paradoxes and guanxi dilemmas in emerging chinese–western intercultural relationships
TRANSCRIPT
Industrial Marketing Management 39 (2010) 264–272
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Industrial Marketing Management
Paradoxes and guanxi dilemmas in emerging Chinese–Westernintercultural relationships
Hongzhi Gao ⁎, David Ballantyne 1, John G. Knight 2
Department of Marketing, School of Business, University of Otago, 56 PO Box, Dunedin, New Zealand
⁎ Corresponding author. Tel.: +64 3 479 8195.E-mail addresses: [email protected] (H. Gao
[email protected] (D. Ballantyne), jknig(J.G. Knight).
1 Tel.: +64 3 479 8985.2 Tel.: +64 3 479 8156.
0019-8501/$ – see front matter © 2008 Elsevier Inc. Aldoi:10.1016/j.indmarman.2008.11.001
a b s t r a c t
a r t i c l e i n f oArticle history:
Three paradoxes have been r Received 23 August 2007Received in revised form 15 August 2008Accepted 4 November 2008Available online 30 December 2008Keywords:ParadoxesGuanxi dilemmasCultural normsNetworkChinese
evealed in the study of business networks by Industrial Marketing and Purchasing(IMP) researchers. These are: seeking opportunities and then facing limitations, influencing others and yetbeing influenced in turn, and controlling and yet being out of control in network situations. These paradoxeshave previously received little critical evaluation. This article investigates these paradoxes through in depthinterviewswith twenty-two business managers in Chinese–Western intercultural relationships. Three specificdilemmas relating to the fundamental Chinese cultural principle of guanxi are revealed. These dilemmas are:dilemmas between strong personal ties (guanxi) and weak personal ties, dilemmas between previousunderstandings and new learning of guanxi ties, and conflicting obligations between inner and outer circles ofguanxi networks. These guanxi dilemmas occur in emerging Chinese–Western intercultural networks,irrespective of the specific cultural variations, contractual constraints, or corporate policies applying. Thispaper identifies a need for more acute study of guanxi cultural norms and their behavioral consequences inemerging Chinese–Western intercultural relationships, given the rise of China in the global economy.
© 2008 Elsevier Inc. All rights reserved.
1. Introduction
Relationships give important structural support to the process ofbusiness interaction (for example, seeAnderson&Narus,1999; Axelsson& Easton, 1992; Gummesson, 2002; Håkansson & Snehota, 1995;Normann & Ramirez, 1998; Vargo & Lusch, 2004; Wilson & Möller,1995). Wide-ranging scholarly studies of industrial behavior conductedby the Industrial Marketing and Purchasing group (IMP) over the lastthirty years have challenged then-prevailing theoretical ideas ofbusiness markets (Håkansson, 1982; Håkansson & Snehota, 1995). IMPresearchers have been especially prominent in studying the dynamics ofinteraction and relationship development between firms. For example,theywere among the first to propose that economic transactions are notentirely synonymous with exchange. Instead, transactions are seen asone form of social and economic exchange episode within the relation-ship contexts operating between suppliers and customers.
This article reports specifically on a study of Chinese–Westernintercultural collaborations to highlight paradoxical situations perceivedby actors when working together. From an international businessnetwork perspective (Håkansson& Snehota,1989; Johanson&Mattsson,1988), it is likely that interactions, relationships and network inter-
l rights reserved.
dependencies will develop cautiously. The ‘working together’ processhas to reconcile any conflicts specifically derived from different culturalnorms and rules operating in different business networks. In particular,the three business network paradoxes revealed by IMP researchers(Håkansson & Ford, 2002) warrant careful study. To date, theseparadoxes have received little critical evaluation in the literature.
This article examines how these network paradoxes (Håkansson &Ford, 2002) underlie the conflicts reported in our case study basedresearch on Chinese–Western intercultural relationships. The networkparadoxes are confirmed but three specific guanxi dilemmas are alsorevealed, irrespective of culture-specific variations, contractual con-straints and corporate policies. Given the growing strength of China inworld trade today, this study is important because of its emphasis onunder-explored Chinese–Western intercultural dilemmas.
The article is structured as follows. First, the network paradoxesreported by Håkansson and Ford (2002) are reviewed. Then thenature of guanxi relationships (or circles) is explained. Next, thequalitative research method is discussed. Then follow findings thataffirm the network paradoxes reported by Håkansson and Ford (2002)but go further and reveal additional Chinese–Western interculturaldilemmas associated with guanxi. The article finishes with a call for amore acute study of norms and behaviors in emerging Chinese–Western intercultural business relationships.
2. The idea of network paradox
Over the past thirty years, B2B researchers and members of the IMPgroup in particular have achieved significant success in understanding
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industrial markets and circulating ideas and theories of firm behavior inbusiness relationships, interactionandnetworks (see recentpublicationsin Industrial Marketing Management, for example, Ford & Redwood,2005; Gadde, Huemer, & Håkansson, 2003; Johnsen & Ford, 2007; Ritter,Wilkinson, & Johnston, 2004; Vaaland & Håkansson, 2003). However,B2B marketing researchers still strive for understanding relationshipspecific problems (Blois,1997; Ehret, 2004;Håkansson&Ford, 2002). Forexample, Blois (1997) posited that long term business relationships arein danger of being ‘fief’ like and becoming “inefficient” and “unstable”.Similarly, Backhaus and Buschken (1999) reported the paradox of“unsatisfying but stable” in their study of German car supplying rela-tionship. In his study of value networks in the hard disk drive industry,Christensen (1997) showed that supplierswere driven out of themarketmainly because theyactively listened to theirmost important customers.
