Guanxiand its role in business Meiling Wong Department of Industrial Engineering and Management, National Chinyi University of Technology, Taipin, Taiwan, People’s Republic of China andDepartment of Industrial Engineering and Enterprise Information, Tunghai University, Taichung, Taiwan, People’s Republic of China Abstract Purpose –Guanxiis believed to be a striking feature that helps to enter a profitable and growing Chinese market. Though many have guanxiwell-defined and classified, the core value undermined within the Confucianism that constructs guanxinetworks, the mechanism of how guanxiworks, and the fac tor s tha t mak e the m sus tai na ble and durab le in Chine se soc iet ies hav e rar ely bee n discussed thoroughly. From the socio-cultural view, this study seeks to examine guanxiand its role in business. Design/methodology/approach – The pap er use d a co mbi natio n of qualitative research approaches, namely interviews, and questionnaire for survey. The quantitative research approaches was also chosen to test and discuss for the results consistency. Findings – The result suggests guanxi, the unique cultural character of Chinese, does not simply connect the social networks; it also plays the role in setting the rules in doing business in Chinese society. Research limitations/implications – This pa per pro vides an inne r view whic h offer s insig hts tha t should prove helpful to academics in management and related disciplines as well as to practitioners engaged in Chinese business. Originality/value – Monitori ng the mechanism of Chi nes e social-cult ure and gaini ng an understanding of how guanxiplays as the internal and external factors in business. Keywords Culture, Confucianism, Business environment, China Paper type Research paper 1. Introduction Whi le it is emphas ize d in Wes ter n on “what you know,” refer s to tec hno logical expert ise , incl uding the pr ice and qual it y of tender ed product or servic e, it is emphas ize d in Con fuc ian soc iet ies on “who you kno w,” whi ch ref ers to per sonal connections with the appropriate authorities or individuals. These connections are known in Chinese as guanxi(Yeung and Tung, 1996), which is believed to be a striking feature that helps to enter a profitable and growing Chinese market. Thus, the issues ofwhat indeed guanxiis and how it works in effect thus have become focal discussions. China, the gr eat fa mi ly of nati onal it ies with mi nor estr angement among, in par ticula r, is a soc iet y built bas ed upon Con fuc ianism where peo ple ar e tie d closel y into varieties ofguanxi, with which the social networks bind millions of Chinese firms into socia l and business webs, largely dicta ting their success (Pearce and Robinson, 2000; Gibb and Li, 2003). Though many have guanxiwell-d efined and classi fied includ ing the way of maintaining it as well as its importance to business in China (Yeung and Tung, 1996; Pearce and Robinson, 2000; Fan, 2002), the core value undermined within the Confucianism that constructs guanxinetworks, the mechanism of how guanxiworks, and the factors that make them sustainable and durable in Chinese societies The current issue and full text archive of this journal is available at www.emeraldinsight.com/1750-614X.htm Guanxiand its role in business 257 Chinese Management Studies Vol. 1 No. 4, 2007 pp. 257-276 q Emerald Group Publishing Limited 1750-614X DOI 10.1108/17506140710828532
Department of Industrial Engineering and Management, National Chinyi University of Technology, Taipin, Taiwan,
People’s Republic of China and Department of Industrial Engineering and Enterprise Information,Tunghai University, Taichung, Taiwan, People’s Republic of China
Abstract
Purpose – Guanxi is believed to be a striking feature that helps to enter a profitable and growingChinese market. Though many have guanxi well-defined and classified, the core value underminedwithin the Confucianism that constructs guanxi networks, the mechanism of how guanxi works,and the factors that make them sustainable and durable in Chinese societies have rarely beendiscussed thoroughly. From the socio-cultural view, this study seeks to examine guanxi and its role in
business.Design/methodology/approach – The paper used a combination of qualitative researchapproaches, namely interviews, and questionnaire for survey. The quantitative research approacheswas also chosen to test and discuss for the results consistency.
Findings – The result suggests guanxi , the unique cultural character of Chinese, does not simplyconnect the social networks; it also plays the role in setting the rules in doing business in Chinesesociety.
Research limitations/implications – This paper provides an inner view which offers insights thatshould prove helpful to academics in management and related disciplines as well as to practitionersengaged in Chinese business.
Originality/value – Monitoring the mechanism of Chinese social-culture and gaining anunderstanding of how guanxi plays as the internal and external factors in business.
