Business Relationship Strategy for Foreign-Invested Enterprises in China: The Moderating Role of Competitive Structure and Entry Type

Abstract

Although the role of Guanxi in China as a form of relationship marketing (RM) has received increasing attention in recent years, few empirical studies have indicated that Guanxi has more impact on performance than RM in the Chinese market. Foreign-invested enterprises (FIEs) may have some difficulty in fully practicing RM in China without considering the influence of Guanxi. In this regard, this study is guided by the following research question: “In China, which factors influence the differences in the impacts created by RM and Guanxi?” In this study, we first provide an overview of previous research on Guanxi, focusing on the fundamental differences between Guanxi and RM. We then provide an empirical analysis of the differential effects of Guanxi and RM on firm performance by investigating 297 FIEs in China. The results suggest that Guanxi and RM are not trade-off options in today’s Chinese market. Guanxi and RM have synergetic effects on firm performance, that is, they have differential effects based on the mode of market entry and the competitive structure. Guanxi is more likely to influence firm performance for collaboration-based entry firms rather than entry without collaboration firms, whereas RM is more likely to influence firm performance when FIEs’ main competitors are foreign firms than when they are local firms.