Guanxi, Trust, and Long-TermOrientation in Chinese Business Markets
This research focuses on buying firms’ trust in a supplier’ssalesperson and posits that this type of trust is determined bycharacteristics of the salesperson, the interpersonal relation-ships between a salesperson and the buying firm’s boundarypersonnel, and characteristics of personal interactions betweenthese two parties. More important, the authors discuss the con-cept of interpersonal relationships in the context of Chineseculture and model it as a three-dimensional latent construct,which, in some literature, is called guanxi. A key aspect of thisresearch is that the authors investigate the impact of eachdimension of guanxi on salesperson trust separately. Moreover,the authors consider the buying firm’s trust in the supplyingfirm and its long-term orientation toward the supplier the con-sequences of salesperson trust. To test the model, the authorsuse data collected from 128 buying organizations in Hong Kong.The sampled firms are from both the government and privatesectors.
Business relationship researchers have typically used keyinformants to provide data on interorganizational relation-ships. However, researchers have assumed that such respon-dents take an organizational role and thus are aware of com-pany information that pertains to interorganizationalrelationships. Implicit assumptions of this organizationalrole include the notion that it is prescribed by organizationalrules, the interaction of the role is universalistic rather thanparticularistic, and the interaction of the organization role isfree of affect (Katz and Kahn 1978). Nonetheless, managerscan also play a social role in which they socialize in non-work settings (e.g., golfing) with friends, including clients orpartners in other organizations. When conducting this typeof research, it may be difficult to separate the organizationaland social roles. Thus, data related to interorganizationalrelationships and collected through the use of key inform-ants may be confounded with personal (social) relationships.However, this potential problem may be overcome by theexplicit examination of personal relationships in this type ofstudy. This is important because personal relationships havebeen found to shape economic outcomes in interorganiza-tional exchange in a variety of contexts (Weitz and Jap 1995).Although managers, as boundary spanners, work throughcritical horizontal ties to external constituencies on which
their organizations depend, the inclusion of interpersonalrelationships in business research has largely been ignored.
Accordingly, a key motivation of our research is to addressthis gap in the literature, which we do by focusing on Chi-nese interpersonal relationships, which are called guanxi(pronounced as guan-shee). A cursory examination of theABI/Inform database found 129 articles about guanxi pub-lished in peer-reviewed academic journals since 1990, pri-marily in the disciplines of marketing and management.However, none of the studies measured guanxi. Therefore,this study may be the first to attempt to measure guanxi,.
The Chinese phrase “guan-xi” consists of two characters.The character “guan” means a gate or a hurdle, and “xi”refers to a tie, a relationship, or a connection. So guanxi liter-ally means “pass the gate and get connected.” The concept ofguanxi refers to interpersonal relationships or connectionsand can be applied not only to kinship and friendship rela-tionships but also to social connections, such as dyadic rela-tionships (Hwang 1987; Jacobs 1979). Research on guanxi isnot new. As early as the 1940s, the eminent Chinese anthro-pologist Fei ([1947] 1992, pp. 25–33, qtd. in Peng 2004, p.1050) observed that whereas U.S. society is organized by vol-untary associations based on universalistic principles andqualifications, Chinese society is organized by concentricalguanxi circles, extending from the family (the core) to rela-tives, friends, and so on. Literally, guanxi means social con-nection and is a synonym for special favors and obligationsto the guanxi circle. The core of Chinese values is differenti-ated attitudes toward parents, children, siblings, kinsmen,friends, and so on, which Fei calls “differentiated mode ofassociation.” Individual rights in the Chinese context are notuniversalistic but guanxi specific and particularistic—thatis, no tie, no obligation, and no rights. Guanxi is basedimplicitly on mutual interests and benefits (Yang 1994), andsome authors (Park and Luo 2001, p. 457) even describe it as“utilitarian rather than emotional” and “based entirely onthe exchange of favors, not an emotional attachment.” Insociological terms, guanxi consists of personal ties or socialbonds (Walder 1986) and is described by some managementconsultants as “the informal connections so essential to gain-ing approval for or access to just about everything in China”(Tsang 1998, p. 64). Guanxi is among the most important,talked about, and studied phenomena in China today.Guanxi lies at the heart of China’s social order, its economicstructure, and its changing institutional landscape. It is con-sidered important in almost every realm of life, from politicsto business and from officialdom to street life (Gold, Guthrie,and Wank 2002, p. 1).
30 Don Y. Lee and Philip L. Dawes
We illustrate the framework of this research in Figure 1; thefocal variable is the buying firm’s level of trust in a supplier’ssalesperson. We posit that trust in the salesperson is affectedby three categories of antecedents: (1) characteristics of theinterpersonal relationships (guanxi) between a supplier’ssalesperson and a buying firm’s boundary personnel, (2)characteristics of interactions between these two parties, and(3) characteristics of the salesperson (expertise and status).We posit that a firm’s trust in the supplier’s salesperson leadsto both trust in the supplier and the buying firm’s long-termorientation toward the supplier, which is also considered aconsequence of trust in the supplier.
According to Ganesan (1994), trust is a two-dimensional con-struct, including perceived credibility and benevolence. Thefirst dimension focuses on the credibility of an exchangepartner with the expectancy that the partner’s words or writ-ten statements are reliable (Lindskold 1978). The seconddimension, benevolence, is the extent to which a partner isgenuinely interested in the other partner’s welfare and ismotivated to pursue joint gain. The target of trust can beeither an individual (e.g., a supplier’s salesperson) or anorganization (e.g., a supplier). We examine trust at both theindividual and the organizational level.
The characteristics of the interpersonal relationships weexamine are related specifically to Chinese culture; thus, werespond to Doney and Cannon’s (1997) call for research inbuyer–seller relationships and buyer–salesperson encoun-ters that examine national culture. A key aspect of Chineseculture is its high degree of collectivism (Hofstede 1980).From birth onward, people belong to strong, cohesive in-groups, such as extended families. The norms of Chineseinterpersonal behavior clearly distinguish in-group from out-group people, such as strangers. For in-group relationships,in which expressive ties are predominant, Chinese peoplepay more attention to attachment, harmony, and long-termrelationships by going along with the group and avoidingrejection (Hui and Triandis 1986). For out-group relation-ships, in which instrumental ties are predominant (Bond andSmith 1996), people distrust one another; are “on guardagainst everyone and on all occasions”; and “treat each per-son like a guest, but guard against him like a thief” (Chiao1989, qtd. in Gabrenya and Hwang 1996, p. 310). Moreover,Fukuyama (1995) categorizes Chinese society as a low-trustsociety in which its citizens tend to distrust out-grouppeople and trust only in-group people.
More specifically, Yang (1994) categorizes interpersonal rela-tionships (guanxi) in China into three groups: (1) betweenfamily members; (2) between familiar people, such as neigh-bors, friends, and colleagues; and (3) between strangers or
CONCEPTUAL FRAMEWORK
31Guanxi, Trust, and Long-Term Orientation
Figure 1.Research Framework
Gu
an
xi
Inte
ract
ion
sS
ales
per
son
Ch
arac
teri
stic
s
.44
.35
.15
Exp
erti
se H
6a: .
