Guanxi, Networks and Economic Development: The Impact of Cultural Connections

TLDR: In this article, the authors explore the mechanics of guanxi in an organizational setting, focusing on the use of interpersonal relationships within Chinese firms to discover how firms initiate, build and use Guanxi networks.

Abstract: The purpose of this study is to explore the mechanics of guanxi in an organizational setting, focusing on the use of interpersonal relationships within Chinese firms to discover how firms initiate, build and use guanxi networks. Two richly detailed case studies document changes that take place over time in two distinct networks with respect to key actors and their contacts. This research also investigates patterns of social structure that emerge over time in these two distinct cases looking at brokerage relationships, network density, and dyadic redundancy in three waves at six month intervals. The cases are dissimilar in all aspects except absolute size demonstrating the universal use of guanxi across time, geographic location, specific industries, and firm experience. Dynamic network visualization is used to highlight the sequence and rate of activity in each network to identify salient changes. The findings show that firms seek to improve their organizational guanxi by improving existing employees’ guanxi quality within the firm and by recruiting new actors from outside the firm. Additionally, firms use organizational guanxi to expand their networks by forming cooperative partnerships with complementary organizations that enhance the attributes or potential of both organizations. And finally, firms initially exploit brokerage in organizational guanxi, then attempt to stabilize the network by fostering new ties to exclusive contacts.