guanxi: understanding social
capital in the China market
2013
Guillermo Wechsler. 2013. This work is licensed under the Creative Commons
Attribution-ShareAlike 3.0 Unported License.
1
introduction
• This document presents a framework for the senior team to begin
conversations about what it is guanxi, how to think about it, and how to
integrate it in specific strategies to grow the business.
• The document does not try to lay out a path for that strategy.
Guillermo Wechsler. 2013. This work is licensed under the Creative Commons
Attribution-ShareAlike 3.0 Unported License.
2
social capital
• In a broad sense, economic literature distinguishes social capital as a form
of trust that lowers uncertainty in a broad range of social relationships.
• Trust is a complex assessment that encompasses multiple dimensions such
as: consistency, accountability, reliability, loyalty, respect or conviction.
• Every culture has its own norms, practices and styles to engage in this
critical aspect of collaboration in business.
• Every culture encompasses (or not) different spheres of human agency such as business, private, government and commons - in their own terms.
• China’s contemporary style of developing social capital in business
networks is distinguished as guanxi.
Guillermo Wechsler. 2013. This work is licensed under the Creative Commons
Attribution-ShareAlike 3.0 Unported License.
3
guanxi: tacit principles
•
•
•
•
•
•
•
Guanxi is just relationship, bond, mutual care in the Chinese way.
Guanxi is intended to benefit all the participants of a particular network of relationships. Using
the network of business relationships for exclusive private benefit - at the expenses of all others - is
called corruption.
Guanxi demands a careful and balanced listening of all the participants in the network,
encompassing a wide range of individuals or collective role identities and their concerns.
Guanxi is not appreciated by its participants under the narrow lens of a specific transaction but in
the long horizon of a relationship inscribed in a vast and pluralistic network. This horizon will vary
for each individual and it will vary along the process of shaping the relationship.
To cultivate guanxi demands a concern for reciprocity. It may require taking cost in the short term
just for the sake of maintaining the relationship, it may demand that you make yourself available
when the other is experiencing breakdowns or difficulties, or it may ask for sensitivity so as to
recognize when a situation calls for the offering of a gift.
Guanxi is a tradition that empowers the citizen to make political decisions for the benefit (or
detriment) of the commons; however, it will also expose them to the later verdict of the
hierarchy on their deeds.
Guanxi is alive. In very simplistic terms, today it is being transformed by the cultural tension
between an orientation toward communitarian concerns and an orientation toward individual’s
concerns; by experiencing future as a passive agency or experiencing the future as coming from an
active agency.
Guillermo Wechsler. 2013. This work is licensed under the Creative Commons
Attribution-ShareAlike 3.0 Unported License.
4
guanxi: investment funding criteria
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Personal Investment:
Guanxi is a relationship
between individuals. It is
personal capital. It can be
“transferred” or “endorsed”
to a company, team or other
individual, but ultimately, all
these decisions are personal
and will benefit individual’s
professional careers.
Hybrid Investment:
The company and the
individual can collaborate in
the medium term on a
specific project of mutual
benefit. Specific mutual
investments as well as
promises of results can be
specified and monitored.
Company Investment:
The company is willing to
pursue the development of
guanxi with a specific market
player. The company team
defines the strategy, the
action plan and the metrics to
track value generated. The
company defines the
investment plan.
Company Approach:
The company expects that
their executives, managers
and employees develop their
own guanxi investment plan
for their own benefit. The
company will recognize these
investments as far as they can
be translated into specific
promises of leaps in revenues
or leaps in efficiency and cost
reduction.
Company Approach:
The individual and the
company share the funding of
the investment.
Company Approach:
Company will fund the
specific strategy.
Guillermo Wechsler. 2013. This work is licensed under the Creative Commons
Attribution-ShareAlike 3.0 Unported License.
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Investing in guanxi: orientation
Invested
Instruments to Develop Guanxi: Illustration
KB
Entertainment gifts
Medium Control Burning:
–
–
Dinners
Attendance at Events
Guided Investments:
–
–
–
–
Linking data
Co-financing events
Co-investing in shared capabilities and
technology
Co-investing in expanding brands
Business +
–
–
Personal
Low Control Burning:
Weakest
Strategy
Burned
Guillermo Wechsler. 2013. This work is licensed under the Creative Commons
Attribution-ShareAlike 3.0 Unported License.
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Investment projects: priorities
 The company will favor investing in guanxi against burning money in guanxi.
 The company will favor guanxi that creates business, social and cultural value. The
company will not favor guanxi that produces mere private value or damages
business, social or cultural values.
 The company will favor investing in guanxi when the instrument used for the
investment grants the company teams more capacity to influence and guide its
final impact.
Guillermo Wechsler. 2013. This work is licensed under the Creative Commons
Attribution-ShareAlike 3.0 Unported License.
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