Keywords Culture, Confucianism, Business environment, ChinaPaper type Research paper
1. IntroductionWhile it is emphasized in Western on “what you know,” refers to technologicalexpertise, including the price and quality of tendered product or service, it isemphasized in Confucian societies on “who you know,” which refers to personalconnections with the appropriate authorities or individuals. These connections areknown in Chinese as guanxi (Yeung and Tung, 1996), which is believed to be a strikingfeature 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.
China, the great family of nationalities with minor estrangement among, inparticular, is a society built based upon Confucianism where people are tied closely intovarieties of guanxi , with which the social networks bind millions of Chinese firms intosocial and business webs, largely dictating their success (Pearce and Robinson, 2000;Gibb and Li, 2003). Though many have guanxi well-defined and classified includingthe way of maintaining it as well as its importance to business in China (Yeung andTung, 1996; Pearce and Robinson, 2000; Fan, 2002), the core value undermined withinthe Confucianism that constructs guanxi networks, the mechanism of how guanxi works, and the factors that make them sustainable and durable in Chinese societies
The current issue and full text archive of this journal is available at
have rarely been discussed thoroughly. In other words, what makes guanxi particularand irreplaceable regardless of the ethical defaults attracts our attention and indeeddeserves a close-up lens. The purpose of this paper is to examine the role of guanxi ,which acts both as the catalyst and the buffer for effective enculturalization, thus
enables business success in Chinese society.In pursuing the objectives the paper is organized as follows. First, it reviews briefly
with the concept of the power of culture. Second, the meaning and context of guanxi with respect to Confucianism is introduced. Third, the guanxi networks and business isdiscussed. Fourth, a further example of guanxi in business in comparison withrelationship marketing is elaborated. Fifth, the propositions of how guanxi plays therole as an internal factor in constructing interpersonal relationship, and guanxi networks as the role of external factor in connecting inter groups are developed andfollowed by questionnaires with our case study. Finally, the paper ends with aconclusion and directions for needed future research.
2. Power of culture
The context of cultural power includes intellectual factors (such as technology,education, etc.), spiritual factors (such as ideal, belief, ethic, value, etc.) and thesocial-cultural network affect our daily life along in addition to the power of traditionalculture (Gia, 1998). Economics and culture are not developing as two parallel lines. Theyinteract and affect each other reciprocally. Based upon the economic developmentcollaboration, productivity increase, and social progress, the power of various culturesintegrates and externalizes with the need of overall development from the power of culture subjectively constructed in the process of cultural value and civilization creation,which pushes, guides, condenses, and inspires the economic development (Gia, 1998).
Inter-cultural differences exist when differences among national cultures exceeddifferences of cultural groups with the respective national cultures (England andNegandhi, 1979; Helfrich, 1999; Hofstede, 1992; Muller and Gelbrich, 2001). However,
while globalization has been radically taking place all over the world, culturaldifferences exist among not just nations but also groups within the same country.Nevertheless, when cross national operation takes place, the dramatic, internal pushingeffect caused by culture, no matter in enterprise or regional economic development, iseven fiercer for the multi cultural blend. Inter-cultural difference and its hybrid seemmore complex and become one of the obstacles that seriously affect the internationalbusiness efficiency among other factors.
Although it is required to understand cultural differentiation in cross national businessoperation, culture is too complex for us to have it defined specifically. Instead of puttingeffort in searching for the cultural definition, we suggest to pay more attention tounderstand the influence of the cultural powerand how its characteristics are related to thecorporate operation. Therefore, in our study, we focus on guanxi , which is considered asthe unique Chinese construct ( The Economist , April 8, 2000) and a product of Confucianvalues and the contemporary political and socio-economic systems (Fan, 2002).
3. Guanxi and ConfucianismGuanxi interaction has been viewed by many scholars as an idiosyncratic culturalphenomenon (Lee and Ellis, 2000) where Confucianism is the major life philosophy.In China, guanxi has been a way of life since time immemorial, thus the personalinvestment required to develop and maintain good social relations is accepted as an
unavoidable fact of life. For each specific relationship, people in China “make out”through interpersonal accommodation and negotiation (Imrie et al., 2002).
