personal networking in russia and china:: blat and guanxi

European Management Journal Vol. 21, No. 4, pp. 509–519, 2003 2003 Elsevier Ltd. All rights reserved.Pergamon

Printed in Great Britain0263-2373 $30.00 + 0.00doi:10.1016/S0263-2373(03)00077-X

Personal Networking inRussia and China:Blat and GuanxiSNEJINA MICHAILOVA, Copenhagen Business SchoolVERNER WORM, Copenhagen Business School

Blat and guanxi are terms describing personal net-works in Russia and China respectively. They haveexisted and been practiced for centuries and remainhighly relevant today. By employing a social net-work perspective, we analyse the architecture ofblat and guanxi and some of the similaritiesbetween them. We also argue that personal net-works in Russia and China are products of specificcultural heritages and as such have their own parti-cular configurations and characteristics. Followinga dynamic perspective, we examine how blat andguanxi have evolved over time: while they weresimilar in a number of dimensions during the com-mand economy period, there are interesting signsof increasing differentiation in the post-commanddecade. The paper outlines important insights forWestern managers and expatriates in terms of sur-viving in and effectively using blat and guanxi. 2003 Elsevier Ltd. All rights reserved.

Keywords: Russia, China, Personal networking,Blat, Guanxi, Differences and Similarities betweenBlat and Guanxi, Command economy, Market econ-omy

‘Zhi ren zhong yu zhi wu’ (‘Who you know is moreimportant than what you know’) — Chinese proverb

‘Ruka ruku moiyet’ (‘One hand washes the other’) — Rus-sian proverb

Networking is a complex phenomenon, which can beapproached meaningfully only in relation to a parti-cular economic, political, social, historical, and cul-tural context. The actions of the members of a parti-cular network are embedded in the wider structureof relations in which network activities are both amedium and an outcome. Due to Western (US/WestEuropean) dominance in business research, there hasbeen less focus on personal networks than on organi-

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zational networks. Most of the work published typi-cally relates either to firms (Johanson and Mattson,1991; Granovetter, 1992) or markets (Gerlach and Lin-coln, 1992). Personal networks, on the other hand, arepredominant in most emerging markets. Althoughevery society is built around patterned relationshipsamong individuals, groups, and organizations, theyexpress themselves differently in different culturalsettings. We argue that personal networking in for-mer socialist societies differs from the West in termsof how extensively it is rooted and activated in socialand business life and how business success is influ-enced by the quality and cultivation of personalrelationships. This implies that personal networksneed to be managed differently in different countriesin order to achieve optimal efficiency and effective-ness.

This paper focuses on personal networks in the twomajor formerly planned economies, Russia andChina, where they are referred to as blat and guanxirespectively. In order to gain a deeper understandingof blat and guanxi, rather than merely describing thepersonal networks or examining their consequences,we need to explore what drives them and how theycoevolve with their environments. What are the spe-cific characteristics that constitute the architecture ofblat and guanxi? How similar and how different arethey from one another? How can Western managersnot only survive but successfully work with, and use,blat and guanxi? These are the questions that thispaper aims to answer.

There is no unified, agreed meaning of blat and theterm cannot easily be translated into English. Aspointed out by Joseph Berliner, one of the pioneeringand most prominent researchers of the informal econ-omy during Soviet times, the term blat is one of thosemany flavoured words which are so intimate a partof a particular culture that they can be only awk-

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wardly rendered in the language of another (Berliner,1957). During socialism it was an exchange of favourof access in conditions of shortages and a State sys-tem of privileges where the favour of access was pro-vided at public expense (Ledeneva, 1998). Blat servedthe needs of personal consumption and reorganizedthe official distribution of material welfare; blatexchange was often mediated and covered by therhetoric of friendship or acquaintance: ‘sharing’,‘helping out’, ‘friendly support’, ‘mutual care’, etc.Intertwined with other types of personal networks,blat provided access to public resources through per-sonal channels (Ledeneva, 1998). Restricted accesswas made possible through structural embed-dedness: it provided information so that parties knewwith whom to exchange and whom to avoid (Joneset al., 1997).

The term guanxi refers to relationships betweenpeople, but, like blat, it does not have a preciseEnglish equivalent. It implies dyadic relationshipsbetween individuals in which each can make unlimi-ted demands on the other. Guanxi is composed ofinterpersonal linkages with the implication of a con-tinued exchange of favours; it differs from friendshipand simple interpersonal relationships by includingreciprocal obligations to respond to requests forassistance (Luo, 2000). This reciprocity is sociallybinding and without time specification. Guanxi net-works are transferable, reciprocal, intangible, andutilitarian (Luo, 2000).

Before we analyse the similarities and differencesbetween blat and guanxi, let us outline how they dif-fer from personal networking in the West. The keydifferences are listed in Table 1.

