Guanxi-Based Strategy and Competitive Advantage: An Exploratory Study

Abstract

The influence of guanxi on business performance in Chinese market attracts increasing attentions from the literature. Many empirical evidences proved that guanxi as important business implementation deliver unique impacts to achieve successful business conducts. However, the strategic positioning of guanxi as an impetus to generate competitive advantage is lack of theoretical study from the existing literature field. Moreover, the theoretical boundaries and background for guanxi-based business competence are at an explorative stage. Due to the research situation in this area, the author is motivated to conduct this empirical study with the purpose of theory building in order to portrait a theoretical outlook for guanxi-based competence and its related strategy forms. This study adopts grounded theory approach as a methodological foundation to investigate the real social process of guanxi-based business strategic implementations in Chinese market. Followed with the procedure of grounded theory, the research objectives were gradually achieved to complete the identified general research direction which is focused on exploring the strategic positioning of 'guanxi-based competitive advantage'. Firstly, this study explored the fact that guanxi is interdependent with firm's core competence development. The supporting role of guanxi in business strategic implementations can be identified as a source of generating 'quasi-competitive advantage' which assists the firm to enhance its market-based core competence. Secondly, guanxi is critically in a position of generating indirect impetus on improving firm's business performance due to three major business realities, namely 'cultural embeddedness', 'business necessity' and 'institutional influence'. Thus, guanxi-based business strategic paradigm is as important as market-based strategic paradigm in Chinese market. The author propose that the functionality of guanxi-based business strategy should be clearly defined as exploiting guanxi advantage to cope with the development of firm's market-based competitive advantage. Thirdly, the interdependent nature of guanxi and core competence is summarised into an evolving process of firm's 'co-development of guanxi-based and market-based competence'. In a word, the firm enhances its controlling power on guanxi management from 'reliant guanxi' to 'dominant guanxi' along with the development of its market-based competence and market bargaining power. The new developed insight of 'quasi-competitive advantage' is originated from this grounded theory study. This theoretical outcome provides a breakthrough perspective for other researchers to extend the understanding of guanxi in business phenomena. Further development of academic and business knowledge on this theory may also contribute to the relevant studies on investigating strategic management issues in a transitional economic market.

Date of Award	1 Aug 2011
Original language	English
Awarding Institution	The University of Manchester
Supervisor	Hong Liu (Supervisor) & En-Chi Chang (Supervisor)