With respect to social context, Chinese culture provides a tightly knitted socialframework in which individuals areprotectiveof one anotherand organizations safeguard
their members’ interests. It projects a preference for cooperation, group decision-making,and relationships. Thus, the importance of networks lies in their emphasis on collectivismand group harmony. Social status is determined largely by guanxi system to which onebelongs – a determination often preordained by the composite membership of one’sextended family. The Chinese strive to keep relationships among guanxi members stableand harmonious since guanxi is the basis on which they exchange a lifetime of favors,resources, and business leverage (Pearce and Robinson, 2000).
Social norms, though somewhat are different around the world, mostly are attached tothe social status, which is the position where people stand in a social system. And theregulation integrated for a certain status is the “role” (Linton, 1972; Chang, 1986). Forsomeone who takes the proper role and plays it accordingly receives high praise for beingqualified for his social status. Wu-lune ( ), the basic norms of guanxi , is the mainthought of the ideal type of manhood and patriarchy and filial piety and the spirit of trust( ) and justice ( ) in regulatingdifferentlevels of guanxi and settingthemin hierarchicalorder with priorities in Chinese societies. It consists of five levels: the monarch and hissubjects ( ), the father and his son ( ), brothers ( ), friends ( ), and thehusband and his wife ( ). In this guanxi system, while the three basic guanxi of thefather and his son, brothers, and the husband and his wife are inside of the family,the political guanxi of monarch and his subjects is up-pushed to the national level, and guanxi of friends contains the rest of those who are outside of the families. From theperspective of Chinese societal progress, the “family – nation – world” is the structurefrom inside out where the family ethic is the basis of Confucius’ human relations, whereeach one ought to be committed, responsible, and content to his given role. As long as
every member in the group follows the rules, the whole society stays in harmony. As timegoes by, the Confucius followers elaborate and report Confucius’ doctrine to the societies inaccordance with the trend of the times. Thus, there is bifurcation of Confucianism, such asneo-Confucianism and others, which states the difference in the implementation of it;nevertheless the core thoughts basically stay in common.
Guanxi is characterized into categories in accordance with its bases (Hwang, 1987;Nuang, 1992). However, no matter, how guanxi is classified and implementedtheoretically, in practice there are certain rules for each role played among parties inaccordance with Wu-lune. And rules are often borrowed when guanxi cannot be clearlydefined. For example, a business relationship built between strangers is seen as mostdistant unless credentials and a mutual sense of identities are established in terms of insiders, such as the “Zijiaren” ( ),thenthe guanxi can be upgraded and seen either
as brothers or friends, and the non-written rules, “Hsin” ( ) for brothers or “Yi ( )” forfriends is borrowed from Wu-lune as metaphors, with which people involved in businessfollow along without suspicions. In markets, people see one invisible hand – price, whilein China, another hand – guanxi , is seen as a potential solution for most problems of entering and operating in China. While guanxi plays the role as the “protocol,” setting therules governing the communication and the transfer of affection between individuals inChinese societies, the teaching of Confucianism deeply rooted in effect constructs thenorms of guanxi for its establishment and maintenance. Although in this paper we limit
our discussion within the phase of guanxi and business, we can still see guanxi networksknitted across, reach out broadly, and wide spread into every corner of Chinese society,which has essential influence in multi and inter dimensions.
4. Internal and external role of guanxi networksChina, the great family of nationalities with minor estrangement among, in particular,is a society built based upon Confucianism where people are tied closely into varietiesof guanxi , whose networks bind millions of Chinese firms into social and businesswebs, which largely dictating their success (Pearce and Robinson, 2000; Gibb and Li,2003). As Hwang (1987) characterized guanxi bases, the strongest ones are referred toas the affective or “expressive” ties found among family members and close friends. Incontrast, more distant others, such as salesmen and customers, connected bytemporary “instrumental” ties that are enacted regularly in the pursuit of materialgoals unless there is a “metaphor” relationship built in (as discussed in above section).In between the two extremes are found “mixed” ties, which are governed by norms of
equality (a function of renqing - and mianzi - ) and thus describe the mostactive domain for guanxi networking. For these mixed ties, guanxi is more like anetwork of relationships a person cultivates through the exchange of gifts and favorsto attain mutual benefits. It is based on friendship and affection, and on a reciprocalobligation to respond to requests for assistance.
Guanxi networks are sub nets (groups) collected with sum of cells (units)constructed by threads (individuals) with knots ( guanxi ), where groups stand for subsocieties, such as communities, and cells stand for organizations, such as families, andfirms. And group is defined as the amount of people gathered together for havingsomething in similarity, and this similarity is often recognized by public as themeaning for certain social interaction, where guanxi can be easier to take place.
