When does guanxi bolster or damage firm profitability? The contingent effects of firm- and market-level characteristics

Academic Article


  • This paper advances that a nuanced approach is necessary to understand the effectiveness of managerial ties (guanxi) in improving firms' financial performance. We take a contingency approach to examine how the effects of managerial ties on performance may be moderated by firm-level factors (i.e., firm age and entrepreneurial orientation) and market-based forces (i.e., demand uncertainty and technological turbulence). Using a survey of 289 firms in China, we find that managerial ties are more salient with regard to enhancing performance for more entrepreneurial-oriented and younger firms. Managerial ties fail to provide performance benefits to firms when high demand uncertainty exists or when the level of technological turbulence is high, which suggests a performance limitation of established ties with government officials, buyers, suppliers, and competitors. The theoretical and managerial implications of the findings are further discussed. © 2010 Elsevier Inc.
  • Authors

    Published In

    Digital Object Identifier (doi)

    Author List

  • Li JJ; Sheng S
  • Start Page

  • 561
  • End Page

  • 568
  • Volume

  • 40
  • Issue

  • 4