There are at least six important differences betweenblat/guanxi and the Western type of networking.Firstly, Confucian societies are some of the mostrelationship-focused societies in the world. Tra-ditional Chinese sociologists label the USA an indi-vidualistic society and Europe a collectivist society,especially bearing in mind that most European coun-tries have strong labour unions. Conversely, theyrefer to China as a relationship-based society. Guanxihas been one of the major dynamics in Chinesesociety throughout its history, particularly in relationto business conduct. The Chinese see business eitheras a war or as a relationship-building activity, prefer-ably the latter. Establishing and nurturing connec-

Table 1 Key Differences between Blat/Guanxi and Personal Networking in the West

Blat/guanxi Personal networking in the West

Based largely on collectivism/relationships Based primarily on individualismVitally important; often a matter of survival ImportantHighly frequent exchanges Exchanges are discrete in timeExchanges take place at the workplace Exchanges take place outside the workplaceExtended relationships/mediated exchanges Dyad-based relationships/direct exchangesExchanges are usually personal Exchanges are usually non-personal

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tions, an essential component of the building of effec-tive networks, has been pivotal to business successin all Confucian societies. In addition to being thebirthplace of Confucianism, China has been ruled bya communist party for the last 50 years and has hada planned economy for most of this period. This hasincreased the need for personal networks. Even nowwhen national and local State capacity in China iscomparatively high, guanxi relationships with differ-ent levels of the Chinese bureaucracy are importantfor both Chinese and foreign business peopleoperating in China. The emerging economic order inChina has been defined as ‘network capitalism’(Boisot and Child, 1999), even though China stillespouses socialism as an official ideology. Second, inRussia and China the mediated exchange configur-ations are perceived as vitally important in everydaylife. Third, mediated exchange events take placemuch more frequently in these two countries com-pared to the Western context, i.e., Russians and Chi-nese encounter a far greater number of exchangesthan Westerners. Fourth, a large number of theexchanges take place at work as opposed to the West-ern context where, when exchanges are conducted,they are on a private basis. Fifth, most cases in Russiaand China involve persons beyond the simple dyadicrelationship, while the exchange relationship in theWest tends to be more dyad-based. Sixth, since blatand guanxi are person-specific, the favour renderedare usually of a more personal nature than those per-formed in Western networking. Blat and guanxi rulethat if there is some kind of a bond between twopeople, each can make a demand on the other andcan expect reciprocal special consideration. Forexample, such favours may include taking care of thechildren of people who belong to the network, givinga position in a company, gaining access to a gooddentist, borrowing money, etc.

Comparing Blat and Guanxi

While there is a sizable body of research on guanxi,the number of studies on blat is very limited.Additionally, our search of the literature has shownthat there is no published research devoted explicitlyto a comparison of blat and guanxi. This under-standably poses a number of challenges, particularlyin terms of selecting appropriate frameworks that canallow a meaningful comparison.

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The social network perspective offers a fruitful lensfor exploring similarities between blat and guanxi. Wehave adopted the definition of social networks as col-lectives of individuals among whom exchanges takeplace that are supported only by shared norms oftrustworthy behaviour (Liebeskind et al., 1996). Thetask of defining a network involves specifying the setof nodes and the relationships between them. Sinceour interest is in what are the specific features of blatand guanxi as personal networks, how they evolveand change, we define the nodes as individuals con-stituting these networks and bearing the dynamics ofthe networks’ development. At the same time, thereare important differences between blat and guanxi.There is a particular way of thinking behind the twophenomena, and looking into concrete features ofthese ways of thinking offers a good opportunity forexploring some of these differences.

Similarities between Blat and Guanxi from aSocial Networks Perspective

On the basis of the literature on blat and on guanxiand detailed examination of the empirical data wehave collected over the last six years (please seeAppendix), we are able to identify three character-istics shared by blat and guanxi. These are: (1) socialresourcing, (2) continuity of relationships, and (3)coexistence of trust and cooperation on the one handand power and domination on the other. These threecharacteristics are related to either structural orrelational embeddedness, which in turn are keynotions within the social networks perspective. Struc-tural embeddedness emphasizes social control sinceit provides more efficient information spread aboutwhat the members of the pair are doing, and thus abetter ability to shape that behaviour (Granovetter,1992). Networks have the ability to develop and dis-seminate a system of shared and tacitly understoodnorms and rules on the one hand and a specific lang-uage on the other. This allows the network membersto act appropriately, not only under well-definedconditions but also under dynamically changing con-tingencies. Relational embeddedness, on the otherhand, is associated with the behaviours of theexchange parties, such as trust, confiding, and infor-mation sharing. It also refers to the degree to whichexchange parties consider each other’s needs andgoals (Granovetter, 1992). Whereas relational embed-dedness encompasses the depth and the quality of asingle dyadic tie, structural embeddedness is theextent to which a dyad’s mutual contacts are connec-ted to one another, implying that a number ofadditional actors beyond the dyadic relationship canbe in play. Below we discuss the three features of blatand guanxi in greater detail.

Social ResourcingBlat and guanxi can be viewed as a social resourcebecause they exist in a latent form not only withinone’s own network but also between the blat or


guanxi networks of members, the so-called set’ blat-nyih in Russia and guanxiwang in China. In structuralembeddedness terms, blat and guanxi are not onlyembedded in dyadic relationships, but can beexpanded to all members of the broader network.Even when blat and guanxi seem to be of a dyadicnature, exchange is often embedded in or influencedby actors outside the dyad. Thus, obligatory relationsmay extend to people whom one does not knowdirectly or will never meet. One could imagine anextended network of relationships where persons Aand B are involved in a dyadic relationship; B, inturn, has a dyadic relationship with C. Thus whileA does not know C directly, under set’ blatnyih orguanxiwang A has an obligation to render a favour toC and vice versa.

