Embedded guanxi networks, market guanxi networks and entrepreneurial growth in the Chinese context

Abstract

Entrepreneurial networks create an important entrepreneurial opportunity and facilitate resource acquisition. However, there has been little research on the correlation between the types of guanxi networks and entrepreneurial growth. This paper divides entrepreneurial/managerial networks into embedded guanxi networks based on social relationship and non-economic trade contracts, and market guanxi networks based on market negotiation. Hypotheses are proposed on how the embedded/market guanxi networks evolve with enterprise age and size. Data from 270 Chinese enterprises are used to empirically test the above classification and hypotheses. The results justify the new dichotomy for guanxi networks. It is also shown that, as an enterprise grows in age and size, its utilization of embedded guanxi network tends to decrease while its reliance on market guanxi network increases. In addition, as an enterprise grows in size and age, the impact of embedded guanxi network on enterprise performance remains significant, while the impact of market guanxi network keeps increasing. © 2010 Higher Education Press and Springer-Verlag Berlin Heidelberg.