Most managers understand at some level the wisdom of the adage, "It's not what you know; it's who you know." Indeed, building the right professional relationships is critical for business success.
In China, relationships are even more important to getting business done. The Chinese have a term for these relationships: guanxi. Guanxi literally means connections or relations, but also refers to the socio-emotional bond that ties people who do business together. Guanxi networks tend to have significant overlap between professional and personal concerns; it is not uncommon that a valuable business contact is also a close friend.
Unlike their Chinese counterparts, American managers are much more likely to keep personal concerns and business separate. Mixing the two is often considered unprofessional.
That makes the contrast between business relationships in China and the United States a rich field of study and one that's a specialty for Harvard Business School professor Roy Chua. Chua, a native of Singapore who speaks fluent Mandarin, draws on human psychology to better understand important social processes in business organizations.
One way to study how networking in China and the United States differ is to examine how managers from these two countries trust members of their network, an endeavor that Chua has undertaken with Columbia Business School professors Michael W. Morris and Paul Ingram.
"The ability to understand the cultural differences in how managers trust their business associates and colleagues is critical for business success in China," says Chua.
Their article, "Guanxi versus Networking: Distinctive Configurations of Affect- and Cognition-based Trust in the Networks of Chinese and American Managers," will appear in a forthcoming issue of the Journal of International Business Studies.
We asked Chua to discuss his research into professional networks and the differences between American and Chinese managers.
Q: How did you go about studying American and Chinese managers' networks?
A: Along with my collaborators, professors Michael Morris and Paul Ingram at Columbia Business School, we surveyed Executive MBA students in Beijing, Shanghai, and New York, asking them detailed questions about their professional networks.
These executives first identified individuals they considered to be important to their career and then reported whether they relied on those people for economic resources, emotional support, career guidance, or task advice. The people we surveyed also indicated the degree to which they felt two kinds of trust—affect- and cognition-based trust—toward these individuals.
Q: What's the difference between affect- and cognition-based trust?
A: Trust is a state of mind toward another person that can arise through distinct psychological processes. Cognition-based trust refers to trust "from the head"—it's a judgment based on evidence that you ought to trust this person because he or she is competent and reliable. It is a judgment that one makes from information about the other's behavior in specific situations.
In contrast, affect-based trust refers to trust from the heart, a bond that arises from one's own emotions and a sense of the other person's feelings and motives. With affect-based trust, individuals express care for the welfare of their partners and believe in the intrinsic value of such relationships. There is usually genuine emotional investment in relationships based on this type of trust, which is why they are more enduring.
Q: Why is it useful to distinguish between these two types of trust?
A: The distinction between affect- and cognition-based trust is useful because research has found that they can actually lead to different outcomes. For example, in earlier research, I found that higher affect-based trust toward one's team member generally leads to greater contribution to the team. However, when cognition-based trust is high, people start to believe that they can rely on their teammates to get work done, and actually stop working as hard.
By differentiating these two types of trust, we can also have a more nuanced view on how trust is built in business relationships.
Q: From your research, what are some of the key differences between Chinese and American managers' professional networks?
A: The central finding from my research is that affect- and cognition-based trust are more intertwined for Chinese managers than for American managers. The people Chinese managers trust with their heads are likely to be the same people they trust with their hearts.
By contrast, American managers divide their relationships more clearly. They tend to have cognition-based trust in one group of network contacts and affect-based trust in a separate group.
This is because American managers typically separate their social and work lives, possibly reflecting the influence of the Protestant work ethic tradition of separating the personal from the professional. Chinese managers have less trouble accepting that personal feelings and business decisions can commingle. One explanation is that norms for family relationships are often applied to relationships in other domains of life, such as professional or business relationships.
The other interesting finding is that the link between economic exchange and affect-based trust is much stronger for Chinese than for Americans.
Americans would limit their emotional connections with those on whom they depend for economic resources (for example, budget allocations, financing, personal loans). In fact, the presence of an economic tie decreases affect-based trust! However, Chinese culture condones the blending of business and personal relationships, and business contacts often interact very much like they would within their own family.
In fact, people who provide economic assistance (for loans, jobs, investment opportunities, etc.) are actually treated like family. The relationship becomes personalized through invitations to family events such as dinners and birthday parties. So, for Chinese managers, the presence of economic dependence in a relationship would increase affect-based trust.
Finally, I also found that in addition to Chinese networks being more tightly woven, the more embedded or connected a given network member is, the higher the cognition-based trust a Chinese manager has in him or her. There is, however, no such effect for American managers.
One reason: Chinese people tend to draw on their social networks to accomplish tasks and solve problems. They pay close attention to indirect ties—their associates' connections to third parties. Put differently, Chinese managers cultivate ties not only toward associates with the expertise or resources they need, but also toward those who are connected to these individuals.
These "connected" people are seen as instrumentally valuable not for any direct benefits they convey but rather because of what they can offer indirectly through their contacts. People judge others' connectedness partially based on the connections they can see. Therefore, Chinese managers should perceive highly embedded network members as capable of providing help.
Q: To what extent do Chinese networks contain more ties to kin and family members compared with American networks? Could that explain some of your findings?
A: Yes, I found that Chinese networks indeed tend to contain more kin-like relationships than American networks do. In my data, about 17 percent of all ties in Chinese networks are ties to kin-like individuals (that is, individuals these managers have known from a very young age), compared with 10 percent in American networks. Yet, when these kin-like ties were excluded from the analyses, the trust effects still stand.
What this tells us is that the findings regarding the differences in the patterns of trust in Chinese versus American networks are not due solely to Chinese managers having more kin or family members in their networks. Rather, Chinese managers probably simply interact with trusted work colleagues just as they would with family.
Q: What are some practical implications of your research for managers who want to build business relationships in China?
A: In Chinese societies, socio-emotional relationships are usually not cleanly separated from business ones. Thus, it is neither uncommon nor inappropriate to get business done through personal relationships. Conversely, relationships that begin as purely instrumental and task-oriented exchanges can be quickly overlaid with emotional elements.
For foreign businesspeople in China, understanding this aspect of Chinese networking can greatly reduce culture shock and frustration. For instance, Chinese business people may allow personal considerations to be factored into financial decisions and while that may be construed as corrupt in the eyes of the Westerners, that's certainly not so in the eyes of the Chinese people. The ability to understand and deal with such cultural differences is critical for business success in China.
Secondly, my research suggests that, in a Chinese business environment, the more well-connected a person is in a manager's professional network is, the more likely the manager is to trust that he or she is reliable and competent.
This form of trust is especially important because it facilitates cooperation and enhances efficiency during business transactions. Thus, when cultivating business relationships in China, a manager may want to know as many people in the Chinese counterpart's network as possible. It may not be sufficient to just interact with the person with whom you want to do business. You would need to get acquainted with the other people in this person's network because that could improve your level of perceived trustworthiness.
Couple this with the fact that affect- and cognition-based trust are highly intertwined in China, and it means that it will generally take much longer to build trusting business relationships in China than in the United States. Businesspeople must be willing to invest substantive time and effort cultivating personal relationships with their Chinese counterparts. Examples include gift exchanges, shared meals and drinks, and really getting to know each other on a personal level. It is not easy.
Q: What are you working on now?
A: I am studying the effects of multicultural networks on innovation and creativity. There is emerging research that shows that when people are exposed to cultures other than their own for a substantive period of time, they become more creative. I am interested in learning whether cultural diversity in one's social network also has the same effect and if so, why.