Guanxi in the Western Context

Intra-Firm Group Dynamics and Expatriate Adjustment

Barbara Xiaoyu Wang

• Publisher: Palgrave Pivot
• Year: 2019
• Print ISBN: 9783030240004
• eBook ISBN: 9783030240011
• Topic: Business
• Subtopic: Business General
• Index: Business

Deeply rooted in Chinese culture, the concept of guanxi has been widely researched from historical, cultural and political perspectives. As Chinese multinational corporations (MNCs) expand, expatriates are increasingly carrying guanxi with them to host countries, yet little has been written on how this indigenous construct is employed in the Western world. This book takes a theoretical approach to the examination of this phenomenon and proposes a conceptual framework for the 'guanxi capitalism structure, ' illustrating its fundamental role as the invisible hand in China. Providing empirical analysis, the author demonstrates how guanxi affects intra-firm multicultural group dynamics involving Chinese expatriates and host-country natives in Chinese MNCs. With insights for scholars researching Asian business and globalisation, and practitioners working in Chinese MNCs, this book argues that guanxi significantly alters an expatriate's adjustment, and offers practical suggestions for cross-cultural management and the process ofinitiating, building, andutilisingguanxiina Western context.

© The Author(s) 2019

Barbara Xiaoyu WangGuanxi in the Western Contexthttps://doi.org/10.1007/978-3-030-24001-1_1

Begin Abstract

1. Introduction

Barbara Xiaoyu Wang¹

(1)

Ashridge Executive Education, Hult International Business School, Berkhamsted, UK

Barbara Xiaoyu Wang

Email: [email protected]

Abstract

This chapter overviews the entire book by including personal motivation, the timely need for both China and the West. It discusses the purpose and main aspects of guanxi research, describes the structure and research focus of each chapter.

Keywords

“Invisible hand”GuanxiDynamics of guanxi

End Abstract

This book was motivated by the increasing globalization of Chinese multinational companies (MNCs), which has had a significant impact on European economies and society. In 2016, according to Mitchell, Chazan, and Weinland (2017), Chinese investment in Europe reached a record €35.1bn, an amount four times greater than the investment by European companies in China. The rising economic and political power of China has created great interest in Chinese business practices in the West. Since the beginning of the twenty-first century, the surging globalization of Chinese firms has inspired numerous studies on the social and cultural challenges that are faced during the internationalization of firms from developing countries to the West (Boisot & Meyer, 2008; Buckley, Cross, Tan, Xin, & Voss, 2008; Child & Marinova, 2014; Child & Rodrigues, 2005; Child & Tse, 2001; Cooke, 2012). In particular, Zhou, Wu, and Luo (2007) noted that some Chinese investments and mergers and acquisitions in Europe failed because of internal management challenges arising from the relationship between Chinese management and local employees, and they argued that guanxi mediated the relationship between inward and outward internationalization and firm performance.

Guanxi is widely accepted in academia as an indigenous construct from China, deeply rooted in Chinese culture, and reflected in the behaviour of Chinese people. According to a widely accepted definition, guanxi is “the closeness of a relationship that is associated with a particular set of differentiated behavioural obligations based on social and ethical norms” (Mao, Peng, & Wong, 2012, p. 1143).

The conceptualization of guanxi originates from the Five Classified Relationships (FCR, Wulun) by Confucius (Farh, Tsui, Xin, & Cheng, 1998; Wang & Rowley, 2016; Wong & Huang, 2015; Yao, Arrowsmith, & Thorn, 2016). It is articulated by Mencius (2004) (372–289 BC), the principal interpreter of Confucianism who is often described as the “second sage” after only Confucius himself,

When it is clear that those in authority understand, human moral relationships, the people will be affectionate…Human moral relationships: love between father and son, duty between ruler and subject, distinction between husband and wife, precedence of the old over the young, and trust between friends. (

)

The human moral relationship, that is, guanxi, is classified in accordance with the hierarchy of social status, which carries moral values such as obligation, reciprocity, and affection. Confucius took as his highest ideal a society of people living in moral harmony, which, rather than the legal system, is the basis for peace in society (Lin, 1938). Guanxi has therefore guided the social behaviour of the Chinese for more than two millennia (Chen, Chen, & Huang, 2013; McNally, 2011; Zhang & Zhang, 2006), inducing the eminent Sinologue Lin Yutang (1938) to remark that the thoughts of Confucius were as vital in Lin’s own time as they had been 2500 years ago. Building on these ideas, guanxi is defined in this book as the hierarchical human moral relationship derived from Confucian ethics for the purpose of reciprocity, obligations, and the mutual benefit of all actors in the inner circle. It is based on social and ethical norms and is the “invisible hand” that steers and synchronizes the political, economic, and social systems of China (Wang & Rowley, 2016).

Some studies (McNally, 2011; Tong, 2014) concluded that the practice of guanxi has prevailed in Chinese businesses largely because of the weak institutional system in China. However, Chen and Easterby-Smith’s (2008) study on Taiwanese MNCs revealed that, although Taiwan benefited from legal institutions because of its earlier integration into the international economy through extensive American and Japanese investment, guanxi remains crucial to Taiwanese MNCs even as they become increasingly internationalized, with employees in host countries. There have been studies of guanxi at both the individual and the organizational levels (Chen, Eberly, Chiang, Farh, & Cheng, 2014). However, these studies have mainly been conducted in China. My study is one of the first to explore the indigenous Chinese guanxi in the Western context.

Although the ideology of the Chinese Communist Party towards business is derived from Marxism, and Confucianism was vilified during the Cultural Revolution of the 1960s (Zhang & Schwartz, 1997), over past two millennia, Confucian values created Chinese culture and psychology that became part of Chinese DNA, they exist and reflect at all aspects in Chinese people’s life regardless of any revolutions and social change. Guanxi, one of core values, is carried by all Chinese either consciously or unconsciously wherever they go. Since mainland China reopened to the world in the 1980s, Chinese business community has evolved to three types of organization where guanxi has been practised by Chinese managers in various degrees: (1) State-owned enterprise (SOE), tightly controlled and led by central government, with the chairman or CEO also serving as an official. At the surface level, people interact each other with communist party-oriented institutional formality, and at the practical level, people get things done through guanxi practice; (2) Western MNCs and Joint Ventures (JVs), managed by Western executives, there is more Western social networking across entire organization; guanxi practice is limited in Chinese employees; and (3) Chinese private companies, dominated by family members and inner-circle friends, guanxi practice plays the key role in all activities in organization. Guanxi practice has been studied intensively in Chinese private companies; therefore, this book focuses on guanxi practice at SOEs where guanxi practice is in their recessive culture however powerful and widely implemented, especially, SOEs are the major force of globalization of Chinese MNCs in Europe.

Overview of Book

On the basis of their integrated review of research on guanxi, Chen et al. (2013) concluded that guanxi tends to be a mixture of family and non-family, personal and impersonal, and expressive and instrumental characteristics. The word guanxi, according to them, reflects the richness, flexibility, and complexity of the Chinese language. This richness i...

Table of contents

• Cover
• Front Matter
• 1. Introduction
• 2. Conceptualization of Guanxi
• 3. Guanxi Practices in Intra-firm Multicultural Groups: A Case of Chinese MNCs Operating in Europe
• 4. Developing Guanxi in the West: Chinese Expatriates’ Adjustment in Europe
• 5. Cross-Cultural Guanxi Leadership
• 6. Conclusion
• Back Matter