Guanxi refers to the durable social connections and networks a firm uses to exchange favors for organizational purposes. This study examines how and when guanxi operates as a governance mechanism that influences firm marketing competence and performance in the transitional economy of China. Drawing on social capital theory, the authors propose an integrative framework that unbundles the benefits and risks of guanxi and delineates the organizational processes to internalize guanxi as a corporate core competence. The authors surveyed senior executives in 282 firms in China's consumer products industries. The findings confirm guanxi's direct effects on market performance and its indirect effects mediated through channel capability and responsive capability. The authors also confirm that technological turbulence and competition intensity can be effective structure-loosening forces, thus reducing the governance effects of guanxi. The findings suggest that firms can improve market access and growth through guanxi networks, but managers need to capitalize on them from the personal to the corporate level. In addition, managers should be aware of guanxi's dark sides, which include reciprocal obligations and collective blindness. This study shows that personal networks are popular universally, but in China, they have unique, distinct ways of operation.

When Does Guanxi Matter? Issues of Capitalization and Its Dark SidesGuanxi refers to the durable social connections and networks a firm uses to exchange favors for organizational purposes. This study examines how and when guanxi operates as a governance mechanism that influences firm marketing competence and performance in the transitional economy of China. Drawing on social capital theory, the authors propose an integrative framework that unbundles the benefits and risks of guanxi and delineates the organizational processes to internalize guanxi as a corporate core competence. The authors surveyed senior executives in 282 firms in China's consumer products industries. The findings confirm guanxi's direct effects on market performance and its indirect effects mediated through channel capability and responsive capability. The authors also confirm that technological turbulence and competition intensity can be effective structure-loosening forces, thus reducing the governance effects of guanxi. The findings suggest that firms can improve market access and growth through guanxi networks, but managers need to capitalize on them from the personal to the corporate level. In addition, managers should be aware of guanxi's dark sides, which include reciprocal obligations and collective blindness. This study shows that personal networks are popular universally, but in China, they have unique, distinct ways of operation.

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Research in international advertising has often taken a dichotomized approach, as exemplified by the global standardization vs localization debate. It is assumed under the standardization approach that the globalization process will absorb different national cultures into a global commercial culture, such that standardized advertising should be preferred. The current research argues that the dichotomization approach may have oversimplified the way consumers read and interpret ad images. We postulate that consumers in a transitional economy apply a variety of reading approaches, including different cultural interpretive strategies and self-referencing, to absorb global images into their cultural and consumption schemas. This is commonly referred to as glocalization. We developed a typology of modern women images in Chinese magazine advertising, potential interpretive strategies, and self-referencing responses in this research. Results of a content analysis and a reader response study support our postulations. Implications are discussed. Journal of International Business Studies (2007) 38, 1034–1051. doi:10.1057/palgrave.jibs.8400303