The role of guanxi in buyer–supplier relationships in Chinese small- and medium-sized enterprises – a resource-based perspective

This paper examines the role of guanxi (personal relationships or connections) in buyer–supplier relationships in Chinese small- and medium-sized enterprises (SMEs), through exploratory research that gained access to companies actually using guanxi. The resource-based view provided a systematic approach for analysing the role of guanxi in terms of its potential to be a source of sustained competitive advantage. Business guanxi connections were identified as possessing the potential to be considered an organisational resource. This study identified several valuable attributes of guanxi at the organisational level. However, the guanxi-based advantage can only be sustained under certain conditions. SMEs should create an organisational environment that encourages their employees to actively establish and maintain guanxi connections within the company and beyond. However, companies in China need to recognise that firms that possess superior technological skills or capabilities have a stronger bargaining power, as they are able to deliver quality at competitive prices over the long run.


Introduction
With a population estimated to be in excess of 1.35 billion, a transition towards a market-based economy and apparently permanent positive economic growth, the People's Republic of China (PRC) is reputed to be one of the world's largest and fastest growing, emerging and promising markets (National Bureau of Statistics of China 2012). In the academic literature China is often portrayed as being a relational society, where the cultural concept of guanxi (personal relationships or connections) has a major influence on both social and business norms (Tseng, Kwan, and Cheung 1995;Styles and Ambler 2003). Rooted in the Confucian philosophy guanxi practice has been pervasive in the lifeblood of the Chinese business community for more than 2000 years. Personal networks are popular universally, but in China, they have unique, distinct ways of operation (Gu, Hung, and Tse 2008) and any business, irrespective of size, local or foreign ownership, inevitably face guanxi dynamics in China (Luo 1997a). So, while similar concepts to guanxi can be found in other cultures, we believe that the importance of guanxi relationships in Chinese social and business life deserves special attention (c.f. Standifird and Marchall 2000).
While the Chinese government has pursued its liberalisation reform and promotion of foreign investment, it has also encouraged a wide variety of privately owned small-and medium-sized enterprises (SMEs) to emerge (Carlisle and Flynn 2005). In the past decade, private SMEs have been starting to gain tremendous economic momentum and have been playing an important role in the Chinese economy (Cunningham and Rowley 2010). Particularly, they have been easing employment pressure, encouraging non-governmental investment, contributing significantly to the economy's growth and helping dispersal of the market prosperity among the broader population (Anderson et al. 2003).
The link between guanxi and SMEs appears to be driven by a pragmatic desire for advancement and organisation survival. Guanxi can be an important business tool to launch new commerce for SMEs because they often have neither a strong brand nor sufficient trust in relationships for doing their business. In addition, many Chinese SMEs face enormous handicaps such as lack of legitimacy, resources and lack of government support. In an environment such as this, guanxi becomes crucial in cultivating business relationships, managing scarcity, securing production factors, distribution channels and institutional support and for that matter the firm's survival (Xin and Pearce 1996;Carlisle and Flynn 2005). Su, Sirgy, and Littlefield (2003) suggest that SMEs are perhaps more dependent on guanxi and thus might have different needs and capacities than larger companies due to their scarce resource base. They are therefore an import area for research with regards to the application of this business tool (guanxi).
The previous academic literature has faced a scarcity of resource-based analysis with sufficient theoretical depth regarding guanxi in buyer-supplier relations from the perspective of Chinese SMEs. Adopting the resource-based view (RBV) theory, the role was examined in terms of the potential of guanxi to be considered as a source of sustained competitive advantage. Specifically, two research questions were posed for this investigation: Question 1: How does guanxi in buyer-supplier relationships act as a source of competitive advantage for Chinese SMEs?; Question 2: When is this guanxibased competitive advantage considered to be sustainable? By adopting an exploratory perspective for the research, the semi-structured and in-depth interviews with Chinese managers revealed some interesting insights and conclusions. Business guanxi connections were identified to possess the potential to serve as an organisational resource. They constitute a valuable part of the human resource and some of the connections can even be considered as strategically important for SMEs. Furthermore, this study identified several valuable attributes of guanxi at the organisational level. According to the RBV framework, guanxi can be considered as a potential source of competitive advantage. However, the guanxi-based advantage can only be sustained under certain conditions; these are explained further in this paper.
