Guanxi-based Investment In China:Interpersonal Relation-Specific Investments From The Perspective Of Guanxi

Firms always make relationship specific investments (RSIs) to achieve cooperation. As a vital construct in the realm of interfirm relationship, RSIs also attract a lot of scholars’attention because their roles in marketing channels activities. In reality, cooperative activities usually involve plenty of RSIs. For instance, many firms make various RSIs, such as adapt manufacturing processes and operating processes. Such investments will become valueless once the cooperative relationship terminates. Previous studies mainly focus on firms’RSIs specified in formal contract, ignoring other type of RSIs out of formal contracts. In fact, boundary spanners from different firms always try to build and maintain health interpersonal relationship with each other to realize interfirm cooperation. Interpersonal RSIs are especially important in Chinese context where guanxi is highly emphasized. People always conduct guanxi behaviors such as affect investment (gan qing tou zi) and maintain face (wei hu mian zi) to build private personal relationship (la guan xi) and promote cooperation between partner firms.To reveal the significance of interpersonal RSIs, the author divides the Relation-Specific Investments (RSI) in Chinese setting into the Contract-based RSIs and guanxi-based RSI. RSIs are divided into two categories in this study:contract-based RSI and interpersonal RSI. The former mainly refers to those properties, such as equipment, facilities and specialized knowledge, etc. This type of specific investments should be conducted in strict accordance with the contents of formal contracts and they are greatly emphasized by western scholars. The relevant activities relating to contract-based RSI are relatively formal, standardized and rational. Interpersonal RSI refers to the existence of interpersonal activities and efforts between important boundary personnel who actively develop good interpersonal relationships with a specific partner to facilitate successful cooperation. If such special connection between spanners breaks down, the investment spanners make in building and maintaining good interpersonal relationship becomes worthless.The author firstly identified the dimension of interpersonal-based RSI and developed a measurement scaling. Up till now, previous studies still haven’t reached an agreement on the contents and the dimensions of guanxi behaviors. In this study, the author adopts a multidimentional aggregate model to describe the construct of interpersonal RSIs in China so that it can reflect the contents and the characteristics of guanxi behaviors more accurately. And then the author conduct studies to address the questions of whether interpersonal-based RSI varies among firms with different ownership structures and whether it relates to partnership performance between firms. The results demonstrated that interpersonal-based RSI among firms with different ownership structures varies little. In addition, both types of RSIs are positively related to the partnership performance, and the positive interaction produced by both kinds of RSIs also enhances partnership performance. Theoretically, the findings of this study contribute to the understanding of interpersonal RSIs in the emerging market by devising a multidimensional construct. The analysis of interpersonal RSIs also extends the contents of RSIs. Practically, the results of this paper provide much practical and guiding significance for cooperation between firms.