Does guanxi influence product performance and customer loyalty?

Abstract

Purpose This paper aims to propose and test a model examining the relationship of guanxi with new product performance and customer loyalty in the context of internationalizing small- and medium-sized enterprises (SMEs) in China. Social network theory and information processing theory provide the theoretical lenses for this research. Design/methodology/approach Guanxi with suppliers, distributors and customers is measured as a second-order construct consisting of ganqing, renqing, and xinren/xinyong. Research hypotheses are tested using survey data (n = 212) gathered in Anhui and Shandong Provinces. The data are analyzed using smart partial least squares technique. Findings The findings reinforce existing studies, which show that a locally based social network can be extended to the success of early-internationalizing SMEs. Results also suggest that the relationship between guanxi and customer loyalty is stronger when technical uncertainty is low and when market uncertainty is low rather than high. Research limitations/implications The data were gathered from the point of view of the SMEs and may not accurately reflect the perspective of the foreign customer. The findings may not generalize beyond the regions surveyed. The study does not differentiate among the type of supply chain member, and the location of the supply chain member was not measured. Practical implications Although guanxi is typically viewed as being localized within a country, guanxi with suppliers, distributors and customers can provide information and resources needed for successful export products. Second, internationalizing SMEs must understand that even though guanxi has positive impact on new product performance which directly leads to customer loyalty only when uncertainty is low. Originality/value Although guanxi has been studied, there are a limited number of empirical studies of guanxi in a supply chain context and most focus on buyers’ guanxi with suppliers. The research on guanxi with customers and distributors is also limited. This research addresses this gap by focusing on guanxi with suppliers, distributors and customers.