33; H
7a: .
32
Sta
tus
H6b
: .32
; H7b
: .20
Fac
e H
1a: –
.03
(not
sig
nif
ican
t)
Rec
ipro
cal
favo
r H
1b: –
.41
(not
sig
nif
ican
t)
Aff
ect
H1c
: .39
Bu
sin
ess
H2a
: .09
(p
≤ .0
5)
Soc
ial
H2b
: –.4
(n
ot s
ign
ific
ant)
H3
H6
H7
H4
H5
H1
H2
Tru
st i
n
Sal
esp
erso
n
R2
= .5
0
Tru
st i
n
Su
pp
lier
R2
= .5
5
Lon
g-T
erm
O
rien
tati
on
R2
= .3
0
Not
es: U
nle
ss o
ther
wis
e st
ated
, all
coe
ffic
ien
ts a
re s
ign
ific
ant
at p
≤.0
1.
32 Don Y. Lee and Philip L. Dawes
mere acquaintances. These three categories of relationshipshave completely different social and psychological meaningsto the parties involved and are governed by different sets ofinterpersonal rules. This classification is consistent with thatof Hwang (1987), who argues that the relationships of familymembers primarily consist of expressive ties, strangers ofinstrumental ties, and familiar people of mixed ties. Similarto the continuum of buyer–seller relationships (Webster1992), we place these three kinds of Chinese interpersonalrelationships on a continuum of guanxi; the family guanxi ison the right extreme (primarily with expressive ties), thestranger guanxi is on the left extreme (primarily with instru-mental ties), and the familiar person guanxi floats in themiddle (with mixed ties). For Chinese people, when theytalk about guanxi, they often imply an interpersonal relation-ship outside of the family, primarily with a familiar person,because between family members, the relationship is unal-terably that of an expressive tie, and obligations are dutifullyassumed (Kipnis 1997, p. 184). In this research, we limitinterpersonal relationships to the familiar person type inwhich there are mixed ties.
Because guanxi is a complicated construct and because weare taking a measurement approach to it, the first researchquestion that must be answered is, What is the dimensional-ity of guanxi? We approached this research question byreviewing the literature and through interviews with Chinesemanagers. In an interpersonal relationship context, Hwang’s(1987) resource allocation model has integrated several con-cepts that are embedded in Chinese guanxi. He proposes thatthe probability of a resource allocator accepting a petition forresource allocation is a function of the closeness of guanxibetween the allocator and the petitioner, which in turn is afunction of the level of their affect relationships, the proba-bility of receiving a reciprocal favor (renqing), and the needfor giving “face” to the petitioner. Kipnis (1997) was in Chinafor two years conducting a field study specifically aboutguanxi; consistent with Hwang’s (1987) work, Kipnis identi-fies three components of guanxi: (1) ganqing (affect), (2)reciprocal favor, and (3) mianzi (face). According to Kipnis,Ganqing (emotions or affect) is the most important compo-nent of guanxi. Lovett, Simmons, and Kali (1999) and Parkand Luo (2001) also suggest that reciprocity of favor, face pre-serving, and affect are the necessary components of guanxi.
To gain insight into how Chinese managers understand themeaning of guanxi, we interviewed five sales managers froma Hong Kong company that is one of the largest dealers ofindustrial products in Asia. In addition, we interviewedabout a dozen sales managers in China. One of these Chinesemanagers gave us a striking description of guanxi that sum-marizes its essence: “Guanxi is just like door steps. If you’re
33Guanxi, Trust, and Long-Term Orientation
not yet on the steps, no one will do business with you. If wedon’t know you, how can we trust you! Once you’re on thedoor steps, then we started to know you, then we open thedoor to talk business with you.” This description of guanxireveals three things: First, Guanxi is a formality, a necessaryprocedure that people (especially salespeople) must gothrough for strangers to establish intention to conduct busi-ness with one another. In short, with no guanxi, there is nointention. Second, there is a threshold level for guanxi belowwhich strangers remain strangers. Third, the establishmentof guanxi may take time. It is unlike the United States, inwhich strangers can immediately begin talking business afterthey are introduced by a third person.
Moreover, managers in Hong Kong and China identified fiveaspects of guanxi behavior between the guanxi partners thatother people can observe: face preserving, reciprocal favor,affect (ganqing or emotions), trust, and interactions. Indeed,some authors (e.g., Redding and Ng 1982; Tong and Kee1998) have also suggested the inclusion of trust as a compo-nent of guanxi; however, we treat trust as the outcome ofguanxi, which is consistent with the work of a majority of theauthors in relationship marketing literature; we treat interac-tions as an antecedent for trust. Thus, in our research, weadopt the view that guanxi consists of three dimensions: facepreserving, reciprocal favor, and affect.
However, these three dimensions are not independent of oneanother; they may be mingled together as a syndrome. Kipnis(1997) points out that the production of guanxi simultane-ously creates human feeling and material obligation; there-fore, in guanxi, feeling and instrumentality are a totality.Guanxi unifies what Western bourgeois relationships sepa-rate, namely, material exchange and affectionate feelings. Inthe United States, “business is business”—that is, businesscannot be mixed with affection. The former is self-interestedand is governed by contracts and rules of the market; the lat-ter is pure and altruistic, governed by spontaneity, and aboveeconomic consideration (Kipnis 1997). However, in China,business and affection go together. Although the three guanxicomponents (i.e., face preserving, reciprocal favor, andaffect) are probably similar concepts in the United States andChina, the presentation of the three concepts as a syndromeversus separately distinguishes Chinese interpersonal rela-tionships from those of the United States.
In this research, we faced two alternatives in the investiga-tion of guanxi as a construct. The first was to view guanxi asan integrated construct that comprises three dimensions(technically, a second-order factor or construct)—that is, as asyndrome (Kipnis 1997). However, the disadvantage of thisapproach is that there is some loss of information in the
34 Don Y. Lee and Philip L. Dawes
process of aggregating the three dimensions. The secondview, which we adopted, was to treat the three dimensionsseparately so that there was less danger of losing informa-tion. By adopting this approach, we could identify the effectsof each dimension separately.
Characteristics of Personal Relationships (Guanxi). Face (ormianzi) refers to a person’s claimed sense of positive imagein a relational context, and it is gained by performing one ormore specific social roles that are well recognized by others(Bond 1991). Face describes a person’s proper relationshipwith his or her social environment, and its importance lies inthe consequence of living in a society that is conscious ofsocial contexts (Hofstede 1992). Face is lost when people,either through their actions or the actions of those closelyrelated to them, fail to meet essential requirements placed onthem by virtue of their social position (Ho 1976). A loss offace brings shame to people and their family, and causingothers to lose face is considered an aggressive act by thosewhose face has been discredited (Tung and Yeung 1996). Inthe process of acquiring face, people indebt themselves tovarious associates who have helped them, such as teachersor former bosses (Bond 1991).
