Guanxi: Social Networking in China and Its Impact on the Performance of Austrian Firms

Andreas Platzl

Student thesis: Master thesis

Abstract

The Chinese market attracts a rising number of foreign firms, as they see great business potential. However, conducting business in the Asian country differs significantly from how it is done in the West. Many Western scholars and business practitioners have annotated that conducting business in China is not only unfamiliar but moreover complex and time consuming. Western firms are advised to address the unique aspects in order to reduce failure. This study examines the role of guanxias a pervasive phenomenon of the Chinese culture, which can shortly be described as relationship building with the continued exchange of mutual favours. Previous studies have mostly focused on business-to-government guanxi and only limited studies have been cross-culturally examined the phenomenon’s impact on firm performance in business-to-business relations. To help address this issue, the purpose of this study is to provide a richer understanding of how guanxi impacts firm performance. By conducting in-depth, semi-structured interviews with both Austrian industrial companies with a subsidiary in China and a Shanghai based Economic Advisor, this study uncovers that guanxi is a double-edged sword when it comes to its impact on foreign firm performance. While guanxi is perceived as a prerequisite for doing business in China, as it provides benefits like access to the market, business networks and resources, the phenomenon’s complexity and particularities of the Chinese culture however entails potential risks, which particularly impair foreign firms. This study provides business practitioners, particularly those coming from Western countries, with valuable practical insight and helps them to successfully adapt to the unfamiliar business environment of China.

EducationsMSc in Business, Language and Culture - Business and Development Studies, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2018
Number of pages119