Guanxi: Connections As Substitutes for Formal Institutional Support

Abstract

Interview data from China are used to test an argument that executives develop personal connections in societies with underdeveloped legal support for private businesses. In China, such connections are called guanxi . An underdeveloped legal framework makes private-company executives more dependent on guanxi than executives in state-owned or collective-hybrid companies. Compared to the other executives, private-company executives considered business connections more important, depended more on connections for protection, had more government connections, gave more unreciprocated gifts, and trusted their connections more.