quarterly, 28: 468–481.CrossRefGoogle Scholar
  82. Woolcock, M. 1998. Social capital and economic development: Toward a theoretical synthesis and policy framework. Theory & Society, 27: 151–208.CrossRefGoogle Scholar
  83. Wu, W., & Choi, W. L. 2004. Transaction cost, social capital and firms’ synergy creation in Chinese business networks: An integrative approach. Asia Pacific Journal of Management, 21(3): 325–343.CrossRefGoogle Scholar
  84. Wu, W., & Leung, A. 2005. Does a micro-macro link exist between managerial value of reciprocity, social capital and firm performance? The case of SMEs in China. Asia Pacific Journal of Management, 22(4): 445–463.CrossRefGoogle Scholar
  85. Xiao, Z., & Tsui, A. 2007. When brokers may not work: The cultural contingency of social capital in Chinese high-tech firms. Administrative Science Quarterly, 52: 1–31.Google Scholar
  86. Xin, K. R., & Pearce, J. L. 1996. Guanxi: Connections as substitutes for formal institutional support. Academy of Management Journal, 39: 1641–1658.CrossRefGoogle Scholar
  87. Zhang, S., & Li, X. 2008. Managerial ties, firm resources, and performance of cluster firms. Asia Pacific Journal of Management, 25(4): 615–633.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  1. 1.School of BusinessState University of New York at New PaltzNew PaltzUSA
  2. 2.Shanghai University/Bloomsburg University of PennsylvaniaShanghaiPeople’s Republic of China

Personalised recommendations