The role of guanxi in buyer-supplier relationships in Chinese small- and medium-sized enterprises - a resource-based perspective

This paper examines the role of guanxi (personal relationships or connections) in buyer-supplier relationships in Chinese small- and medium-sized enterprises (SMEs), through exploratory research that gained access to companies actually using guanxi. The resource-based view provided a systematic approach for analysing the role of guanxi in terms of its potential to be a source of sustained competitive advantage. Business guanxi connections were identified as possessing the potential to be considered an organisational resource. This study identified several valuable attributes of guanxi at the organisational level. However, the guanxi-based advantage can only be sustained under certain conditions. SMEs should create an organisational environment that encourages their employees to actively establish and maintain guanxi connections within the company and beyond. However, companies in China need to recognise that firms that possess superior technological skills or capabilities have a stronger bargaining power, as they are able to deliver quality at competitive prices over the long run.