GUANXI AND WORD-OF-MOUTH
Desmond Lam and Xiaoli Lin
University of Western Australia
Track: Marketing in International and Cross-Cultural Environments
Abstract
Word-of-mouth is an effective tool for marketing. Nevertheless, few companies have tried to
harness its full potential. Among all factors, cultural values can influence the word-of-mouth
behavior. Past research has found that cultural value specific to the Chinese, such as guanxi,
tend to encourage information exchanges. An empirical study was conducted on two ethnic
groups, namely Chinese and White Caucasian. Interestingly, this exploratory study found that
the Chinese group reportedly engaged in more word-of-mouth than the White Caucasian
group. This difference was associated to the Chinese group’s cultural focus on guanxi.
Introduction
The Chinese has known to have a deeply-rooted Confucian culture based on complex guanxi
connections. This distinctive culture has been found not only among Chinese in China but
also among the Overseas Chinese (Weidenbaum & Hughes 1996). The latter represents the
groups of Chinese immigrants residing outside China such as in ASEAN, who form the socalled “Overseas Chinese Network” or “Bamboo Network” (Yeung & Soh 2000; Anonymous
2000; Hutchings 2002; Tanzer 1994). The Chinese’s guanxi may have a significant impact on
how Chinese engage in information exchanges or word-of-mouth activities. Past research has
shown that information exchange between consumers, or often called consumer word-ofmouth, is a powerful force in the marketplace. One may engage in word-of-mouth activities
for a number of intrinsic reasons such as for reasons of altruism and to project social power
(Sundram, Mitra & Webster 1998). Word-of-mouth is also influenced by a number of
extraneous factors such as personality and physical infrastructure (Buttle 1998). The influence
of culture is to be one of the most important factors, particularly in the context of international
marketing. This exploratory study will demonstrate that the Confucian cultural element of
guanxi can have a significant influence on the Chinese’s word-of-mouth behavior.
Literature Review
The word guanxi originates from the Chinese culture. Guanxi can be translated into “personal
network”, “connections” or “special relationship” (Leung et al. 1996, pp.749). In a typical
Chinese context, guanxi goes much further than connections. It is produced, maintained and
applied in every aspect of the daily life of a Chinese. In a business context, guanxi refers to a
Chinese system of doing business on the basis of personal relationship, which is
representative of the way that business is done throughout much of the non-western world
(Lovett et al. 1999, pp.231).
The concept of guanxi and its importance to the Chinese have been researched extensively by
authors such as Yang (1986), Brunner and Koh (1988), Brunner et al. (1989), Wong and
Leung (1992), Ambler (1995), Luo (1997) and Wong (1998). Guanxi has been argued to be
premised on Confucian principles and teaching that referent social organizations and
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relationships (Hutchings & Murray 2002). The teachings of Confucius comprised four key
principles: the hierarchical relationship among people, the family as a basic unit, Jen and the
emphasis on education (Hofstede & Bond 1988). These principles have direct or indirect
influences on the Chinese’s guanxi, especially the concept of hierarchical relationship.
According to Confucianism, an individual is a social or relational being. Social order and
stability depend on properly differentiated role relationship between particular individuals
(Luo 2000, pp.7). There are five basic relationships called “Wu-Lun”, or the Five Codes of
Ethics: ruler-subject, father-son, husband-wife, older brother-younger brother and between
friends. The five relationships are the basis of all Chinese social networks. In fact, the word
“Lun” was used in Confucian ideology to refer to a concept similar to guanxi (Luo 2000,
pp.7). Because of the influence of “Wu-Lun”, the Chinese become used to judging their
position in a certain circumstance and then taking corresponding responsibilities of their
actions. They often view themselves as interdependent with the surrounding social context.
The self in relation to other becomes the focus of individual experience (Luo 2000).
Maintaining face and reciprocity are two fundamental concepts that are closely associated to
the Chinese culture and guanxi. Face management involves keeping and enhancing one’s
dignity, self-respect, and prestige (Schuster & Kavencansky 1999). While the concept of face
has been shown to be universal, it varied by the degree and quality across different cultures.