The Chinese idiom “would rather make sacrifices than loseface” illustrates the importance of face. Because it is soimportant in the personal life of Chinese people, members ofin-groups protect the other members’ face (Bond 1991). Faceis important not only for Chinese people’s personal lives butalso for their business lives. For example, Redding and Ng(1982) find that Hong Kong businessmen claim that face is aconsistently important consideration in their professionalinteractions and that fear of losing face forms the basis for theinformal system of contracts and agreements that are com-mon in Chinese business. They also find that for middle-level business executives in Hong Kong, face has a signifi-cant influence in business negotiations. To give face tosomeone during a business negotiation is perceived as highlydesirable, whereas to jeopardize or challenge the other’s faceis considered highly undesirable.
The concept of face has universal applicability (Ho 1976).The Western sociologist Goffman (1955, p. 213) defines faceas the “positive social value a person effectively claims forhimself by the line others assume he has taken during a par-ticular contact. Face is an image of self-delineation in termsof approved social attributes.” As Hu (1944, p. 45, qtd. inBond and Hwang 1987, p. 243) notes, “Face stands for thekind of prestige that is emphasized in this country [theUnited States]: a reputation achieved through getting on inlife, through success and ostentation.”
HYPOTHESIS DEVELOPMENT
Developing Trust in aSupplier’s Salesperson
35Guanxi, Trust, and Long-Term Orientation
In short, the norm of preserving face in Chinese societyencourages people to play proper social roles, to meet therequirements of and to be liked by peers of the same affili-ated group, and to allow all members to appear good in thegroup. As a result, conflicts within the group are reduced,and harmony is enhanced. Therefore, in Chinese interper-sonal relationships, face has a function that is instrumentalin the stabilization of the group.
Reciprocity in Chinese is called bao or huibao, and recipro-cal favor is called renqing. If a personal relationship partnergets into difficulties, the other partner should help him orher, and after the recipient has received the favor, he or sheshould return it as soon as the opportunity arises (Hwang1987). Reciprocal favor is a strong social norm and is morallybinding for Chinese people, and those who do not repayfavors are considered to have “no credibility,” to have “noconscience,” and to be “mean,” and they lose face, reputa-tion, and ultimately personal relationships and their peers’trust. The norm of reciprocal favor requires that all membersof a group perform favors to help those in need and that allfavors be repaid.
The rules of reciprocal favor require certain social behaviorin Chinese culture (Hwang 1987). First, in normal times, aperson should keep in contact with acquaintances in his orher guanxi circle by greetings, visitations, or exchanging giftswith them from time to time. Second, when a person in a net-work gets into trouble or faces a difficult situation in life,other members of the group should sympathize with andhelp that person and do a renqing (offer favor or help); afterthe troubled member has received a renqing from others, heor she should return it as soon as the opportunity arises. Rec-iprocal favor has several implications in Chinese culture(Hwang 1987). First, it indicates the emotional or affectiveresponses of a person who is confronting various situationsor life events. Second, it is a resource that a person can pres-ent to another as a gift in the course of social interaction.Third, it connotes the social norms by which a person mustabide to get along well with others. Reciprocal favor, with itsrules and implications, facilitates the survival of each personin the group and thus the survival of the group. Reciprocityis a universal concept and rule; it is even applicable to ani-mal behavior (Axelrod 1984).
Affect (ganqing) refers to human feelings and is related toenduring and emotional commitments that are found inlong-term and intimate social bonds, such as those betweenparents and their children, close friends, and teachers andstudents (Yang 1994). Affect is the most important compo-nent of guanxi, and it is so critical that Chinese people tendto mix the word guanxi with ganqing, often using the words
36 Don Y. Lee and Philip L. Dawes
interchangeably. Notably, Chinese people tend to differenti-ate between two types of friendship. One is based on deepmutual ganqing and a willingness to sacrifice materially for afriend, and the other consists of an affected guanqin and isestablished for the purpose of enabling mutually beneficialmaterial exchanges. However, even when two “friends”desire only a mutually beneficial exchange, they still findthat it is necessary to affect ganqing. In both types of friend-ship, affect and mutual indebtedness go together (Kipnis1997). The concept of affect is also universal because it isrelated to human feelings, though the presentations of affec-tion may be different across cultures. For example, an Amer-ican father may kiss his daughter on the cheek, but a Chinesefather may only pat his daughter’s shoulders or arms to showhis love.
Because face, reciprocal favor, and affect are manifestationsof Chinese personal relationships, closer guanxi betweentwo partners (in this case, between a salesperson and abuyer) helps their relationship move toward in-group-likerelationships, thus fostering more trust (Fukuyama 1995).Thus, we hypothesize the following:
H1: A buying firm has more trust in a salesperson (a)when a salesperson gives more face to the buyingfirm’s boundary personnel, (b) when there is recip-rocal favor between a salesperson and the buyingfirm’s boundary personnel, and (c) when there is apositive affect between a salesperson and the buyingfirm’s boundary personnel.
We use the Chinese concept of guanxi and personal trust todevelop this hypothesis. However, the following hypothesesare primarily consistent with Western literature, particularlyin marketing and sociology. In general, previous research hasfound that most models of interpersonal relationships pro-posed by Western psychologists are also applicable to Chi-nese people (Bond and Hwang 1987, p. 241).
Characteristics of Interactions. When salespeople have fre-quent contact and take time to interact with customers in abusiness or social context, trust can be engendered because abuyer can observe the salesperson’s behavior across a varietyof situations. Thus, information obtained in interactionsenables a buyer to foresee the salesperson’s future behaviorwith confidence, which fosters trust. In Western literature,Crosby, Evans, and Cowles (1990) find a positive relationshipbetween interaction intensity and salesperson trust in theinsurance field. Thus, we hypothesize the following:
H2: Greater intensity of salesperson interaction in (a) abusiness context and (b) a social context leads tomore trust in the salesperson.
37Guanxi, Trust, and Long-Term Orientation
Historically, Chinese firms arose in legal contexts in whichproperty rights and contract law were unreliable. Therefore,the cultivation of long-term, reliable guanxi and the adoptionof a guanxi-oriented management style build the trust that isnecessary to conduct business transactions and are essentialfor survival (Redding 1990). By definition, guanxi empha-sizes personal behavior. Hamilton (1991), Kao (1991), andRedding (1990, 1991) argue that trust at the personal level,but not at the organizational level, continues to serve as theprimary basis for business transactions among Chinese firmsin Taiwan, Hong Kong, and Southeast Asia. In addition,reliance on guanxi extends to external business relation-ships. For many Chinese firms in Hong Kong, overseas con-tacts are usually based on uncles and cousins who live over-seas. Business contacts are friends, and virtually all businessis based on personal contacts. The relationships are largelyinformal, and great importance is placed on personal trust(Bond and Hwang 1987).
Furthermore, Chinese culture is hierarchical (Hamilton1991); a firm is usually tightly controlled by the top boss(Redding and Wong 1986). Because Chinese firms adopt aguanxi business style, the person is the firm, and the firm isrepresented by the person. Thus, the degree to which clientstrust a firm is primarily determined by the clients’ trust intheir personal contact in the firm.
