Understanding the importance of Guanxi in UK/Chinese joint venture relationships

Abstract

The importance of the Chinese concept of guanxi is now widely acknowledged by cross-cultural management and marketing scholars. However, to what extent is it important in relation to UK/Chinese joint venture relationships? Although many British companies choose the IJV option for entering China, joint ventures often result in conflict and possible dissolution. We argue that one of the key factors in IJV success or failure is the degree of understanding of guanxi on the part of the UK partner. The primary purpose of this paper is to provide a better understanding of guanxi and its relative importance in UK-Chinese joint venture relationships. The results from 25 interviews with managers involved in UK/Chinese joint ventures are discussed in the paper. Our research findings indicate that those companies that succeeded in China generally have a firm understanding of guanxi. This is largely because the majority of managers involved are Chinese. Many believe that guanxi and the understanding of guanxi is an important factor in successful UK-Chinese IJV relationships. We evaluate the argument that the significance of guanxi is already in decline, or will shortly be in decline, as a result of economic and legal reforms in China