Håkansson and Ford (2002) reported three paradoxes in networksituations in their review of the IMP research: seeking opportunitiesand then facing limitations, influencing others and yet beinginfluenced in turn, and controlling and yet being ‘out of control’. Aparadoxical situation can be understood as the situation thatcomprises “contradictory yet interrelated elements – elements thatseem logical in isolation but absurd and irrational when appearingsimultaneously” (Lewis, 2000, p.760).
2.1. Paradox 1: Opportunities and limitations in networks
Through relationships and interactions with others in the businessnetwork, business actors can gain access to external resources such asfinancial capital, technology and information, as well as marketopportunities to do things that they could not do alone (Batt & Purchase,2004; Ghauri, Lutz, & Tesfom, 2003; Håkansson & Ford, 2002). In theirstudy of Small and Medium Enterprises (SMEs) of developing countriesin gaining access to new foreignmarkets, Ghauri et al. (2003) found thatnetworks are actively used to solve export-marketing problems.
However, relationships in networks alsomean that afirm's pursuit ofits own objectives, such as in introducing a new product or service oraltering an existing system, have to depend on the approval and actionsof other actors in the same network or allied networks (Håkansson &Ford, 2002). Very often, different actors view the costs and benefits ofchange differently and demonstrate different degrees of support orresistance. This puts constraints on choices and on the strategicdecisions of the focal firm. Reliance on others in the network determinesthat the outcomes of the firm's actions are strongly influenced by theattitudes and actions of those firms with whom the focal firm hasrelationships (Batt & Purchase, 2004). According to Uzzi (1997), when afirm becomes too embedded in the network, adaptation becomes moredifficult. Similarly, Burt (1992) pointed out that a concentrated level ofexchange with only a few network partners reduces access to newopportunities. Therefore, the network situation in which actorsencounter both opportunities and limitations is said to be paradoxical(Håkansson & Ford, 2002). Håkansson and Ford (2002, p. 136) suggestthatonewayoutof the paradox is for parties entering anew relationshipto choose to make the necessary investments and accept the negativetrade-off effects of the new relationship on existing relationships.
2.2. Paradox 2: Influencing and being influenced in networks
The second paradox concerns the tensions that arise between actorfirms (nodes) through their relationships (threads) in the network. Afirm's relationships in the network provide tools for strategic actionaffecting present and potential partners, while at the same time, theseothers try to influence the company through thevery same relationships(Gaddeet al., 2003). Fromanetwork learningperspective, theprocess ofinfluencingothers and being influenced can be translated into inter-firmlearning. However, benefits and risks of this learning process can neverbe equally distributed between firms in collaborative relationships(Mohr & Sengupta, 2002). Actors may put their self interest first and
focus on influencing others. This type of influencing can itself be apositive force for networkdevelopment. Themore actors try to influenceone another, the greater the potential for network development(Håkansson & Ford, 2002). For example, Nokia's announcement of itsnew partnering policy has shaped the development of the wholeindustry by trying to influence the beliefs, goals and behaviour of otherkey actors (Möller, Rajala, & Svahn, 2005). Yet listening, reflecting andreacting to others are also within the range of behavioral norms fornetwork actors. The paradox is that the company's development is itselfan outcome of the process of influencing others and being influenced(Håkansson & Ford, 2002). A way out of the paradox is for a firm todevelop its strategy more interactively, evolutionarily and responsively,rather than self-centredly (Håkansson & Ford, 2002).
2.3. Paradox 3: Controlling and being out of control in networks
A network is the outcome of the deliberations, aims and actions of anumberof participants (Håkansson& Ford, 2002, p.135). Business actorstend to compete for the best positions in business networks, forexample, securing the gateway to the customer in marketing channelmanagement (Achrol & Kotler, 1999). One actor's seeking control maycompensate for the lack of goal congruence of actors in the networkcontext while this controlling focus may also drive other actors towardspassive and reactive modes (Ojasalo, 2004).
According to Håkansson and Ford (2002), no one firm is the “hub” ofa network for long and even dominant firms are unlikely to havecomplete control. It follows that a firm canmobilize part of a network inthe direction it wishes only with support from other parties in thenetwork. Further, the position in a network that an actor firm holds isdynamically unstable, as there are competing views between actorfirmsregarding the future structure of the network and any firm's positionwithin it. Any one firm seeking control is a destabilizing force because itis confronted by competing aims from other actors.
The control effort of individual actors might create stimuli for thenetwork to develop at first but, paradoxically, the more an actor firmachieves its control aims, the more contributions of other actors will bethwarted and the less innovative and effective the network is likely tobecome (Gadde et al., 2003; Håkansson & Ford, 2002). In extreme cases,the network will develop a single-centre orientation and evolve to ahierarchical structure. Thismeans that at the level of the individual actorfirms, being ‘out of control’ is necessary in order to optimize the perfor-mance of the network as a dynamic whole. The situation is thereforeparadoxical, according to Håkansson and Ford (2002). It follows that afirm should not lightly seek to control a network. Changing the networkposition of an actor firmmay be preferable over time. Notwithstanding,there are no “nice neat solutions or standardized approaches to strategicnetwork success” (Håkansson & Ford, 2002, p. 137).
