Mr. X

AUTHOR: KATHERINE R. XIN, JONE L. PEARCE ACADEMY OF MANAGEMENT JOURNAL (1996)

YUANZE UNIVERSITY- DOCTOR OF PHILOSOPHY PROGRAM

COURSE OF ORGANIZATION THEORY

INSTRUCTOR: PROFESSOR SHIH-CHUN HSUPRESENTED BY: JESSIE PHAM, ID: s1019424

Introduction & research backgroundFramework and HypothesesResearch MethodologyResearch Results Conclusion and Discussion

Theories of organizational behavior are surprisingly silent on the meaning of executives’ interactions Formal structure provides an

incomplete picture of how they develop connections

Seek out and cultivate close personal relationships to obtain resources and protections

Particularly important in countries without stable legal and regulatory environment

Good personal relationships in doing business in developing countries has been discussed widely, especially executives in China The sense of right “social

connections” Focus on mutual interests and

benefits No empirical tests of Guanxi or of

the circumstances that shape When, where, with whom such

relationships should be important

Personal relationships are useful when the regulation of transactions in the absence of state institutions (Redding, 1996)

China’s transitional economy is characterized by weak capital market structures, poorly specified property rights and institutional instability (Nee,1992) Market exchanges are uncertain and costly

A weak rule of law is particularly burdensome for newer, smaller private businesses

Guanxi as a substitute for formal institutional support for new, small organizations, which is more available to state-owned and collective-hybrid ones

Chinese private companies cultivate close personal relationships with people useful to business

Controlling for Liability of Newness and Smallness Lack of external legitimacy than older organizations

(Stinchcombe, 1965) Fewer ties endanger the chance to survive

After control organizational age and size:Hypothesis 1:

“With the age and size of their companiescontrolled, executives in private Chinesecompanies will report that their businessconnections are more important to theirsuccess than will executives in either state-owned or collective-hybrid companies”

Rather than reporting the usefulness ofconnections in obtaining customers, marketinformation, or securing credit, manager mayreport needing connections to help them facefundamental threats such as expropriation andextortion (Nee, 1992; Redding, 1990; Yang, 1994)

Hypothesis 2:“Executives in private Chinese companies are more

likely to report that their business connectionsare useful as a defense against threats than areexecutives in either state-owned or collective-hybrid companies”

Good connections in government to beparamount importance to those in societieswith a weak rule of law as a protection

Hypothesis 3:“Compared to executives in either state-owned or collective-hybrid Chinesecompanies, executives in private ones willreport more connections with individualswho hold positions in government”

Private company executives will seek to build relationships that are deeper in trust for protection

Hypothesis 4:“Executives in private Chinese companies will

report that their business connections arecharacterized by more trust than executivesin either state-owned or collective-hybridcompanies will report as characteristic oftheir relationships”

Guanxi depends primarily on shared identification with family, hometown, region, school or place to work

Not only common background, but the attempt to increase the social interactions between them, such as continuous gift giving

Hypothesis 5:“Executives in private Chinese companies will report giving more non-reciprocated gifts to

those with whom they have business connections than executives in either state-

owned or collective-hybrid ones”

Snowball sampling was used from the business connections of a close relative who is an executive for the state-owned insurance company

Heads and directors of key functional units (OFM) from as wide a variety of industry of organizations who have ownership status: 15 from stated-owned, 8 from collective-hybrid, 9

private company executives

Average age of 41.7 yrs, 7.2 yrs tenure, 80% male

Structural interview in was developed in English, then translated into Chinese and back-translated into English

Conduct 2 field tests with business students from China to ensure the terminology and correct meanings for each items

Besides descriptive information, list of 8-10 the most necessary people to each executive’s job and career success were obtained

Using single item scale, modest confidence in measure reliability but no prior information of the validity since they are new “The importance of a connection”: “How importance is the

relationship to you?” (1=not important-4-vitally important)

“defense against threat”: “this relationship is useful as a defense against threats” (1=strongly disagree – 5=strongly agree)

Using a within-and-between analysis (WABA) to prevent the problem of non-independence of measure to test hypotheses 1,2,4

Logistic regression analysis was used to test hypotheses 3,5 ( DV are dichotomous)

After controlled for the companies relative youth and small size, executives in private companies apparently did seek to

compensate for their relative lack of formal structural support by relying MORE on GUANXI

Hypotheses 1,2 ,4

supported

Private-company executives in developing economy seek to compensate for their lack of formal institutional support by cultivating personal connections

Compared to other executives, private companies Considered business connections more important

Rely significantly more on building relationships with government officials to defense themselves against threats like expropriation or extortion

Make more extensive use of gift giving

Trusted their connections more The Problems of Reliability and Validity of Scales

THANK YOU VERY MUCH FOR YOUR PARTICIPATION AND

ATTENTION!

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