Leveraging Social Capital for Business in China: The Power and Pitfalls of Guanxi
Flora Gu, Kineta Hung, and David Tse (see the article When Does Guanxi Matter? Issues of Capitalization and Its Dark Sides in the July 2008 issue) shed fascinating light on guanxi within a collectivist society, such as China. The authors rely on social capital theory to argue that guanxi, or the influence stemming from social connections or networks in Chinese settings, represents an organizational resource that can be leveraged for competitive advantage.
Their study considers the role of guanxi as a governance mechanism, affirms its direct and positive impact on the firm’s market performance, and acknowledges indirect impact through channel capability and responsive capability. That is, guanxi has a positive influence on both channel and responsive capabilities that, in turn, generate positive impact on firm performance. Furthermore, the authors identify the dark side of guanxi: Technological turbulence and competition intensity are presented as “structure-loosening” factors that diminish the governance effects of guanxi. They also alert readers that reciprocal obligations stemming from guanxi can become damaging and potential fatal. In addition, the “ties that bind” can become “ties that blind.” In other words, guanxi at its worst may contribute to collective blindness among the social network entities.
As usual, I welcome the thoughtful contributions from JM readers on this article. Ultimately, a key goal of JM’s blog feature is to provide readers and authors with a forum to engage in a productive and intellectually stimulating dialog.
by Siva K. Balasubramanian, Journal of Marketing Web Site Editor
