GUANXI, SOCIAL CAPITAL AND KNOWLEDGE EXCHANGE

GUANXI, SOCIAL CAPITAL AND KNOWLEDGE EXCHANGE: A CROSS-DIMENSIONAL VIEW
WEN TIAN
Knowledge and Innovation Management Team, USTC-CityU Joint Advanced Research Center
166 Ren’ai Road, Suzhou, 215123, P.R.China
E-mail: stellat@mail.ustc.edu.cn
FELIX B. TAN
Faculty of Business and Law, Auckland University of Technology
Private Bag 92006, Auckland 1142, New Zealand
E-mail: felix.tan@aut.ac.nz
Drawing upon the dynamics of guanxi, Nahapiet and Ghoshal’s (1998) social capital theory, and Adler and Kwon’s (2002) Opportunity-Motivation-Ability (OMA) framework, this paper develops a conceptual model to elaborate the dynamic interactions between the multi-dimensions of guanxi, social capital and knowledge exchange, and how they are influenced by the collaborative online environment in the Chinese context. We propose that the structural, relational and cognitive dimensions of guanxi are activated through the three conditions of knowledge exchange, i.e., the opportunity, the motivation and the ability, forming guanxi capital. In turn guanxi capital can lead to several types of knowledge exchange outcomes - information volume, information richness and information diversity. The dynamic process of leveraging guanxi capital to facilitate knowledge exchange is moderated by the collaborative environment, strengthened by the balance of benefits and risks evaluation of the process.
1. Introduction
The role social capital plays in facilitating knowledge exchange, combination and creation has been heavily illustrated in recent years (Nahapiet & Ghoshal, 1998; Adler & Kwon, 2002; Koka & Prescott, 2002; C.-J. Chen, 2004; Nielsen, 2005; Wasko & raj, 2005; Mu, Peng, & Love, 2008; Smedlund, 2008; He, Qiao, & Wei, 2009). Since Nahapiet and Ghoshal (1998) pointed out the three dimensions of social capital and their possible relationship to the generation of intellectual capital, the study of social capital has been very fruitful as the study of each dimension evolved. These dimensions are: the structural dimension, the cognitive dimension and the relational dimension. Studies on social network mainly address the issues in the structural dimension and those on trust and social identifications are mainly in regard to the relational dimension. However, most of these studies are conducted in a western context based on western theories, which can lead to problematic generalization of these findings to other places such as the eastern countries (Wong, Ngo, & Wong, 2003).
Close to the concept of networks in Western culture, guanxi can be viewed as a source of “social capital” (Putman, 1995) embedded in social relationships. It has a unique status in the eastern culture and has been identified as a necessary condition to do business successfully in China (Chen & Chen, 2004). Compared to social network, guanxi is more dynamic (Chen & Chen, 2004; Fu, Tsui, & Dess, 2006) and shows closer interplay with trust in knowledge exchanging activities within Chinese firms in individual level (Park & Luo, 2001; Wong et al., 2003; Chou, Cheng, Huang, & Cheng, 2006; Fu, Tsui, & Dess, 2006; Chua, Morris, & Ingram, 2009). In addition, studies on group-level knowledge transfer in the Chinese context showed that the unique Chinese cultural factors play important role in the knowledge exchange process (Hutchings & Michailova, 2006; Inkpen & Pien, 2006; Inkpen, 2008). However, the context of these studies is limited to traditional types of individual-level or group-level networks, largely ignoring the role technology plays in supporting the development of social capital and eventual knowledge exchange intentions.
In addition, there is a time dimension in both trust (Schoorman, Mayer, & Davis, 2007) and guanxi (Fu, Tsui, & Dess, 2006) Studying these at a single point of time is unlikely to discover the dynamic interactive mechanisms between trust, guanxi-generated social capital and knowledge exchange.
The purpose of this paper is therefore to develop a set of theoretical arguments and propositions in a conceptual model which synthesize the dynamic interactions between the multi-dimensions of guanxi, social capital and knowledge exchange, by clarifying the relationships between these constructs and the mechanisms by which knowledge exchange is facilitated in conjunction with the emerging online collaborative environment in the Chinese context. Based on Adler and Kwon’s (2002) “Opportunity-motivation-ability” (OMA) framework, we hope the model will provide a better understanding on how to leverage the guanxi capital to facilitate knowledge exchange in the changing business environment in China. For instance, the design and application of expert recommender systems that suggest actors to establish or to refresh relations by studying one’s guanxi network can help the system better understand whether the actor’s link to others is more common interest-oriented, or kinship-oriented, thus providing better awareness. Also, as Chinese people tend to be more willing to share in the in-group context (clan or small circle) where people have close guanxi, the design of groupware may strategically facilitate inter-group knowledge sharing to enlarge the organization’s knowledge (Hutchings & Michailova 2006).
