21 May 2017
It has been widely recognized that Chinese government officials and their associated firms practise cronyism with those companies regarded as insiders. Multi-national enterprise (MNE) managers are often at a disadvantage as Chinese competitors frequently are more flexible and governmental officials have preference for dealing with loyal insiders. MNE managers also tend to perceive cultural practices, such as gift giving as being unethical. This study advances our understanding of cronyism and loyalty in a Chinese context by developing and testing a relationship model for the benefit of MNEs to leverage organizational performance in China through nurturing insider relational status with Chinese government officials and business counterparts. Our findings reveal that MNE managers should practice the art of gift giving and building mianzi
in order to obtain renqing
with Chinese government officials and subsequent business counterparts. The reciprocity dynamics of renqing
will enable MNE managers to accumulate ganqing
and become good friends with their Chinese partners. The establishment of ganqing
between MNE managers and their Chinese counterparts also engenders the development of xinyong
between exchange parties and loyalty then emerges as a key for generating cronyism and subsequent organizational performance.