Mayfair M.H. Yang has described guanxi building as the transformation process
whereby two discrete individuals construct a basis of familiarity to enable thesubsequent development of relationship. And in this process, the gap between twohitherto unrelated individuals is bridged so that an outsider becomes part of the insidesocial circle of another person (Yeung and Tung, 1996). Take locality as an example forfurther elaboration. Locality is one of the common forms of ascribed guanxi bases inChina to the group identification, where Da-ton-hsiang ( ) refers to membersfrom the same province, and Hisao-ton-hsiang ( ) refers to a even closerrelationship for members from the same village. People from the same origin have theaffection to their hometown, this kind of liking thus is passed down to each other,which ties them together and reinforces their friendliness.
Firms seldom survive and prosper solely through their individual efforts. Eachfirm’s performance depends upon the activities and performance of others and hence
upon the nature and quality of the direct and indirect relationships a firm developswith its counterparts (Wilkinson and Young, 2002). Corporate networking is not a newphenomenon, it is critical to most business success in our global society. Westernmanagement literature reflects executives’ appreciation for the value of networkingand for the need to develop corporate links. Networking is now believed to enhance afirm’s competitive advantage by providing access to the resources of other networkmembers. It is used to bridge the gap between business people of different nations andcultures, stimulating trade that might not otherwise occur (Pearce and Robinson, 2000).
As Gundling (2003) discusses in his book, a company’s global strategic-planningprocess involves obtaining specific local market knowledge and on understanding of aspecific culture’s values and history. With respect to “yin/yang,” the perspective stemsfrom the East Asian belief that duality and contradictions are inherent in all aspect of
life. People believe that utilization of both in harmony brings prosperity, or otherwisewhen fail to do so. Guanxi and its networks in a sense are connections built betweendiscrete individuals across organizational boundaries activate the intra-culturalizationand inter-culturalization, not just have knowledge transferred across, but also thegeneration of ideas turned into products, services, or work-place improvements thatspurs innovation. And its strategic positioning depends on employee interaction withleadership and interface roles. It is highlighted that building these relationships is acritical factor in grasping local frames of reference and developing a strategic plan thatwill expand their presence overseas, which can be managed through guanxi networks.
5. An example for elaboration the role of guanxi in business: a comparison
with the Western perspectives on relationship marketingThe common element in Western relationship marketing is the mutual, quality, ongoingrelationship between two exchange parties (Merrilees and Miller, 1999). Four dimensionsof trust, reciprocity, bonding, and empathy are identified, where trust refers to mutualreliability and dependability, reciprocity, in Eastern term, is closely aligned with thenotion of obligation, bonding, is mainly used in a business-to-business context, referringto common interests with the client, and empathy, is referred to the ability of customersand sellers to understand each others’ needs (Callaghan, 1993; Callaghan et al., 1994).When trust is regarded as the foundation (Berry, 1995) and reciprocity is considered asthe core of relationship marketing (Bagozzi, 1995), empathy and bonding have beengiven less attention in the Western consumer relationship marketing literature.
In regards to their definitions, characteristics, and applications in contemporary
relationship marketing, it is believed that all these four dimensions deserve a furtherdiscussion with respect to the differences between West-East cultures (Gronroos, 1994;Czepiel, 1997; Bitner, 1995; Luk et al., 1996; Merrilees and Miller, 1999). In this paper, thecomparison in between will be discussed in the following so as to see the mechanism of guanxi in marketing.
5.1 Trust Most countries have cultures within cultures that require a special approach: distinctregions, ethnic groups, or particular segments of the economy. Selling is probably oneof the most resistant activities to globalization and at the same time, the most crucial,demanding successful personal relationships. Companies need to handle customerconcerns authentically to make the art of persuasion easier (Gundling, 2003). In China,
the success of relationship marketing is based on guanxi networks. People do businessonly with those whom they know and trust, and those who are connected into guanxi networks. In guanxi networks, members give each other highly preferential treatment.Business relationships thus are designed to enhance guanxi and thereby lead to otheropportunities. Therefore, guanxi is maintained and reinforced through continuous,long-term association and interaction.
