Good guanxi and bad guanxi: Western bankers and the role of network practices in institutional change in China

Abstract

There is an assumption in some neo-institutional theories of organization that China's integration into the global economy will inevitably lead to a reduction in the influence of guanxi on business practices. Drawing on in-depth qualitative interviews, the study shows that while the network practices of many Western managers may contribute to the adoption of international business norms in China, there is another group of managers who make significant adjustments to local conditions and, contrary to the assumptions of neo-institutional theory, actually engage in strategies, which reinforce some of the existing evasive practices sometimes associated with guanxi. This dichotomy is guided by a process of ‘bricolage’, where managers creatively re-interpret the norms of the local context to justify their actions. This observation tempers the proposition that the influence of guanxi will decrease as China moves closer to a form of rational-bureaucratic labour market organization and human resource management. It is argued that the ‘discourse’, which expatriate managers developed around guanxi, is an example of organizational myth-making which is, in itself, an important part of the process of bricolage. It is important therefore not to overlook the role which external forces, such as expatriate managers, can play in re-defining the role of guanxi in China's urban economy.

Keywords:

• banking
• bricolage
• China
• guanxi
• HRM
• institutional change
• Western bankers

Acknowledgement

I gratefully acknowledge support for this research from a grant by the Nuffield Foundation (NCF/33837).

Notes

1. In the context of this study ‘Western banks’ refer to banks trading in mainland China which are headquartered in the USA, Canada, Western Europe or Australia. The informants interviewed here were all nationals of one of these countries/regions.

2. The job titles of the managers were regional CEO, chief representative officer or general manager. All had direct involvement with decision-making in relation to local hires.

3. Tier rating indicates the capital adequacy of a bank as assessed by regulators. Tier 1 represents a bank with more resources than a Tier 2 institution.

4. Names of cities are anonymized to protect confidentiality.

5. Names of individuals are anonymized to protect confidentiality.

6. Thanks to one of the anonymous reviewers of this study for this remark.