In Western literature and in industrial markets, a salesper-son’s behavior is partially attributable to the supplier firm’sculture, reward systems, and training programs. Moreover, abuying firm views the salesperson’s behavior as a reflectionof the supplier’s values and attitudes. Therefore, when a cus-tomer has limited experience with the supplier firm, trust inthe firm can be inferred on the basis of the perceptions of thesalesperson’s trustworthiness. Essentially, the customer’strust in the salesperson transfers to the firm that the salesper-son represents (Doney and Cannon 1997).
Trust can be transferred from a trusted “proof source” toanother person or group with which the truster has little orno direct experience (Milliman and Fugate 1988). Thetrusted proof source can be an institution or a person. Forexample, certified public accountants may be trustedbecause they are certified by a trusted agency; in this exam-ple, the proof source is an institution (Zucker 1986). In thisstudy, we are more interested in people (i.e., salespeople) asthe proof source and the organizations (i.e., their employers)as the target for transfer. When the buyer trusts the salesper-son who serves as a proof source, the buyer’s trust in thesalesperson can be transferred to the organization. Thus, wehypothesize the following:
Relationship BetweenSalesperson Trust and Trust inthe Supplier
38 Don Y. Lee and Philip L. Dawes
H3: The greater the buying firm’s trust in the salesper-son, the greater is its trust in the supplier.
On the basis of Kelly and Thibaut’s (1978) work, we considera buyer’s long-term orientation its perception of the inter-dependence of outcomes in which both a supplier’s out-comes and joint outcomes are expected to benefit the buyerin the long term. This definition is similar to Noordewier,John, and Nevin’s (1990) concept of “expectations of conti-nuity of a relationship,” because both definitions capture thelikelihood of future interactions. Nevertheless, long-term ori-entation encapsulates the desire of the parties toward a long-term relationship. According to Ganesan (1994), trust is anecessary antecedent for long-term orientation because itshifts the focus to future conditions. A buyer’s trust in thevendor affects the long-term orientation of the buyer in threeways: (1) It reduces the perceived risks associated withopportunistic behaviors by the vendor, (2) it increases thebuyer’s confidence that short-term inequities will beresolved over a long period, and (3) it reduces the transactioncosts in an exchange relationship. Empirical evidence sup-ports the notion that trust in the selling firm is central to abuyer’s intention to continue the exchange relationship.Anderson and Weitz (1989) find evidence that trust is key tomaintaining continuity in conventional channel relation-ships. Conversely, Morgan and Hunt (1994) demonstrate anegative relationship between trust and propensity to leave.Therefore, we propose the following hypothesis:
H4: The greater the buying firm’s trust in a supplier, thegreater is its long-term orientation with the supplier.
Chinese firms are guanxi based and encourage trust and loy-alty at a personal level and toward members of the guanxicircle. As a Hong Kong executive said, “People are moreloyal to people than to an organization. I like people to beloyal to me. People down below should be loyal to the supe-rior rather than to the firm itself” (Redding 1990, p. 166).Loyalty to other members of a person’s group is society’smost outstanding value, and this loyalty requires that friendsand relatives go to extreme lengths to honor their obligationsto one another. The disloyal person is a person without face(Wilson 1970).
While we were interviewing Chinese managers in China, weheard many stories of this kind of loyalty that results fromguanxi, including stories of three foreign joint-venture com-panies, one with a U.S. bathroom facility company, one witha major European electronic appliance company, and onewith a German electrical appliance company. The sales man-agers who worked for these foreign joint ventures resignedwhen they had established guanxi networks with enough
Relationship Between Trust inthe Supplier and Customers’
Long-Term Orientation
Relationship Between Trust inthe Salesperson and
Customers’ Long-TermOrientation
39Guanxi, Trust, and Long-Term Orientation
Chinese wholesalers, and they established their own distri-bution companies. Their downstream wholesalers thenswitched their purchasing from the joint-venture companiesto their guanxi partners. These “defectors” brought a host ofguanxi customers with them, because those wholesalerswere trusting in and loyal to their guanxi partners.
To a buyer, long-term orientation is related to the perceptionof interdependence of joint gains with the supplier; that is, asupplier’s gain also benefits the buyer in the long term.Before the sales managers left the joint ventures, the whole-salers, who had guanxi with them, were indirectly loyal tothe foreign joint ventures because of the individual guanxi inthe joint ventures. These wholesalers believed that it wasbeneficial for them to conduct business with the guanxi part-ner, and therefore they had long-term orientation to the jointventures at that time. When the sales managers left, however,the wholesalers stopped their long-term orientation with theforeign joint ventures and began a long-term orientation withtheir guanxi partners, because they trusted their guanxi part-ner suppliers more and believed that they would be benefi-cial. Thus, we hypothesize the following:
H5: The greater the buying firm’s trust in a salesperson,the greater is the long-term orientation toward thesupplier.
In addition to trust (at both the personal and the organiza-tional levels), trust-related variables (guanxi and personalinteractions), and long-term orientation, we also investigatesome variables that are reported to be important to trust. Bydoing so, we may mitigate specification errors (excludingimportant variables in a regression model) and thus increasethe reliability of the path coefficients. In the marketing liter-ature, salesperson expertise and status have been reported tohave significant effects on trust at both the personal and theorganization level. Therefore, we have included them in themodel as control variables.
Expertise. Trust that is based on a partner’s expertise focuseson the expectancy that the partner’s word or written state-ment is reliable (Lindskold 1978). In a study examining theuse of marketing research, Moorman, Deshpandé, and Zalt-man (1993) find that expertise is an important foundation fortrust. This is because a salesperson’s expertise can build abuying firm’s trust by increasing its confidence that the sales-person can deliver on promises as a result of his or her capa-bility. Empirically, the role of salesperson expertise in foster-ing trust has received some attention in the marketingliterature. For example, Andaleeb and Anwar (1996) findthat salesperson expertise leads to increased trust. Crosby,Evans, and Cowles (1990) and Doney and Cannon (1997) also
Control Variables: SalespersonCharacteristics
40 Don Y. Lee and Philip L. Dawes
find a positive relationship between expertise and trust inthe seller. However, Armstrong and Yee (2001) find no rela-tionship between the two variables.
Status. Status refers to the salesperson’s position in the sell-ing firm. In general, the higher the position, the more thebuying firm believes that the salesperson is capable of pro-viding buyer outcomes that match what he or she says orpromises. This is because salespeople with higher status canexercise greater control over the organizational resourcesthat are necessary to fulfill promises (Swan and Nolan 1985).Support for this contention is provided by Moorman, Desh-pandé, and Zaltman (1993), who find that when a researcherhad a higher position in a firm, trust was greater.
On the basis of the previous arguments and in some casessupporting empirical evidence, we advance the followinghypothesis:
H6: The greater the salesperson’s (a) expertise and (b)status, the greater is the buying firm’s trust in thesalesperson.