With respect to trustworthiness, guanxi can also be classified into three categories:“family,” “helper,” and “business” guanxi , where “family” guanxi is deeply rooted in
the Confucian heritage, “helper” guanxi and “business” guanxi are mainly the productof the political and socio-economic systems in the contemporary China (Fan, 2002).Chinese offer privileges to people whom they consider as “Zijiaren” (one of us, but notnecessarily of one’s own family), and purposely keep distant with those whom they
consider as “Weyeren” (outsider). Since, there is no particular elaboration in Wu-lunefor business relationships in China, “Hsin” ( ) and “Yi ( )” stand for honesty andloyalty and exist only between brothers and friends, are borrowed as the metaphor of the norm for business relationship, with which people accept and follow it as true.Thus, for outsiders involved in business with Chinese, they always try hard to stepacross the “door” in order to become an insider. And the magic code of doing so is tohave guanxi upgraded to be as either brothers or friends through dining, face-giving,and so on. When such roles are firmly placed, guanxi is bilaterally defined andcommitted, and rules will be mutually agreed and followed without contract or anyother written format. That is also why Chinese business men in particular worshipGuan-Yu, a legend character, who is the symbol of the great spirit of “Yi.”
5.2 Bonding Of the four dimensions, empathy and bonding have been given less attention in Westernrelationship marketing literature (Merrilees and Miller, 1999). In China the system of Wu-lune, including five types of relationship, ruler-subject, father-son, husband-wife,brother-brother, and friend-friend, has been discussed in depth in previous sections, aperson’s fulfillment of the responsibilities of a given role ensures the smooth functioningof society, where in the West, the primary influence on human behavior is self-interest.As used by Callaghan (1993), bonding is mainly used in a business-to-businesscontext, referring to common interests with the client. In a consumer or direct sellingcontext, bonding might be expressed as friendship, which is more common in Chinesesociety. This dissimilarity between the two cultures has led to the development of verydifferent attitudes about reciprocation (Yeung and Tung, 1996).
5.3 ReciprocityAs Yeung and Tung’s (1996) detailed discussion in their study, Confucianismencourages each individual to become a “yi-ren” (righteous person). To become a“yi-ren” a person must repay favors and increase the value of the favor given. TheChinese saying, “If someone pays you an honor of a linear foot, you should reciprocateby honoring the giver with ten linear feet,” captures the essence of this principle. Withthis kind of philosophy, guanxi is more like a financial statement that never balances,which makes it existing and long lasting. According to Peter M. Blau’s social exchangetheory, while there is also unequal reciprocity in Western social transactions, the tilt of disadvantage is directed at the other party, not the self.
5.4 EmpathyThe core thought of Confucianism is “Ren” ( ). “Su” ( ), in a way represents for“Ren” in practice, which stands for the meaning of “Do not do to others as one does notwant others to do to him” ( , ). Therefore, it is a two-way flowconcept goes beyond the one-way role of empathy in Zeithaml et al. (1990), which is infact closer to Callaghan’s reference to the ability of customers and sellers to understandeach other’s needs. And surely responsiveness is naturally given to each other withoutasking. Empathy has been recognized as a subcomponent of the guanxi notion in China
(Hwang, 1987; Callaghan, 1993) while seems less apparent for most Western consumermarketing relationships (Merrilees and Miller, 1999).
In addition to the above discussion, there is one more characteristic, discrete butrelated to consumer relationship marketing. Promise, is important in a sense that
guarantees the service quality in West (Merrilees and Miller, 1999), but in China, amore implied code of conduct, assumed rather than stated, which is attached to the roleassigned in the Wu-lune system and believed ought to be fulfilled with commitment ina common view acknowledged by public.
In daily life, we can easily see countless examples of how guanxi in Chinese societyworks in building all kinds of relationships and have them spread out into guanxi networks to connect inter groups. Thus, in our study, we examine the guanxi mechanism to see how guanxi works as the internal factor for the firm in buildinginterpersonal relationship so as to increase business sales; and guanxi networks as theexternal factor in connecting inter groups, either partners or competitors, to ensure theservice quality for their customers. Insurance is an immaterial product that is valuedsubjectively by its recipients which is influenced (Hofstede, 1996). For the purpose of
our research, we raise and examine the propositions as follows:
P1. The perceived service quality differs independently of what theservices/goods are but dependently of how the services/goods providerscarry out with it, which is basically relied on the guanxi construct between theservice provider and receiver.
