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I really enjoyed the thought-provoking article.

In the U.S., we're so often used to strong-tie relationships being embedded within the hierarchy of a company--where people in higher positions are able to locate and mobilize resources within the firm because of their position. However, Guanxi places durable kinship ties (or virtual kinship ties) over structural/positional ties.

The findings on channel capability and resource capability show that there's definite value in "corporatizing" the individual managers' guanxi network.

Overall, a very interesting piece of research on social capital theory. I had been rereading Yanjie Bian's article "Guanxi Capital and Social Eating in Chinese Cities" earlier today, so it proved a very timely follow-up.

Very interesting article which I find ads fuel to the ongoing mini-controversy about the nature and the influence of social connections on business activities and results when institutional and economic structures change in emerging economies. On the one hand, the camp around Guthrie, Peng, and others argues that as emerging economies evolve networks and personal connections decline vis-à-vis competitive resources and capabilities. The need for or significance of social connections to conduct business in such an emerging country is fading, they argue, because as economic reform progresses the emerging institutions erode the importance of idiosyncratic cultural behavior (e.g., guanxi practice) and increasing competition in these markets favors efficiency over indebtedness.

On the other hand, there is quite some disagreement with above perspective by another camp around Wank because the impact of social networks and tie-based business relationships remain salient in Asian countries, including China, due to its cultural roots and despite changing influences. Wank argues that patron-client ties are active elements of transitional economies shaping the course and future of a transition toward a market economy that are unlikely to decline in significance. Rather, new networks and social ties emerge and become an integral element of this transition by facilitating resource access and information flows.

The study presented here appears to parallel and reconcile some of these prior assessments of the proponents of the two perspectives.

The article, “When Does Guanxi Matter? Issues of Capitalization and Its Dark Sides”, gave some insights on the positive as well as negative effects on the guanxi practice followed in Chinese business. Due to this practice followed from historical times, it has a lot of impact in the way Chinese people conduct business. This practice is also prevalent in other collectivist cultures of Spain, Italy, and Israel. But in these other culture this practise is not organized and structured like Guanxi. Another minus point is that it is very protectionist in nature and does not allow anyone new business to flourish because the existing businesses form a guanxi against any newcomers.
Historically, a firm’s risks and disappointments were minimised by developing a guanxi through its employees. Therefore, Guanxi becomes even more important for the Chinese, when it does business outside China. Due to the guanxi culture, the Chinese are obligated to do business with their friends first. But when things go wrong, these same guanxi relationships go for a toss. Hence Guanxi can be a double-edged sword. Currently, Guanxi is used by hundreds of thousands of loyal users in over 20 cities through-out China.
All Guanxi interactions take place with the understanding that the individual’s Guanxi Web’s total net worth is increased by some measure. This means that the foreigner should not "count" on his or her Guanxi too much.
However, in today’s fast changing times, a strong collectivist culture like China, is increasingly becoming individualist by the day because of the American influence. Hence, this becomes a balancing factor as guanxi as a practice will not be as strong as it used to be.
The article, “When Does Guanxi Matter? Issues of Capitalization and Its Dark Sides”, gave some insights on the positive as well as negative effects on the guanxi practice followed in Chinese business. Due to this practice followed from historical times, it has a lot of impact in the way Chinese people conduct business. This practice is prevalent in other collectivist cultures of Spain, Italy, and Israel. But these other culture practises she is not organized and structured like guanxi. Another minus point is that it is very protectionist in nature and does not allow anyone business to flourish because the existing businesses form a guanxi against any newcomers.
Historically Guanxi has minimized a firm’s risks and disappointments by developing a guanxi through its employees. Therefore, Guanxi becomes even more important for the Chinese, when it does business outside China. Due to the guanxi culture, the Chinese are obligated to do business with their friends first. But when things go wrong, these same guanxi relationships go for a toss. hence guanxi can be a double-edged sword. Currently, Guanxi hundreds of hundreds of thousands of loyal users in over 20 cities through-out China.
All Guanxi interactions take place with the understanding that the individual’s Guanxi Web’s total net worth is increased by some measure. This means that the foreigner should not "count" on his or her Guanxi too much.
However, in today’s fast changing times, a strong collectivist culture like China, is increasingly becoming individualist by the day because of the American influence. Hence, this becomes a balancing factor as guanxi as a practice will not be as strong as it used to be.
By
Ramya Rajamani(Greatlakes Institute of Management)PGPM
Consumer Behavior Section 1- Group 7-Roll no 9438

The guanxi network evolved into a core feature of their daily operating system. Guanxi provides an alternative mechanism that enables firms to bypass institutional hurdles. Guanxi is actually considered as a core competence of a person. A more networked person is considered to be an asset in China.

Guanxi increases accessibility to insider information. It also pulls down the search cost. It increases the pace at which a transaction is done between private parties and the government officials.

Some of the reasons why Guanxi may not work any more in China are follows:
1. Continuous Westernization: With China getting more and more westernized, the ‘rule of law’ is expected to come into effect pretty soon which won’t favor guanxi based transactions.
2. Stronger Corporate Governance: As China becomes a more ‘open’ economy and accepts the true market system in its entirety, the power of the guanxi is likely to get reduced.
3. Privatization and Increasing FDI: With the increasing privatization and mounting levels of FDI, foreign countries are demanding a level playing field and a fair judiciary. A just judiciary system will help in diminishing guanxi to a lesser evil.

Is guanxi problematic?
Yes, indeed. I feel so for the following reasons:
1. Benefits only a few: Common people who have no or negligible guanxi suffer the most. Only the business class is benefited the most at the expense of others.
2. Erodes social wealth: Guanxi involves huge amounts of give and take of gifts in cash and kind which goes unrecorded. It does not respect the ‘best in breed’ philosophy and opts for ‘next-in-class’ instead.
3. Can create corrupt souls and society: At the end of the end day, if everybody is involved in heightened forms of dishonesty and bribery, it may lead to corruption of souls and ultimately leading to creation of an ‘altered society’.

Guanxi affects the way common Chinese people lead their life. There can be various forms of guanxi which may have varied socio-economic impacts on the Chinese people. If there exists a word or a way of guanxi called ‘Ethical Guanxi’, then it should be followed. There’s a huge difference between being recognized as a world power and being respected as a world power. I feel ‘Ethical Guanxi’ can bridge the gap.