Logistics service innovation by third party logistics providers in China: Aligning guanxi and organizational structure

Abstract

In response to intensifying competition and escalating customer expectations, third-party logistics (3PL) providers need to become more innovative. In logistics service innovation, external relationships are important sources of resources and knowledge. Drawing on social capital theory and the strategy-structure-performance paradigm, this study proposes that guanxi (Chinese system of social networks and relationships that facilitates business and other dealings), expedites logistics service innovation by 3PL providers in China. This study also proposes that the effect of guanxi on logistics service innovation is contingent on the alignment between the type of guanxi and the provider’s organizational structure. We tested our proposed model using survey data from 165 3PL providers in China. Our findings suggest that both political and business guanxi have a positive effect on logistics service innovation; however, those types of guanxi should be used in consideration of the firm’s organizational structure. The results suggest that with respect to logistics service innovation, political guanxi is more effective for 3PL providers whose organizational structure is highly centralized or has low formalization. The converse applies to business guanxi.