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AUTHOR: KATHERINE R. XIN, JONE L. PEARCE ACADEMY OF MANAGEMENT JOURNAL (1996)
YUANZE UNIVERSITY- DOCTOR OF PHILOSOPHY PROGRAM
COURSE OF ORGANIZATION THEORY
INSTRUCTOR: PROFESSOR SHIH-CHUN HSUPRESENTED BY: JESSIE PHAM, ID: s1019424
Introduction & research backgroundFramework and HypothesesResearch MethodologyResearch Results Conclusion and Discussion
Theories of organizational behavior are surprisingly silent on the meaning of executives’ interactions Formal structure provides an
incomplete picture of how they develop connections
Seek out and cultivate close personal relationships to obtain resources and protections
Particularly important in countries without stable legal and regulatory environment
Good personal relationships in doing business in developing countries has been discussed widely, especially executives in China The sense of right “social
connections” Focus on mutual interests and
benefits No empirical tests of Guanxi or of
the circumstances that shape When, where, with whom such
relationships should be important
Personal relationships are useful when the regulation of transactions in the absence of state institutions (Redding, 1996)
China’s transitional economy is characterized by weak capital market structures, poorly specified property rights and institutional instability (Nee,1992) Market exchanges are uncertain and costly
A weak rule of law is particularly burdensome for newer, smaller private businesses
Guanxi as a substitute for formal institutional support for new, small organizations, which is more available to state-owned and collective-hybrid ones
Chinese private companies cultivate close personal relationships with people useful to business
Controlling for Liability of Newness and Smallness Lack of external legitimacy than older organizations
(Stinchcombe, 1965) Fewer ties endanger the chance to survive
After control organizational age and size:Hypothesis 1:
“With the age and size of their companiescontrolled, executives in private Chinesecompanies will report that their businessconnections are more important to theirsuccess than will executives in either state-owned or collective-hybrid companies”
Rather than reporting the usefulness ofconnections in obtaining customers, marketinformation, or securing credit, manager mayreport needing connections to help them facefundamental threats such as expropriation andextortion (Nee, 1992; Redding, 1990; Yang, 1994)
Hypothesis 2:“Executives in private Chinese companies are more
likely to report that their business connectionsare useful as a defense against threats than areexecutives in either state-owned or collective-hybrid companies”
Good connections in government to beparamount importance to those in societieswith a weak rule of law as a protection
Hypothesis 3:“Compared to executives in either state-owned or collective-hybrid Chinesecompanies, executives in private ones willreport more connections with individualswho hold positions in government”
Private company executives will seek to build relationships that are deeper in trust for protection
Hypothesis 4:“Executives in private Chinese companies will
report that their business connections arecharacterized by more trust than executivesin either state-owned or collective-hybridcompanies will report as characteristic oftheir relationships”
Guanxi depends primarily on shared identification with family, hometown, region, school or place to work
Not only common background, but the attempt to increase the social interactions between them, such as continuous gift giving
Hypothesis 5:“Executives in private Chinese companies will report giving more non-reciprocated gifts to
those with whom they have business connections than executives in either state-
owned or collective-hybrid ones”
Snowball sampling was used from the business connections of a close relative who is an executive for the state-owned insurance company
Heads and directors of key functional units (OFM) from as wide a variety of industry of organizations who have ownership status: 15 from stated-owned, 8 from collective-hybrid, 9
private company executives
Average age of 41.7 yrs, 7.2 yrs tenure, 80% male
Structural interview in was developed in English, then translated into Chinese and back-translated into English
Conduct 2 field tests with business students from China to ensure the terminology and correct meanings for each items
Besides descriptive information, list of 8-10 the most necessary people to each executive’s job and career success were obtained
Using single item scale, modest confidence in measure reliability but no prior information of the validity since they are new “The importance of a connection”: “How importance is the
relationship to you?” (1=not important-4-vitally important)
“defense against threat”: “this relationship is useful as a defense against threats” (1=strongly disagree – 5=strongly agree)
Using a within-and-between analysis (WABA) to prevent the problem of non-independence of measure to test hypotheses 1,2,4
Logistic regression analysis was used to test hypotheses 3,5 ( DV are dichotomous)
After controlled for the companies relative youth and small size, executives in private companies apparently did seek to
compensate for their relative lack of formal structural support by relying MORE on GUANXI
Hypotheses 1,2 ,4
supported
Private-company executives in developing economy seek to compensate for their lack of formal institutional support by cultivating personal connections
Compared to other executives, private companies Considered business connections more important
Rely significantly more on building relationships with government officials to defense themselves against threats like expropriation or extortion
Make more extensive use of gift giving
Trusted their connections more The Problems of Reliability and Validity of Scales