Scientific study on Guanxi in Business

To guanxi or not to guanxi, what actually ís the question? Stephanie Lie asked a dozen of questions to dozens of recipients a few months ago, in order to find the right definition, meaning and application of guanxi in Chinese business life. The questionnaire covered several topics, ranging from ‘explain in your own words what guanxi means to you or what your interpretation of guanxi is’, to ‘how many clients does your business attract via gaunxi?’

The results of Stephanie’s guanxi research are in and we would like to share them with you.

When asked for the definition, 60,5% interpret and define guanxi as a network, 23,2% as having meaningful relationships or connections. The remaining 16,3% varied in their personal definition of guanxi, of which some examples are bringing people into contact, impossible to do business in China without it, and guanxi has been defined as an effect for establishing mutual beneficial business relationships.

Definition of Guanxi
Definition Guanxi

When you look at the purpose and the frequency of the usage of guanxi, the answers among the interviewees are quite diverse.

Purpose of Guanxi
Purpose Guanxi

Usage Frequency of Guanxi
Frequency Guanxi

In other words guanxi is used as a source of knowledge and expertise, for finding business partners and suppliers. Other reasons for using guanxi are to get better relationships in order to create new business and generate new clients. Through referrals, opportunities arise to develop and support the usual business. Guanxi is also used to cooperate, to stay informed and to keep existing clients. Consulting firms also use guanxi to help, make business deals, explore the potential buyer’s network and as a marketing tool.

Guanxi Statements
In the questionnaire, 10 statements about guanxi were included and its relation to the client’s base, company size and return on sales.

I: Guanxi is useful in order to maintain a stable client base
According to the results, 21.4% of the respondents completely agree with this statement and 42.9% agrees. 31% neither agreed nor disagreed and 4.8% disagreed.

II: Guanxi is useful in order to maintain a competitive advantage
16.7% of the respondent completely agrees that guanxi is useful to maintain a competitive advantage, 40.5% also agrees. However 35.7% neither agrees nor disagrees and 7.1% disagrees.

III: Guanxi is useful in order to deal with challenges within the consulting industry
40.5% of the respondents agree that guanxi is useful for dealing with challenges in the industry, and 16.7% completely agrees. 28.6% does not agree and neither agrees on this statement and 14.3% does not agree with the statement

IV: When making use of guanxi, a company is able to attract more clients
Concerning the 4th statement, 52.4% agreed that through guanxi a company can attract more clients, and 26.2% completely agreed which sums up to 78.6% (more than ¾ of the total respondents). 16.7% of the respondents have indicated neither to agree or disagree and 4.8% did not agree with the statement above.

V: When making use of guanxi, a company can realize business on a broader scale
81% of the respondents agreed on the 5th statement, of which 38.1% completely agreed. As with the statement before 4.8% did not agree and 14.3% neither agreed nor disagreed.

VI: Guanxi has little influence on a company’s return on sales
Concerning the 6th statement which was negatively formulated, 14.3% completely agreed on the fact that Guanxi does not influence a company’s ROS and 38.1 also agreed. 28.6% neither disagreed nor agreed and 19% disagreed.

VII: Guanxi has little influence on a company’s size
As the statement before, statement 7 was also formulated negatively and resulted in the following; the greater part of the respondents which is 40.5% neither agreed nor disagreed, 21.4% agreed that guanxi does not influence a company’s size and 9.5% completely agreed. 23.8% disagreed meaning that guanxi does influence the company’s size and 4.8% completely disagreed.

VIII: The larger the company size, the greater the use of guanxi
Concerning statement 8, about 45.2% disagreed that the bigger the company the more guanxi is used. To be more detailed, 38.1% disagreed and 7.1% completely disagreed. 42.9% neither agreed nor disagreed and only 11.9% clearly agreed that the use of guanxi increases with the increasing size of a company.

Stephanie is currently processing the gathered information, so we will let you know anytime soon what guanxi in business boils down to. Without wanting to jump to conclusions, for now it seems fair to say it is ‘do or die’ as far as guanxi is concerned. Would you agree?

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