Abstract
Significant progress has been made with respect to defining, operationalizing, and measuring the guānxì system in the business field. Yet research still lacks a clear understanding of exactly how its elements (identified in Chapter 2) are embedded in the theory behind business strategy.
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References
This book deliberately neglects collective market conduct (e.g. alignment with the market leader’s action parameters), for its analysis requires the application of game theory (Gibbons 1992: xi; see Section 2.2.8.).
Consider Shapiro’s (1989: 127ff.) six typical examples of areas in which strategies are crucial: investment in physical capital, investment in intangible assets, strategic control of information, horizontal mergers, network competition, and contracting.
In a more detailed manner, The Supply Chain Operations Reference Model splits elements into process, category, element, task, and activity (Supply Chain Council 1999: 17f.).
Acknowledging that guānxì strongly affects the optimal choice of business strategy (Day 2002: 87), Ye and Zhang (2003: 1) formally incorporated miànzi as an independent variable into a game theory model. In spite of the fact that, in a mixed environment of guānxì and a market system, such a formal model is needed, too many of the basics are still disconnected (Lovett et al. 1999: 237), preventing precise integration.
Such practices severely damage social wealth, for the unjustified high price is usually not lowered in subsequent bid clarification meetings. Furthermore, public funds (
) are regularly used by low-quality bidders to improve their chances (Si 1996: 17).The specificity of this finding was qualified, however, by a replication study by Merrilees and Miller who found that presumed key “components of guanxi [reciprocity, trust, friendliness] play the same role in Australian direct selling activities” (1999: 272).
For further analysis, see Bian (1994: 971ff.) and Bian and Ang (1997: 981ff.).
Shanghai, July 12–13, 2005.
Clissold (2004: 285f.) provides an insightful example of ever-changing regulations. In China, exploding bottles of beer injure scores of people—which is, mentioned in passing, why in the 1990s many people with facial injuries could be seen in the streets. Made of poor glass and bearing thin patches, beer bottles in China were reused many times. Each time they were steamed during the cleaning process, which weakened the bottle walls. Also, variations in temperature further weakened the glass. In early 1999, the Chinese government introduced a new regulation that required breweries to use “B-bottles”, which had a minimum wall thickness. Since B-bottles were much more expensive, their implementation was enforced by announcing fines in case of non-observance. While the Chinese-foreign JV Five Star Brewery immediately replaced its bottles, Yanjing Beer Brewery, in which the Beijing government was a major shareholder, refused. Instead, it used lateral guānxì and made the government withdraw the regulation. Shortly thereafter, Five Star Brewery went bankrupt.
guānxì with members very high in the hierarchy, however, may be disadvantageous. Although officials in a higher bureaucratic position have more discretionary power, it is more expensive to cultivate guānxì with them. In addition to being an overinvestment, it would also be shortsighted, for some decisions require commitment by lower level officials; for a negative example, see Clissold (2004: 254–291).
Therefore, it is not surprising that Tang Jinsu (1998: 108f.) supported his analysis of chīkuī in business with international examples (e.g. the strategy of car producer Ford).
Note that monetary remuneration works better for male Chinese employees than for their female counterparts (Ang 2000: 56).
Empirics suggest that this figure well reflects the labor market conditions: in a July 2005 report, the US-based employment consulting firm Mercer (2005 China CBM) found an average turnover rate of 19% in consumer goods companies. Drawing on field research by Hewitt Associates (Hewitt Annual Study Reports 2005), the newspaper Xinhua (September 28, 2005) reported that an average of 14% of employees left their companies in 2005. However, the turnover rate topped 20% in some sectors (e.g. non-manufacturing) and some business functions (R&D).
As Hu and Chen (1996: 165, 172) have observed, this disability is correlated to the socio-cultural distance between the foreign investor’s country of origin and China.
However, Westerners may fall back on their attractiveness in terms of the “internationalism” with which Sino-foreign JVs are associated. Plus, many Chinese realize that with “foreign friends” a visit or study program abroad becomes easier (Seligman 1999: 36).
) are regularly used by low-quality bidders to improve their chances (Si 1996: 17).Rights and permissions
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© 2007 Physica-Verlag Heidelberg
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(2007). Guanxi-Based Business Strategies. In: Guanxi and Business Strategy. Contributions to Management Science. Physica-Verlag HD. https://doi.org/10.1007/978-3-7908-1956-4_3
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DOI: https://doi.org/10.1007/978-3-7908-1956-4_3
Publisher Name: Physica-Verlag HD
Print ISBN: 978-3-7908-1955-7
Online ISBN: 978-3-7908-1956-4
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