Sonja Opper, Lund University: "Why Risk Aversion Affects Guanxi-Activities: A Behavioral Analysis of CEOs in China" – University of Copenhagen

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Sonja Opper, Lund University: "Why Risk Aversion Affects Guanxi-Activities: A Behavioral Analysis of CEOs in China"

Abstract

Guanxi activities, broadly defined as the “use of personal relations for achieving organizational activities”, are not only pervasive in the management of business-to-government exchange but also prevail in business-to-business transactions in China. Explanations for why organizations focus so heavily on managing relationships with important referent audiences have favored a contingency perspective emphasizing a close link between the organizational environment and corporate strategic choice. This approach however, leaves much of the intra-group variation of Guanxi activities unexplained. Our study shifts attention to the importance of executive traits as a predictor of strategic choices. More specifically, our focus is on the entrepreneur’s propensity to accept risk. To explore the potential association between a manager’s general propensity to accept risk and strategic reliance on Guanxi-activities in company management, we combine well established lab-in-the field experiments with standard survey techniques. Our data set includes 700 randomly sampled company managers operating private manufacturing companies in China’s Yangzi delta region. The results show that managers, with a low tolerance for risk are more likely to refrain from Guanxi-activities. These results are robust to the inclusion of a broad set of control variables.

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