Guaranteed Guanxi: A Review of an Analysis of Chinese Managerial Ethics - Assignment Example

Running Head: Guaranteed Guanxi Guaranteed Guanxi: A Review of an Analysis of Chinese Managerial Ethics The last thirty years have brought about immense changes in the Chinese economy. After thousands of years of working within a strictly planned economy, the Chinese were finally told, by Deng Xiaoping, their Communist leader, that "to get rich is glorious" (De Mente, 1994, p. 39), upon the beginning of his economic reform process in 1978. The idea of individual wealth goes against both of the major philosophies in China - that of Mao Tse-Tung, the longtime Chairman of the Communist Party in China, and that of Confucius, the renowned philosopher of ancient times (Redfern and Crawford, 2004). Both of these schools of thought taught that the interests of the individual should be of less priority than the interests of the community. It should be no surprise that when companies from Western countries have arrived in the last thirty years to do business in this "new" China, they have been surprised by some of the cultural differences. Cultural values in Europe and in the Americas, in many instances, value the individual more than the community. As a result, companies have often gone to China to do business, and come away feeling that they have dealt with a corrupt culture; that they had operated under expectations that turned out to be unproven; that each person within a Chinese company has a different perspective on a given situation, and will even stab each other in the back to gain an advantage (Blackman, 2000). The area of copyright protection is one on which Chinese and many Western companies seem to disagree - many Chinese companies appear to have a more relaxed view on copyright violations (Whitman, Townsend, and Hendrickson, 1999). The confusion resulting from the apparent differences in business ethics between many Western companies and their Chinese counterparts has led to a significant interest in the ethical principles governing Chinese management. Kylie Redfern and John Crawford presented "An Empirical Investigation of the Influence of Modernisation on the Moral Judgement and Managers in the People's Republic of China" in Cross Cultural Management, a vignette-based survey of managers across China that sought their responses to several ethical scenarios. These managers came from 21 of China's 28 provinces, which were ranked by their "modernisation" using a scoring system devised by the authors. The authors combined the provincial scoring system with the attitudinal responses returned by the managers to determine whether managers in more modernised provinces had business ethics that were closer to Western norms than those in less modernised provinces. The research in this paper rests on two assumptions: that Individualism and Collectivism (the desire for individual wealth versus the desire to work for the greater good of one's society) are in opposition, and that exposure to Western values will cause Chinese managerial ethics to "converge" toward those found in Western companies. However, there is research that indicates that the Chinese do not necessarily see a polar opposition between the good of the individual and that of the society (Egri, Ralston, Murray, and Nicholson, 1996). This is in large part due to the Chinese concept of guanxi - a concept of business relationships that is different from that held by most Western companies, and may explain much of the confusion that has hindered positive business dealings between Chinese businesses and companies in the West. Guanxi refers to a complex relationship that combines friendship and partnership, while prizing individual ascendancy as well - a relationship that benefits both the individual and the community. Pye (1992) defines guanxi as a network of "dyadic relationships between individuals in which each can make unlimited demands on the other[involving] reciprocal obligations for assistance"(pp. 4-5). This sounds much like the Confucian (and Communist) ideals of sacrificing one's own personal interest for the greater good. However, research indicates that many Chinese prefer guanxi relationships with someone about whom they know a negative secret, so as to gain leverage over that person (Michailova and Worm, 2003). The Chinese economy, over the last thirty years, has entered an area of unprecedented freedom, as far as openness of markets. However, most of the powerful figures in the Chinese economy have not changed. These figures have continued to maintain their guanxi networks, and so, even without regulations governing the Chinese market, those with the most relationships have the most flexibility, and the most power (Boisot and Child, 1999). Redfern and Crawford developed six hypotheses for their findings in their vignette-based survey. The first was that as modernisation increased, approval of bribery would decrease. They did not comment on this hypothesis, but, according to their statistical tables, this hypothesis was proven (p. 57). There is no research showing the penalties for bribery in China, as opposed to the West - and research has shown that