Guanxi is a Mandarin word, translated into English as "connections." In Chinese, the term "Guan" means a door/gate or "to close up" with those who are around while XI means to join a chain. Therefore, "Guanxi" can be translated as making connections and relationships with individuals. In China, the word Guanxi is used for a person who knows many people and has many connections that help him to get things done.
In simple words, guanxi can be defined as the relations and connections that individuals develop in their surroundings. It is a process to make dyadic relationships with the individuals and make unlimited demand from each other. It is different from simple friendship or interpersonal relationship as it involves continuous exchange of favors from each other. This reciprocity is not bounded with time and is intangible and transferable (Park & Luo 2001, p.455).
It is a fact that guanxi has a very long heritage in China; however it gained importance in western academics in the field of sociology, anthropology, social psychology and business management, only in 1980s (Tsang 1998, p.64). Since, than the businesses and social research have started taking interest in this concept and its role is continuously extending and upgrading. Different experts have given their opinion regarding guanxi and its effects on the Chinese business. Some have identified it as the most important and critical factor for doing business in China (Yeung & Tung 1996, p.54; Abramson & Ai 1999, p.17) while some considered it as a source of competitive advantage (Tsang 1998, p.65; Fock & Woo 1998, p.33). In addition, some also perceived as the future direction for doing business in the west during the 21st century (Lovett, et al., 1999, p.231).
Despite being criticized by few experts, Guanxi is considered as a probable solution of the many of the problems for the businesses of China. According to Lou (1997, p.51) and Abramson & and Ai (1999, p.18), personal relationships in China due to the "guanxi" have played a critical role in great success of firms of China. Guanxi focuses on the idea that businesses are done between people and not between the companies. Entrepreneurs of Chinese firms know well about the importance of guanxi and have expertise in managing their personal networks. Furthermore, as Chinese industry is becoming an important figure in the global economy; many foreign businesses have also realized the importance of guanxi and have started following the guanxi management strategy.
In 2001 (p. 455-477), Park & Luo performed a study in which they observed the effect of guanxi on the performance of organization. They concluded from the research that guanxi is used by the Chinese firms to promote their sales growth, expand market and establish a competitive position of the firm. Chinese consider Guanxi as a network of connections that is strategically constructed by the people (Yan 1996, p.1-2). Social interactions are developed through a series of pre-planned activities through this process. For instance, introducing the owners of the business to the people who can benefit them (Fan 2002, p.543; Chen and Chen 2004, p.305).
Guanxi is not linked with a particular group of people; it is dynamically developed and is for everyone. It is not only important for the entrepreneurs but also equally important at the individual level. It is used by different types of people working at different levels and in different departments of the entrepreneurial firm, including supervisors, subordinates and colleagues.
Supervisor-Subordinate Guanxi
Many experts have focused on the guanxi relations between the superiors and subordinates. Indeed, most of the studies published on guanxi have focused on the relations between the subordinates of the organization and their supervisors (Law et al. 2000, p.751; Chen et al. 2009, p.375; Yan & Altman 2009, p.91)
According to Chen et al. (2009, p.375 -399), there are three elements of subordinate's guanxi relations with their superiors, these include; attachment, personal life inclusion and giving respect & deference to the supervisor. Smith et al. (2011) stated, "Measures of these elements were more predictive of positive outcomes than were simple indices of the presence or absence of guanxi."
Chen et al. (2009, p.375-399) and Law et al. (2000, p.751-765) studied the behaviors that are linked with the presence of guanxi in superior and subordinate relationships in China. They found out that these behaviors predicted different consequences that were related to career progress and other outcomes than those that were derived from the leadership theories of USA.
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