Assumptions of the Guanxi Circle Theory

Based on the aforementioned characteristic analysis of Chinese behavior, we can see that the guanxi circle theory is built upon the following assumptions about humanity:

(1) The motive for people to work may carry out favor exchanges, so they will voluntarily perform tasks, or may want to evade responsibility. This depends upon who their exchange partners are; (2) If the exchange partners are their familiar ties or members of their guanxi circles, work means favor exchanges and will be done by them on a voluntary basis; but if those who deliver work are acquaintance ties or people outside their guanxi circles, work is nothing but responsibility;

(3) Most people can only satisfy their need for self-realization by building their own egocentric guanxi networks and mobilizing the collective power of these networks. Accordingly, building up egocentric guanxi network through favor exchanges is an important motive for them to work;

(4) Most people, if they are able to establish favor-exchange relationships with the leader or a group of people, will form a guanxi circle, have a sense of belonging, work very hard, and, when addressing serious problems, be able to fully use their imagination, wisdom and creativity;

(5) Chinese employees who seek a sense of personal achievement will want to build their own teams and organize the team members to pursue their personal goals of life;

(6) A powerful motive for Chinese to work is giving them opportunities for self-organization and enfeoffing them so that they have a particular business that belongs to them.

With such assumptions about the nature of Chinese, the guanxi circle theory proposes an organizational model that is also situation determinism –i.e. core members, circle members and outsiders are identified in various situations, so that they will be treated by different principles of social exchanges..

Now that Chinese are good at favor exchanges and prone to form guanxi circles, there are always small or large guanxi circles within a Chinese-style organization that overlap each other. A successful leader will make good use of these guanxi circles by letting them organize into independent teams and contracting a particular business or being in charge of business in a particular place. By so doing, he will enable these groups of employees, who have a sense of belonging and a strong motive to work, to unleash their potentials freely.

By contrast, a failed leader is unable to control the development of guanxi circles and, hence, leads to a large number of closed cliques within the organization. Cliques become increasingly cohesive and decreasingly interactive with each other, and that will not mind sacrificing the interests of others for their own. This will usually result in fierce fighting among cliques, whose members rely on the collective power to work against policies and instructions from higher levels.

Dynamic Balancing of Guanxi Circles

Dynamic Balancing of Changes in Guanxi Circles

Given the aforementioned favor-exchange operations, we can see that familiar ties come with limited constraints and benefits, unlike family ties, including real- and pseudo-family ties, within a circle core characterized by unlimited responsibility, unbreakable ties and a closed group of core members. The existence of this buffer enables a guanxi circle to stay elastic.

An elastic operating mechanism has three advantages. First of all, it reduces structural constraints for ordinary members of the guanxi circle. Operations among familiar ties within the guanxi circle are rather elastic, as opposed to family ties within the circle core that stay loyal, that assume unlimited responsibility and that share all the secured benefits. Circle members will join collective actions when necessary, before sharing the fruits of these actions. Notwithstanding, their responsibility and favor exchanges are limited, so they also may not, if unnecessary, join these actions.

The existence of this buffer facilitates the resolution of the ―tightly coupling‖ dilemma put forward by Granovetter (1995). Like most of the small groups, a guanxi circle is faced with a dilemma – it is ego-centered social capital (Lin, 2001) and the primary approach to mobilizing resources, on the one hand, and is faced with structural constraints (Burt, 1992) and a large amount of favor debts that dissipate resources, on the other. An entrepreneur has an important function that coupling social networks (Granovetter, 2002) to make them produce social capital, on the one hand, and decoupling them to avoid excessive structural constraints and needs for resources, on the other. Accordingly, how to balance coupling and decoupling becomes an important capability of an entrepreneur, and Chinese are always known for this (Granovetter, 1995). This is why Chinese are globally renowned for entrepreneurship.