P2. Guanxi networks, among either partners or competitors, help firms in thesame industry cooperate to secure the customers’ service quality, whichfurther enhances the customers’ confidence and in turn increases their sales.
In the insurance industry, firms sell mostly similar products and services except thesales persons’ attitude, which is what really counts in making deals with their
customers. We propose that firms in Taiwan, either local or foreign ones, cooperatetogether to switch or combine their product/service programs so as to satisfy theircustomers for all kinds of requirements. A good guanxi reinforces relationshipmarketing and ensures its success whereas a bad guanxi spoil relationship marketingand in turn terminates the transaction.
6. An empirical studyWith the teaching Confucianism, Chinese are religious by nature, and have a firm belief in one supreme, all-ruling, and personal god whom is called Heaven. People ought toknow the Mandate of Heaven, stand in awe of them, obey them faithfully and carrythem out enthusiastically (Shangxing and Singqing, 1993). For Chinese, death is thewrath of the heaven, and talking about it is a taboo. Insurance is an immaterial productthat is valued subjectively by its recipients which is influenced (Hofstede, 1996).Therefore, for the purpose of our study, in spite of all other variables may influenceservice quality, we conduct an empirical study of the insurance industry to examine guanxi and its role in business, with which constructs interpersonal relationships asthe internal factor; and guanxi networks which connect inter groups as the externalfactor that endow buyers’ evaluation to the service quality, thus in turn direct theirpurchasing behavior. A survey was administered to individuals employed in salesdepartment and their customers of both Taiwanese local and Foreign Direct Invested
(FDI) insurance firms in a major Taiwan city. Using Likert scale of five levels fromhighly agreed to highly disagreed, the questionnaires contained with 24 questions(Appendix 1) concerned with the internal and external effects of guanxi in business,was designed in accordance with interviews with six senior managers of our studied
firms and filled up by the employees and their customers of the top six insurancecompanies (local and FDI) in Taiwan.
7. DataTotal of 1,513 subjects of questionnaires were collected, consisted of 1,092 from localinsurance firms and the rest from FDI ones, including both of their salesrepresentatives (686) and customers (827) in a major Taiwan city. The respondentsof the service providers, with three or more years of working experience, have beenworking with the present company for at least one year, and up to 90 percent of themhad finished high school and taken more than two years of college courses (see detailsin Tables AI-AVIII of Appendix 2). There is around 42-58 percent ratio of male andfemale sales agent (service providers) for FDI firms while there is 30-70 percent ration
of male and female for local firms. As for customers (service receivers), the ratio of maleand female is 53-47 for FDI firms and 65-35 for local firms. The ration of sales agents of both local and FDI insurance firms shows there is the gender culture in the serviceindustry which may be worth for a further research.
8. Results and discussionsWith our sample of 1,513 questionnaires collected and analyzed, under Likert scale, theresult for this survey is as following (Appendix 1, Tables AIII and AVII).
(1) For the service providers (including both local and FDI), questions no. 2 receives86 percent of agreed, no. 13 of 82 percent, and no. 15 of 86 percent, which showthat situations between the service providers and receivers can be:.
there may be more than one sales agent provides the service after sales, sinceteam (inter group, inter organizational or inter industrial) may take over theafter sales service;
. the sales agents may not totally agree with their organizational culture onthe service conception, so they do not always follow along with it; and
. the customer’s budget may not be taken into consideration for insuranceplan, which explains budget is not the main concern for the business deals.And question no. 20 reaches to 75 percent of agreed, the lowest among all,shows the agents may not be as active and enthusiastic of learning asexpected since it is not required, which in a sense is consistent with Foo’s(1992) research: Eastern structural approaches to productivity tend to beinclined towards more of a humanistic, adaptive posture, whilst Westernmanagement is more mechanistic (labor doing perhaps what technology isunable to do efficiently or effectively) and strategy-directed, or “hard”.However, with our hybrid sample mixed with local and FDI firms, this resultevidently shows that business strategy in terms of local marketing iscultural bound regardless indigenous or foreign/multinational firm.Nevertheless, there are more than 90 percent of the respondents give the“agreed” answers for the rest of the questions, which clearly express the ideaof guanxi and its role in business, such as guanxi helps the agents to
establish and maintain their business based upon the trust and reliabilitythat come with it, although there is service differentiation provided basedupon various levels of guanxi in between the receiver and provider. Inaddition to that, these results also indicate that sales agents have strong
faith in guanxi , with which they can have the inter organizational and interindustrial cooperation in providing the best service promised for theircustomers (supported by questions of nos. 3, 7, 10, 19, and 22).
