Guanxi as a supply relational risk source in China: a systematic review of western forms of relational governance and Guanxi

It is well known that China has become the world’s manufacturing centre in the past two decades. More and more Western firms outsource their products, semi-finished products, materials and services to China. In this process, some are successful while others fail. It is true that there are various reasons for failure but one of the most important ones is the cultural differences between the West and China. The question is: what is the rationale behind the success or failure of dealing with the cultural differences? Guanxi is one of the major dynamics in the Chinese society where business behaviour revolves around it. The objective of this paper is to review Western forms of supply relational risk management and compare them with Guanxi. First of all, a synthesized concept of supply relational risk is coined. Secondly, synthesized models of both Western forms of supply relational risk management and Guanxi are proposed. Ten sources of risk are identified based on the comparison; these are presented as assumptions to be tested through field research. The main differences between the Western and Chinese forms of relationship management are: 1) Affection is an element of Guanxi which is missed by the Western business relationship management; 2) Chinese are responsible for family, while Westerners are responsible for society. 3) There are no such concepts as face and renqing in the West, which originated from hierarchically ancient China and are the key elements of Guanxi. Risk implications derived from these differences are presented. Finally, the outcome of the review is the identification of two PhD research questions and limitations and learning points of this review.