consequences for negative behavior can be more powerful than attitudinal changes (Whitman, Townsend, and Hendrickson, 1999). Also, the fact that these surveys were distributed to managers by their superiors, instead of by mail, could result in skewing due to fears by respondents that their superiors would read their answers. The second hypothesis concerned a vignette asking whether the respondents would publish a book that contained a chapter explaining how to construct an atomic bomb. The answers to these questions were used to test the hypothesis that increased modernisation would lead to an increased sense of social responsibility (and a decreased willingness to publish the book). Redfern and Crawford themselves acknowledge the difficulty of asserting this hypothesis (p. 52), given the use of students to answer the second vignette, and although they claim that it was statistically upheld, it is problematic to base the hypothesis on such an extreme question as teaching the general public to build nuclear weapons. There are more moderate questions that would measure a sense of gradations of social responsibility -- the incredibly destructive nature of atomic weapons makes this question less reliable. The authors' third hypothesis asserts that, as China modernises, nepotism will be seen as less acceptable over time. According to their statistical analysis, this hypothesis was upheld. Existing conditions in China seem to belie this - an absence of regulations, as stated previously, places a premium on connections, and so the networking benefits of guanxi become even more crucial (Bian, 1997, Gnyawali and Madhavan, 2001, Triandis, 1998). The loyalty demanded by the guanxi bond would seem to mandate nepotism, especially in an economic environment suddenly devoid of the regulatory safety nets protecting the powerful. Additionally, it is certainly questionable whether managers would admit to nepotism in hiring practices in a survey that they had to turn in to their superiors. The fact that the admissions do not appear in their surveys does not reliably imply that nepotism is losing favor. The fourth hypothesis concerns Chinese attitudes about the physical environment. The authors cite considerable research (p. 52) to support their claim that increased modernisation will result in an increased desire to keep industrial activity from damaging the environment. Statistically, this hypothesis was upheld, and it makes sense, given the fact that the Chinese culture includes a more holistic world-view than that of the West. Chinese culture seeks to find connections and relationships among people and events (Nisbett, Choi, and Norenzayan, 2001). This would lead to an analysis of how a company's actions and decisions would affect its surroundings. The authors' fifth hypothesis asserts that, as modernisation progresses, gender equality will improve in the ranks of Chinese management - both in the area of job opportunities, as well as in the area of equal pay for parallel positions. The authors cite research basing gender stereotypes in Confucian philosophy, "with females assumed to be obedient, submissive to men, timid and respectful"(p. 52). The rest of their research in this area consistently suggests a greater bias in gender stereotypes throughout China, Hong Kong, and Taiwan than in other cultures, yet the authors assume that modernisation will cause that bias to disappear. However, there is research that indicates that, despite modernising, the Chinese business culture also continues to hold to its Confucian tenets, and so the term crossvergence is more appropriate for the change in Chinese business culture. In other words, many Chinese companies may move toward a more individualistic philosophy of wealth, but may also maintain the idea of guanxi, and also the idea that women do not have an equal place to men in society (Ralston, Egri, Stewart, Terpstra, and Kaicheng, 1999). Statistically, and not surprisingly, this hypothesis was rejected.1 Whistle blowing is the topic of the last hypothesis - namely, that an increase in modernisation will result in an increased willingness to report corruption within one's company. While this is statistically upheld, it contains the same problems as the hypotheses concerning bribery and nepotism. What the Chinese may have learned from the West is not to acknowledge these forms of corruption publicly, but there is no suggestion from this paper that those practices will actually decline in China as the economy continues to become more modern. The objective of Redfern and Crawford's paper was to project the effects of modernisation on the ethics of Chinese management. There were problems with several of their hypotheses, and the fact that the respondents' superiors distributed these surveys to them may well have skewed the results. The authors do not appear to acknowledge the role of business networks (guanxi) in designing and implementing their measurement tool, and to ignore that component of the Chinese business culture is to ensure ruin in one's dealings in the world's largest emerging market. References Alter, C., & Hage, J. 1993. 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