The paper is structured as follows. First, literature on the RBV and aspects of guanxi are briefly presented. This literature is used to assist in the research design, and qualitative data on China and guanxi are presented in the findings. These are then discussed and compared to findings from the literature. We finish with conclusions and suggestions for both researchers and practitioners alike.

The literature
Within this section we briefly present literature on the RBV and aspects of guanxi. This has been done to: (i) reduce the degree of crossover between the literature and discussion sections; (ii) control the word count within reasonable limits; and (iii) focus more on the 'value add' through the defined contribution of the discussion.
Business practices and concepts of relationship management differ in many regions of the world (Hofstede 1983). In the case of China, a major difference constitutes the concept of guanxi which represents an important cultural component of buyer-supplier relationships (Ambler 1994;Wong 1998). In Chinese, guanxi refers to two characters, guan and xi, meaning 'gate' and 'connection' (Wan and Ng 2013) and Cheng (2007, 81) states that 'one must pass the gate to get connected to [the] networks '. But what are the differences between guanxi and standard relationship management in western companies? In the west, business relationships are also important resources for creating opportunities. Personal relationships and connections which are similar to guanxi exist in any country although definitions do differ from the term guanxi. Cheng (2007) identifies the differences between relationship management and guanxi in terms of: (i) the personal characteristic of guanxi and the particular nature of the relationship; (ii) trust from xinyong (trust); and (iii) trust and the unique meaning of renqing (favour). Xinyong and renqing are said to direct behavioural norms in guanxi, and this is different from the western concept of relationship management in terms of the order in which transactions and relationships take place and the short-term vs. long-term nature of business transactions Geddie 2002, 2005;Sin et al. 2002).
Guanxi is therefore complex, multifaceted and the existing definitions in the literature do not capture its true nature (Fan 2002). Lovett, Simmons, and Kali (1999) and Park and Luo (2001) suggested that (i) favour, (ii) reciprocity, (iii) face, (iv) trust and (v) affection are the central dimensions of guanxi. (Table 1).
Examining a firm's competitive advantage from the RBV perspective allows emphasis of the magnitude of importance placed upon the firm's internal resources, such as capabilities associated with relational assets (Hunt 1997;Dyer and Sign 1998;Morgan and Hunt 1999;Yang 2008). A firm's resources can be perceived as strengths that a firm can use to conceive and implement its strategies (Barney 1991) and categorised as financial, physical, human and organisational assets (Barney 1991;Morgan and Hunt 1999). Guanxi might be considered as part of the firm's human resources (Tsang 1998;Fan 2002) and primarily relates to personal relations and exchanges that take place among members of guanxi networks (Fan 2002). Consequently, guanxi processes are often represented as a long-term personal investment into ones 'social capital' (Xin and Pearce 1996;Luo 1997a;Luo and Chen 1997;Tsui and Farh 1997;Nahapiet and Ghoshal 1998;Fan 2002;Standifird 2006). On the other hand, guanxi can be perceived as an organisational resource if it is utilised for the purpose of the organisational goal achievement or as a way of finding business solutions (Xin and Pearce 1996;Yeung and Tung 1996;Luo 1997a;Fock and Woo 1998;Tsang 1998;Park and Luo 2001;Gu, Hung, and Tse 2008;Standifird 2006). Guanxi can also be considered to be an organisational strategic resource (Peng and Heath 1996;Luo 1997aLuo , 1997bLuo and Chen 1997;Zhang and Keh 2010). Furthermore, resource heterogeneity and imperfect mobility represent two core elements of the RBV theory (Barney 1991). Park and Luo (2001) have empirically proven that guanxi utilisation is heterogeneous across firms and depends on the institutional, strategic and organisational settings of each organisation. Regarding resource mobility, however, guanxi that is related to human resources is argued to be mobile in nature (Luo 1997a;Fan 2002). Consequently, when an employee leaves the company, the guanxi connections leave the organisation with him/her (Fan 2002). Thus, the imperfect mobility of personal guanxi depends upon the extent to which the company can retain its staff (Wright, McMahan, and McWilliams 1994;Barney and Wright 1998;Tsang 1998). Guanxi as an organisational resource, on the other hand, has the characteristic of being imperfectly mobile (Tsang 1998).