(2) For service receivers (both local and FDI firms), respondents give around52-80 percent to agreed while less than 5 percent of disagreed, and the rest of 16-38 percent stands for yes and no. The result tells us that most of thecustomers do not really care about the budget limit, agent’s capability, orthe insurance firm’s culture and institutions. They trust the service quality inthe agent’s hand that they have guanxi with, in spite of whether the serviceis provided from inside or outside of the contracted firm. Question no. 4 receives80 percent of agreed shows that for service receivers, the service provider’s
attitude which reflects one’s value onto others is what really counts since itsymbolizes the level of guanxi they have in between, thus guarantees the servicequality as they expected. Furthermore, with the contract adjustable enabled by guanxi , business deals are achieved much easier.
Having both of our propositions verified, we conclude in Chinese society whereobligation is attached to specific roles assigned under Wu-lune system with theteaching of Confucianism, guanxi thus plays not just as the internal factor inconstructing interpersonal relationships, it also brings the effect in reconciling people’sperceptual differences, the service quality perception gap between service providersand receivers in our study, and guanxi network plays as the external factor inconnecting inter organizations to ensure the business collaboration and the servicequality. Therefore, guanxi ought to be considered as one of the essential elements not
just in hooking up people physically, it also has all hearts of members bonded togethernot only for individuals but also for the society they belonged to.
In addition to the above result, there are rooms for discussion with the congruencesince a CHITEST ( p % 5 percent) shows that some of the values of x
2 are smaller than0.05 (Appendix 2, Tables AIV and AVIII), which shows that data may differ withrespect to respondents of different background, such as the levels of salary and amountinsured and so no. People with lower pay, position, and less amount insured usually donot have as strong faith in guanxi and its role in business as people at the other end.This indicates that there are subcultures for subgroups where there is guanxi existingwithin guanxi , with which Chinese are able to utilize it as needed at the right time and
right place with right people, which is another subject that deserved a closer lens.Chinese culture provides a tightly knitted social framework in which individuals are
protective of one another and organizations safeguard their members’ interests. Guanxi in Chinese society is the basis on which they exchange a lifetime of favors, resources,and business leverage. It projects a preference for cooperation, group decision-making,and relationships. Thus, the importance of guanxi and its networks lie in theiremphasis on collectivism and group harmony, and in turn help the business to achievean integrated success.
9. Directions for future researchAlthough the purpose of this paper was to analyze guanxi and its role in business, werealize that there are likely to be other associations not specially examined in this paperthat warrant future attention. There are a few suggestions for future research: First,
Wu-lune, on the basis of Confucianism in effect defines the social roles and classifiestheir hierarchical system, is in fact the cornerstone for guanxi construct. The effect of the teaching of Confucianism is dynamic which may vary with the possibility of generation gap. With changing social structure, how guanxi mechanism works forChinese in recognizing and manipulating with their guanxi networks deserves moreattention and studies. Second, in our study we acknowledge that guanxi networksknitted across and widely spread into every corner of Chinese society, its essentialinfluence in multi and inter dimensions requires further research.
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Appendix 1. Questionnaire (Chinese version upon request)
. The service received from the insurance agent is adjustable in accordance with thecustomers’ personal requests.
.
There is only one single agent who provides his customers service from the beginning of signing contract to after sale service.. The programmed insurance contract can be altered and services of other rivals can be
included as requested by the customers.. Warm attitude of the service providers enables the customers’ willingness to sign up the
insurance contract.. The insurance agents pay their customers regular visits to impetus mutual understanding.. Having good guanxi , the insurance agent(s) always put(s) his customers at the top of his
service priority under any circumstance.. The insurance company offers full support for his insurance agents in service providing,
including rival’s service.. Whether the insurance firms have the full support system does not affect the customers’
decision on a contract.. The insurance agents and his customers are having good relationships because of the
excellent and frequent communication.. A team service provided ensures the service quality.. The insurance agents and customers are having nice relationship, thus a lifelong service is
guaranteed.. Customers rely on their insurance agents with insurance related matters because of trust
which is based upon their guanxi .. The insurance agents agree with his firms’ service conception and follow along with their
organizational culture accordingly.. Having reliable guanxi , the insurance agents are often introduced to their customers’ friends.. The insurance agents take the customers’ personal budget into consideration while
planning them the insurance contract.. For different customers with various guanxi , there is service differentiation provided by
the insurance agents.. The insurance agents and their customers are good friends who extend the service in
accordance with their customers’ personal situation.. Having common value of life, it is easier for the insurance agents to build good guanxi
with their customers.. All possible service either inside or outsideof thefirms canbe offeredto satisfy thecustomers.. The insurance agents do not overlook learning opportunities so as to upgrade his
competence and improve the service quality.. The insurance firms have their organizational culture and service quality well defined.. Lots inter organizational and inter industrial cooperation take place to provide better service.. With guanxi , the insurance agents actively search out problems with solutions for their
customers.. More and more inter organizational and inter industrial cooperation are taking place for
the approach of customization of insurance contract.
