Using Guanxi to Establish Corporate Reputation in China
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Volume 9 Number 3
Using Guanxi to Establish Corporate Reputation in China Stephen S. Standifird School of Business Administration, San Diego, CA, USA
ABSTRACT
The purpose of this article is to explain how guanxi can be used as a mechanism for establishing corporate reputation in China. Guanxi can be roughly described as a type of social capital that is developed between two persons via a process of reciprocal exchange. The key to using guanxi as a way of establishing reputation is to focus on developing and maintaining a network of high-quality contacts while maintaining the focus on the discrete relationships that constitute the network. Organizations can establish themselves as reputable in China by having a multitude of organizational participants engage in guanxi-based business practices. However, guanxi remains a product of individuals and becomes an organizational asset only to the extent that individuals are willing to use their guanxi in order to achieve organizational objectives. Corporate Reputation Review (2006) 9, 171–178. doi:10.1057/palgrave.crr.1550026 KEYWORDS: China; guanxi; network; repu-
tation INTRODUCTION
The practice of guanxi continues to be an important driver of success in China. Guanxibased business practices have proven to be pervasive and capable of facilitating economic exchange in the Chinese business community (Standifird and Marshall, 2000). Guanxi can be roughly described as a type of social capital that is developed between two persons via a process of reciprocal exchange (Fan, 2002a). At quick glance, it
might be tempting to describe guanxi as similar to reputation. However, guanxi and reputation are distinctly separate concepts. The purpose of this article is to provide a brief overview of guanxi and to explain how guanxi can be used as a mechanism for establishing reputation in China. We begin with a brief discussion of guanxi, including a discussion of the differences between guanxi and reputation.This is followed by a discussion of how guanxi can be used as a way of establishing reputation in China. As will be noted later in the discussion, guanxi is fundamentally an individualistic phenomenon. Thus, we spend some time explaining how individual guanxi can be turned into organization advantage. We conclude with a discussion of implications for firms wanting to establish themselves as reputable in the Chinese business community. GUANXI DEFINED
Contrary to common perception, guanxi is more than the exchanging of gifts in order to procure favorable business exchange. As Luo and Chen (1996: 298–299) point out, ‘many Western business people are often in danger of overemphasizing the gift-giving and wining-and-dining components of a guanxi relationship, thereby coming dangerously close to crass bribery or to being perceived as “meat and wine friends,” which is a Chinese metaphor for mistrust.’ Guanxi is first and foremost about the cultivation of long-term personal relationships. In these terms, guanxi does not appear to be unique, and in fact it exists to some extent in every
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