Flora F. Gu, Kineta Hung & David K. Tse
Executive Summary
A common way for firms to navigate within the confines of China’s powerful institutions is the use of guanxi, commonly conceptualized as interpersonal ties. Whereas existing literature and managerial practice have recognized the importance of relational exchanges in general, this study examines guanxi as a country-specific form of relational exchange that is shaped by China’s institutions. In other words, although the salience and rules of relational exchange applies across all cultures, the lack of other balancing institutions in China allows guanxi to go deeper as a governance mechanism that influences firm marketing competence and performance in China. On the basis of data collected from senior executives in 282 firms in China’s consumer product industries, this study confirms that guanxi continues to operate and exert significant impacts on brand market share and sales growth amid the growing forces of globalization and the country’s institutional reform. With inherent benefits of trust, information, and control as prescribed by social capital theory, guanxi can be capitalized at the corporate level to build firm competences. In particular, the results in this study indicate that guanxi influences brand performance through two mediating corporate competences—namely, channel and responsive capabilities—which allow the firm to deliver products and respond to environmental changes efficiently and effectively. Indeed, to develop sustainable competitiveness, firms need to pay attention to the organizational processes that capitalize on a firm’s channel and responsive capabilities to “house” the benefits drawn from interpersonal guanxi. Moreover, this study delineates guanxi’s dark sides, including reciprocal obligations and collective blindness. In the context of structure-loosening forces, such as competitive intensity and technological turbulence, guanxi exhibits negative impacts on brand performance. This finding points to the fallacy of overreliance on guanxi and its potential damaging impacts under contingencies that loosen the existing social structure. In all, this research suggests that it is crucial for managers operating in China to grasp the nature of guanxi, a deep-rooted governance structure; understand is capitalization process; and most importantly, be aware of its negative effects.
Biography
Flora F. Gu is an assistant professor in the Department of Management and Marketing at the Hong Kong Polytechnic University. Her current research interests include business-to-business relationship management, distribution channels, and marketing strategies in transitional economies. She has published in Journal of International Business Studies and Journal of Advertising.
Kineta Hung is an associate professor in the School of Communication at Hong Kong Baptist University. Her research interests include advertising, online communications, and consumption behavior in transitional economies. She has published in Journal of Advertising, Journal of Retailing, and Journal of International Business Studies.
David K. Tse is Chair Professor of International Marketing and Director of Chinese Management Centre in the Faculty of Business and Economics at the University of Hong Kong. He holds BBA (Chinese University of Hong Kong), MBA, and PhD (University of California, Berkeley). His research interests include satisfaction and services marketing and various marketing issues in China, including channel management, market entry, branding, and product innovation. His papers appeared in Journal of Marketing, Journal Marketing Research, Journal of Consumer Research, Journal International Business Studies, Journal of International Marketing, and Journal of Advertising, among other outlets.
Journal of Marketing, Vol. 72, No. 4, July 2008
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