Proper Guanxi network: A business essential for western firms in China
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China, the largest emerging economy, has become the second largest recipient of foreign direct investment in the world. Joint ventures are dominant market entry modes used by foreign investors to adapt into the Chinese market. However, Western investors have been frustrated by China’s guanxi-based relational nature. With the differences between Chinese guanxi-based culture and Western culture, shared management, partners and employees can disagree on just about every aspect of the venture, which results in unsatisfied performances and even fatalities. Therefore, an understanding of guanxi and the construction of a proper guanxi network are essential for western investors who use Joint Venture (JV) as an entry vehicle into China. This paper aims to create an insight into guanxi by reviewing literature in the areas of guanxi definitions and classifications, and on comparisons between guanxi and western social networking patterns. A guanxi managerial model, based on Confucian wu-lun guanxi typology, is proposed to help western investors to construct and manage their ventures in China.