Government and family Guanxi in Chinese private firms: perceptions and preference

Abstract

This paper examines the role of family ties in private firms in China. Drawing on social capital theory, we argue that family ties can be valuable assets for running businesses, and should be studied as a separate type of managerial ties. Government ties are then used as a benchmark to demonstrate the difference between family and government ties in four dimensions: face, affection, reciprocity and trust. Taking the resource-based view, we argue that Guanxi network is a dynamic capability that evolves in response to the changing operating environment and a firm’s lifecycle. A survey of 296 private firms in China is utilized to explore antecedents of managers’ perceptions and their preference between government and family ties. We find that a volatile operating environment is the most important factor that is linked to the perceived importance of government and family ties. In addition, we find younger firms are more likely to value family ties highly, while perceived importance of government ties increases with the size of the firm. This study contributes to the literature by adding an extra domain, family ties, to managerial ties and highlights the importance of family ties for fledgling firms. It provides further evidence on the role of managerial ties in mitigating operational uncertainties, and sheds light on the different roles that family and government ties play.