1. Mr. X

3. AUTHOR: KATHERINE R.XIN, JONE L. PEARCE
ACADEMYOF MANAGEMENT JOURNAL (1996)
YUANZE UNIVERSITY- DOCTOR OF PHILOSOPHY PROGRAM
COURSE OF ORGANIZATIONTHEORY
INSTRUCTOR: PROFESSOR SHIH-CHUN HSU
PRESENTED BY: JESSIE PHAM, ID: s1019424

4. Introduction & research
background
Framework and Hypotheses
Research Methodology
Research Results
Conclusion and Discussion

5.  Theories of organizational
behavior are surprisingly silent on
the meaning of executives’
interactions
 Formal structure provides an
incomplete picture of how they develop
connections
 Seek out and cultivate close personal
relationships to obtain resources and
protections
 Particularly important in countries
without stable legal and
regulatory environment

6.  Good personal relationships in
doing business in developing
countries has been discussed
widely, especially executives in
China
 The sense of right “social
connections”
 Focus on mutual interests and
benefits
 No empirical tests of Guanxi or of
the circumstances that shape
 When, where, with whom such
relationships should be important

7.  Personal relationships are useful when the
regulation of transactions in the absence of
state institutions (Redding, 1996)
 China’s transitional economy is characterized
by weak capital market structures, poorly
specified property rights and institutional
instability (Nee,1992)
 Market exchanges are uncertain and costly
 A weak rule of law is particularly burdensome for
newer, smaller private businesses

8.  Guanxi as a substitute for formal institutional
support for new, small organizations, which is
more available to state-owned and collective-
hybrid ones
 Chinese private companies cultivate close
personal relationships with people useful to
business
 Controlling for Liability of Newness and
Smallness
 Lack of external legitimacy than older organizations
(Stinchcombe, 1965)
 Fewer ties endanger the chance to survive

9.  After control organizational age and size:
Hypothesis 1:
“With the age and size of their companies
controlled, executives in private Chinese
companies will report that their business
connections are more important to their
success than will executives in either state-
owned or collective-hybrid companies”

10.  Rather than reporting the usefulness of
connections in obtaining customers, market
information, or securing credit, manager may
report needing connections to help them face
fundamental threats such as expropriation and
extortion (Nee, 1992; Redding, 1990;Yang, 1994)
Hypothesis 2:
“Executives in private Chinese companies are more
likely to report that their business connections
are useful as a defense against threats than are
executives in either state-owned or collective-
hybrid companies”

11.  Good connections in government to be
paramount importance to those in societies
with a weak rule of law as a protection
Hypothesis 3:
“Compared to executives in either state-
owned or collective-hybrid Chinese
companies, executives in private ones will
report more connections with individuals
who hold positions in government”

12.  Private company executives will seek to build
relationships that are deeper in trust for
protection
Hypothesis 4:
“Executives in private Chinese companies will
report that their business connections are
characterized by more trust than executives
in either state-owned or collective-hybrid
companies will report as characteristic of
their relationships”

13.  Guanxi depends primarily on shared
identification with family, hometown, region,
school or place to work
 Not only common background, but the attempt
to increase the social interactions between
them, such as continuous gift giving
Hypothesis 5:
“Executives in private Chinese companies will
report giving more non-reciprocated gifts to
those with whom they have business
connections than executives in either state-
owned or collective-hybrid ones”

14.  Snowball sampling was used from the
business connections of a close relative who
is an executive for the state-owned insurance
company
 Heads and directors of key functional units
(OFM) from as wide a variety of industry of
organizations who have ownership status:
 15 from stated-owned, 8 from collective-hybrid, 9
private company executives
 Average age of 41.7 yrs, 7.2 yrs tenure, 80% male

15.  Structural interview in was developed in
English, then translated into Chinese and back-
translated into English
 Conduct 2 field tests with business students
from China to ensure the terminology and
correct meanings for each items
 Besides descriptive information, list of 8-10 the
most necessary people to each executive’s job
and career success were obtained

16.  Using single item scale, modest confidence in measure
reliability but no prior information of the validity since
they are new
 “The importance of a connection”: “How importance is the
relationship to you?” (1=not important-4-vitally important)
 “defense against threat”: “this relationship is useful as a
defense against threats” (1=strongly disagree – 5=strongly
agree)
 Using a within-and-between analysis (WABA) to prevent
the problem of non-independence of measure to test
hypotheses 1,2,4
 Logistic regression analysis was used to test hypotheses
3,5 ( DV are dichotomous)

18. After controlled for the companies relative youth and small size,
executives in private companies apparently did seek to
compensate for their relative lack of formal structural support by
relying MORE on GUANXI
Hypotheses
1,2 ,4
supported

19.  Private-company executives in developing
economy seek to compensate for their lack of
formal institutional support by cultivating
personal connections
 Compared to other executives, private companies
 Considered business connections more important
 Rely significantly more on building relationships with
government officials to defense themselves against
threats like expropriation or extortion
 Make more extensive use of gift giving
 Trusted their connections more
 The Problems of Reliability andValidity of Scales

20.  THANK YOU VERY MUCH FOR
YOUR PARTICIPATIONAND
ATTENTION!
 ANY COMMENTS &
QUESTIONS?