The process of mediation of exchanges is closelyrelated to the intensity and dynamics of social tieswithin the particular personal network. To use theabove example, imagine the following situation: A,the receiver in the triad, makes a request to B, thebroker, who is unable to respond; therefore B passesthis request to C, the donor, who responds positively.In this case, C does a favour for both A and B, andboth A and B will feel an obligation to return thefavour to C. An additional consequence would bethat after this exchange, C would not feel inhibitedfrom contacting A directly if s/he needed a favourfrom A or her/his network. In this sense the brokerplays an important role in shortening the distancebetween the donor and the receiver and facilitatingthe process of establishing trust. It is worth notingthat the psychological burden for B is less than thatfor A since B makes a request which is not directlyrelated to her/his own needs (Ledeneva, 1998). Sev-eral of the Russian respondents in our study won-dered about outsiders’ negative attitudes towardsblat, since Russians ‘frequently used blat not to gainpersonally, but to help their friends or acquaint-ances.’ Blat and guanxi are hole-rich networks whichcan have a large number of structurally autonomousactors (Burt, 1992) and which resemble informal con-tracts.

Although blat and guanxi are phenomena anchoredat the individual level, they become an importantasset at the organizational level as personal relationsare dedicated to and used by the organization. Inter-organizational networks, too, are built on personalrelationships, most of which persist for a long time,in many cases extending over a lifetime or beyond,i.e., passed on to successive generations. There is awidespread belief among Russians and Chinese thatto succeed in business in their countries, personalnetworking and social connections with the appro-priate authorities or individuals are often moreimportant than the price and quality of the productor service or the technological expertise offered(Michailova, 2000; Tung and Worm, 2001). Thestronger the network, the more demands can be

Many people in Russia

and China prefer a time-lag

that allows them to be owed a

favour for later use

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imposed. The Chinese refer to this as the ‘hardness’of a guanxi relationship.

Continuity of Personal RelationshipsRussians like to develop close long-term personalrelationships (Wilson and Donaldson, 1996; Yerginand Gustafson, 1994), and this is also true of the Chi-nese (Luo, 2000; Tung and Worm, 2001). The conti-nuity of personal relationships is a prerequisite forthe existence of blat and guanxi. These personal net-works develop the ability to establish and dissemi-nate a system of shared and tacitly understood normsand rules on the one hand and a specific languageon the other, which allow the members of blat andguanxi to act appropriately not only under well-defined conditions but also under dynamicallychanging contingencies. The process of establishingthese norms, rules, and language takes a long time,i.e., continuity of relationships is a precondition forthe existence of blat and guanxi. Only throughcontinuous interactions does it become possible toestablish the conditions for developing commonunderstandings, to define the norms of acceptablebehaviour, to establish trust, confide, and to shareinformation. All these provide the foundation forsocial mechanisms to coordinate and adaptexchanges effectively.

Another aspect of the continuity of the relationshipsin blat and guanxi is associated with the fact that theperson doing the favour doesnot expect an immediatereturn: reciprocation usuallytakes place later or much later.A Chinese respondent notedwith a smile: ‘If I help my Dan-ish boss I know there will be aflower outside my office nextmorning.’ The Chinese respon-dent would actually have pre-ferred her boss to have waited to repay the favouruntil a time when she might really need it. This illus-trates a key difference between favours in the Westand in Russia and China in terms of time orientation:where Northern Europeans desire to clear such issuesas soon as possible, many people in Russia and Chinaprefer a time lag that allows them to be owed a fav-our for later use.

Russians and Chinese invest serious effort and con-siderable time into building personal relationships.These investments only pay off if the relationship canbe sustained over a longer period. Several of our Rus-sian and Chinese respondents expressed frustrationat the fact that foreign expatriates come and go, oftenonly staying in Russia or China for two years or less.This prevents them from engaging in multiple andlong-term projects, which would offer the opport-unity of establishing good personal relationships.Using evidence from the biotechnology sector, astudy concluded that relationship-specific capital,i.e., the knowledge about a particular partner and


how to collaborate with that partner, becomes deeperfor collaborative longer-term arrangementsencompassing multiple projects than for thoseinvolving a single project (Pisano, 1989). Addition-ally, continuous and long-term oriented interactionsallow the transfer and assimilation of tacit knowl-edge, which is usually impossible in short-termexchanges (Jones et al., 1997). In 1998, aquestionnaire-based survey was conducted to studythe problems of initiating and sustaining effectiverelationships with Russian business partners. Thesurvey focused on the experiences of 14 UK organiza-tions (e.g. commercial, academic, and governmental)across a broad range of involvement with Russia.One of the conclusions of the study was that whenRussians enter into a business collaboration, theywant personal relationships. This wish was rankedvery highly, second after ‘wanting one big income’.

Coexistence of Trust and Cooperation and Power andDominationBlat and guanxi are based to a great extent on trust.Studies of networks emphasize the notions of ‘trust’and ‘negotiation’ between network members(Johanson and Mattson, 1991). Some authors suggestthat interpersonal trust has fundamentally twoforms — a cognitive form and an emotional form(McAllister, 1995). The cognitive form results from areliance on a deliberate choice by the trustee regard-

ing whom to trust, to whatextent, and under what con-ditions. This choice is based onwhat we perceive as goodreasons or proof of reliability.In other words, the decision totrust a person very much orig-inates from the decision-mak-er’s knowledge about the per-son s/he considers trusting. In

this perspective, a person’s perception of another’scompetence and integrity is the critical condition fortrust. Emotional trust, on the other hand, is basedon emotional ties between individuals, for instancefriendships. Our fieldwork in Russia and Chinaclearly demonstrates that emotional trust, rather thancognitive trust, is more prevalent in the two coun-tries. Many of our respondents emphasized that theyvalue a friendship much more highly than a contract.It is usually postulated in the literature that a certainlevel of cognitively-based trust is a condition for thedevelopment of friendship-based trust (McAllister,1995). This sequence seems to be reversed in the Rus-sian and Chinese context: friendship-based trust ismore likely to occur first and it may develop eventu-ally into cognitively-based trust. This is probably thecase for most collectivist societies, where some kindof friendship is a precondition for developing busi-ness relations, but it conflicts with the logic of moreindividualistic societies where cognitive trust is thebasis for doing business. One can have a guanxi orblat without friendship, but not vice versa.

