Balancing Formality and Informality in Business Exchanges as a Duality: A Comparative Case Study of Returnee and Local Entrepreneurs in China

Abstract

The management paradigms in the West mainly rely on legal contracts and explicit rules (formality), while the management traditions in the East emphasize social relationships and implicit norms (informality). In an era of ‘West-meets-East’, balancing formality and informality is becoming critical for firms, especially those facing institutional differences in transnational contexts and institutional transitions. In this research, we conducted a comparative multicase study on returnee entrepreneurs and local entrepreneurs in China. We found that at the early stage of venturing, returnee entrepreneurs emphasized formality more than informality, while local entrepreneurs stressed informality more than formality. However, the formality-informality balance among both returnee and local entrepreneurs converged over time in line with the institutional transition in China. Returnee entrepreneurs increased the emphasis on informality (but kept the dominant position of formality), whereas local entrepreneurs gradually shifted from informality to formality. The spatial pattern of asymmetrical balancing and the temporal pattern of transitional balancing are both rooted in the Chinese philosophy of Yin-Yang balancing.

Are ‘sea turtles’ slower? Returnee entrepreneurs, venture resources and speed of entrepreneurial entry

“…We contribute by adding to an emerging series of studies addressing the challenges faced by returnee entrepreneurs compared to their local counterparts by exploring factors that facilitate or impede their venture creation. Interestingly, while past research has placed emphasis on resources associated with social capital in the context of returnee entrepreneurship (Lin et al, 2015), we find insignificant coefficients in respect of our variables relating to the role of family and friends. Rather, speed of entry by returnees is strongly related to financial and technology resources, pointing to the importance of these dimensions.…”

The Unique Value of Yin-Yang Balancing: A Critical Response

“…Related to the tenet of duality integration, the third operating mechanism is called ‘curvilinear balancing’ with the interactive effect of the opposite elements following an inverted U‐shape curve. There is some initial evidence in support of the above three mechanisms of the Yin‐Yang frame (e.g., Li, Li, & Liu, ; Lin, Lu, Li, & Liu, ). In a case study on the formal‐informal balance in two groups of firms founded by returnee and local entrepreneurs in China (Lin et al., ), it is evident that both formal and informal elements were adopted by both returnee and local firms (in support of the holistic and duality tenets), but the formal element was the dominant in returnee firms at the early stage in contrast to the informal element as the dominant in local firms at the early stage (in support of the asymmetrical mechanism); further, the formal‐informal balance shifted from the early stage to the later stage, with the formal element being less dominant in returnee firms but the informal element in local firms reversing its role from the dominant to the subordinate (in support of the dynamic tenet and the transitional mechanism).…”

The emerging research on indigenous management in Asia

“…As the underlying core of Eastern philosophy of wisdom, Yin-Yang balancing has inherent geocentric implications (Li, 2012a(Li, , 2016Lin, Lu, Li, & Liu, 2015). This system can operate in the Western context, as shown in the case of Lego, a Danish toy-maker, that adopts eleven paradoxical principles, similar to the practices in China, as found in a recent study (Zhang, Waldman, Han, & Li, 2015).…”

“…However, we must remind everyone that the Bindigenization-from-within approach^is still necessary to develop relevant indigenous theories before we can effectively engage in Bcross-indigenization geocentric approach^to developing geocentric theories (e.g., Li, 2006Li, , 2014Lin et al, 2015). Further, the quantitative methods and mixed methods could be used in the future to test the validity of those indigenous theories that are newly developed in the qualitative studies.…”