Asian Business & Management

, Volume 14, Issue 4, pp 257–282 | Cite as

Leveraging Asian institutions to deepen theory: A transaction cost perspective on relational governance

  • Jean-François Hennart
Perspective Article


Is guanxi China-specific? Will it wane as China develops? I look at guanxi as a relation-based way to enforce transactions, and argue that it is a type of external hybrid used whenever the output constraints of market transactions must be supplemented by some behavior constraints. Drawing on transaction cost and network theories and on the new institutional economics and private ordering literatures, I specify the advantages and drawbacks of guanxi. I conclude that it is not China-specific and that it will survive further improvements in Chinese market and judicial institutions, although its scope will be somewhat reduced.


guanxi relation-based governance transaction cost theory new institutional economics private ordering China 



The author thanks Tailan Chi, Alex Eapen, Jim Hagen, Martin Hemmert, Tom Roehl, Markus Taube and Denise Tsang for useful comments.


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Copyright information

© Palgrave Macmillan, a division of Macmillan Publishers Ltd 2015

Authors and Affiliations

  • Jean-François Hennart
    • 1
  1. 1.Center for Research in Economics and Business, Tilburg UniversityAlphenThe Netherlands

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