In business markets, a salesperson’s expertise is important tofacilitate communications with potential customers. Forexample, a salesperson with a high level of expertise canhelp customers with various technical problems, theirdesigns, and even training. A salesperson’s expertise is anindication of a supplier’s human resources and thus the qual-ity level of the services that a supplier can provide. Moor-man, Deshpandé, and Zaltman’s (1993) empirical findingsindicate that interpersonal factors are the most predictive ofclients’ trust in their marketing research firms. Specifically,researchers’ expertise is an important factor that contributesto clients’ trust in marketing research firms. In addition, asalesperson’s status in the supplying firm indicates his or herability to mobilize resources. The higher the salesperson’sposition, the more likely he or she has the ability to fulfillpromises on behalf of the supplying firm. Therefore, sales-person expertise and status indicate the supplying firm’scredibility. Thus, we hypothesize the following:
H7: The greater the salesperson’s (a) expertise and (b)status, the greater is the buying firm’s trust in thefirm that the salesperson represents.
We approached the XYZ Corporation in Hong Kong andasked if we could use its organizational customer database inour research. We were referred to the Industrial EngineeringDivision, and the managers agreed to cooperate. Headquar-tered in Hong Kong, XYZ is one of the largest multiple-line
METHOD
Participating Firm
41Guanxi, Trust, and Long-Term Orientation
dealers in the world, focusing mainly on industrial productsand distributing products from agricultural machinery tozincking equipment. It is also one of the leading engineeringcompanies in the Pacific region. The Industrial EngineeringDivision of XYZ supplies mechanical and electrical equip-ment and associated services. Hong Kong is one of theworld’s leading international financial centers and serves asan international commercial center as well. For example, 233U.S. firms have established Asia-Pacific regional quarters inHong Kong, and 437 U.S. firms have established theirregional offices there. Hong Kong has been a special admin-istrative region of the People’s Republic of China since 1997,when the United Kingdom returned its Hong Kong colony.The residents in Hong Kong are primarily Chinese, and mostemigrated to Hong Kong during the late 1960s. Therefore, theChinese people in Hong Kong and in the People’s Republic ofChina are similar to each other in culture.
Although we developed new measures for the three dimen-sions of guanxi, we also adapted the measures for the othervariables from Ganesan’s (1994) and Doney and Cannon’s(1997) work. To develop measures of guanxi, we used anunstructured interview procedure, and we interviewed fivesales managers of the XYZ Corporation (the Industrial Engi-neering Division) in Hong Kong. In addition, we also inter-viewed about a dozen managers in three cities in China (i.e.,Shanghai, Chengdu, and Hangzhou). In addition to theauthors of this article, the research team included a localresearch assistant who was a sales manager for an industrialproducts firm in Hong Kong. We asked both Hong Kong andChinese managers the following question: If two people (onesales manager from the selling company and one purchasingmanager from the buying company) have a close guanxi,what kinds of behaviors or acts between them (i.e., manifes-tations) can other people observe? The answers were dividedinto five categories: reciprocal favor, face preserving, trust,emotion, and interactions between the two people. In accor-dance with relationship marketing literature, we consideredtrust the consequence of guanxi, and interactions were theantecedent variable of salesperson trust. Items for the threedimensions of guanxi were partially based on input wereceived from discussions with the five Hong Kong salesmanagers. In addition, we asked the sales managers to readthe draft questionnaire and note anything they did not agreewith or understand. As a result of their input, we made thefollowing changes to the questionnaire: First, Ganesan (1994)and Doney and Cannon (1997) refer to a seller as a supplier,resource, or vendor, whereas we used seller for all terms.Second, we changed the tone of the original questions tomake them a little “softer” because Chinese people do notlike to use direct or explicit language. Third, we changed the
Measure Development
42 Don Y. Lee and Philip L. Dawes
first question for the buying firm’s long-term orientationfrom “relationship with the seller will be profitable in thefuture” to “will be beneficial in the future” because the latteris less direct or explicit. Fourth, in accordance with the expe-rience we gained in designing the questionnaire for the Chi-nese respondents, we found that such respondents tend togive inconsistent responses for reverse questions. Thus, wechanged all the reverse questions to positive statements. Forexample, we changed “This salesperson is not trustworthy”to “The salesperson is trustworthy.”
We asked the five XYZ sales mangers again to read the draftquestionnaire, and then we asked them to indicate the mean-ing (or label) of the corresponding set of questions. They cor-rectly stated the meanings for all constructs. We checked theconceptual equivalence of constructs whose measures wereadapted from U.S. studies (Doney and Cannon 1997; Gane-san 1994), because theories and constructs that have beendeveloped in the United States do not necessarily have thesame meaning in other environments and sociocultural set-tings (Craig and Douglas 2000). In addition, the surveyinstrument was designed by a multicultural team, includinga local researcher. Such an arrangement facilitates the miti-gation of self-referent criterion or bias, whereby researcherstend to perceive and interpret stimuli and other phenomenain terms of their own cultural background (Craig and Douglas2000). Craig and Douglas (2000) call the participation ofresearchers from different cultural backgrounds, particularlythe local, the “decentered approach.” Details of our measuresappear in Table 1.
For the sample frame for data collection, XYZ Corporationprovided a list of 280 organizational customers who hadmade purchases from XYZ in the past two years. To checkthe appropriateness of the questionnaire, we conducted apilot study using a convenience sample of 30 customers fromthe sample frame. We left blank spaces at the end of the ques-tionnaire for managers’ additional comments. The question-naire was in English, which is the official language in HongKong, though Chinese is the mother tongue for most people.The questionnaires were addressed and mailed to the buyingfirms’ purchasing managers or engineers who were involvedin purchasing decisions according to company records. Atotal of 20 completed questionnaires were returned, and weconducted a preliminary data analysis using the correlationprocedure to check item quality. We gave special attention tothe items for the three dimensions of guanxi. Thus, we reviseseveral items in accordance with managers’ written feedback(mainly wording) and the findings from the preliminary dataanalysis. We then sent the revised questionnaire to theremaining 250 customers on the XYZ name list. In total, 128completed questionnaires were returned, constituting a
Sample Frame, Respondents,and Data Collection
43Guanxi, Trust, and Long-Term Orientation
Construct/ Variable Load-Factor (Indicator) ing AVE α Table 1.
