Key Drivers to Developing Guanxi in China for Taiwanese Small to Medium Sized Firms

As Chinese economy has become one of the world’s economic powerhouse, research on guanxi, social or business ties in China, has been gaining ground in business research. The study is couched in the theoretical framework of social embeddedness in which the flows of information, resources, and opportunities occur across recognized members of a social network to create mutual benefits. This study empirically tests the major impetus for Taiwanese small to medium sized firms (SMEs) to utilize guanxi networks with business community, local governments, and the central government in China. The study results indicate the extent to which Tawanese firms utilize different types of guanxi differ by firm characteristics (i.e., resources, capabilities, and entry mode) and market factors (i.e., market stability and competition).