Yadong Luo - Guanxi and Business

3rd Edition

ASIA-PACIFIC BUSINESS SERIES

(ISSN: 1793-3137)

Series Editor

Leo-Paul Dana
Professor of International Entrepreneurship
Groupe Sup de Co Montpellier Business School, France

Published

Vol. 10 Guanxi and Business (Third Edition)
by Yadong Luo

Vol. 9 Asian Models of Entrepreneurship: From the Indian Union and Nepal to the Japanese Archipelago: Context, Policy and Practice (Second Edition)
by Leo-Paul Dana

Vol. 8 Catalyst for Change: Chinese Business in Asia
edited by Thomas Menkhoff, Hans-Dieter Evers, Chay Yue Wah & Hoon Chang Yau

Vol. 7 From Adam Smith to Michael Porter: Evolution of Competitiveness Theory (Extended Edition)
by Dong-Sung Cho & Hwy-Chang Moon

Vol. 6 Islamic Banking and Finance in South-East Asia: Its Development and Future (Third Edition)
by Angelo M. Venardos

Vol. 5 Guanxi and Business (Second Edition)
by Yadong Luo

Vol. 4 Asian Models of Entrepreneurship From the Indian Union and the Kingdom of Nepal to the Japanese Archipelago: Context, Policy and Practice
by Leo-Paul Dana

Vol. 3 Islamic Banking and Finance in South-East Asia: Its Development and Future (Second Edition)
by Angelo M. Venardos

Vol. 2 From Adam Smith to Michael Porter: Evolution of Competitiveness Theory
by Dong-Sung Cho & Hewy-Chang Moon

Vol. 1 Guanxi and Business
by Yadong Luo

Asia-Pacific Business Series Vol. 10

3rd Edition

YADONG LUO

University of Miami, USA

Published by

World Scientific Publishing Co. Pte. Ltd.

5 Toh Tuck Link, Singapore 596224

USA office: 27 Warren Street, Suite 401-402, Hackensack, NJ 07601

UK office: 57 Shelton Street, Covent Garden, London WC2H 9HE

Library of Congress Cataloging-in-Publication Data

Names: Luo, Yadong, author.

Title: Guanxi and business / Yadong Luo, University of Miami, USA.

Description: 3rd Edition. | USA : World Scientific, 2020. | Series: Asia-pacific business series, 1793-3137 ; Vol. 10 | Revised edition of the authors Guanxi and business, 2007. | Includes bibliographical references and index.

Identifiers: LCCN 2019053426 | ISBN 9789811210549 (hardcover) | ISBN 9789811210556 (ebook)

Subjects: LCSH: Industrial sociology--China. | Corporate culture--China. | Interpersonal relations--China. | Business enterprises--Corrupt practices--China. | Business networks--China.

Classification: LCC HD6957.C6 L86 2020 | DDC 306.30951--dc23

LC record available at https://lccn.loc.gov/2019053426

British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library.

Copyright 2020 by World Scientific Publishing Co. Pte. Ltd.

All rights reserved. This book, or parts thereof, may not be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage and retrieval system now known or to be invented, without written permission from the publisher.

For photocopying of material in this volume, please pay a copying fee through the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA. In this case permission to photocopy is not required from the publisher.

For any available supplementary material, please visit
https://www.worldscientific.com/worldscibooks/10.1142/11558#t=suppl

Desk Editors: Balasubramanian/Lixi Dong

Typeset by Stallion Press
Email:

Printed in Singapore

Interpersonal relationship (guanxi) is one of the major dynamics of Chinese society. Guanxi has been a pervasive part of the Chinese business world for the last few centuries. It binds literally millions of Chinese firms into a social and business web. It is widely recognized that guanxi is a key business determinant of a firms performance, especially its market growth. Any business in this society, including both local firms and foreign investors and marketers, inevitably faces guanxi dynamics. In Chinas new, fast-paced business environment, guanxi has become more entrenched than ever, heavily influencing Chinese political landscapes, social behavior, and business practice.

Despite the current academic and practical interest in guanxi, there is no book-length treatment systematically and vigorously exploring the concept and practice of guanxi from the business perspective. This book addresses this lacuna by exploring various social, economic, cultural, and business issues relating to this complex concept and practice. As perhaps the first systematic effort along this line, this book, I hope, can serve as a conceptual, theoretical, and practical foundation upon which future studies may build so that our understanding of guanxi will no longer be fuzzy. This book is written not merely for academics but also for executives and business students who have an interest in doing business in China and beyond. It is intended to provide important managerial lessons and insightful practical guidance for them. Each chapter attaches several minicases illuminating how business people or companies develop and utilize guanxi to nourish economic activities. These minicases, except those directly adapted from public sources, are prepared by myself based on publicly available information solely for the purpose of class discussion.

The concept of guanxi is extremely nebulous and cross-disciplinary. provides a definition of guanxi and other relevant concepts and delineates major principles underlying guanxi dynamics. It illuminates the social philosophy behind guanxi cultivation, utilization, and maintenance and outlines the importance of guanxi to social life. The relationships between guanxi, gifts, and bribes are also articulated. The expected importance of guanxi in the future and theoretical directions for future research are highlighted.

Legitimate, healthy guanxi is a valuable asset for its possessor and aids in gaining economic rent, although it does not necessarily add value to the social welfare of the nation. offers the economic rationale of guanxi and explains the difference between Chinese guanxi and Western networking. It also elaborates on guanxi as a necessity for achieving a competitive edge in the Chinese market. Managerial implications of guanxi are also illustrated.

Guanxi network affects managers strategic choice and hence impacts the performance of the firms they lead. Guanxi has a direct impact on the market expansion and sales growth of Chinese firms by affecting resource sharing and social, economic, and political contexts in inter-firm transactions. discusses guanxi network in relation to firm performance. It illuminates the influence of two forms of guanxi with other businesses and with government officials on two major aspects of performance, namely market growth and financial return.

Although guanxi is embedded in almost every part of social life in China, companies demonstrate different needs and capacity toward