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Additionally, both Russia and China have been ruledby the Communist Party for more than 50 years. Dur-ing this period the Party placed itself above the law.As a result, rules and regulations are easily violatedand this results in a propensity for people not tovalue contracts highly. Close personalized relation-ships are naturally reinforced in a context wherepeople cannot be sure that they are protected by thelaw. Cooperative behaviour is both necessary andstrengthened for customized, complex tasks underconditions of uncertainty.

Although blat and guanxi are predominantly basedon cooperation and mutual support, issues such asdomination and power relations are present andshould not be underestimated. They take the formof a disciplinary technology that objectifies, confirms,and reinforces the identities of selected subjects asnetwork members. Exchanges within the network areneither random nor uniform but rather patterned,reflecting a division of labour (Jones et al., 1997). Inevery network there is a power structure where dif-ferent actors have different powers to act and influ-ence the action of others. This power in combinationwith the interest structure of the network affects itsdevelopment (Hagg and Johanson, 1988). The simul-taneous existence of cooperative relationships andcompetitive tendencies leads to constructs such as‘co-opetition’ (Brandenburger and Nalebuff, 1996).Personal network relationships in Russia and Chinaare built into hierarchical social structures. In China,they have been described as similar to the lifelong‘patron – client’ relationships that existed in medievalEurope (Walder, 1986), with the important differencehowever that subordinates have almost unlimitedrights over the superior and that the balance ofadvantage often lies with the weaker partner in thenetwork. Russian society views blat, influence, pull-ing strings, and the ability to take care of friends asimportant status symbols. Additionally, the morerank and power one has, the more blat one nor-mally possesses.

The use of collective sanctions is an important featureof the structural embeddedness of blat and guanxi inthe sense that network parties must know about mis-feasance in order to act jointly to condemn or ostrac-ize perpetrators (Jones et al., 1997). We do not suggestthat the position occupied by a particular person isdecisive in terms of her/his role in a particular net-work. Sometimes it is not the highest officials but thehumblest who are in a position to do the greatest fav-our (Smith, 1976). Our empirical data suggest thatpower within blat and guanxi is perceived to be tran-sitory, mainly due to resource asymmetries. The lat-ter occur because of the differential flow of resourcesamong network members, as well as their varyingability to control such flows. Neither blat nor guanxiare networks that tend to increase homophily, i.e., thetendency to exclude, over time, those players that arevery different. At an individual level, heterophilousties help determine the amount of social capital an


actor can mobilize. Social capital, like human and cul-tural capital, facilitates an individual’s success inmarket exchange. But whereas other forms of capitalare defined as individual traits, social capital reflectsa recognition of the potential advantage of beingembedded in a network of ties (Coleman, 1988).

We argued earlier that blat and guanxi are hole-richnetworks. A network rich in structural holes presentsopportunities for control, in that the focal actor candistort information flows between disconnectedactors and can leverage structural holes to controlinformation opportunistically. Although the majorityof our Chinese and Russian respondents perceivedguanxi/blat relationships to be personal and based ontrust, a number mentioned that the best kind ofguanxi/blat is attained where one has some negativeinformation about the other party. This negativeinformation may be disclosed if the other partybetrays the trust-based relationship. In this way, theother party in the relationship is held hostage to con-tinue the linkage. This may partially explain whyguanxi is sometimes viewed as a basis for illegal, cor-ruptive business transactions. Similarly, it has beenpointed out that in Russia transmitted information isoften deliberately misinterpreted, by both theimmediate and the indirect receivers, with the clearintention of harming the transmitter. Such misinter-pretations might lead to negative consequences forthe transmitter and her/his network. In this case, thereceivers would be rewarded if able to ‘substantiate’the grounds for their intentional misinterpretation(Michailova and Husted, in press).

Blat and Guanxi in the CommandEconomy: Similarities Emphasized

During the decades of a centrally planned economy,blat was an unavoidable necessity rather than a mat-ter of choice. It was, to a great extent, the result ofdealing with the permanent shortage of any kind ofresources and consumer goods, poor quality, andintolerable delays in service, and as such it was anessential lubricant of life. Blat worked where moneydid not (Ledeneva, 1998), and almost any transactioncould work po blatu (through connections) or po znak-omstvu (through acquaintances). Similarly, the Chi-nese spoke of la guanxi (using one’s relationships) insuch situations. The shortcomings in satisfying thevital needs of people in the socialist regime were notaccidental or fugitive. Rather, they were caused bythe law of ‘faster growth of sector I’, which producedthe factors of production. The imposed expansion ofsector I automatically meant permanent under-development and discrimination of sector II, whichproduced consumer goods. Furthermore, one of theleading principles of socialist planning was ‘more ofthe same,’ meaning that as few products as possiblehad to be produced in parallel by different manufac-

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turers and consumers rather than sellers were forcedto compete with one another (Kornai, 1980). In suchan environment, blat became an integral part of thesocialist system, a permanent feature of Sovietsociety. It is important to point out that coping withscarcity is not the sole source of blat-related phenom-ena. It resulted from the particular combination ofshortages and, even if repressed, from consumerismfrom a paradox between an ideology of equality andthe practice of differentiation through the closed dis-tribution system (Ledeneva, 1998). Additionally, blatrelationships under socialism should not be confusedwith or equated to the exchange of goods or barterin the literal sense of the term, since they have nomonetary expression: blat is associated with exchang-ing favours of a special kind, ‘the favours of access’(Ledeneva, 1998).