A firm's attributes must be valuable in order to be considered as strategically important resources under the RBV (Barney 1991;Yang 2008). A review of the available literature identified seven guanxi-based value drivers. (Table 2).
Guanxi was identified as really providing value. However, investment of resources such as effort, time and money are required for the cultivation, maintaining and utilisation of guanxi relationships (Luo and Chen 1997;Fock and Woo 1998;Lovett, Simmons, and Kali 1999;Park and Luo 2001). An important feature of guanxi is therefore that it is an organisational resource which belongs to specific individuals; in this it differs from other resources that can contribute to improved performance, effectiveness and efficiency. In general terms, organisations can accumulate business resources (such as know-how, skills and capabilities) but guanxi is a mobile human-specific resource. This means that when an employee leaves the company, the guanxi connections leave the organisation with him/her (Fan 2002). Guanxi is important for SMEs and business start-ups because they often struggle to secure excellent human resources.
The RBV literature discusses a variety of isolating mechanisms, which act to preserve the sustained competitive advantage 1 . (Table 3).
The literature review revealed limited studies (one) that attempted to address guanxi from the RBV perspective. Tsang's (1998) analysis came to the conclusion that guanxi represents a necessary company resource, but as the sole success factor it is not sufficient for business success in China. However, Tsang's study faced several limitations. First of all, he did not fully apply the RBV framework for his analysis. Particularly, his analysis did not address the substitutability question. Moreover, as with many other guanxi studies, there was no distinction made between guanxi with the government and the guanxi utilised in buyer-supplier relations, which can be different in nature (Park and Luo 2001). Furthermore, Tsang also did not make the distinction between largeand small-and medium-sized companies. Finally, similar to the majority of guanxi literature, Tsang (1998) emphasised guanxi from the perspective of foreign enterprises but did not provide a focus on enterprises with a mainland Chinese background. This is an indication of the paucity of literature regarding a resource-based analysis with a sufficient theoretical depth of the role of guanxi in buyer-supplier relations in SMEs in China. Indeed, Wan and Ng (2013) in their paper focused on the significance of guanxi in relationship marketing (on perspectives of foreign banks in China) identify a lack of Guanxi also embodies reciprocity (bao) of renqing obligations by all parties involved. When one individual receives a favour, he/ she is expected to reciprocate the favour in the future. Hwang (1987); Luo (1997a); Wong et al. (2007) Face (mianzi) A key component in guanxi dynamics is defined as "… one's respect, status, and moral reputation and an image of selfdelineation in terms of approved social attributes as the recognition by others of one's social standing and situational defined position". Wong et al. (2007, 878) Personal trust (xinyong) Due to the lack of stable political and legal structures in China, personal trust (xinyong) sometimes plays a more salient role than legal contracts among Chinese businessmen. Xinyong is different than the western concept of trust; it can refer to the integrity, credibility, trustworthiness or the reputation and character of a person. Tong and Yong (1998); Yau et al. (2000); Leung et al. (2005); Wang (2007); Humphreys et al.
Affection (ganqing) The Chinese term for affection, sentiment and a measure for emotional commitment or the degree of closeness. It determines an important dimension of guanxi 'quality'. Building up ganqing requires prerequisites, such as the experience of sharing and social interactions through the process of living, working or studying together. Tong and Yong (1998); Tsang (1998) literature on relationships between guanxi and marketing/ operations and call for further research in this area. Consequently, this investigation intends to cover this research gap.