Factor Loadings andReliabilities for Constructs
Face
Reciprocalfavor
Affect
Expertise
Status
Businesscontact
Socialcontact
1. Both we and the salesperson care forface.
2. The more respect we receive, themore “face” we have.
3. We give “face” to the salesperson,and he also gives us face.
1. We will do the salesperson a favor ifhe did one for us before.
2. The salesperson will do us a favor ifwe did one for him before.
1. The salesperson sometimes presents(nonexpensive) souvenirs to us.
2. He sends greeting cards to us whenthere is a marriage, promotion, andso forth.
3. He is our good friend, and we careabout each other wholeheartedly.
4. We like the salesperson, and he likesus.
1. The salesperson is knowledgeable inhis area.
2. The salesperson is knowledgeable inthe product market.
3. The salesperson is able to providesolutions to improve our existingoperation.
4. The salesperson is able to proposealternative products to suit ourapplications.
1. The salesperson has goodrelationships with renowned overseassuppliers.
2. The salesperson has goodrelationships with large suppliers.
3. The salesperson has a relativelyhigher position in the supplier firm.
4. The salesperson has a professionaland university education background.
1. The salesperson visits our place ofbusiness frequently.
2. The salesperson spends time gettingto know our people.
3. The salesperson contacts us byphone, e-mails, letters, and/or faxfrequently.
1. The salesperson often contacts usafter office hours.
2. The salesperson usually meets us in arelaxed environment (e.g., dining out).
3. The salesperson usually gets togetherwith us primarily to have fun.
4. The salesperson often talks aboutcommon interests besides work.
.86
.90
.94
.91
.93
.69
.92
.94
.81
.97
.93
.88
.92
.82
.87
.91
.85
.93
.93
.95
.95
.94
.96
.95
.81
.85
.72
.86
.75
.88
.90
.89
N.A.
.88
.94
.93
.95
.90
44 Don Y. Lee and Philip L. Dawes
Notes: AVE = average variance extracted; N.A. = not applicable.
Table 1.Continued
Construct/ Variable Load-Factor (Indicator) ing AVE αBuyer’s
trust insalesperson
Buying firm’strust insupplyingfirm
Buying firm’slong-termorientation
1. The salesperson has been frank indealing with us.
2. The salesperson does not make anyfalse claims.
3. The salesperson has given usconfidence.
4. The salesperson is trustworthy.
1. If problems arise, the seller is honestabout the problems.
2. This seller keeps promises it makesto us.
3. We believe the information given bythis seller.
4. This seller is genuinely concernedwhether our company succeeds.
5. When making decisions, this sellerconsiders our welfare and its own.
6. We trust that this seller keeps ourbest interests in mind.
7. The seller is trustworthy.
1. We believe that our relationship withthe seller will be beneficial in future.
2. Maintaining a long-term relationshipwith this seller is important to us.
3. We focus on achieving long-termgoals in this relationship.
4. We are willing to make sacrifices tohelp this seller from time to time.
5. We expect this seller to be workingwith us for a long time.
6. Concessions we make to help thisseller will even out in the long run.
.78
.85
.88
.91
.70
.77
.65
.75
.84
.82
.85
.84
.82
.78
.59
.75
.78
.74
.59
.58
.88
.88
.86
51.2% response rate. Among the 128 questionnaires that wereceived, 70 (55%) were from the government sector (e.g.,government departments, police force, post office, publichospitals), and 58 (45%) were from the private sector. All therespondents were male; on average, they were 40.5 years ofage, in their current position for 4.0 years, and had a rela-tionship with XYZ for 2.9 years.
We used the partial least square (PLS) latent path model(Wold 1986) to estimate the causal model in Figure 1. Partialleast square is a nonparametric estimation procedure, which,as does LISREL, belongs to the structural equation modelingfamily. Some of the advantages of PLS are as follows:
Model Estimation
45Guanxi, Trust, and Long-Term Orientation
• PLS avoids many of the restrictive assumptionsimposed by other causal models that involve latentvariables, such as LISREL.
• PLS provides measurement assessment, which is crit-ical to our study because we developed some newmeasures.
• A jackknife procedure packaged in the PLS software(PLS-PC, Version 1.8 by Lohmöeller 1989) calculatesthe standard deviation for parameter estimates andgenerates an approximate t-statistic. This overcomesthe disadvantage of the lack of formal significancetests for parameters that results from nonparametricmethods.
• PLS is suitable for the analysis of small samples (Wold1986). In our research, this is an important considera-tion because there are only 128 observations available,whereas there are a total of 41 variables (items) in themodel estimation.
We checked all the multi-item constructs for unidimension-ality using a one-factor analysis technique. In addition, weconducted a correlation analysis to scrutinize the correlationof each item with the total of the relevant construct and toexamine the Cronbach’s alpha coefficient for internal consis-tency within a construct. As a result of this procedure, weremoved one item in the construct—reciprocal favor; weremoved another item in the construct (i.e., face) in the PLSmodeling process. We then conducted a three-factor analysiswith Varimax rotation to examine the three dimensions ofthe guanxi characteristics. Both the eigenvalues and a screetest indicated a three-factor model. Table 2 illustrates theloadings of the three-factor model. All loadings are greaterthan .7, indicating that all are statistically significant. Wethen conducted a one-factor analysis using the correlationsbetween the three dimensions (i.e., the constructs of face,reciprocal favor, and affect). The factor model illustrated inTable 3 unambiguously indicates that the second-order factorguanxi is behind the three first-order factors (i.e., face, recip-rocal favor, and affect), and all loadings are greater than .8.Our factor solution for guanxi as a second-order factor sup-ports Kipnis’s (1997) view of guanxi as a syndrome. That is,in guanxi, emotional and instrumental components are atotality, and guanxi unifies these two sets of components.Table 4 shows that the three dimensions of guanxi are highlycorrelated (.50 for face–favor, .43 for face–affect, and .54 forfavor–affect), which again supports Kipnis’s view of guanxias a syndrome.
RESULTS
Assessment of theMeasurement
46 Don Y. Lee and Philip L. Dawes
Although we estimated the measurement and structuralparameters together, we interpreted the PLS results in twostages: First, we assessed the reliability and validity of themeasurement model, and second, we assessed the structuralmodel (Fornell and Larcker 1981). The details of our assess-ment of the measurement model appear in Table 1. Each ofthe ten constructs has consistent positive loadings, indicat-ing the general convergence of the indicators with their con-struct. As Fornell and Larcker (1981) suggest, we assessedthe convergent reliability of constructs by average varianceextracted (AVE). The AVEs of all ten constructs are wellabove the critical value of .5, indicating that these constructscapture more than 50% of the variance in their observable
Notes: Loadings smaller than .4 were suppressed. The loading indicated by the asterisk is .43.
Table 3.Personal Relationship (Guanxi)
as a Second-Order Factor
Name of the First-Order Loadings on the Factor Second-Order Factor
Face preserving .80
Reciprocal favor .85
Affect .80
Table 4.Correlations of Latent
Variables
47Guanxi, Trust, and Long-Term Orientation
measures. Therefore, the convergent reliability of the con-structs is satisfactory.
One criterion for adequate discriminant validity is that thecorrelation of a construct with its indicators (i.e., the squareroot of the AVE) must exceed the correlation between thatconstruct and any other (Fornell and Bookstein 1982). Thefindings that appear in Table 4 suggest that there is strongdiscriminant validity, because each construct is more highlycorrelated with its measures than with any other construct.This is indicated by the diagonal elements being greater thanthe off-diagonal elements in the corresponding rows andcolumns.
We evaluated the structural model on the basis of the R2 ofthe major dependent constructs. As we indicate in Figure 1,the R2 for “trust in the salesperson” and “trust in the sup-plier” is 50% and 55%, respectively, indicating that thedependent variables are well explained by their correspon-ding independent variables. Overall, the assessment of themeasurement and structural models indicates that the resultsof the PLS model are acceptable. The path coefficients of thestructural model appear in Figure 1.
