Determinants of effective client entertainment in China: a transaction governance approach

Abstract

PurposeThis paper aims to take an economic transaction governance approach to explore the determinants for the effectiveness of the social practice of client entertainment in facilitating business relationships in China.Design/methodology/approachThe analysis is based on a broader theoretical framework which posits that exchange relationships are regulated through a combination of market, legal and social relational mechanisms and client entertainment plays a governance role by reinforcing social relational governance to regulate the behaviors of economic actors. Upon this framework, this study proposes that the social behavioral features of client entertainment affect the effectiveness of client entertainment in facilitating exchange relationships and that time moderates such effects. These hypotheses were tested on survey data collected from a sample of Chinese sales managers.FindingsEmpirical results indicate that the effectiveness of client entertainment in facilitating exchange relationships is associated with its social behavioral features that could reinforce social relational governance, including intensity (i.e. value and frequency) and format (i.e. intimacy and observability) of entertainment activities, and the time factor plays a moderating role.Practical implicationsThis study can potentially help policymakers to regulate client entertainment, and business practitioners to manage entertainment spending, more effectively and efficiently without causing legal and ethical problems.Originality/valueThis is the first study that takes an economic transaction governance perspective to directly explore how the social practice of client entertainment plays a constructive role in China’s economic life and what factors affect its effectiveness in playing such a role. It offers guidelines for policymakers, business managers and future research to manage and study this practice.