Social network theorists have pointed out thatorganizations operate as structural constraints onpersonal networks, making it difficult for individualsto manipulate their own exposure to potential, newheterophilous altars, regardless of their dispositiontowards diversity (Popielarz, 1999). Blat under social-ism was a highly efficient mechanism against the pre-vailing anti-individualistic attitudes and norms, andin that sense it represented an intentionally andrationally constructed phenomenon. In the socialistcollectivist-autocratic system there was no place forthe individual and her/his own way of thinking andbehaving (Stojanov, 1992). What mattered was theclass/collective interest — private interest wasentirely ignored. The individual was absent in thetwo dogmas of communist society, dialectical materi-alism and historical materialism: ‘in dialecticalmaterialism the individual has not come into viewand in historical materialism s/he is “overcome” bythe deeper notion of society’ (Puchlikov, 1990). Insuch a context where the notion of the individual wasmeaningless, blat was a powerful instrument toinvolve a number of individuals in a complicated net-work based predominantly, if not solely, on personalfeatures and the exchange of favours. It became anessential part of people’s everyday lives under themotto ‘Tuy-mne, ya-tebe’ (‘You scratch my back andI’ll scratch yours’).

As China was closed to the outside world from 1960to 1980, many important guanxi relations during thatperiod were developed within the Chinese Commu-nist Party based on common experiences during thewar of liberation against the Japanese and later theGuomindang Party which fled to Taiwan in 1949. Thestrength of such guanxi relationships can be seenfrom the fact that Deng Xiaoping was able to ruleChina without any formal party, government, ormilitary position from 1989 until his death in 1997 —and one could argue that he remains a central figurein Chinese politics. Hu Jintao, who took over partyand State leadership in November 2002, was inreality nominated by Deng when, before he passedaway, he described Hu as the most promising mem-


ber of the fourth generation of leaders. In a moreeveryday context, one can take the example of a ruralshop owner who denied using guanxi, as everybodypaid the same price (Kipnis, 1994). However, her cus-tomers proved to be predominantly people from herown work group, and she tried to give better serviceto those she knew. In this way she used her guanxito increase her turnover. In addition, her uncle, a pre-fect, had helped her to obtain the licence to trade, butbeing a member of the family she did not perceivethis transaction as guanxi. The story illustrates notonly the pervasiveness of guanxi in Chinese plannedeconomy, but also that it is a blurred concept, whichat least some regard as negative. Using a familymember to obtain a business licence at that time wasa typical application of guanxi.

Among enterprise managers guanxi and blat wereused to help each other fill the gaps in quotas stipu-lated in the Five-Year Plan for Economic and SocialDevelopment. Structural holes and other deficienciesin the planned economy made networking abilitiesa necessary competence for managers to be able toexercise basic managing functions and fulfil pro-duction targets. Promotion was also to a great extentdependent on blat and guanxi.

Culturally Grounded Differencesbetween Blat and Guanxi

The main culturally bound differences between blatand guanxi are presented in Table 2.

Origin

Guanxi is a rather neutral word in Chinese. The termoriginated from a rural gift economy, in particular inrelation to family affairs such as marriage, funerals,etc. The concept’s original connotations of familyaffairs have made it a positive word closely associa-ted with Chinese family businesses, which operatedin China long before 1949 (Redding, 1990). Chinesesociety has historically not been composed of indi-viduals, but of families. The Chinese word jia meansboth ‘family’ and ‘home’. The family-centred societycreated a social fabric in China that was minimallyintegrated. The other main force shaping guanxi formost of China’s history has been Confucianism,which emphasizes that individuals are social orrelational beings. Social order would be achieved ifeveryone played their role properly in the hier-archical relations. According to Confucianism, anindividual is basically a relational being. Confucian-ism ordered the relationships hierarchically amongfamily members and modelled the state after theextended family. In Chinese society, in contrast toRussia, authority resided in State patrimonialism.Dependence was based on the fostering of per-

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Table 2 Culturally Bound Differences between Blat and Guanxi

Guanxi Blat

Neutral origin of the term Negative origin of the termHelping friends through connections is a moral and social Helping friends through connections is a pleasureobligationLosing face/guanxi is perceived as having drastic negative Losing blat is perceived as a matter of life and deathpersonal consequencesDominating holistic approach Prevailing analytical approach

sonalized relationships for obtaining favours fromthe mandarinate (Redding, 1990). The combination ofa minimally integrated society and a personalizedpower structure created the necessity for developingand maintaining guanxi, which became an increas-ingly sophisticated art and one of the main dynamicsin Chinese society throughout its history. Guanxi isnot simply a key feature of Chinese culture, but themother of all relationships (Bian, 1997).

The word blat was originally a negative term refer-ring to criminal activities, although it was generallyused to mean less serious crimes such as minor theft.The concept was used by criminal gangs, where itforms part of their argot, and blat was mainlyinternalized in these circles in order to give protec-tion against society. In the early years of the SovietUnion’s existence ‘by blat’ meant ‘in an illegal man-ner’. Later on, the meaning of the term startedbecoming more associated with acquainting,obtaining or arranging. Although blat needs to beviewed in the context of pre-revolutionary Russiantraditions of patronage and self-interested giving, itshould also be distinguished from them in its extent:the types of everyday ‘fixing’ encountered in Russiansociety before 1917 became more widespread andsystemic under the shortage economy brought intobeing by the Soviet State’s monopoly over the officialdistribution of goods and services.