Research methodology
The aim of this research was to examine the role of guanxi in buyer-supplier relationships in Chinese SMEs. Specifically, the role was examined in terms of the potential of guanxi to be considered as a source of sustained competitive advantage. By adopting the RBV framework as a theoretical lens, two research questions were identified as appropriate: Research question 1: How does guanxi in buyer-supplier relationships act as a source of competitive advantage for Chinese SMEs? This question is primarily concerned with the analysis whether guanxi can be considered as an organisational resource and what valuable attributes it can provide to Chinese SMEs; Research question 2: When is this guanxi-based competitive advantage sustainable? This question allowed the analysis of the sustainability mechanism rareness, imperfect imitability and imperfect substitutability. A qualitative approach was considered appropriate due to the exploratory nature of the researchit enabled Guanxi mechanisms such as trust, favour and face giving reduce risks in weak and uncertain legal systems and governmental institutional support Xin and Pearce (1996) Gaining access to scarce resources A primary guanxi function which helps accommodate growth Davies et al. (1995); Xin and Pearce (1996); Pearce and Robinson (2000); Yi and Ellis (2000); Park and Luo (2001); Su, Sirgy, and Littlefield (2003) Trustworthy, richer, and more useful information The organisational guanxi network of reliable sources saves search costs, allowing partners to make more informed decisions Luo (1997a); Millington, Eberhardt, and Wilkinson (2006) Gain access to new business opportunities Facilitates 'back doors' into the business community, through preferential treatment and mutual support instead of arms length dealings Ambler (1994); (Luo 1997a); Yi and Ellis (2000) Corporate reputation enhancement Development and maintenance of a network of highquality contacts Davies et al. (1995); Yi and Ellis (2000); Standifird (2006); Fan (2007) Reduce transaction costs The potential to reduce opportunistic behaviour Luo (1997a); Standifird and Marshall (2000) Smooth transaction arrangements E.g. the smoothing of transportation arrangements, procurement of production resources, collection of payments, long-term mutual collaborations between parties Davies et al. (1995); Leung, Wong, and Wong (1996); Lee and Dawes (2005); Lee and Humphreys (2007); Humphreys et al. (2011)  Guanxi as a rare resource Businesses may face difficulties in the form of scarcity of appropriate guanxi connections Dyer and Sign (1998); Tsang (1998); Wong and Chan (1999); Yeung and Tung (1996) Guanxi as an imperfectly imitable resource. Barney (1991) presented three characteristics of a resource that make it difficult for rivals to imitate (i) unique historical path dependence Dierickx and Cool (1989); Yeung and Tung (1996); Tsang (1998); Barney (1991); Luo (1997a); Fan (2002) (ii) social complexity Dierickx and Cool (1989); Barney (1991); Barney and Hansen (1994); Yeung and Tung (1996); Park and Luo (2001); Ramasamy, Goh, and Yeung (2006); Wong et al. (2007) (iii) casual ambiguity Barney (1991); Tsang (1998) Guanxi as an imperfectly substitutable resource A review of guanxi literature revealed that the concept of substitutability and nonsubstitutability of guanxi is not addressed within the academic discussion so far Barney (1991) an investigation into areas of sociocultural life, such as guanxi relations, where the collection of quantitative data is difficult or not possible to conduct (Glaser and Strauss 1967;Bamford 2008). This method emphasises a more open approach of data collection, which provides the opportunity to acquire in-depth rather than breadth data and understanding over the complex guanxi concept (Remenyi et al. 1998;Silverman 2005). The tentative nature of the research was very much emphasised by the struggle to get managers to take part. Whilst in general conversation people were willing to give an opinion on guanxi, once a request for a more formal discussion was made many managers chose not to proceed. Indeed, prior studies showed that Chinese people are reluctant to reveal information about their personal guanxi to strangers due to its sensitive nature (Yeung and Tung 1996;Xin and Pearce 1996;Fan 2002).
To try and overcome the difficulty of finding managers willing to talk openly about the sensitive topic of guanxi, two methods were adopted. First, following the suggestion of Yeung and Tung (1996) to rely on personal contacts, managers were asked for a favour to establish an initial contact with Chinese managers in Chinese SMEs. The authors did have the restriction that they needed managers able to speak English (interestingly, this did not appear to be a problem at all), and for them to gain permission for an interview with the author (this was a problem). The second method employed relied on the so-called 'snow-balling' approach (Remenyi et al. 1998); after each interview it was explained to the interviewees the extremely difficult nature of finding Chinese managers willing and able to talk about guanxi. Some respondents were cooperative and provided access to further potential respondents. However, following up on these few recommendations and getting agreement proved are very challenging indeed. This is an area mentioned in the recommendations for future research in the conclusion section. Furthermore, in order to protect the identity of the respondents and the companies they represented, the authors had to limit the detail presented on the organisations involved. This is a recognised limitation of the transparency of the primary research but could not be done any other way.