In order to achieve the objectives, we first elaborate the rich dynamics of guanxi from previous literature, and then link the multi-dimensions of guanxi to that of social capital, so as to clarify the concept of guanxi capital in the Chinese context. Next, we examine the types of knowledge benefits generated from the creation of guanxi capital and investigate how this process would be moderated by collaborative environment. We then present the conceptual model. In the conclusion, we summarize the paper and also discuss the proposed empirical testing.

2. Literature Review
Guanxi is “by no means culturally unique” (Walder, 1986) in China. It refers to the concept of building up connections to secure favors in personal and organizational relations (Park & Luo, 2001). It has been identified as a critical condition to do business successfully (Xin & Pearce, 1998; Chen & Chen, 2004; Chua et al., 2009). Chinese people and organizations cultivate guanxi “energetically, subtly, and imaginatively” (Park & Luo, 2001), which heavily influences their attitudes toward social relationships. Even today, when information technology can lead people to whatever information they seek, guanxi informants are still a highly trustworthy knowledge source for Chinese people.
2.1. Guanxi dynamics
Trui and Farh (1997) posit that there are three types of people with whom guanxi is formed: qinren (family members), shuren (acquaintances or familiar persons such as neighbors, or people from the same village, friends, colleagues, or classmates), and shengren (strangers). Generally, the strength of the qinren guanxi is expected to be the strongest, shengren guanxi the weakest and shuren guanxi in between. However, shengren guanxi implies a “yet-to-be discovered”(Fu, Tsui, & Dess, 2006) guanxi, and Chinese people are encouraged to transform it into shuren guanxi.
On the one hand, shengren guanxi can turn into shuren guanxi or even qinren guanxi by carefully handling the interactions. On the other hand, shuren guanxi or qinren guanxi can weaken into shengren guanxi, for instance, when something undermines mutual trust. Guanxi tie changes in distance and strength in a highly contextual and relational culture like that of China, more so than may be the case in western cultures (Fu, Tsui, & Dess, 2006).
The dynamic nature of guanxi is articulated by Chen and Chen (2004) in the process of guanxi building, in which they claim that the ultimate goal is to form a long-term equity to get benefits from each other. In order to reach the ultimate goal, the three guanxi stages (i.e., the initiating, the building and the using stages) are required. But it is the use of guanxi that makes the exchange of material or spiritual matter as a desired outcome.
There are several empirical studies that shed light on how Chinese people use the dynamics of guanxi for resource exchange. For example, based on interviews with 52 managers of 16 Chinese high-tech firms, Fu, Tsui, & Dess (2006) found that guanxi categories would lead to different types of social networks that have important implications for both knowledge management and decision-making processes within firms. As for firm-level utilizations of guanxi, Xin and Pearce (1998) conducted interviews with 32 executive managers in China representing 3 types of firms and concluded that firms in different stages relied on different types of individuals’ guanxi as substitutes for formal institutional support, thus gaining resources for the firm as competitive advantages. These studies not only indicate that guanxi serves a similar function for knowledge exchange in China as that of social networks in the West, but also imply that managing the dynamics of guanxi is the key to activating the benefits of guanxi ties.
By examining the dimensions of guanxi through the lens of social capital theory, we will focus on the mechanisms that activate guanxi as a means for knowledge exchange in the following sections.
2.2. Linking guanxi to the multi-dimensions of social capital
Nahapiet and Ghoshal (1998) defined social capital as “the sum of the actual and potential resources embedded within, available through, and derived from the network of relationships possessed by an individual or social unit”. They grouped social capital factors into structural, cognitive, and relational dimensions. The structural dimension refers to the network ties, the overall configuration of these ties and the appropriable organization; the cognitive dimension include shared language and codes and shared narratives as well; and the relational dimension contains factors such as trust, norms, obligations and identifications.
As an ancient practice of social exchange (Hammond & Glenn, 2004), how does guanxi map into the social capital dimensions?
First, guanxi has many similarities with the social networks. For example, guanxi is transferable and intangible. (Park & Luo, 2001); the different types of guanxi convey different strength of the ties (Fu, Tsui, & Dess, 2006); the configuration of guanxi shows the network of the “self in relation to other” (Chou et al., 2006); and the upgrade from shengren guanxi to shuren guanxi represents how people bridge the structural holes (Bjorn & Worm, 2008).