Emotions versus Social Obligations

There is a particularistic way of thinking behind bothblat and guanxi. Russia and China are positionedclose to each other on the particularism–universalismdimension: of 46 countries, Russia is third and Chinafifth at the particularistic end of the scale (Hampden-Turner and Trompenaars, 2000). Particularism refersto the claim that a certain event is outside the scopeof any rules and is unique. Particularistic culturesfocus on the exceptionality of present circumstances.Rules are not as important as personal relations; indi-viduals are not managers or representatives ofremote institutions, but friends, brothers, sons, orpersons of unique personal importance with specialclaims on emotional involvement. Members of parti-cularistic societies such as Russia and China have astrong tendency to divide people into two categories:those they know and can trust and those who arestrangers and who could be dangerous. In-group


(network) relationships are very intimate, whereastrust towards strangers is typically very low. How-ever, if fated to work with strangers, particularistsare compelled to attempt to form personalizedrelationships with them. Chinese and Russians feelthey should help their acquaintances both from amoral and a social point of view. One loses face inChina if one does not live up to one’s obligationstowards family, friends, and friends of friends. Andone is viewed as untrustworthy in Russia if one ref-uses to return a favour and does not follow the recip-rocity rule. However, there is an important differ-ence: while helping friends through connectionscomes as a pleasure to many Russians (Wilson andDonaldson, 1996), Chinese see helping friends as amoral and social obligation.

Chinese tend to conceal their feelings in order to fulfiltheir appropriate role in organizations according tosocietal norms, and therefore appear inscrutable. Incontrast, Russians have a higher propensity toexpress emotions, as it is more acceptable to showpersonal feelings in a more individualistic society,where one is mainly responsible towards oneself.Although perceived as immoral, Russians wish tohelp as interpersonal trust is higher in Russia thanChina. The Chinese think in terms of social obli-gations and how they can be won or lost withoutdestroying harmony among acquaintances or poten-tial acquaintances. As a result of the strong collectiv-ism among Chinese, they tend have an external locusof control, which means that harmony is particularlyimportant for Chinese people in their relation topeople they know, while it is of much less impor-tance in relation to strangers.

Different Degree of Negative Consequences ofLosing Guanxi/Blat

The position of guanxi cannot be understood withoutrecognizing that the Chinese have always been verysensitive to face and renqing (human obligations).These three concepts are intertwined: in an informalguanxi network one has to honour one’s obligationsto avoid losing face, which is something the Chineseare most afraid of as it means a loss of prestige forthe interdependent self. In that sense guanxi and facereinforce one another. People with many personalconnections have more face or prestige, which in turnmakes it easier for them to establish more guanxi. The

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fact that there are more ‘face’ and social obligationsinvolved in guanxi than in blat means that breakinga guanxi bond has more radical implications for aChinese person in terms of social and personal conse-quences than for a Russian who for whatever reasonloses part of her/his blat connections.

Holistic versus Analytical Epistemology

Chinese people tend to think more holistically andsynthesize, whereas Russians tend to be more ana-lytical. The holistic approach of the Chinese meansthat they are highly concerned with relationshipsamong actors and events (Nisbett et al., 2001). Insteadof seeing events and actors as isolated or inde-pendent, Chinese tend to contextualize these eventsand actors into specific settings. In order to do thatthey have to know the people they are relating tocomparatively well, which means that members inguanxiwang know more about each other than Russi-ans in set’ blatnyih. The holistic approach increasesthe propensity to engage in broad networking,whereas a more analytical epistemology increases thepropensity to build dyadic relationships.

Blat and Guanxi in the Market ReformEra: Differences Emphasized

Personal networks in Russia and China could beviewed as a remnant of central planning. We argue,however, that they are more than that. Previousexperiences and legacies are often regarded as bar-riers in the transformation process. However, theyare often underestimated as relevant sources for thefuture. First of all, in a weak institutional system andnonexistent or poorly functioning societal frame-works and mechanisms, as in Russia and China fromthe beginning of the 1990s, personal networking is ahighly significant resource. In a climate characterizedby high uncertainty, having access to reliable infor-mation and other resources becomes vitallyimportant. Where the political authority has been oris personal, arbitrary, unchecked, and intrusive, onecan naturally find security in close personal ties. Sec-ondly, as discussed earlier, blat and guanxi undersocialism were compensatory mechanisms for thebasic fundamentals of socialism — an economy ofshortages and strong anti-individualism. In fact, theycontributed to the development of market activitiesalready during the socialist period and have been,and continue to be, an important source ofentrepreneurship. If blat and guanxi were simply alegacy of central planning, one could expect thatwhen the economy is no longer centrally plannedand shortages are essentially a thing of the past, therewould be no need for blat and guanxi. Although thereis a generational difference in the use of the term blat,this does not mean that the phenomenon has disap-peared: it is a way of investigating the resources,


limitations, and consequences of the post-Sovietreformation.