The unifying theme between these three paradoxes is constraint onaction at the individual firm level. The idea of one actor firm actuallymanaging relationships within a network and the other party respond-ing passively is problematic, yet it is a common positive assumptionamong many practitioners and some academics as well. We take theview as do Håkansson and Ford (2002) that business relationships arenot a resource that can be easily manipulated in themarketingmix and“captured” for the benefit of a supplier. While highly dependentrelationships do exist in social life, they are almost always regarded asdysfunctional or coercive. In business life, for such relationship arrange-ments to continue, the dependent party must judge the costs of exitingto be greater than the gains. Focusing on the needs of one dominantparty or the other raises newquestions aboutwhat kind ofmanagementcontrol is appropriate today. In other words, we agree with HåkanssonandFord (2002) that the interactiveprocessesoperatingwithinnetworkstructuresput serious constraints on the freedomofmanagerial action atthe level of the firm.
However, dependent and coercive relationships that have beenquestioned in IMP studies are highly acceptable in Chinese social and
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business life, in accordance with the relational orientation of Chineseculture (Ho,1993;Hwang, 2000; Luo, 2000). Someconstraints operatingin a Chinese social context may also spill over into economic activityand impact on intercultural business behavior. These will be describednext.
3. Guanxi circles
A related network phenomenon in the Chinese context is guanxi,which has an important role in Chinese social and business life (Luo,1997; Tung, Worm, & Fang, 2008; Weidenbaum, 1996). Relationshipliterally means guanxi in Chinese (Hwang,1987). However, guanxi notonly means ‘relationship’ but has a ‘special’ or ‘particularistic’ nature(Yang, 1994). Etymologically, guan ( ) in Chinese means gate, andxi ( ) means special connections among people who passed throughthe guan (gate). People going through the guan can enjoy ‘one of us’relationships, but people outside the guan are excluded. It is alwaysdifficult for outsiders to pass through the gate due to the exclusivenessof guanxi networks (Wang, 2007). This applies in business as in sociallife.
Guanxi actors operate as if in “three circles”, or networks inWesternterms (see Fig. 1). This conceptualization is based on three types of ties,as proposed byHwang (1987): expressive,mixed, and instrumental. Theinnermost circle consists of expressive ties, normally among kinships(qinqi/ in Chinese) and closest qinqi like friends. The intermediatecircle comprises familiar ties (shouren/ in Chinese) or mixed ties,including friends and persons to whom one feels particularly close. Theoutermost circle is composed of instrumental ties that accommodatepeople who just know each other (renshi/ in Chinese) and seekinstrumental value from each other.
These three inner circles are governed by different rules. The inner-most circle is governed by the need rule that means resources areallocated among family members based on their needs. The inter-mediate circle is based on the renqing ( ) rule that means thatresources are allocated as an emotional response to particular partnersin this circle. The outermost circle is based on the equity rule that haslittle emotional component and focuses on rationality andreasonableness.
Three paradoxes proposed by Håkansson and Ford (2002) have aclear focus on business networks of actor firms and their relationshipswhich comprise those networks. Their unit of analysis is the companyrather than the individual. They have highlighted paradoxical situations
Fig. 1. Guanxi networks (circles). Source: Adapted from Hwang (1987).
for business actors or their representatives operating in these businessnetworks. Yet, they are less concerned over dilemmas that operate at thesocial and cultural level of the “individuals-in-relations” (Hwang, 2000).
Although some IMP studies have looked into close inter-personalrelationships (Wilson & Jantrania, 1995; Wilson & Mummalaneni, 1986),they primarily see close personal relationships as the output rather thanthe input of successful business relationships. This we argue can beattributed to theWestern cultural context inwhichmost IMP research hasbeen conducted. One key cultural difference between Chinese andWesterners concerning themeaningof ‘relationships’according toAmbler(1994, p. 71) is that:
The Chinese believe that one should build the … personal relation-ship and, if successful, transactions will follow. Westerners buildtransactions and, if they are successful, a relationship will follow.
In the Chinese context, business relationships and personal relation-ships cannot be separated from each other (Luo, 1997; Szeto, Wright, &Cheng, 2006; Yau & Powell, 2004), so paradoxes have to be looked atboth at organisational levels and personal levels. The aim of thisempirical study is to explore paradoxical situations derived fromChinese–Western intercultural relationships that seem to operate atthe individual actor level and at firm actor level concurrently, in theChinese–Western intercultural context. The intercultural context isreferred to cultural norms that are of concern for individual actors whoconfront those from the other culture.
More specifically, the research sets out to explore:
(1) What are the intercultural constraints in Chinese–Westernintercultural business relationships?
(2) How do these constraints relate to network paradoxes proposedin the IMP studies?
(3) What new understandings can be generated to make sense ofconstraints in Chinese–Western intercultural business contexts?
4. Research method
Past research has questioned the applicability and relevance ofWestern researchmethods in understandingChinesephenomena, giventhe differing social and cultural settings (Boisot & Child, 1996; Roy,Walters, & Luk, 2001). Therefore an inductive theory building approachhas been chosen. The merit of this approach is “it lets the reality tell itsstory on its own terms and not on the terms of received theory andaccepted concepts” (Gummesson, 2003, p.488). The role of researchersin inductive theory building research is to gently assist the researchtoward an area of interest, in this case study of ‘intercultural relation-ships’. Thus, new and useful perspectives emerge gradually frominterpretation of empirical materials rather than from any predefinedor imposed theoretical constructs (Gummesson, 2003).