The issues of obtaining access to willing respondents and gaining their permission to use the data collected presented real challenges. In-depth interviews therefore provided the best apparent way to elicit information and control the data gathering as well as to provide deeper insights within this obviously highly sensitive area of research (c.f. Brand and Slater 2003). Furthermore, this paper has been positioned as exploratory research from a methods perspective. To strengthen the validity of the contribution the authors asked additional respondents to recount actual examples of guanxi; we have therefore presented several concrete examples in terms of how guanxi works as a useful business tool. These are presented in Section 4.6.

Sample profile
The population addressed in this investigation is targeted at SMEs located in China with Chinese ownership. There is no one standard definition for what constitutes an SME. In the UK the Companies Act 2006 defines an SMEs as: (i) a small company that has a turnover of not more than £6.5 million, a balance sheet total of not more than £3.26 million and not more than 50 employees; (ii) a medium-sized company has a turnover of not more than £25.9 million, a balance sheet total of not more than £12.9 million and not more than 250 employees (Companies Act 2006). For this research project we have applied this definition. Table 4 outlines the main sample profile of this investigation. The interviewees and the companies are coded in letters to preserve confidentiality and anonymity. The participating companies ranged in size in terms of employees from 5 to 140 with a mean of 63. Regarding the annual turnover, all participants indicated a turnover of less than US$100 million and thus they can be considered as small-and medium-sized in nature. Further, five out of six companies were originally privately established with a history of 3-20 years. While, two of the companies belonged to the manufacturing sector (A, C), the rest of the firms (B, D, E, F) embodied mainly service providers. All of the interviewees were Chinese nationals with a gender split of onethird female and two-thirds male. Regarding the educational background, all of the participants disclosed that they have achieved a higher educational degree in Anglo-Saxon educational systems. All of the respondents were engaged in either buyer or supplier relations or both. Five out of six interviewees were senior managers and in charge of either the entire company or major departments. This majority also indicated that they possessed some degree of ownership rights in these companies.
Furthermore, to provide real-life examples of guanxi in application a secondary survey was carried out using seven additional SMEs within the Shenzhen Region; with the findings similarly coded. These companies were all Chinese owned and ranged from a pharmacy supplier with just 10 employees to a manufacturer with 45 employees. (Table 10).

Data analysis method
With the permission of the interviewees, all interviews were digitally recorded and transcribed verbatim. The analysis of the qualitative reference data was undertaken in the light of the understanding of the key issues regarding the guanxi and RBV theory identified previously in the literature review. This allowed the coding of the transcription material into categories derived from the literature, especially the RBV theory categories (Fereday and Muir-Cochrane 2006). Reliability limitations refer to the difficulty of gaining the same results if the same research procedures are repeated. E.g. the semi-structured interview method would be difficult to repeat as the naturally emerged conversations with the respondents are difficult to replicate (Maylor and Blackmon 2005). The validity limitation refers to the question as to whether the results are generalisable to a broader population (Maylor and Blackmon 2005, 363). The main limitation of this research is the small sample size of six, core, in-depth interviewees and the lack of a random selection. Nevertheless, in the case of exploratory research, it is more about gaining insightful evidence regarding attitudes towards a certain topic in order to generalise to theory rather than to population (Miles and Huberman 1994). Furthermore, there also might be a sampling bias. The sample was composed of Chinese managers who were able to speak English and possessed a western educational experience. However, this might not apply to the broader population of Chinese managers. To address this concern, following the main data collection, analysis and discussion an electronic survey was conducted involving seven employee staff in small companies within the Shenzhen Region. The results of this survey are presented, with the addition of several concrete examples of the application guanxi. Of course, all concerns regarding research methodologies cannot be directly addressed within this paper, we have therefore made suggestions for further research in the conclusion.