Second, from the communicative practice point of view, the guanxi relationship based on human communication, is enabled by shared assumptions, orientations, and linguistic and extra-linguistic knowledges, which will be inherited and renewed through guanxi production (Gold, Guthrie, & Wank, 2002). Thus, guanxi is underpinned with a lot of shared codes, language and narratives.
Third, trust and identification, as in the relational dimension, are salient factors in both guanxi and social capital. Trust is a critical building block of guanxi (Park & Luo, 2001; Chou et al., 2006; Fu, Tsui, & Dess, 2006; Bjorn & Worm, 2008) and so is the case of trust to social capital in the western context (Hosmer, 1995; Putman, 1995; Nahapiet & Ghoshal, 1998; Adler & Kwon, 2002; Schoorman, Mayer, & Davis, 2007; Bjorn & Worm, 2008). In addition, the most common base of guanxi such as tongxiang, tongxue, tongshi (i.e. from the same birth place, from the same educational institution, and from the same work place respectively) consists of common social identities (Chen & Chen, 2004), while in social networks the connection to certain people or groups help people achieve social identification (Nahapiet & Ghoshal, 1998).
Based on the above, we summarize the link between guanxi and the multi-dimensions of social capital in Table 1.




Table 1 Guanxi and multi-dimensions of social capital
Social capital dimensions
(Nahapiet & Ghoshal, 1998)
Examples of Guanxi
(Chen & Chen, 2004; Fu, Tsui, & Dess, 2006)

Structural
Network ties
Network configuration Dyadic ties, distributed as an ego-centric network
La guanxi (to build guanxi) is encouraged so that guanxi network changes quickly
Relational
Trust
Identification Types of guanxi indicate different trust level:
Shengren - strangers, low trust level
Shuren - acquaintances, higher level of trust
Qinren - kinship, highest level of trustworthiness & dependency
Guanxi bases provide a high level of social identification
Cognitive
Shared codes and language
Shared narratives Guanxi production as a communication practice, shared codes, language and narratives are inherited or generated
As Table 1 suggests the key elements of guanxi are equivalent to those in social capital theory but applied a little differently. For instance, according to Fu et al. (2006), there are three main differences between Guanxi and networks. First, guanxi is usually dyadic while network involves multiple connections, because guanxi is highly particularistic between two individuals. Second, guanxi is more dynamic while network is more structured and assumed to be relatively stable once formed. Third, guanxi is much richer and more complex than networks. Not only is its inherent nature different depending on the type of people with whom guanxi is built, but also, within each category the quality of guanxi, “the state of the relationship at a given point in time” (Chen & Chen, 2004) can vary in the degree of closeness or strength (Tsui & Farh, 1997).
2.3. The OMA framework and Guanxi capital
The Opportunity-Motivation-Ability (OMA) framework, introduced by Adler and Kwon (2002), reveals the condition of how to activate social capital in that a lack of any of the three factors (i.e. opportunity, motivation and ability) will undermine social capital generation. Social structures are treated as antecedents of the three factors in this framework, and social capital benefits and risks as consequences.
Because the value of social capital lies in the “utilization” of social structures and “mobilization” of assets (Nahapiet & Ghoshal, 1998), the idea of activating social capital makes a lot of sense. Thus, we decide to wrap the “opportunity, motivation and ability” factors into the concept of social capital and into guanxi capital by the same token. Here, guanxi capital is different from merely the guanxi concept, since resources “embedded within, available through, and derived from the network of relationships” (Nahapiet & Ghoshal, 1998) must turn into actual assets to be called as capital. Adler and Kwon (2002) highlight several criteria for the resources to be characterized as capital.
However, the OMA framework does not address the relationship of the three dimensions of social capital with the OMA factors. Hence, we go back to Nahapiet and Ghoshal’s (1998) assertions and find that constructs in their conceptual model is consistent with the OMA factors in Alder and Kwon. For instance, “access to parties for combining/exchanging intellectual capital” is the opportunity for knowledge exchange, the motivation to combine/exchange intellectual capital is the same motivation mentioned in OMA framework, and the combination capability maps well to the ability in OMA framework. Aligning both the dimensions of social capital and the OMA framework has support from Huysman and Wulf (2006) who also found similarities between these two approaches.
Combining the OMA framework with the arguments in previous sections, we propose that:
Guanxi capital opportunity is enhanced by manipulating the structural, relational and cognitive dimension factors to gain more access to parties.
Guanxi capital motivation becomes stronger when there’s higher level of relational dimension factors to facilitate cooperation.