The objective of this exploratory case study was to sample as muchdiversityaspossible among theparticipants so that anoverall viewcouldbe distilled from these diverse sources. In the sampling process, amaximum diversity of perspectives was sought, e.g. New Zealandnationals versus Chinesenationals, large sized versus small andmediumsized companies, multinational companies versus New Zealand andChinese origins, topmanagement versus low andmiddle level manage-ment, marketing versus purchasing, andmanufacturing versus services.New Zealand was chosen as the home country of foreign informants inChinese markets for the convenience of data collection.
In-depth personal interviewswere preferred to achieve a richness ofmaterial unlikely to emerge from an impersonal questionnaire.Quantitative survey research in China is also found to encounter theproblems of poor response rates and the medium value tendency ofresponses (Roy et al., 2001). Furthermore, it seems most unlikely thatthe senior level of respondents included in this study would respondpersonally to a mail-out questionnaire. These barriers are especially
Table 2Topics used to guide interviews.
• Major issues considered when deciding for or against suppliers/distributors/agents/sales representative
• Important connections and relationships in doing business in China• Valuable resources in making business connections in China• Risks and constraints in business interactions• Rules/norms that govern relationships and interactions• Open or closed networks• Gift giving• Dinner• Mianzi (face)• Status• Identity• Renqing (exchange of favour and reciprocal obligations)• Ganqing (emotion)• Flexibility• Adaptation• Trust/trustworthiness• Interdependence• Guanxi (special personal relationships)
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problematic for the topics of interest in this study – paradoxes ordilemmas in relationships.
This study followed a purposeful and convenience samplingapproach (Miles & Huberman,1994). Twenty-two personal interviewswere conducted with business people involved in trading relationsbetween China andWestern countries,mainly in Shanghai and Beijing,two main commercial centres in the Peoples' Republic of China (PRC),and in Auckland, the foremost commercial centre in New Zealand.
The characteristics of the interviewees are shown in Table 1.Interviews were conducted at the premises of the respondents,
coffee shops and cafes, wherever the informants felt comfortable andappropriate. Interviews ranged from 60 to 120 min, and in most caseswere conducted in English, but Mandarin was applied whereverapplicable to capture the indigenous meaning of what Chinese infor-mants said.
Topic sensitivity and social acquiescence are further importantconstraints on research in China (Roy et al., 2001). To address theabove problems, we deliberately asked Chinese respondents to usetheir group as reference rather than speaking their own mind(Usunier, 1998). In addition, the bilingual background (of the firstauthor in this study) and intercultural experience (all three authors inthis study) of researchers also help address the above problems(Brislin, 1976).
In the interviews, the focus of conversation was directed towardsstory telling regarding:
(1) establishing and developing relationships with Chinese or NewZealand counterparts;
(2) cultural constraints on business including guanxi;(3) identifying rules/norms that govern business interactions in
the Chinese market.
A list of topics (Table 2) was used to guide the major areas ofenquiry (Denzin& Lincoln, 2000; Kvale,1996;McCracken,1988). Thesetopics were derived from the extant literature and our researchinterests. As can be seen, the material reported in this paper relates toonly part of the material explored in these interviews. Questions wereopen-ended to enable determination of what was most salient torespondents (McCracken, 1988, p. 40).
A translation from Chinese to English of some transcripts was laterconductedby thefirst author, and then corrected for grammarand idiomby the other authors (native English speakers). The authors had iterative
Table 1A brief profile of key informants.
Ref # Location Size of organisation(L: large; SME: Smalland Medium)
Ownership(F: foreign;C: Chinese; J: joint)
Sector
A Shanghai L F DairyB Shanghai SME F EngineeringC Auckland SME F MeatD Auckland SME F MeatE Auckland SME F MeatF Shanghai SME J logistics/consuG Shanghai SME J logistics/consuH Shanghai L F LogisticsI Shanghai L F Insurance brokJ Shanghai SME J InsuranceK Beijing SME F CateringL Arrowtown SME F TimberM Beijing SME F PR serviceN Beijing SME F PR serviceO Beijing SME F PR serviceP Beijing SME F PR serviceQ Shanghai L J HotelR Shanghai F Government agS Beijing L C Space technoloT Beijing L F Refinery chemiU Shanghai L F High tech instrV Shanghai L F Grain feed pro
discussion on the themes and meanings extracted from empiricalmaterials throughout the coding and analysis (Coffey & Atkinson, 1996;Seidel & Kelle, 1995).
The fieldwork revealed that many Chinese informants do not treatNew Zealand managers as specifically from New Zealand, butrepresentative of Western cultures. This can be evidenced by their useof laowai ( in Chinese: literallymeaning ‘a foreigner’)when referringto New Zealand managers or counterparts. This study has a major focuson “conflicts” between cultural norms in the Chinese–Western inter-cultural context rather than focussing on Chinese or Western culturesper se.
There is always present a disparity between a researcher'sexpectations and participants' likely responses on questions ofinterest and depth of sharing of experiences (Kvale, 1996, p.15–16).In order to close this gap, we endeavoured to establish rapport withthe respondents and to build a conversation-like dialogue rather thanasking questions that impose categorical frameworks on informantsunderstanding and experiences (Arnould & Wallendorf, 1994, p.492).The frankness with which some respondents spoke about sensitiveissues provides evidence of rapport built between interviewer andrespondents.
