Discuss in your blog the relevance of Guanxi and the existence of Chinese business networks as supporting factors to the internationalization process of Chinese companies.
The Chinese social system is classified as a relation-based system, which focuses on the special relations between individuals, and is based on reciprocity in order to achieve harmony. Good relationships are based on co-operative behavior among members of the community. In Chinese societies, guanxi can be defined as “a friendship with unlimited exchange of favors”, which means if two people share a guanxi relationship they feel fully committed to each other. To make guanxi work a Chinese businessman/ woman must complete his or her obligations, try to be loyal to friends, do favors and maintain a reputation for fairness. (S) He will try hard to maintain the image of a person who can be fully relied on and will always reciprocate.
In terms of FDI, Chinese and Taiwanese firms tend to depend highly on networks when going abroad, at least at the beginning. Network resources are less important for entering a mature market such as the United States where institutions exist that can facilitate internationalization.
There has been certain degree of westernalization in the Taiwanese companies
and there are questions about how much Chinese values will remain. Chinese management faces technological and economic challenges from both Western and Japanese MNCs. The challenge of Western influences: in order to advance high technology and provide services in the global market, they require leverage and the capability for research and design, which may change traditional Chinese management. Second, economic influences: as Taiwan faced the economic downturn between 2000 and 2003, Western management practices such as HRM were brought into Taiwan; therefore the Chinese management may have been altered toward Western style. Third, industrial influences: unlike the traditional industry emphasis on recruitment and guanxi as mentioned above, a rejection of guanxi in recruitment can be found in high-tech organizations. Finally, management fashion influences: as the ideas of HRM and business strategy integration spread from the USA, organizations in Taiwan started to introduce HR methods, and hence the way of managing employees (laouzi guanxi) may have been challenged.Guanxi is the crucial factor in the internationalization of Taiwanese MNCs as well as IHRM practices. The horizontal guanxi can be found in the Taiwanese MNCs in the UK IT industry, and they choose to locate near to their business partners in UK. On the other hand, the forming of guanxi in business relations occurs after Taiwanese MNCs in the financial service industry have made their entry to the UK. However, there is no guanxi associated with the investments of Taiwanese MNCs when implementing internationalization strategies; foreign direct investment is the common method. The vertical guanxi can be found in Taiwanese MNCs in the British context as well. Taiwanese managers believe that personal relationships with employees (laouzi guanxi) are very important in managing human resources in an international organization in respect of trust, renqing, face and reciprocity. Sectorial differences were apparent within the Taiwanese companies regarding their degree of preference for guanxi related to recruitment. In Taiwan the conflicts in the office can be resolved through socializing.
References:
Chen, I Chun Lisa. Easterby-Smith, Mark. Is Guanxi still working, while Chinese MNCs go global? The case of Taiwanese MNCs in the UK
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