Guanxi capital ability is promoted by increasing the cognitive dimension factors to make actors more capable of synthesizing the knowledge exchanged.
Guanxi capital opportunity, motivation and ability are antecedents of knowledge exchange outcomes.
2.4. The dimensions of knowledge outcomes from guanxi capital
Social capital has been found to be useful in explaining and predicting various knowledge exchange behaviors and outcomes (Law & Chang, 2008), such as knowledge transfer, knowledge creation, knowledge acquisition and exploitation, knowledge contribution and knowledge synthesizing. The complexity of knowledge exchange process is not our focus, but the outcomes in terms of the quantity and quality of the exchanged knowledge are to our central interests.
The most-cited and influential distinction of knowledge is Polanyi’s identifications of two aspects of knowledge: tacit and explicit (Nahapiet & Ghoshal, 1998). Winter (1987) has used tacitness as a variable referring to the extent to which the knowledge can be codified and abstracted. However, in the analysis of network ties, these features of knowledge are missing (Moran, 2005; Wasko & Raj, 2005; Sykes, Venkatesh, & Gosain, 2009), since it is difficult to analyze the connectedness and the tacitness of the knowledge shared at the same time.
Is there a better way to measure the exchanged knowledge through social capital establishment? Koka and Prescott (2002) summarized three distinctly different dimensions of information benefits yielded by social capital: information volume, information richness, and information diversity. Information volume is highlighted by the dense network ties in which dense interactions allow significant volume of information be created and disseminated. But it could have adverse consequences such as when it is imperative to make fast decisions (Eisenhardt, 1989). Information richness emphasizes the quality and nature of information (Koka & Prescott, 2002). It is important in guanxi capital, as the closer the actors are, the richer the information they would share. It is always the rich-contextual and fine-grained information that flows (Fu, Tsui, & Dess, 2006) between the shuren and qinren guanxi or between well-established firm-level guanxi. Information diversity emphasizes the variety and to a somewhat lesser extent quantity of information that one can access through his relationships (Koka & Prescott, 2002).
As both guanxi and social networks encourage people to build relationships to bridge structural holes (Granovetter, 1982; Bjorn & Worm, 2008), information diversity is highly likely to be achieved in both context. But information volume is easier to get from dense networks than from complex guanxi network, while information richness is easier to obtain through interactions with those who are in the individual’s guanxi network. Table 2 shows the potential contribution that guanxi network and social network bring to the three dimensions of benefits. Although information and knowledge are different, we use them equivalent here since the information flow between the three dimensions of exchanged do carry certain amount of knowledge whether the tacit or explicit.
Table 2 Guanxi capital, social capital and knowledge outcomes
Indicators Information volume Information richness Information diversity
Guanxi network Distance between the actors Not necessary high high
Social network Network centrality & density high Not necessary high
Due to the fact that quality improvement is likely to be limited without quantity but quantity is no guarantee that quality will occur, we propose that:
Information volume and information diversity are positively associated with information richness.
However, there’s no priority in the three dimensions of the information, since knowledge is embedded regardless of the volume, richness or diversity dimension, people will find useful information as contextual knowledge to them through guanxi networking process.
2.5. The effects of collaborative environment on guanxi capitals and knowledge exchange
According to Law and Chang’s (2008) investigation of the literature related to the study of social capital in the area of knowledge management, few studies have applied social capital theory to contexts such as online collaborative environments. It is still unclear that how social capital is fostered and further being leveraged for knowledge exchange through individuals’ engagement in a collaborative environment. Adler and Kwon (2002) pointed out that some firms interested in fostering social capital have adopted collaborative technologies, such as shared knowledge repositories, chat rooms, and videoconferences, but these merely create opportunity; building social capital requires not only establishing more social ties but also nurturing motivation and providing resources. Hence, we argue that opportunity, motivation and ability serve as necessary conditions for guanxi capitals to be activated.
A study on the knowledge contribution behaviors in a distributed environment where contributions occur primarily through information technologies (Olivera, Goodman, & Tan,2008) suggests three mediating mechanisms: (1) awareness; (2) searching and matching; and (3) formulation and delivery. In their model, awareness is a cognitive activity through which a person recognizes an opportunity to contribute, thus generate motivation to engage in searching and matching; searching and matching require relevant ability while provides motivation to engage in formulation and delivery, which is a cognitive representation of the contribution. Although the context is very special, this result indicates that information technology can enhance individuals’ awareness of knowledge contribution opportunity, increase searching, matching, formulation and delivery ability of tacit knowledge, thus generating the motivation to contribute. Therefore, we argue that information technology supported collaborative environment serves as a moderator in general. The effects of collaborative environment are interpreted as follows.
