Indirect cronyism and its underlying exchange logic: How managers’ particularism orientation and the third Party’s hierarchical power strengthen its existence

Abstract

In this paper, we conceptualize indirect cronyism as a phenomenon in which managers show favoritism to indirect guanxihu subordinates who have informal, particular, and personal connections with a third party (e.g., another manager) and demonstrate its prevalent existence in Chinese organizations. We further explore crucial factors (i.e., the manager’s particularism orientation and the third party’s hierarchical position in the organization) that may play a role in whether managers engage in indirect cronyism and downstream consequences on other members of the organization. We draw on the indirect reciprocity logic embedded in social exchange theory to predict two underlying motives to explain why managers engage in indirect cronyism: (a) fulfilling their felt obligation to favor the indirect guanxihu subordinate and (b) strengthening their own guanxi with the third party. Results from three scenario-based experiments and one field study sampling a total of 1,559 working adults provide consistent support for our theoretical reasoning and hypotheses. We discuss the theoretical contributions this paper makes to advance the guanxi and cronyism literatures, as well as the practical implications of our findings for Chinese organizations and beyond.