Nationality(NZ: New Zealand;C: Chinese)
Title of informant Inter-culturalexperiences (years)
NZ Managing Director 10C Sales Representative 5C Marketing Manager 10NZ Senior Export Manager 10NZ Managing Director 10
lting NZ Managing Director 12lting C General Manager 10
NZ Manager 1.5erage NZ Vice President 1
NZ Chief advisor 5NZ Owner 6NZ China Marketing Manager 23NZ Director 5NZ General Manager 13C Account Manager 3C Account Supervisor 1NZ Director of Sales & 8
ency NZ Senior official 4gy C Import Manager 8cals C Marketing Manager 8uments C Marketing Manager 4ducts C Purchasing Manager 5
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5. Findings
The findings of cultural norms and associated intercultural con-straints are summarised in Table 3.
6. Guanxi dilemmas
The empirical findings presented in Table 3 are analysed in thissection. This analysis reveals support for the structure of threeparadoxical situations as observed by Håkansson and Ford (2002) inChinese–Western intercultural business relationships. However, dueto the impact of Chinese guanxi culture, three additional dilemmas arerevealed. These dilemmas are conceptualised within a “three-circle”structure at the end of this section.
6.1. Guanxi dilemma 1: Between strong interpersonal ties (Guanxi) andweak interpersonal ties
Empirical findings from this study reveal that, through developingbusiness relationships, Western business actors acquire hiddenmarket information, and obtain access to local customers and localorganisational resources such as political power or social status withinthe Chinese hierarchy. However, intercultural relationships alsoimpose constraints on the action of those business actors. Forexample, Western managers are frustrated by distrust of their Chinesecounterparts. They may also have to spend their private time insocialising with their colleagues and Chinese clients for businesspurposes. They have to deal with favour requests from their Chineseemployees or counterparts.
The above findings align with the first B2B network paradox,“opportunities and limitations” (Håkansson & Ford, 2002). However,actors in Chinese–Western intercultural relationships constantlyencounter dilemmas between strong interpersonal relationships andweak interpersonal relationships. Actors develop strong interpersonalrelationships with their Chinese counterparts when they seek supportfrom these counterparts' associated personal networks. For example,they rely on guanxi to open the door controlled by individuals whohavepolitical power or high statuswithin the Chinese hierarchy. On the otherhand, they are required to develop weak but open relationships withothers in order to instil Western business management principles orcultural norms into practice in China; weak interpersonal relationshipsensure achieving a fair and open relational environment instead of‘closed’ guanxi circles. In the dynamic and complicated social andeconomic environment of China, it is extremely difficult for an actor todecide the appropriate degree of “closeness” or “openness”with others.Take the example of exchange of gifts – gift giving is a common activityto show the strength of interpersonal relationships between Chineseactors but it is indeed a dilemma for laowai managers. Similarly,Steidlmeier (1999, p. 121) observed, “it is very difficult to knowwhen itis proper to give or receive a gift, what sort of gift is appropriate, or whatsocial obligations gift giving (or receiving) imposes”.
Håkansson (1982) has discussed special relationships and specialtreatment given to some customerswho are, for example, large volumepurchasers. This special treatment can be justified in aWestern contextby the equity rule and is largely measured by inputs and performances(e.g. investments, sales and profit). However, special treatment toothers based on guanxi is difficult to measure in an economic sense,and is often discouraged in foreign organisations that follow the equityrule and/or the equality rule in its management.
6.2. Guanxi dilemma 2: Between previous experiences and new learningof guanxi
Business actors follow different cultural norms in interculturalinteractions. Both Chinese companies and their Western counterpartstend to influence others based on their own ways of conducting
business. Yet, they have to accept influence from others with businessnorms that are contradictory to their own. This relates to the secondnetwork paradox, “influencing others and being influenced” (Håkans-son & Ford, 2002).
Evolving rules make guanxi interactions extremely difficult tomanage. Actors tend to carry behavioural norms derived fromprevious experiences into new relationships; these include: mutualdependence, gift giving, favouritism for some Chinese actors,mutual respect, and (for some laowai actors) discomfort acceptinggifts and passively responding to favours. The previously under-stood rules or norms evolve in new relationships and actors'behaviour changes accordingly. For example, Informant F, a laowaimanager, gradually realised the importance of “wining and dining”,and even getting drunk (“being disgraceful together”) with Chineseclients. Informant C, a Chinese employee, changed his behaviourfrom exaggerative to being honest in business communications afterhe worked for a New Zealand company for some years. However,these emerging rules of interaction have to be developed withsensitivity. For example, by overemphasising the gift giving andwining-and-dining components of a guanxi relationship, Westernbusiness people are in danger of becoming “meat and wine friends”,which has a connotation with mistrust in Chinese eyes (Davies,Leung, Luk, & Wong, 1995).
Informant F, a laowai manager, expressed the difficulty for laowaimanagers in adapting to Chinese cultures this way:
I find some foreigners come and they try too hard to overly respectChinese local cultures and China in general. It comes across asalmost a bit fake. Chinese sides pick up on that. They will use it.Chinese are good at looking for weakness that they can exploit.Some foreigners come here and are overly respectful. I will explainto them that that is not respectful in Chinese cultures. It can beexploited. Too many New Zealanders have tried that too hard.
The difficulty in showing appropriate responses in interculturalrelationships is due to the varying rules and the constant change ofactors that impacts on rules of interaction. A formermanaging directorof ACNielsen in China made the following revealing observation: “Icould tell you something about China; my friend could tell yousomething about China and both of these would be completelyopposite. But both would be completely right” (NZTE, 2008, p.3).
