Relationship Marketing Versus Guanxi

Introduction 

Previous studies have explored the change from traditional mixed marketing to a relationship marketing approach in the service industry (Grönroos, 2007; Halinen, 1997; Webster, 1992). Several studies have also demonstrated that a relationship marketing approach highly benefits professional services (Halinen, 1997; Karantinou & Hogg, 2001; Woo & Leelapanyalert, 2014), e.g., advertising agencies, solicitor firms, and management consultancies. Professional service firms (PSFs) attract much attention from organizational theorists as they are presumed to be distinct from other types of corporations (Von Nordenflycht, 2010). The significance of relationship marketing practice is that clients are not proficient at evaluating professional services when making a purchase commitment owing to the lack of advanced knowledge, expertise, or experience, especially in terms of PSF services (Sharma & Patterson, 1999; Shemwell, Yavas, & Bilgin, 1998). Studies by Woo and Leelapanyalert (2014) and Karantinou and Hogg (2001) have established the following reasons that professional service companies generally tend to take relationship marketing seriously: The rapidly changing market (Cravens & Piercy, 1994), the risky nature of their products (Mitchell, 1994), the fact that service evaluation is heavily dependent on credentials (Barnes & Howlett 1998), the frequency of competition (Barry & McNeilly, 2003), and the decline in credibility for professional services (Karantinou & Hogg, 2001). To be more precise, recent studies have shown that service providers now are more likely to prioritize building, maintaining, and enhancing long-term relationships with their clients (Eisingerich & Bell, 2007; Nitzan & Libai, 2011), and further, that doing so improves their market share (Karantinou & Hogg, 2001) and profits (Barry, Dion, & Johnson, 2008; Liang, Wang, & Farquhar, 2009; Sin, Tse, Yau, Lee, & Chow, 2002).

There is a wealth of literature on relationship marketing, especially for PSFs, specific to Western society; in Western countries, in fact, relationships are commonly considered an inextricable component of the tradition of professionalism (Hall, 1968; Snizek, 1972; Boyt, Lusch, & Naylor, 2001). Relationship marketing approaches are also regarded as a vital component for successful business in China, where the uniqueness of traditional Asian culture makes the direct transfer of Western relationship marketing methods into China or other Asian communities somewhat difficult (Davies, Leung, Luk, & Wong, 1995; Wang, 2007; Yau, Lee, Chow, Sin, & Tse, 2000). Guanxi, a concept embedded in the Confucian philosophy, has garnered considerable attention from both Chinese and Western academia and is often equated with the concept of relationship marketing or networking (Zhang & Zhang, 2006); current studies have shown that guanxi does indeed share certain characteristics with modern Western networking and relationship marketing (Tomás Gómez Arias, 1998; Warren, Dunfee, & Li, 2004). In general, guanxi refers to “a network of informal interpersonal relationships and exchanges of favors established for the purpose of conducting business activities throughout China and East Asia” (Lovett, Simmons, & Kali, 1999). Some scholars have assumed that China’s integration into the global economy would inevitably lead to a reduction in the influence of guanxi in its business practices (Fan, 2002; Guthries, 1998; Nolan, 2011), but the overwhelming majority of empirical studies show that guanxi will continue to be an important factor in Chinese society well into the future (Kudamatsu & Seim, 2015; Michelson, 2007; Tian & Nan, 2016). Ambler, Witzel and Xi’s study even describe guanxi as “the modus operandi of Chinese business” (2009). Earlier studies have shown that guanxi possesses a positive and profound effect on the performance of a corporation by enhancing competitive advantage and reducing transaction costs (Tsang, 1998; Standifird & Marshall, 2000; Xin & Pearce, 1996). Several previous studies as well focused on the ethics associated with guanxi; critics both Chinese and Western regard guanxi as an unethical conceptually or at least related to unethical behavior, bureaucratic corruption, and bribery (Chan, Cheng, & Szeto, 2002; Dunfee & Warren, 2001; Lovett, Simmons, & Kali, 1999). Huang (2000) and Hwang’s (1987) studies also pointed out that gao guanxi in Chinese context and in terms of exploitative human relations are based on philosophical and cultural backgrounds. In studies on East Asia, scholars have proven that a personal influence model or gao guanxi of public relations unequivocally exists. Gao guanxi involves the exploitation of personal relations or networks, an activity that members of disadvantaged classes often use to associate themselves with power and to solve logistical or daily-life problems (Huang, 2000; Hwang, 1987). Huang (2000) suggested that gao guanxi is frequently related to unethical and unprofessional behavior, and a number of other researchers have suggested that ethical problems have considerable positive influence on the public relations industry (Bivins 1987; Han, Park, & Jeong, 2013; Huang, 2011; Ki, Chio, & Lee, 2012; Ki & Kim, 2012; Taylor & Yang, 2015; Pratt & Rentner, 1989). Because the main function of public relations is to maintain a mutually beneficial relationship between clients and stakeholders, it is difficult to judge which side public relations practitioners should take when they attempt to balance the interests of their affiliated firms and the public interest (Han, Park & Jeong, 2013).