Male 89 41.78Female 124 58.22 AgeBelow 20 years old 1 0.47Between 21 and 25 years old 20 9.39Between 26 and 30 years old 36 16.90Between 31 and 35 years old 34 15.96Between 36 and 40 years old 52 24.41Between 41 and 50 years old 57 26.76Above 51 years old 13 6.10 EducationElementary school 0 0.00
Junior high school 7 3.29High school 75 35.21
Community college 2 0.94Technological college 66 30.99University 57 26.76Masters and above 6 2.82Working experienceLess than one year 10 4.69Between one and three years 17 7.98Between three and five years 40 18.78Others 146 68.54Years insured Less than one year 9 4.23Between one and three years 17 7.98Between three and five years 38 17.84Others 149 69.95
PCA Life ( ) 57 26.76Others 114 53.52 Amount insured (yearly)Below $20,000 18 8.45Between $20,000 and 40,000 22 10.33Between $40,000 and 60,000 29 13.62Between $60,000 and 80,000 14 6.57Between $80,000 and 100,000 10 4.69Above $100,000 120 56.34Table AI.
Gender Number of people Percentage
Male 150 32
Female 326 68 AgeBelow 20 years old 3 1Between 21 and 25 years old 44 9Between 26 and 30 years old 85 18Between 31 and 35 years old 65 14Between 36 and 40 years old 72 15Between 41 and 50 years old 155 33Above 51 years old 52 11
EducationElementary school 3 1 Junior high school 12 3High school 211 44Community college 15 3Technological college 115 24University 107 22Masters and above 13 3Working experienceLess than one year 26 5Between one and three years 59 12Between three and five years 87 18Others 304 64Years insured Less than one year 28 6Between one and three years 56 12Between three and five years 89 18Others 303 64
AgeBelow 20 years old 21 3Between 21 and 25 years old 176 29Between 26 and 30 years old 180 29Between 31 and 35 years old 98 16Between 36 and 40 years old 59 10Between 41 and 50 years old 49 8Above 51 years old 33 5 EducationElementary school 18 3
Junior high school 17 3High school 123 20Community college 21 3Technological college 352 57
University 70 11Masters and above 15 2Working experienceLess than one year 50 8Between one and three years 137 22Between three and five years 156 25Others 273 44Years insured Less than one year 65 11Between one and three years 138 22Between three and five years 173 28Others 240 39Current positionSales agent 400 65
Amount insured (yearly)Below $20,000 147 24Between $20,000 and $40,000 255 41Between $40,000 and $60,000 87 14Between $60,000 and 80,000 50 8Between $80,000 and 100,000 26 4Above $100,000 51 8Table AV.
Gender Amount Percentage
Male 107 52.97Female 95 47.03
AgeBelow 20 years old 4 1.98Between 21 and 25 years old 31 15.35Between 26 and 30 years old 78 38.61Between 31 and 35 years old 45 22.28Between 36 and 40 years old 23 11.39Between 41 and 50 years old 16 7.92Above 51 years old 5 2.47 EducationElementary school 3 1.49
Junior high school 5 2.48High school 47 23.27Community college 2 0.99Technological college 92 45.54
University 51 25.25Masters and above 2 0.99Working experienceLess than one year 11 5.45Between one and three years 27 13.37Between three and five years 60 29.70Others 105 51.98Years insured Less than one year 19 9.41Between one and three years 30 14.85Between three and five years 60 29.70Others 93 46.04Current positionSales agent 134 66.34
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