Managing interdependence: Using Guanxi to cope with supply chain dependency

Abstract

The continued growth of logistics outsourcing and dependence on third-party logistics (3PL) providers highlights the need for firms to strategically consider their dependence on their supply chain. We draw on resource dependency theory to propose guanxi (a cultural tradition in China of interpersonal connections that facilitate a mutual exchange of favors) as a dependency-coping strategy. Integrating transaction cost economics, we propose the effectiveness of guanxi as a dependence coping strategy is contingent on the level of exchange hazards (i.e., uncertainty and asset specificity) in logistics outsourcing. Based on data collected from 149 3PL users in China, we found that guanxi is a more potent strategy in highly uncertain environments and less relevant when extensive relationship-specific assets are involved. Implications and directions of future research are discussed.