Informant K, a laowai manager, reported that he followed his sensewhen dealing with close guanxi friends. According to him, a foreignperson does not normally havemany close guanxi relationships. Thereare no explicit rules for interacting with close guanxi. Similarly,Informant Q, a laowai manager, reported difficulty in evaluating herpersonal relationships with others: “The problem is when you firstcome, you do not know and you do not realise the door (to personalrelationships) is closed because of something you have done”.
Informant T, a Chinese junior, from a MNC in Beijing, reported thatthere is very limited training or guidance in many foreign organisa-tions on how to deal with ‘special’ requests from Chinese clients. Thislack of guidancemakes the Chinese employees' job very difficult to do.Informant T had to learn how to deal with the special requirementsfrom her clients by herself.
In summary, there are no set rules but only emergent rules forinterpersonal interactions in evolving intercultural (interpersonal)relationships. The emergent rules are not necessarily all Chinese localrules orWestern rules, but the blending ofmixed rules, according to thecircumstances. Therefore, all the contextual factors (who is in thenetwork, their personal relationships with others, and personalresources of these connected relationships) are critical in guidinginteractions between individual actors. Individual actors constantly facethe challenge of reconciling conflict between their “learned” guanxiknowledge and learning new guanxi relationships norms in the middlecircle.
Table 3Findings of cultural norms and intercultural constraints.
Themes Chinese norms and examples Western norms and examples
Guarding against versustrusting new relations
Guarding against new relations Trusting new relationsIn the Chinese context, trusting strangers or new relations isperceived as “stupid” (informant F, a Western manager).
“It takes him (Chinese partner) eight or nine years to trust uswhile we trust him mostly” (informant E, a Western manager)
Short-term versus long-term thinking
Short-term thinking Long-term commitmentChinese clients tend to “shop around” for the cheapest priceand “shortcut” the foreign intermediary wherever possible(informant F, a Western manager)
Chinese business people do not tend to engagein such long-term relationships as the western counterpartsexpect (informant C, a Chinese manager)
Wu shang bu jian ( in Chinese: business people aresupposed to be astute and cunning) against new businessrelations (informant C, a Chinese manager)
Exaggerations versusbeing honest
Exaggerations Being honestSome Chinese business people like to exaggerate the size of theirbusiness and their capacity by saying “we are the biggest buyerin this area (informant C, a Chinese manager)
Highlighting the importance of being honest in buildingrelationships with Chinese counterparts despite the cunningbehaviour of these counterparts (informant L, a Western manager)
Informant G (a Western manager) observed the “over promiseand under delivery” behaviour of some Chinese suppliers
Hiding versus sharinginformation and knowledge
Hiding information and knowledge from others Sharing information and knowledgeChinese counterparts or employees jealously protectcustomer information and work knowledge from theirbusiness partners and even from colleagues withwhom they do not have a special interpersonal relationship(informants H, M, two Western managers).
“In western countries, if someone comes into a new role,the first who was doing the role beforehand is expected to spendone or two weeks or more training the replacement how to do thejob, sharing information, then this person moves on and starts his/hernew job…So there is much more teamwork and there is muchmore collaboration” (informant H, a Western manager)
Favouritism versusequity and equality
Favouritism Equity and equality rulesSome Chinese employees take a further ‘shortcut’ at workonce they think they have a special relationship with theWestern manager, after the exchange of ‘favours’(informant Q, a Western manager)
Informant Q (a Western manager) reported her frustration infollowing the rule of favouritism against the rule of equity sheinsists on for her team.
Mutual dependenceversus mutual respect
Mutual dependence Mutual respectChinese counterparts place high value on mutual dependence whenit comes to close guanxi (informant B, a Chinese manager)
To Western managers, mutual respect is the way to buildinterpersonal relationships (informant B, a Chinese manager)
In Chinese culture, everybody knows his/her status inan organisation. They also want to know a foreigner's statusin the foreign organisation. Then, they know how muchrespect to give to that person. This means mutual respect inthe Chinese mindset is more to do with each other's titles andpositions in a hierarchy (informant O, a Chinese accountmanager, and informant F, a Western manager)
Many Western managers are not good at differentiating peopleaccording to their status and showing corresponding respect.Without understanding the positions of others, respect shownby one party is easily exploited (informant F, a Western manager)
Guanxi power versus expertand coercive power
Guanxi power Expert and coercive powerLocal Chinese parties enjoyed the power derived frompre-existing interpersonal relationships between individualsin the client company and the local competitor – guanxipower; this guanxi power undermines coercive power andexpert power enjoyed by some Western agents.
According to informant I, the foreign party had coercive powerbased on the legal agency agreement and expert power based ontheir Western business experiences and professional knowledge.
Sacrificing versuskeeping privacy
Sacrificing personal time and space Keeping privacyInformant B, a Chinese manager of a New Zealand ownedcompany, reported that his CEO came from NZ to visit oneChinese client once. After the banquet, the Managing Directorof this Chinese client company suggested having a chat with theNZ CEO in his room in the hotel. This New Zealand CEO feltvery strange about this type of interaction which appearsnormal to Chinese.
Western counterparts place a higher value on professional servicesor expert services in China and are reluctant to sacrifice theirprice for guanxi relationships (informant C, a Chinese manager)
Western managers are reluctant to sacrifice their private time andspace to interact with their Chinese employees or Chinese counterpartsfrom business relationships (informant M, a Western manager)In social times, “the groups of foreigners and Chinese staff arequite separate” (informant M, a Western manager)
Generosity versuscalculative behaviour
A big contrast between being calculative in businessnegotiations and a great deal of generosity in social settings
Insignificant
“They (Chinese counterparts) will negotiate three hoursfor one hundred dollars, but they will take you out inthe evening and spend five hundred dollars, just for the goodnight out. It appears to them that to an extreme degree workis work; when you finish the work, you have a social time,and money is not a matter. They are very generous andvery open” (informant K, a Western manager)
We (New Zealand companies) price our products based on qualityand the professional services we provide to our customers(informant C, a Chinese manager) and we stick to our prices and areconsistent in price negotiations (Informant L, a Western manager).