Post-socialist development is marked by a highdegree of uncertainty and ambiguity. The nature ofblat transactions is associated precisely with reducingthis degree of uncertainty: it is initiated by definiteintentions and is rationally controlled. A number ofauthors have explored the rational design of net-works and accounted for their development in termsof uncertainty reduction and/or environmental stabi-lization (Hagg and Johanson, 1988) — and the core ofblat and guanxi does consist of networks. A possibleexplanation for the increasing importance of blat andguanxi in the post-command economy relating to per-forming managerial tasks and obligations is that net-working increases flexibility. In an environment thatcontinuously introduces an enormous range of con-tingencies, it becomes vital to be able to respond to(often suddenly and unpredictably) changingenvironmental and internal conditions. Networkingis the most efficient way of providing the possibilityto respond by gathering and disseminating infor-mation and reallocating different types of resourcesin a relatively fast and cheap manner.

On the more negative side, this kind of networkingcan create new forms of dependency and abuses ofpolitical and economic power, increasing corruptionand undermining the development of an open mar-ket economy (Edwards and Lawrence, 2000). In theirquestionnaire-based study from 1997 of managers inVolgograd, researchers identified an extensive net-work of former Communist Party functionaries whowere now active in enterprise management and pub-lic administration (Edwards and Lawrence, 2000). Itwas not clear whether or what links they had withthe current Communist Party. However, theyappeared to form a local elite encompassing the econ-omic and political spheres.

Over the last decade both Chinese and Russiansociety have been commercialized and marketized.At present, every commodity, including houses, cars,and resident permits for the major metropolises, canbe bought for money. Power is also something thatis traded on the market, i.e., it too can be bought formoney (He, 1998). Many members of the CommunistParty nomenklatura or their spouses also hold pos-itions in commercial entities. With money being thekey issue to success rather than power and a marketeconomy in development one would anticipate thatblat and guanxi would be fading. However, this doesnot seem to be the case, at least not yet. In the caseof China, this is probably partly due to the influenceof Confucianism on Chinese societies, where peopleare socialized to think in terms of personal relations,for example information resides in networks, andpartly because imperfect markets are still predomi-nant in China. Nor has blat been abolished by thetransition period in Russia. Although legal pro-cedures have been established, informal contactshave not lost their significance: they give access to

China is still a pre-modern

society, where nothing

significant can happen

without guanxi

PERSONAL NETWORKING

information and guarantee its reliability. Today, blatis especially necessary in relation to tax authorities,customs offices, the banking sector, and regionaladministration, in other words, the spheres that con-stitute the face of shortage at present. Gaining accessto good schools and universities or to high qualitymedical services, for example, is a matter of activat-ing personal networks. Blat and guanxi have becomeexplicitly related to economic interests and the con-duct of business, whereas in the socialist period itwas mainly associated with political considerationsand private consumption. We have observed a shiftof the spheres where blat is needed and used, a shiftfrom physical resources and assets to informationflows and services.

We stated earlier that there are a number ofimportant similarities between blat and guanxi. Dur-ing the 1990s, however, with the introduction of amarket-oriented economy, one can observe someimportant emerging differences. Whereas blat is anincreasingly negative concept in Russia, especiallyamong the well-educated young, guanxi remains apositive notion that connectspeople in a society based onlow social trust. In Chinaguanxi is returning to its pre-socialist content as a legitimateway of relating interpersonallyin a collectivist society, wherethere are clear boundariesbetween people that are mem-bers of an in-group and others.Our Chinese respondents consistently maintainedthat guanxi has been increasingly exercised over thelast twenty years. A similar trend can be seen amongoverseas Chinese for whom extensive networking isa core business competence. The difference betweenRussia and China can be explained by differentdegrees of collectivism in the two societies, althoughboth Russia and China are very family-oriented.China has a stronger collectivist legacy than Russia andRussia is culturally closer to European individualism.

Blat is losing its warm, human face and becomingincreasingly ‘materialized’, dominated by pragma-tism and market-governed. The transformation of itsnature from being based on moral and ethical con-siderations to having an explicit financial expressionis a phenomenon in itself. Blat is becoming a negativeword again with criminal undertones. China is stilla pre-modern society, where nothing significant canhappen without guanxi. Guanxi interaction betweenthe government and enterprises is seen as facilitatingthe dynamism of market transaction in China.Characteristic of the Chinese hybrid transition systemis the way in which personal connections reduce theinherent uncertainties involved in interorganizationalrelationships and eventually generate multiple bilat-eral dependence between individuals (Boisot andChild, 1999). The distinctive character of the Chinesemarket system, often referred to as network capi-


talism, is manifested through a system of networkedtransactions that are based on long-standing personalconnections (Boisot and Child, 1999). Guanxi has evenbecome more widespread after socialism, and hasbeen further strengthened after China joined theWTO in 2001. As a respondent noted, ‘the WTO havecreated more competition between local and centralgovernment, which has made guanxi even moreimportant for foreign business recently’. It appearsthat competition makes access to decision-makerseven more vital during the current period of China’sadjustment to WTO regulations.

Managerial Implications

Although knowledge of networks has expanded sig-nificantly over the last few years, the analysis of net-works as a distinct empirical phenomenon remainsembryonic. In this paper, we provide contributions tothe understanding of personal networks in particularhistorical, social, cultural, and economic contextsusing the examples of blat and guanxi in Russia and

China. Most of the literature onnetworks and networking hasbeen developed in a Westerncontext, where the focus hasbeen mainly on outcome and toa lesser extent on the architec-ture of the networks. Althoughthere is a vast amount of litera-ture on relationships and net-works in both Western and

Eastern societies, there have been few attempts tocompare and contextualize networks in specificsocieties and thereby create a framework for makingeffective use of networking in different societies.Despite the currency of the slogan ‘think globally, actlocally’ over the past decade, the focus seems often tohave been on the former to the exclusion of the latter.