Findings
The RBV framework was adopted as a theoretical lens to guide the research and facilitate a systematic analysis of the role of guanxi. Interview transcripts provided a rich evidence base to cover the RBV framework categories.

Guanxi as an organisational resource
The identified themes for the potential of guanxi to be considered as an organisational resource are summarised in Table 5. All respondents indicated that within their daily business practice they rely on guanxi when a need arises, problems need to be solved or when help is needed. The common perception is that guanxi can provide a higher likelihood of being successful and achieving company goals.
All participating companies encouraged their employees to utilise their guanxi for the purpose of company goal achievement. All senior managers (B, C, D, E and F) indicated that guanxi of their employees contributes, not only to their personal value enhancement, but also to the enhancement of the company's value. Four respondents (B, C, D and E) also revealed that their companies provide incentives to their employees to utilise their guanxi. The incentives ranged from a renqing obligation, dinner with the boss, gifts and also monetary incentives. Respondent F explained: Essentially, every company is encouraging their staff to try to use their own personal guanxi. Of course they did not put it in black and white but no boss will be against this kind of guanxi. Everybody knows that in this kind of world you have to go for the guanxi otherwise you lock [yourself] the door. -Respondent F Some of the participating companies (B and D) even perceived guanxi as an important criterion of human resources in their field of occupation and thus evaluate their potential new employees on their guanxi before hiring them.
Sales people are supposed to have guanxi, because this is a part of their value. Why do we hire someone, it's because, of his personality in the first place, and in the second place, because of his or her guanxi. That is going to help a lot to promote the sales. -Respondent D Guanxi is also seen as a strategic tool for approaching new and existing customers and suppliers. All respondents said that guanxi is very important for suppliers in order to find and establish contacts with potential customers for the purpose of business expansion. Two respondents (B and E) indicated that their companies have also established a formal budget for establishing new and maintaining existing important guanxi relationships with customer companies.
Three other respondents (B, D and F) also, referred to the importance of having guanxi relationships with suppliers. Having this kind of guanxi relationships to the personnel of supplier companies allows them to gain information from suppliers quickly to achieve a safe supply of goods and smooth transactions. Interviewee B explained that some small companies could face the lack of access to goods directly from the manufacturer because of the large minimum order quantities asked by the suppliers. Here, guanxi connections help to achieve a safe supply of goods though back-door agreements.
Three interviewees (C, E and F) also highlighted that when new upper level guanxi between a customer and supplier is developed, it usually requires the involvement of higher positioned managers from the side of an SME-sized supplying company. Even more, in the case of Chinese SMEs the establishment of important guanxi connections with key account customers can mean that the owner of the supplying company gets involved in the  Table 6 summarises the evidence on value-adding benefits and the associated costs of guanxi-based buyersupplier relations. The most cited valuable attribute of guanxi-based relations is that they provide access to valuable information e.g. about the market, potential business opportunities, customers, suppliers, competitors etc., which can also result in a first-mover advantage.

Guanxi as a valuable resource
The second most cited (A, C, D, E and F) benefit refers to the enhancement of business in terms of gaining access to new deals and maintaining existing deals. Half of the respondents (B, C and D) also indicated that having the appropriate guanxi can contribute to decreasing transaction costs.