For guanxi network that already exists, collaborative environment moderates the relationship between the opportunity-motivation-ability factors and knowledge exchange by enhancing actors’ capability and flexibility of managing the large volume and multiple sources of information (eg., by tracing the transaction memories).
For guanxi network yet-to-be built, the role of collaborative environment are three fold.
First, it moderates the relationship between the structural dimension and opportunity by increasing opportunities to know people (eg., increasing awareness of opportunity through “people you might know” or “people who have done xxx” recommender system). Second, it moderates the relationship between relational dimension and motivation by enhancing the fairness of the control system and protection of intellectual property so that the users’ extrinsic motivations are aroused. Third, it moderates the relationship between cognitive dimension and ability by self-disclosure of “what I’ve done” (transaction memory) and “what I know” (users’ profile), as a result those who are looking for guanxi will cognitively feel much easier to identify “shared codes” out of the system.
Therefore, we propose that:
In the guanxi network maintenance stage, the presence of collaborative environment will facilitate the management of information, thus moderating the relationship between an actor’s guanxi capital opportunity-motivation-ability factors and his knowledge exchange outcome.
In the guanxi network initiating stage, the presence of collaborative environment will provide strategies beyond traditional control of the guanxi capital dimensions, thus, moderating the relationship between an actor’s structural, relational and cognitive dimensions and his guanxi capital opportunity.
3. Conceptual Model
To activate the guanxi capital, the actor not only has to pay attention to his shuren network which provides him with the opportunity of getting access to resources, but also needs to choose the right type of shuren who has the ability to contribute knowledge, and then he can communicate with the shuren so that trust can be built during the process. When it’s all done, the guanxi capital has been activated and is ready to facilitate knowledge exchange activities. During this process, the collaborative environment such as Electronic Knowledge Repository (EKR), Knowledge Management Systems (KMS), Social Network Services (SNS), etc., can enhance the actor’s perceptions toward the opportunity, the motivation and the ability by making it more capable for the actor to manage multiple guanxi dyadic through the development of each dimension of guanxi capital. Based on previous propositions, we develop our conceptual model (Figure 1) to illustrate the process.
Although we’ve discussed a lot on the benefits of guanxi capital to knowledge exchange, guanxi is a double-edged sword which can also bring negative effects. For example, close personal connections tend to have negative externalities on organizations when people use it for private capital, rather than organizational capital (Chen & Chen, 2009). According to Adler and Kwon (2002), after the knowledge exchange activities, the actor will evaluate the benefits and risks of the process, trying to balance them. Due to the guanxi dynamics, the actor will re-evaluate the guanxi quality toward a long-term equity guanxi relationship for knowledge exchange purpose. Therefore, we add further propositions as follows:
The knowledge exchange outcomes lead to the actor’s perceptions towards the benefits and risks of the exchange process, the evaluation of which leads to the actor’s perceptions towards his guanxi capital.
4. Conclusions
The purpose of this paper is to develop a conceptual model to elaborate the dynamic interactions between the multi-dimensions of guanxi, social capital and knowledge exchange, and how they are influenced by the collaborative online environment in the Chinese context.
By examining the dimensions of guanxi through the lens of social capital theory, we firstly found that the elements of guanxi have similarities to all three dimensions of social capital. The way guanxi capital is activated is also similar to the way social capital is activated. But the nature of guanxi capital is more dynamic. Secondly, the structural, relational and cognitive dimensions of guanxi capital are positively associated to the opportunity, motivation and ability factors to facilitate knowledge exchange activities, which can result in the contribution of information volume, information richness and information diversity. Thirdly, for actors in the stage of guanxi capital maintenance, the collaborative environment moderates the relationship between an actor’s guanxi capital opportunity, motivation and ability and his knowledge exchange outcome respectively; in the guanxi network initiating stage, the collaborative environment moderates the relationship between an actor’s guanxi capital dimensions and the opportunity, motivation and ability of knowledge exchange respectively. Lastly, guanxi capital evolved as the loop from the guanxi capital building to the evaluation of knowledge exchange outcomes continues.
In terms of how the work will progress, we plan to further substantiate the relationships in the model and then empirically test these via an experiment using a recommender system. As this paper has mapped the elements between guanxi capital and social capital, we also propose to employ social networking tools used in social capital research in the experiment, so that the outcome of knowledge exchange can become more transparent - for example, to operationalize information volume, richness and diversity.
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