Blat and guanxi are highly elaborated practicescharacterized by very complex and multifaceteddimensions. Often blat and guanxi transactionsinvolve many steps and a number of factors. The fail-ure to recognize that they are patterns of mentalityand behaviour, and as such are culturally grounded,may lead to unanticipated outcomes. There are alsoimportant lessons to be learned regarding theapproach of Western owners, managers, and expatri-ates with assignments in Russia and China. A num-ber face difficulties in the conduct of their day-to-dayoperations, in many cases due to not being able tounderstand and deal with the complexities and intri-cacies of blat and guanxi. Although Westerners tendto develop their own social networks, this is not suf-ficient to meet the challenges posed by the art of deal-ing with blat and guanxi.

After a market economy with all its market imperfec-tions was introduced in Russia and China, networksbecame more affiliated to conducting business. Theimportance of blat and guanxi during the reform per-

PERSONAL NETWORKING

iod does not seem to have waned, rather blat hasbecome more materialized and pragmatic and lessemotional and human. It has been perceived increas-ingly negatively, particularly among young people,and it has even been associated with bandit capi-talism. In contrast, guanxi remains a positive notionand is even more important now than under social-ism. One explanation of this difference is that Russiais a more individualistic and industrially developedcountry than China. It should be stated, however, thatboth Russia and China are currently undergoing enor-mous changes and it would be premature to predictwhat the outcome will be for the development of per-sonalized networks. Blat and guanxi are forms of socialcapital that can work with or without markets.

To ensure financial success, Western business peoplemust be familiar with and sometimes play the gameof blat and guanxi. This can be done by incorporatingelements of blat and guanxi in Western business stra-tegies in Russia and China. In particular, it seemsfrom our data that relationships with official auth-orities often require blat or guanxi. However, in RussiaMNCs should be somewhat cautious about using blat,as it has become more materialized and can be per-ceived as a way of corrupting or indicating that atti-tudes have not changed since socialism, though theconcept of corruption is defined and perceived differ-ently in different cultures. Western business peopleshould be aware of the increasingly negative conno-tation of blat in particular in relation to privateentrepreneurs. If they choose to engage in blat activi-ties, it is preferable to keep these activities at a dyadiclevel and limit their blat connections to officials theyknow well. The character of criminal activities meansthat Western business people should in many instancesavoid becoming entangled in blat activities, althoughblat should not be equated with bribery. In the Stateapparatus and certain more traditional sectors of thebusiness community blat is still viewed differently andmore human than bribery and corruption. Westernbusiness people should also be aware of the impor-tance of blat to Russian employees and managers, andthey should not try to destroy existing relationships,as their destruction will often be counterproductive.Expatriates should not try to enter blat relations them-selves, but be supportive of existing blat relations.

In China, establishing trust-based networks(guanxiwang) in the correct way will be seen as adap-tation to cultural behavioural norms. It is importantto be aware of the long-term orientation of guanxi asit can be regarded as a tactical misuse of knowledgeof Chinese culture, which the proud and nationalisticChinese will react strongly against. When Westerncompanies engage in guanxi building and mainte-nance, it is important to be aware of the broad net-working characteristics with mutual obligations andface work at stake including social pressure for har-mony — there is no free lunch in China either. Legalguanxi will typically not be dyadic, but will refer toa whole set of dyadic relations or networks. The net-work analysis can be made at company level in order


to gain an overview of the networks they are orshould be involved in (Tsang, 1998). Dyadic guanxishould be reduced to a minimum among WesternMNCs in China, as they will often entice illegal prac-tices. At the same time, there is an economics ofguanxi meaning that there is a strong anticipation ofreciprocity. Guanxi cannot be used merely to benefitWestern business ventures without contributingsomething to the Chinese side, often in terms of per-sonal benefits.

As guanxi means simply ‘relationships’, Westernbusiness people can enter guanxi connections withChinese people and their networks, but if the West-ern and Chinese individuals do not know each otherat all an intermediary will be preferable as it takes agreat deal of time to establish trust-basedrelationships with strangers. Having an intermedi-ary, preferably of Chinese origin, who assumes moralresponsibility for introducing the two parties, willensure that trust can be established relatively quickly.

Appendix: Methodology

The sample consists of 29 in-depth interviews con-ducted in Russia and 25 interviews conducted inChina. All the interviews were conducted in manu-facturing companies operating in a diverse range ofindustries, including chemicals, pharmaceuticals,electronics, consumer goods, energy production, tex-tile and machine building.

The interviews in the Russian sample were conduc-ted in the period 1996–2001 in six companies withNorth European participation and in 21 purely Rus-sian companies. The interviews in the Chinese sam-ple took place in 40 companies with North Europeaninvestments and 15 purely Chinese companies in1997 and 2001 respectively.

Each interview took between one hour and two anda half hours depending on how much time therespondent allowed us. Although time consuming, itwas considered best to elicit this information in thecontext of face-to-face interviews given the sensitivenature of the data being sought. The interview formatallowed ample opportunity for the participants toelaborate on their response. All interviews wereaudio taped and transcribed verbatim.

We focused on respondents with similar background.The Western respondents were all younger, highlyeducated Northern European expatriates living incentral metropolises in the two countries. The localRussian and Chinese respondents were living in thesame cities and also well-educated but probablysomewhat more internationally minded than theaverage Russian or Chinese. As our purpose in thispaper is to look at the specificities of personalizednetworks in the business context in the two societiesthe data are comparable, despite the minor deviancesmentioned above.

PERSONAL NETWORKING

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