It is not whom you know, it is how well you know them: Foreign entrepreneurs building close guanxi relationships

Abstract

Within the growing body of Chinese entrepreneurship literature, guanxi is increasingly recognized as an important indigenous Chinese business practice with important implications for firm performance and success. Guanxi is defined as relationship or connection. China’s continued economic growth and forecasts of it becoming one of the world’s largest consumer markets present multinational corporations and foreign entrepreneurs alike with unprecedented economic opportunities. Thus, greater insight is required into how foreign entrepreneurs, as outsiders, establish and develop close guanxi relationships. Conceptualizing guanxi as a dynamic process, this paper explores the underlying interactions and processes foreign entrepreneurs engage in to establish and build a strong emotional connection and trust with their closest guanxi partner. Using an exploratory single case study approach, data from 15 foreign entrepreneurs operating legally registered small- and medium-size enterprises (SMEs) in Shanghai was collected and analyzed. In addition, self-administered structured questionnaires that utilize the McAllister trust scale were used to measure 20 foreign entrepreneurs’ levels of cognitive and affective trust toward their closest guanxi partner. Overall, the findings of the study provide an in-depth understanding of the complex interplay and functioning of third-party and anticipatory bases. In so doing, the study’s outsider perspective addresses a critical gap in the literature that yields initial yet important insights that contribute to a better understanding and appreciation of the inherent nuances and differences in relationship-building processes in cross-cultural settings. Furthermore, these findings bring to the fore the need to consider the ways in which this indigenous Chinese business practice may be evolving in the face of increasing internationalization.