Conflict avoidance versusconflict confrontation
Conflict avoidance Conflict confrontationThe “following the mainstream” thinking of Chinese actorsfrustrates Western counterparts most in Chinese–Western businessrelationships; This cultural element also puts constraints on Chinesecounterparts or employees' critical thinking and taking initiativesin the development of new businesses.
Facing conflicts
Conflict avoidance by Chinese actors inChinese–Western relationships was also observed.
(continued on next page)(continued on next page)
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Table 3 (continued)
Themes Chinese norms and examples Western norms and examples
High power distance versuslow power distance
High power distance Low power distance“Junior levels will do nothing before their Chinese boss has noddedtheir head… It is very hard to know when the Chinese boss has noddedfor going ahead with this deal” (informant H, a Western manager)
Working with Chinese is particularly frustrating for Western actorswho are from a low power distance cultural environment suchas New Zealand (informant H, a Western manager)
Communication style Ambiguous communications and unwritten rules Explicit communicationsThere can be massive discrepancies between nominalpositions and actual roles of actors in Chinese organisations(networks) (informant D, a Western manager)
Foreign parties have difficulty to know the true thoughts ofChinese counterparts (informant P, a Chinese manager)
“For foreigners, talking about personal benefits in businessrelationships is very unnatural. Chinese can feel that. It is hardto build that trust if they do not feel good. They normally thinkWestern actors do not understand the unwritten rulesin the Chinese culture”. (informant K, a Western manager)
Gift dilemma Actively engaging renqing/favour and gift exchange Feeling uncomfortable accepting a giftGift giving expresses special thanks for peoplewho make personal efforts in business dealings(informant C, a Chinese manager).
“Quite often I declined it. Look, I am not here to take this (gift)or to do this. What about you? you take it”(informant H, a Western manager)
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6.3. Guanxi dilemma 3: Conflicting obligations between inner guanxicircles and outer circles
Chinese business actors want to steer the direction of developingintercultural business relationships towards local guanxi actors (e.g.local suppliers) while Western actors prefer using Western suppliers.The underlying issue is control of the emerging intercultural network(“the intercultural middle circle”). However, none of the actors hascomplete control of the intercultural network. The closer theintercultural relationships get to local guanxi networks (“the insidercircle”), the less innovative and more complicated the interculturalbusiness relationships will be. On the other hand, the closer theintercultural relationships get to Western networks (“the outsidercircle”), the less flexible and more dogmatic actors become in Chinesemarkets. Therefore, actors in emerging intercultural relationshipsconstantly operate in the paradoxical situation described by Håkans-son and Ford (2002) as ‘controlling and being out of control’.
The individual actors in intercultural business relationshipsactually operate within different circles concurrently. The behaviouralfocus shifts largely depending on purpose, opportunities and any
Fig. 2. Guanxi
change in closeness of their personal relationships with others. It isrelatively easy for actors to interact with others from their owncircles – the insider circle for Chinese and the outsider circle forlaowai managers as per agreed rules. However, those interacting inthe middle circle have to constantly juggle conflicting obligationsimposed on them from the insider circle and the outsider circle. Forexample, informant F, a laowai manager, on the one hand exaggeratesthe size and capability of his consulting firm to meet expectationsfrom his Chinese clients but on the other hand, he has to be honestand frank with his foreign business partners or clients. Informant Falso reported a contrast in his own behaviour, from saving mianzi(face) for others on some occasions to being drunk and disgracefulwith others on other occasions. As informant L reported, Chinesenegotiators, on one hand, are obliged to be calculative with newcommercial relationships, but on the other hand, they are obliged tobe generous to their counterparts in social settings.
Another example provided by informant T (a Chinese salesmanager) shows salespeople from foreign controlled companies inChinese markets are expected to fill out sales journals by the foreignmanagement but they also have an obligation to maintain ‘secrecy’ for
dilemmas.
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their guanxi clients. Informant Q, a laowai manager, on the one handhad to give special favours to people associated with a local powerfulguanxi, and on the other hand had to instil the equity and equalityrules in her work team. According to informant I, the foreign party hasto juggle between the equality rule imprinted in the insurance policies(contracts) and the reciprocal obligation expected by the pre-existingguanxi of his Chinese colleagues. In simultaneously dealing withactors at the interpersonal level that come from different circles,actors unavoidably encounter conflicting obligations, expectationsand norms in the intercultural middle circle.
The three dilemmas identified above in the intercultural middlecircle, that is emerging intercultural interpersonal relationships (seeFig. 2), are more associated with social bonding than with structuralbonding in business relationships. Social bonding in the buyer–sellerrelationship is defined by Wilson (1995, p. 13) as “the degree ofmutual personal friendship and liking shared by the buyer andseller”. Structural bonding refers to non-retrievable investmentsincluding financial and technical investments that create obligationsin the relationship (Wilson & Jantrania, 1995). Obligations instructural bonding can be discharged by negotiation once theassociated benefits and costs are agreed on. However, social bondingand associated obligations are more difficult to discharge because ofinvolvement of the family and other close personal relationships thatare part of the day-to-day social life of individual actors, particularlyin the Chinese cultural context. Guanxi behaviour invariably spillsover to business contexts, irrespective of social class and culturalvariations (Ho, 1993), and impacts on contractual and corporatepolicies. The activation of intercultural guanxi ties in the middlecircle means that actors constantly encounter dilemmas that have tobe reconciled somehow.