As we depict in Figure 1, the majority of the hypotheses arestatistically supported, and those that are not supported havea negative sign, indicating a direction opposite to thehypotheses. For the impact of the three dimensions (i.e.,face, reciprocal favor, and affect) on salesperson trust, onlyaffect has a significant effect (path coefficient = .39, p ≤ .01);the effect of face is not significant (i.e., face has no effect onguanxi), and reciprocal favor has a negative sign (–.41),which is contrary to hypothesis H1b. Note that only the emo-tional component (i.e., affect) of guanxi contributes toenhancing salesperson trust, whereas the two instrumentalcomponents (i.e., face and reciprocal favor) do not.
For the two interaction variables, only business contact has asignificant effect on salesperson trust (H2a) (.09, p ≤ .05). Theeffect of social contact on salesperson trust is not supported(path coefficient = –.4), which is contrary to H2b.
The path coefficients for the two consequences of salesper-son trust are both significant (H3: salesperson trust → trust insupplying firm, path coefficient = .35, p ≤ .01; H5: salesper-son trust → buying firm’s long-term orientation toward thesupplying firm, path coefficient = .44, p ≤ .01). The effect oftrust in a supplier on a buyer’s long-term orientation (H4) isalso significant (path coefficient = .15, p ≤ .01). In addition,the two control variables of salesperson characteristics—expertise and status—have significant effects on both trust in
Assessment of the StructuralModel
Results of the HypothesisTesting
48 Don Y. Lee and Philip L. Dawes
a salesperson and trust in a supplier (H6a: expertise → trustin salesperson, path coefficient = .33, p ≤ .01; H6b: status →trust in salesperson, path coefficient = .32, p ≤ .01; H7a:expertise → trust in supplier, path coefficient = .32, p ≤ .01;H7b: status → trust in supplier, path coefficient = .20, p ≤ .01).
With respect to the three guanxi dimensions, face and recip-rocal favor did not have significant effects on salespersontrust. Accordingly, the data failed to support H1a and H1b.However, the data strongly supported H1c (affect → salesper-son trust). As we previously discussed, face and reciprocalfavor are two instrumental components of guanxi; therefore,our findings indicate that the instrumental part of guanxidoes not contribute to the buying firm’s trust in a supplier’ssalesperson. Affect is the expressive or emotional part ofguanxi, and it contributes to the development of salespersontrust. These findings are consistent with the sociology litera-ture, which classifies trust sources into cognition based andaffect based (Lewis and Weigert 1985; McAllister 1995) andattributes different levels of trusting relationships to differ-ent routes of trust (Lewicki and Bunker 1995). Trust based onclosely identifying with the partner (i.e., affect-based trust) ismore flexible to changing conditions and is a bond that ismore difficult to break than is cognition-based trust (Lewickiand Bunker 1995). Personal trust caused by face and recipro-cal favor is cognition based, whereas trust caused by affect isaffect based; therefore, our findings in the business marketsetting in China support Western literature in that affect-based trust is stronger than cognition-based trust. However,these findings are somewhat different from those from manyarticles on guanxi (e.g., Tung and Yeung 1996; Yang 1994),which state that giving face, reciprocal favor, and gift givingare necessary for maintaining good guanxi and earning trustfrom Chinese people. Our findings are consistent with thepreviously proposed concept that guanxi or Chinese inter-personal relationships can be represented as a continuumfrom instrumental ties to expressive ties; that is, the closerthe guanxi, the greater are the expressive ties. The affectcomponent of guanxi is the driving force that moves thefamiliar person relationship toward a guanxi with moreexpressive ties. The closer the guanxi, the more the personalrelationship approaches an in-group-like relationship, thusfostering personal trust.
The lack of support for H1b (reciprocal favor → salespersontrust) and H1a (face preserving → salesperson trust) can beexplained as follows: Fukuyama (1995) characterizes Chi-nese society as a low-trust society, and Chinese people trustonly in-group members. The personal relationship betweenthe salesperson and the boundary personnel of the buyingfirm is a familiar person relationship, which usually is not anin-group relationship. Therefore, the buyer has a certain
DISCUSSION
49Guanxi, Trust, and Long-Term Orientation
degree of distrust in the salesperson and may be suspiciousof the salesperson’s motive if he or she extends a favor to thebuyer personnel. Bribery in Hong Kong has been a severecrime since the establishment of the Independent Commis-sion Against Corruption in 1974. People, particularly civilservants, are heavily penalized if they are found guilty ofcommitting bribery; thus, people are sensitive and avoid get-ting involved in anything subject to corruption scrutiny. Incontrast, giving reciprocal favors is a strong norm in Chineseculture (Hwang 1987). If a buyer receives a favor from a sales-person, the buyer is then morally obligated to repay the favorto the salesperson. As a result, a buyer may be reluctant toaccept a salesperson’s favors, because the buyer does notwant to get into an embarrassing situation in which he or sheowes the salesperson a favor. At the same time, the buyerdoes not want to be suspected of corruption. The suspicionof a salesperson’s motive for extending favors appears tomake boundary personnel less trusting of the salesperson.
A similar logic can explain the nonsignificant effect of facepreserving on personal trust. The essence of a face-preserv-ing component of guanxi is to respect the relational partnerand to protect and enhance his or her image. However, if abuyer considers a salesperson an out-group member, thebuyer may perceive that the salesperson is behaving obse-quiously to make a sale, thus leading to distrust.
This study shows that guanxi is a latent or second-order fac-tor that is behind three subfactors: affect, face preserving,and reciprocal favor. By definition of a second-order factor,these three subfactors are unidimensional; that is, theyshould behave in a similar way. However, our results showthat their effects on personal trust are different and that onlythe affect component fosters personal trust. This may implythat as a latent construct, guanxi functions well only in closeguanxi conditions in which interpersonal relationships arecharacterized primarily by expressive ties and with minimaldistrust, such as in-group relationships. If this is indeed thecase, we may expect that all three components of guanxi fos-ter personal trust in in-group relationships.
The results also show that salesperson expertise is a moreimportant personal characteristic than status in contributingto earning trust from the buying firm (H7). This is not sur-prising given Ganesan’s (1994) finding that salespersonexpertise is one of the necessary conditions of trust.
The findings emphasize the important role of personal rela-tionships in relationship marketing, especially in the theo-ries of industrial buying and buyer–seller relationships.Although most previous research has ignored interpersonalrelationships between a buying firm’s boundary personnel
Theoretical Implications
50 Don Y. Lee and Philip L. Dawes
and a supplier’s salespeople, our study indicates that inter-personal relationships and salesperson trust are importantcontributors that foster a buying firm’s trust in the sellingfirm. The inclusion of personal relationships also mitigatesthe bias and confounding effects that result from using thekey informant method to conduct research on organizationalrelationships.