For the Chinese, face saving is an extremely important concept - relating to the principles of
Confucianism.
As guanxi is such an important issue when doing business with the Chinese, several authors
such as Leung (1995) and Wong (1995) have tried to explore guanxi by looking at its building
process. Leung, Wong and Tam (1995), in a G-A-I-O model, explained that eight stages are
involved in the guanxi building process. The eight stages starts from “Availability”, where the
beginning of guanxi starts, to “Adaptation”, where a very good guanxi is confirmed. Several
key variables are also found to affect the adaptation of guanxi such as information exchange
and mutual expectation (Leung, Wong & Tam, 1995). The exchange of information, in
particular, will be the central issue for this exploratory study. As information sharing is a key
variable in guanxi, one may assume that people who are adapted more to guanxi may tend to
share more information, or use more word-of-mouth.
Interestingly, the interpersonal exchange of information or word-of-mouth communication
has been shown to influence a variety of conditions: awareness, expectations, perceptions,
attitudes, behavioral intentions and behaviors (Reingen 1987). Arndt (1967), one of the
earliest marketing researchers on word-of-mouth’s influence on consumers, viewed word-ofmouth as an oral, person-to-person communication between a receiver and a communicator
whom the receiver perceives as non-commercial, regarding a brand, product or service. It is a
group phenomenon – an exchange of ideas among two or more individuals (Bone 1992).
The potential value of word-of-mouth arises as a consequence of its impact on actual and
potential buyers (Ennew, Banerjee & Li 2000). Because consumers generally cannot process
all of the information that is available for purchase decisions, they often engage in word-ofmouth for the purpose of reducing the amount of information that must be processed to make
a decision (Duhan, Johnson, Wilcox & Harrell 1997). Gatignon and Robertson (1986) cited
that consumers engaged in word-of-mouth giving to support and justified their decisions, and
to project social status and power. In addition, consumers engaged in word-of-mouth seeking
for informational value, to relief their decision anxiety and to seek conformity with their ingroups.
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Research Hypothesis
The Confucian influence on both mainland and overseas Chinese, leading to guanxi, facesaving and reciprocity, would possibly lead to greater information exchange or word-ofmouth among the Chinese compared to the Westerners. For example, the strong hierarchical
relationship among Chinese and the emphasis on other in the light of self will motivate wordof-mouth giving and seeking through the projection of social power and seeking conformity
respectively. Hence, this study attempts to test the following hypothesis: Chinese will engage
in more word-of-mouth than the White Caucasians.
Research Methodology
Sample
The dataset used was obtained from an earlier study on word-of-mouth communication. Some
of the items used in that study are highly relevant to this current topic. The data was originally
collected from a group of 122 business students through a self-administrated survey. The
participants were first-year business undergraduates at a university in Perth.
Eleven items were considered useful to this study. The word-of-mouth construct was
operationalized using four items, measured on a five-point likert scale. Two of the items were
adopted from Feick & Price (1987). Six other items were demographic questions on age,
nationality, birthplace, race, primary language and gender. Finally, the last item was a
question asking the participants to classify (culturally) themselves into either Easterner or
Westerner.
These participants were grouped based upon their reported race into Chinese (51) and White
Caucasian (71). To improve the classification, six Australians who reported Chinese as their
race were removed from the Chinese sample; participants from Asia represented the rest of
the Chinese group (45). All participants within the Chinese group had classified/identified
themselves as Easterners. Among the Chinese group, there were 29 Singaporeans, 10
Malaysians, four Indonesians, and two mainland Chinese. Among the White group, 65 were
Australians; the others were US Americans (2), British (2), Canadian (1), and Zimbabwean
(1). The ages of the participants ranged from 18 to 30 years old; the median ages for the
White Caucasians and the Chinese were 19 years old and 21 years old respectively. Around
69% of the Chinese group was female, compared to 42% of the White Caucasian group.
