Wednesday, June 19, 2013

Guanxi or关系: one word, many interpretations - Global Business Hub -

Guanxi or关系: one word, many interpretations - Global Business Hub -

 While there is no shortage of U.S. companies building successful business relationships in China, the dynamic and roadmap to do so continue to evolve. Roy Y.J. Chua, assistant professor of business administration at Harvard Business School, discusses the role of trust in building intercultural business relationships, specifically two types of trust: cognitive trust and affective trust. Chua’s recent contribution to MIT Sloan Management Review, “Building Effective Business Relationships in China,” provides depth and detail on his theories and observations. The following is based on a conversation with Chua about this article, and recommendations for Western businesses developing Chinese relationships.

Chinese companies have become more Western in their approach to business, but that doesn’t mean long-standing cultural expectations have disappeared. Western executives heavily study the concept of guanxi but the concept often proves to be one that education, books and articles cannot truly capture. Guanxi, according to Wikipedia, “describes the basic dynamic in personalized networks of influence, and is a central idea in Chinese society.” This deeply embedded cultural facet informs both business and personal relationships in China.

The Boston business community may loosely interpret guanxi as networking – something Bostonians are quite good at – but it goes much deeper, encompassing a system of personal connections, expectations of action relative to those connections, and trust within the network. However, while Chinese businesses still practice guanxi deeply, including in their relationships with Western businesses, it is no longer the primary driver of a successful business relationship. Chua describes the Chinese business environment as one that now relies upon “trust from the head and from the heart.” While guanxi and networking share many similarities, there are systematic differences across cultures, especially in the way interpersonal trust is built.
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