Guanxi, performance and innovation in entrepreneurial service projects

Abstract

This paper analyzes the role played by two dimensions of entrepreneurs' private social capital in the survival, growth and innovativeness of entrepreneurial service ventures: local size and preferential attachment degree. We build a bi-dimensional measure of social capital based on network models and a methodology to estimate this measure for any group of entrepreneurs. Based on a survey of service entrepreneurs who launched their business in the city of Shanghai, we show that roles played by each dimension are quite different. A large local size of the network increases the chances of survival of the new venture. However, the chance to become a dynamic venture is only related to entrepreneurs' preferential attachment degree. This finding has relevant political and managerial implications.

The changing role of guanxi in influencing the development of entrepreneurial companies: a case study of the emergence of pharmaceutical companies in China

“…There is no agreement, as yet, in the academic literature on how a large range or scale of guanxi can better create value for entrepreneurial companies, since their choices about network scale are influenced by a number of factors, such as business type (Troilo and Zhang 2012;Arribas et al 2012), organizational characteristics (e.g., strategic capabilities and orientation, size and history) (Xin and Pearce 1996), level of influence of network members and so on . Under normal circumstances, guanxi mainly existed in in-groups, but as time went by, it gradually expanded to out-groups , during the process of which the guanxi networks of entrepreneurial companies gradually transferred from personal networks to business networks at the firm and market level.…”

“…In our case, the renqing hierarchy mainly refers to the importance of past relationships with relatives, friends, colleagues, acquaintances and so forth, and the acceptance level reflects the degree of mutual recognition decided by the cultural and behavioral mode of guanxi. Similar to the viewpoint held in the field of sociology, Arribas et al (2012) assume that the structure of the guanxi of entrepreneurs is not distributed randomly but rather has certain preferences. A compact or close-degree structure has already become one of the evaluative indexes for entrepreneurial companies' guanxi structure, which can reflect the maturity of the guanxi partnership (Yang and Jiang 2010).…”

“…Generally speaking, the larger the scale of the guanxi, the bigger the value it can create for entrepreneurial companies, because a large local network size increases the chances of survival for the new venture (Arribas et al 2012). Guanxi is seen as the key for entrepreneurial companies to attract resources (Semrau and Werner 2013), especially as guanxi scale of entrepreneurs has a positive impact on the growth of entrepreneurial companies (Hansen 1995).…”

“…The scale of the guanxi is represented by an index indicating the range of connections a party has through guanxi , as defined by the number of direct links an entrepreneur or entrepreneurial company has with other agents (Arribas et al 2012). There is no agreement, as yet, in the academic literature on how a large range or scale of guanxi can better create value for entrepreneurial companies, since their choices about network scale are influenced by a number of factors, such as business type (Troilo and Zhang 2012;Arribas et al 2012), organizational characteristics (e.g., strategic capabilities and orientation, size and history) (Xin and Pearce 1996), level of influence of network members and so on .…”

“…The characteristics of these personal networks are the very reason guanxi has been such a necessary and important factor of production in the Chinese economy. A growing number of studies have shown that it is unavoidable for Chinese companies' entrepreneurial activities to be imbedded in a guanxi network Yeung and Tung 1996;Yu et al 2013;Guo and Miller 2010;Liao and Sohmen 2001;Yang and Jiang 2010;Arribas et al 2012;Puffer et al 2010;Lovett et al 1999;Yang and Wang 2011).…”