This study examines the antecedents and outcomes of trustat both the individual and the organizational levels in a dif-ferent culture, specifically the Chinese culture, thus answer-ing Doney and Cannon’s (1997) call for the need to studybuyer–seller relationship in different cultures. This is impor-tant when firms expand their business beyond national bor-ders. Research such as this can improve the understanding ofindustrial marketing theory in a foreign country, particularlyfor marketing managers. Personal relationships (guanxi) inChina are so important that they are considered a crucial ele-ment of conducting business in China. They facilitate busi-ness negotiations, channel management, management insideand outside a company, government approval, and nearlyeverything else in China. Our research models a three-dimensional conception of guanxi and obtains a second-order factor of guanxi to which the three dimensions con-verge, thus supporting both the notion that guanxi is a latentvariable with three subfactors and Kipnis’s (1997) view ofguanxi as a syndrome. In other words, the instrumental com-ponent and expressive component of guanxi act in totality;they mingle together. This understanding of guanxi contrastswith Western relationships in which material exchange andaffectionate feelings occur separately (Kipnis 1997).
Although there are many studies about the Chinese personalrelationships, this may be the first that takes a measurementapproach to the study of guanxi. As a result, a new route ofresearch in this area has been opened. Our study shows thatpersonal relationships foster personal trust mainly throughthe affect component of guanxi. This conclusion sheds lighton the similarities between guanxi and the Western conceptof a “bond” (Wilson 1995).
The findings demonstrate the importance of affect in inter-personal relationships and trusting behavior, which is ofexpressive qualities (i.e., with feeling and emotions) and isparticularistic (i.e., affect cannot be transferred to otherpeople). Thus, the assumptions that are generally imposed inorganizational research that key informants are (1) free ofaffect and (2) universal in their interaction with externalorganizations are questionable.
The findings show that salesperson trust is important to theselling firm because trust at the personal level can be trans-Managerial Implications
51Guanxi, Trust, and Long-Term Orientation
ferred to the organizational level. Therefore, one of the majorfunctions of the salesperson is to increase his or her personaltrust and transfer it to the selling organization. A buyingfirm’s trust in a salesperson is attributable to three categoriesof variables: (1) salesperson characteristics, (2) interactioncharacteristics, and (3) personal relationship characteristics(guanxi components). In the first category, a salesperson’sexpertise and status in his or her firm are important to build-ing both personal and organizational trust. In the second cat-egory, interactions in the business context (but not the socialcontext) between a buying firm’s personnel and the sup-plier’s salesperson are important. All these sources of per-sonal trust in the first two categories are business related;they are the cognition bases of trust (Lewis and Weigert1985). Nonetheless, the most important source of personaltrust is affect, or affect-based trust. Affect contains emotionalassociations that are particularistic, and it often takes a longtime to build and is therefore a relationship-specific invest-ment for both parties. This research suggests that for a sales-person to enhance a buying firm personnel’s personal trust inhim or her, the salesperson should pay attention to both thecognitive and the affect sources of trust. Thus, we suggestthat salespeople take a long-term perspective to their interac-tions with buying firm boundary personnel to build affectwith and earn trust from those personnel. Furthermore, thestudy indicates that a useful way to build personal trust is toemphasize more discussions and interactions with buyingfirm personnel in business areas (e.g., providing business-related and technical information and expertise) becausesocial contact itself does not lead to personal trust. Surpris-ingly, our results indicate that too much social interactioncan harm trust in the salesperson. Because the salesperson isonly a familiar person in terms of guanxi position, theemphasis on social contact may induce the buyer to suspectthe salesperson’s motives.
Our research suggests that a salesperson should avoid givingthe favors to the buyer firm personnel and expect payback inthe future because reciprocal favor reduces salesperson trust.Reciprocal favor is a norm in Chinese culture, especially inpersonal life. In buyer–seller relations, however, salespeopleshould avoid extending personal favors to buying personnel.This is because favors create a trap in which the recipients ofthe favors are obligated to repay favors; this may ultimatelylead to the suspicion of corruption. Many articles about Chi-nese guanxi have emphasized the importance of reciprocalfavor in maintaining guanxi with Chinese people.
This study found that a buyer’s long-term orientation towarda seller is influenced by the buyer’s trust in the seller. Thisfinding has some implications for the selling firm. First, abuyer’s decision of future interactions with the seller is
52 Don Y. Lee and Philip L. Dawes
largely determined by its trust in the seller. Second, becausethe buying firm’s trust in the seller is influenced by its trustin the salesperson, the salesperson should transfer his or herpersonal trust to the organization level, thus increasing thebuyer’s long-term orientation toward the seller.
One finding is particularly surprising. In China’s industrialmarkets, a buying firm’s trust in a salesperson is much moreimportant than its trust in the supplying organization in con-tributing to the buyer’s long-term orientation toward the sell-ing company. This is because a significant part of a buyingfirm’s long-term orientation toward its supplier is attributa-ble to its personal loyalty to the sales manager, which resultsfrom his or her guanxi with the buying personnel. Therefore,supplying companies that conduct business with Chinesebuyers should carefully “manage” the guanxi with boundarypersonnel. Guanxi is a double-edged sword; on the onehand, it enhances buyers’ long-term orientation toward theselling company; on the other hand, if the sales managerleaves the company, he or she takes the guanxi partner.
We also show that guanxi mingles instrumental componentsand affect; that is, it mixes business with affection. Whenconducting business with Chinese partners, it seems to bemore effective to treat them as friends because friendshipfacilitates business deals.
Research in international marketing almost always encoun-ters the issue of construct equivalence (for a review of vari-ous equivalence, see Malhotra, Agarwal, and Peterson 1996).That is, the constructs have the same meaning and signifi-cance in different cultures if they are equivalent conceptu-ally, functionally, and in measurement (Malhotra, Agarwal,and Peterson 1996, p. 19). In this study, all the constructsexcept guanxi and its dimensions were adapted from thosedeveloped in the United States. We were careful in develop-ing our research design, and we took advice from the litera-ture; for example, we used a multicultural research team(including a local researcher) and checked with Chinesemanagers to determine whether their understanding of thestatements in the questionnaire was consistent with con-struct meanings. In addition, we used many research find-ings from studies on Chinese culture, personal behavior, andorganizational behavior to justify our hypotheses. However,we did not conduct formal studies to scrutinize constructequivalence. Nonetheless, “in practice, construct equiva-lence is rarely considered in empirical studies” (Craig andDouglas 2000, p. 395).
In addition, because the key informants we used in thisstudy were all highly educated men, further studies are nec-essary to establish the generalizability of these findings. Fur-
Limitations and FurtherResearch
53Guanxi, Trust, and Long-Term Orientation
thermore, the sample size we used in this study is only 128,which is not large enough to validate the new construct ofguanxi; future studies should use a larger sample size tomake a holdout sample possible in the validation of the newconstruct.
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THE AUTHORS
Don Y. Lee is Associate Professorof Marketing, Department of
Management and Marketing, TheHong Kong Polytechnic University
The first author acknowledges thesupport of a grant for this research
from the Hong Kong University GrantCouncil (UGC Grant No. B-Q269).The authors thank Leo Lo for his
assistance in data collection for thisresearch.
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