Guanxi is deeply ingrained in Chinese society and business etiquette; therefore, it is critical to understand and appreciate it to gain a commercial foothold in China. This paper explores the fundamental differences between Chinese and Western approaches to business dealings, to identify the factors that make it difficult for Western managerial practises to adopt guanxi. The authors identify the differences in the perception of trust in both societies and how this ultimately leads to clashes in cultures. However, there is also a need for Western practices to be more flexible and appreciate guanxi and its implications if multinational corporations are to succeed in China. The paper concludes by suggesting a possibility for both approaches to co-operate well, given the relative success of each approach in their respective cultures.
TopFoundations Of Guanxi: The Literature Review
While it is emphasised in the Western concept on “what you know,” refers to technological expertise, including the price and quality of tendered product or service, it is emphasized in Confucian societies on “who you know,” which refers to personal connections with the appropriate authorities or individuals. These connections are known in Chinese as guanxi, which is believed to be a striking feature that helps to enter a profitable and growing Chinese market. Thus, the issues of what indeed guanxi is and how it works in effect thus have become focal discussions
Guanxi literally means relation or relationships, ties or connections – and this already establishes the foundation on which to understand the Chinese approach to social network building and ultimately – business relationships. According to Pablos (2006) the origin of guanxi relates to the Confucianism heritage of Asian countries and Chinese communities in non-Asian countries. According to it, five major relationships dictate all relationships: Emperor–subject, father-son, husband-wife, elder-younger brothers and senior friend- junior friend. To ensure social harmony, order and stability, appropriate behaviours are needed. Lee et al. (2006) states that “With a history of more than 2500 years, Confucianism has exerted a fundamental influence on the Chinese and East Asian modes of thinking and way of behaving.” Thus, by definition, ‘Guanxi’ embodies this influence, and so it is not surprising that “Guanxi is deeply embedded in the mindset of Chinese and is in every aspect of their personal and organisational interactions” (Park & Luo, 2001). The basis of these relationships also confirms Asian countries such as China, Japan, Korea, Taiwan and Singapore as relatively high power distance countries.