Impact Of Guanxi Practices On Organizational And Innovative Performance

This research seeks to show through data whether guanxi practices in human resource management(e.g.,the tendency of organizations to make human resource management decisions on the basis of personal relationships or ‘guanxi)have an impact on organizational and innovative performance.Though there is abundant previous research on the effects of guanxi on organizational performance,no such studies exist,to the researcher's knowledge,which comprehensively display through data whether guanxi style management practices of employees at the organizational level provide a firm with a strategic advantage or whether such practices hinder them.In the first section of the text,the author describes the current literature on guanxi and defines guanxi practices.Although guanxi has been thoroughly researched in the past,there is still no consensus definition of the term.For the purpose of this research,guanxi practices were defined as a particularistic practice of a general pattern within an organization or business unit of making human resource decisions based on managers guanxi,or particularistic relationships.Previous literature has shown that human resource practices and strategic human resource management have a profound effect on organizational performance and innovative performance.In China,human resource management has evolved over the past thirty years as China has undergone reform with gradually more and more exposure to the world.China's particularistic guanxi practices and more increased attention paid to human resource management as a strategic lever led to the formulation of the research question of whether or not guanxi practices had an impact on organizational or innovative performance.Data was collected from a sample of chief executive officers(CEOs)and chief operations officers(COOs)of 205 companies located in various regions throughout China through snowball sampling,where subjects recruit other suitable subjects through drawing on their network of acquaintances.Each organization was paid a visit on site and each organization's COO and/or CEO to complete a questionnaire of Likert scales to assess their organization's guanxi practices and performance,as well as some control variables.If a CEO and/or COO was not on site,we left the corresponding questionnaire to him/her and asked to return the completed questionnaire via post.In this study,we received feedback from 143 CEOs and 152 COOs.The final matched sample consisted of 137 companies of which both CEOs and COOs provided ratings.Findings indicated through correlation and multiple regression that guanxi style human resource practices have a moderate negative relationship with firm and innovative performance.This proved true for both organizational performance and innovative performance as our dependent variables.These results offer various theoretical and managerial implications.First,the negative effects of guanxi on firm performance and firm innovation build upon the existing knowledge that posits particularistic practices,such as guanxi human resource practices,are detrimental for the organization to achieve its goals.The results further suggest the utility of extending neutrality in unbiased procedures to neutrality in personal relationships at the workplace in order to control potential negative effects.Second,this study establishes that human resource management practices are an important factor to organizations financial and innovative performance.