Data Treatment and Analysis
Initial tests on the data found significant differences in age (t=-5.397, df=114, p<0.001) and
gender (X2=7.452, df=1, p<0.01) between the two groups. As such, further statistical tests
would control for these two variables (covariates).
A factor analysis, using principal components extraction and varimax rotation, was performed
on the four items that were used to measure the word-of-mouth and successfully yielded a
single factor when tested on both the White Caucasian and Chinese groups (Brishlin et al.
1973; Matsumoto 1994). In addition, a reliability test on the items revealed a Cronbach’s
Alpha coefficient of 0.61. Nunnally (1967) has suggested that reliabilities in the range of 0.5
Marketing in International and Cross-Cultural Environments Track
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to 0.6 are satisfactory in the early stages of research. The coefficient was, hence, deemed
sufficient given the exploratory nature of this study. The variances were then calculated for
each of the items and then compared between the two groups. No significant difference was
detected (p>0.05) and the equivalence of scale was deemed satisfactory (Matsumoto 1994).
By averaging the four items, an overall word-of-mouth index was created. Lastly, using a
median split, the participants were separated into two categories: low and high word-of-mouth
users.
Results
A multi-nominal logit model was employed to compare the composition of word-of-mouth
users between the Chinese group and the White Caucasian group. It was found that there was
significantly (X2 = 14.046, df = 1, p<0.001) more heavy word-of-mouth users among the
Chinese group (62.2%) as compared to the White Caucasian group (27.1%). Most of the
White Caucasians (72.9%) were, reportedly, light word-of-mouth users compared to 37.8% of
the Chinese. Figure 1 shows the results of a comparison between the mean word-of-mouth
index of the White Caucasian and the Chinese groups using an ANCOVA by controlling for
age and gender. On the whole, the mean word-of-mouth index of the Chinese group
(Mean=4.01) is significantly higher (F=11.68, df=1, p<0.001) than that of the White
Caucasian group (Mean=3.58). The Chinese group reportedly engaged in more word-ofmouth than the White Caucasian group.
Mean Word-of-Mouth Index
4.2
4.01
4
3.8
3.6
3.58
3.4
3.2
White Caucasian
Chinese
Figure 1: Comparison of Word-of-Mouth between White Caucasian and Chinese Groups
Discussion And Implications
The result showed that there were significantly more heavy word-of-mouth users in the
Chinese group compared to the White Caucasian group. The mean word-of-mouth index was
significantly higher for the Chinese group compared to the White Caucasian group; the
Chinese group reportedly engaged in significantly more word-of-mouth than the White
Caucasian group. The hypothesis is, thus, supported.
The results of this exploratory study offer businesses greater insight into using word-of-mouth
as a potential tool for marketing, especially to the Chinese communities in China and across
the overseas Bamboo Network. It has certainly enhanced our existing knowledge on Chinese
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consumer behavior. Naturally, some cultures may be more receptive to information sharing
among its members compared to others. For companies operating in these cultures such as the
Confucian culture, word-of-mouth marketing may become a highly viable tool for a
successful marketing program.
Limitation And Future Research
Two major limitations of this study were (1) the use of student sample for generalization, and
(2) the use of race, along with nationality, as the only basis for classification. Moreover, this
study did not investigate the structure of the reported word-of-mouth. For example, the higher
level of reported word-of-mouth behavior found in the Chinese group might have been
attributed to activities within in-groups instead of out-groups. Future research will attempt to
fill these gaps in our understanding. Another key area of future research is to examine the
differences in negative versus positive word-of-mouth across these cultures.
Conclusion
Cultural values may significantly influence one’s word-of-mouth behavior. In this exploratory
study, the Chinese group reportedly engaged in more word-of-mouth than the White
Caucasian group. The higher level of word-of-mouth communication in the Chinese group is
believed to be associated to their Confucian cultural influence that promotes guanxi, facesaving and reciprocity. Future research will attempt to differentiate such behavior between ingroup and out-group. One of the key challenges of international marketing is the ability to
recognize cultural traits as being unique and to adapt strategies to the local culture. Failure to
do so often results in embarrassing, not to mention potentially expensive, blunder.
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