The guanxi associated dilemmas in the intercultural middle circleappear more problematic to laowai managers because they carry theiroutsider orientation and Western cultural norms with them to someextent when stepping into this middle circle. These guanxi dilemmascan thus be called outsider dilemmas. Due to the long history of livingin a paradoxical and contradictory environment (Kim, Pan, & Park,1998; Lewis, 2006), Chinese actors are more accepting of theinevitability of such constraints and dilemmas. This observation isconsistent with the Taoist philosophy which accepts paradox as anormal state of being (Fletcher & Fang, 2006).
7. Conclusion
In this study, we have reviewed the IMP work of networkparadoxes and the relevant B2B marketing literature. In order toevaluate B2B paradoxes in Chinese–Western intercultural contexts,we have conducted in-depth interviews with business managers inNew Zealand and China. Our empirical findings supported the threeB2B paradoxes proposed by Håkansson and Ford (2002) in Chinese–Western intercultural networks. Additionally, we discovered threedilemmas specifically associatedwith the intercultural guanxi context.These dilemmas are: dilemmas between strong personal ties andweak personal ties, dilemmas between previous understandings andnew learning of guanxi ties, and conflicting obligations between theinsider circle and the outsider circle.
These guanxi dilemmas are not separate from the three paradoxesas earlier discussed, but are restatements of these paradoxes from anintercultural guanxi perspective. These dilemmas are not well coveredin international and B2B marketing literature. They are perceivedmore at the personal level than at the organisational level. This studydiffers from previous IMP studies that focus on B2B relationships inindustrial networks (Easton, Zolkiewski, & Bettany, 2003; Ford &Håkansson, 2006). This difference can be understood from theinseparable nature of business relationships and interpersonalrelationships in the Chinese cultural context (Luo, 1997; Szeto et al.,2006; Yau & Powell, 2004).
8. Managerial implications
In Chinese–Western intercultural contexts, what is clear is thatactors have to comprehend and establish their positions in each ofthree circles of guanxi. Once such positions are understood andclarified, actors follow the rules (norms) of the correspondingpositions, and invest in developing interpersonal relationships withothers. This applies as much in a business sense as it does in the socialsetting. In fact, there is no distinction. In addition, the businessactivities of an actor can only be effective when other actors in theinsider circle or the outsider circle acknowledge the position of theactor and are prepared to respond to it. This position is therefore theproduct of symbolic interactions (Blumer, 1969).
Thus it is that individual actors can only develop strategies graduallyand interactively with others for dealing with guanxi dilemmas. Theyshould not pursue complete control of others. They have to learn fromthose experienced in the intercultural middle circle who also haveinitiative and capabilities and are in appropriate positions to give advice.Through working with others together, actors gradually learn aboutevolving rules in different guanxi circles, and acquire necessaryresources or capabilities and engage in appropriate strategic activities.
9. Future research
In light of the above discussion on guanxi dilemmas, future researchis called for to develop a better understanding of norms and learningprinciples in emerging intercultural relationships and so enhanceindustrial marketing's theoretical and empirical frameworks. In addi-tion, the middle forces that facilitate the interactions between guanxiinsiders and outsiders warrant exploration, given the complexity ofguanxi dilemmas foroutsiders. Further researchon the facilitating forcesand associated activity should reveal how these guanxi dilemmas areresolved in the intercultural middle circle. In light of the rise of China inthe world economy in the twenty first century and given the “mystery”of this land to outsiders, such research would be valuable to businesspractice and academic understanding alike.
Acknowledgments
Authors are grateful to New Zealand Trade & Enterprise and theKEA network in their help with recruiting research respondents. Weare also grateful to the financial support from the Education NewZealand Postgraduate Study Abroad Programme in funding thefieldwork of this research.
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Hongzhi Gao is a research fellow and lecturer in the Marketing Department of theUniversity of Otago. His research areas are intercultural relationship management,product-country-image, crisis management and branding. He has published papers inLong Range Planning, Industrial Marketing Management, and the Journal of MarketingManagement.
David Ballantyne is an associate professor of marketing at the University of Otago,New Zealand, and an International Fellow at the Centre for Relationship Marketing andService Management, Hanken School of Economics in Finland. He is a co-author withMartin Christopher and Adrian Payne of Relationship Marketing: Bringing Quality,Customer Service and Marketing Together (1991), the first academic text publishedinternationally on this topic. He is also a member of the editorial review boards of theJournal of Business-to-Business Marketing, Industrial Marketing Management, Manage-ment Decision, and International Marketing Review. His research interests includeinternal marketing, chaos and knowledge management, B2B marketing, and the newservice-dominant logic of marketing.
John Knight is an associate professor in the Marketing Department of the University ofOtago. His research areas are product-country image, barriers to adoption ofinnovation, and crisis management in international markets. He has published widelyin the biomedical field (eg Lancet, Proc Natl Acad Sciences USA, Molecular Psychiatry,Nature Biotechnology) in addition to business journals (eg Journal of InternationalBusiness Studies, Industrial Marketing Management, Journal of Marketing Manage-ment, Long Range Planning).