Guanxi and Business Strategy

2 The Guanxi System (p. 27-28)

The guanxì system contains "both cultural and structural elements" (Chen JJ 1998: 106). This chapter will therefore address gu nxì as a cultural phenomenon (Section 2.1), and it will provide a detailed analysis of the structure of its sociologic elements (Section 2.2). For methodological reasons (see above), the cultural embeddedness argument will not be presented in great depth,13 rather, gu nxì is treated as a cohesive (socio-economic) exchange system. The structural factors behind gu nxì will then be processed in Section 2.3, in order to allow for integration into a competitive environment in Chapter 3.

Guanxì has developed a level of persistence beyond what would be expected from the technical arguments at hand. From the sociological observation that institutions may persist even when they imply economic disadvantages (Coleman 1990: 302), it follows that the dominance and persistence of the gu nxì system today may result from a deep-rooted, indigenous culture (Standifird/Marshall 2000: 29). The cultural embeddedness argument, therefore, assumes that certain exchange patterns have been taken for granted as necessary and appropriate, and that it was culture that triggered a period of development, at the end of which gu nxì emerged as a major exchange mechanism in contemporary China (Day 2002: 85).

Because they clearly have interacted and stimulated each other, structural- economic and historical-evolutionary factors are somewhat complementary, but an analytic separation is necessary to yield the desired level of transparency. This assessment of the guanxì phenomenon begins with an overview of the cultural factors for two reasons. First, some general notes on cultural factors are in order because it is understood that the preexisting Chinese culture paved the way for the gu nxì exchange system.

However, in line with Standifird and Marshall (2000: 38), it is suggested that cultural arguments reinforce the gu nxì system, and hence merely explain its persistence rather than its emergence. Second, the integration in Chapter 3 takes a static perspective focused on the structural elements of gu nxì rather than a dynamic perspective as in evolutionary theories. Presenting the cultural embeddedness argument before applying social exchange theory provides the reader with a basic understanding, as well as an insight into the shortcomings inherent in a structural approach. It also allows for an uninterrupted presentation of the argument.

2.1 The Cultural Embeddedness Argument

Interpersonal relationships are said to have been one of the major dynamics of Chinese societies during the past 2,000 years (Standifird/Marshall 2000: 29). Assuming that the historical roots of guanxì constitute a pervasive part of modern Chinese (business) conduct, it is commonplace -especially among popular scholars (e.g. Wong/Slater 2002: 339ff.) - to draw analogies between the situation two millennia ago and the presentday context. When espousing the idea that culture plays a dominant role in economic exchanges, most analyses leave out Chinese heterodox cultures (Pye 1988: 39f.) and restrict themselves to Confucianism, the elements of which are assumed to be predominant in Chinese civilization (e.g. Lam et al. 1994: 205). It will be shown that "[explaining] general values or ideals (e.g. […] preference for harmony, etc.) by reference to Confucianism" (Chaihark 2003: 42) is untenable when analyzing the gu nxì system.