Guanxi Barriers In International Business

1. Scope of the Paper

In today´s business trade an interrelationship has become crucial and inevitable, because humankind is living in a more interdependent world. For this many multinational corporations from major economies such as China and the United States merged together and entered joint venture agreements. However, findings claim that unexpected high acculturation, low employee resistance, and high synergy realization may be explained partly by a greater cultural awareness in cross-border mergers and acquisitions (M&A).2 In the past, many considered that differences in culture were barriers for communication and interaction, but today effective global leaders believe that these variations, if well managed, are resources, and not

A definition of guanxi according to Davies, is the “set of personal connections which an individual may draw upon to secure resources or advantage when doing business or in the course of social life”.8 The concept of guanxi refers to the relationship two persons have with each other9, but more specifically of connections that are defined by reciprocity and mutual obligation.10 If a person refuses to return favor for favor he or she loses face and may appear as untrustworthy. Moreover, renqing or known as humanized obligation plays an important role in the development of guanxi, which implies a continued favor exchange with a sentimental touch involved.11 This also applies for the notion of Confucian ethic. To make guanxi work in the Chinese business world, a Chinese businessperson honors his or her obligations, tries to be loyal to his friends, does favors and maintains a reputation for

The Effect of Cultural Differences on Collaboration

4.1 Consequences and Measures of Cultural Variations

The effects of cultural differences in collaboration can be cultural clashes, negative employee reaction due to acculturation and different organizational culture.30 According to Davis, there are five areas of potential conflict in business style: company philosophy, time/return attitude, disposition of profits, delegation of authority and functional emphasis.31 This cultural disturbance does not only affect the job performance but also the productivity and thus a company´s operating income.

Consequently, finding similar organizational cultures and management styles have become crucial factors for solving issues like employee dysfunctions.32 Findings suggests to conduct research about the role of cultural awareness in cross-border M&As as well as about types of culture clashes, for example through the use of Hofstede´s cultural dimensions is also of importance for managing cultural differences.33 Another way to use cultural varieties as a resource is, by implementing cultural synergy. The aim of synergy is to increase effectiveness by sharing perceptions, insights, and knowledge.34

4.2 Benefits and Disadvantage of Joint