As was proposed by Granovetter (2002), large social networks fall under three types of structures – highly decoupled, weakly coupled and highly coupled. The highly decoupled structure is full of guanxi circles with no bridge among them at all. The highly coupled structure is a high-density network that is unable to solve the aforementioned dilemma caused by tightly coupling. The weakly coupled structure is the only one with guanxi circles among which there are bridges. Once he is able to mobilize these guanxi circles, the leader will initiate large-scale collective actions in a large network. Good balancing will generate a weakly coupled structure, where the leader can take guanxi circles as the solid foundations for resource mobilization while maintaining the possibility of initiating larger-scale collective actions.

Secondly, the focal person of a guanxi circle may access resources from friends at critical moments, but may return at convenient times, the favor debts in a way needed by them at value much lower than that he or she originally received. This is just like a rotating credit association, where its head may mobilize huge amounts of resources at proper times but will reward the helpers at much later times. From the short-term perspective, delays in the rewarding can help the head get decoupled from excessive demands for reward in the high-density network.

The last but the most important point is: A guanxi circle has non-fixed boundaries. The phenomenon of guanxi circles is rooted in the Chinese concept of family. A Chinese person is always inclined to expand family ethics to social life beyond his or her family; a guanxi circle assumes some family functions for Chinese at work and life. This is why Liang Shuming (Liang, 1982; 1983) referred to Chinese society as ―society based on family ethics.‖ Yang Guoshu (Yang, 1993) put forward the concept of ―family-orientation‖ – that is, non-family members can be socialized into a family and develop very close ties with it (Chua, et. al., 2008; Chua, et. al., 2009).

Like dynamic guanxi changes explained in Lecture 4, it is an important part of the Chinese culture to bring valuable exchange relationships into a guanxi circle from acquaintance ties outside it and to turn these acquaintances into good friends. Familiar ties constitute the primary cornerstone of ego-centered social networks in China. Most Chinese are inclined to dynamically move their relationships into and out of the three types of ties. Accordingly, a valuable and trustworthy acquaintance can be brought into a guanxi circle of friends to become its member.

In addition, identification with some roles can make a friend enter the core of the focal person's guanxi circle – family ties. In Chinese society, the identities of parties to a relationship are changed by means of marriage, adoption, becoming blood brothers, etc., to turn the ties between them into pseudo-family ones (Chen, 1994; 1995). People regarded as outsiders in western societies may find it easier, in Chinese society, to enter the innermost ring – family ties – through a new identity (Chen 1994; Luo 2005). Since such ties are not confined to family members, it is also called pseudo-family ties (Chen, 1994; Luo, 2005).

Chinese will see similarities to get to know more people, as is shown in the figure 4.1. The Chinese saying – ―A maternal relative may be as distant to you as a stranger‖ – reflects the efforts by Chinese to seek similarities. Next, they will exhibit trustworthy behavior during exchanges with acquaintances, then carry out favor exchanges to establish long-term familiar ties and, ultimately, creating new identification with roles to establish family ties. These are part of the daily work and life of a Chinese person. A guanxi circle may be open, therefore, to acquaintances. Since every acquaintance is likely to become a friend in the future, obeying the principle of reciprocity is helpful for expanding the guanxi circle for the focal person. Likewise, the core of a guanxi circle, although tight and relatively closed, is not fully closed, making it possible for friends to join the Ban-Di(i.e., the primary, loyal team members and devoted followers, as we have explained above) of the focal person. Familiar ties blur the boundaries of a guanxi circle so that it can accept new members from the outside, on the one hand, and make the core team somewhat open to members other than those of the core team, on the other. This will leave more structural room for elastic operations during coupling and decoupling.

It is through this process that a Chinese person will know who in his or her social network can be mobilized to access what kind of resources. A person with good interpersonal relationships will mobilize the members of his or her guanxi circle to realize his or her goal. Also, he or she doubtlessly needs to help the members realize their respective goals during exchanges. How to maintain mutual trust within the guanxi circle tends to be the primary concern of Chinese at work. The elasticity of a guanxi circle – entry and exit are both allowed – decides that it is not closed; two guanxi circles may overlap each other and the overlapped part may serve as the bridge between them, plus considerable freedom.

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