Three respondents (B, D and F) have also indicated that guanxi can reduce opportunistic behaviour from other parties. The threat of losing good quality guanxi with a business partner prevents the other party switching to a competitor. SME suppliers are also unable to secure their position once the purchasing personnel are changed at the customer company. General manager F revealed an example where his company suddenly lost a cooperation contract that lasted successfully for several years with a big foreign company. The newly assigned foreign purchasing staff just allocated the business to another supplier. However, having the appropriate upper level guanxi allowed F to prevent this loss of business. Table 6 reveals further benefits, nevertheless all interviewees were also aware of the opposing costs

Trade-off between benefits and costs
Cost is rather an investment than an expenditure A, B, C, D, E, F 6 Opportunity cost of guanxi is perceived to be high (guanxi competition) A, C, D, E, F 5 associated with guanxi practice. Participant E stated that his company spends between 2 and 5% of total revenue to build up important guanxi connections with customers and maintain existing ones. From the interviews, the costs associated with guanxi can be summarised as: (1) time; (2) financial; (3) personal effort; (4) reciprocation of favours; and (5) uncertainty over outcomes and span of time of reciprocation. However, these costs are perceived as an investment rather than expenditure. The common perception was that it is just a matter of time to when the investment was going to yield. Most respondents referred that having guanxi with the right decision-maker requires access to upper level guanxi, which is very difficult to achieve. The first difficulty lies in identifying who makes the required decisions. Respondent D explained:

Guanxi as a rare resource
In most of these companies, they don't have only one head. We should first of all make sure we are in the right direction; we are contacting the right person. Otherwise, if you have made this step wrong you may lose the opportunity to have business with this company. -Respondent D Respondent F also referred to the difficulty of identifying the right heads on lower levels: Sometimes the operation department, or the operation mangers, they also can do a lot of damage or a lot of interruptions to your supply chain. Unless you know those key persons, there is no chance you can break the icing. -Respondent F In case the key decision-maker was identified, there is still the difficulty of establishing a guanxi relationship to a person they never knew or met before.
They don't know you and you don't know them. So normally, they will not trust you and they will ignore you. -Respondent E Moreover, the guanxi competition that might have a higher 'quality' guanxi to key decision-makers might also result in a barrier for establishing this kind of influential guanxi. The common opinion was that, in a business environment such as PRC, if one does not go the guanxi way, the competition would. The opportunity costs of not having this kind of guanxi are perceived to be high. Table 8 provides a summary on the imperfectly imitable nature of business guanxi. The evidence was categorised All participants provided indications that guanxi relationships are long-term in nature. This long-term perspective on guanxi relations requires the participants to continuously invest resources such as time, money and personal effort in order to maintain and strengthen their guanxi relations. Some of the respondents (A, B, C and E) also indicated that some of their guanxi-based cooperation has existed since or even before their companies were founded. Interviewee F revealed some common social interaction activities used for strengthening guanxi:

Guanxi as an imperfectly imitable resource
In China, normally you have to communicate more with the business guanxi partner, you have to be friendly and occasionally you go to have dinner, drinking, and singing with them. This is the time to build, secure and strengthen that kind of guanxi relationships. -Respondent F Five interviewees (A, C, D, E and F) also highlighted some indications for social and cultural complexity of guanxi relationships. Guanxi is perceived to be more than a relationship as opposed to the western perspective. It has more social attributes in it, which makes it difficult to distinguish between where business objectives tend to play the role and where friendship starts to emerge. Feelings and emotions can also be a part of the guanxi-based exchange. Thus, the boundaries between business and friendship tend to be blurred. Interviewee D emphasised the attitude behind guanxi: When we maintain guanxi, business purpose is kind of subconscious. It is not a theme. We just come out and feel happy and are friends. And then in the future, when the time comes and opportunity comes for business, then we talk about business. Then we also help each other. -Respondent D The long-term perspective of guanxi-based relationships also has an impact on trust between guanxi parties. Four participants (A, C, D and E) revealed a similar pattern of trust development. If the guanxi is just built and new in nature, then there tends to be no trust between business guanxi partners. However, if it is an existing long-term guanxi, with prior cooperation and interactions, then guanxi partners usually trust each other. Trust is also perceived to be a mutual product of both parties.
The analysis also proposed that 'quality' of guanxi tends to influence the guanxi-based exchange outcome. All respondents provided indications that high 'quality' guanxi, e.g. strong and close guanxi relationships tend to contribute to a positive achievement of business objectives. Ultimately, high 'quality' guanxi connections tend also to serve as a barrier for competitors to establish high 'quality' guanxi connections and conduct exchange with key decision-makers.
Finally, respondents E and F indicated that guanxi with government officials will be differently approached than guanxi with suppliers or customers. Respondent D revealed that guanxi in different departments will be utilised for different purposes. For instance, guanxi possessed by members of the marketing department is utilised for gaining new and relevant market or competitor information, while guanxi possessed in the sales department is utilised for approaching buyers and gaining new customer contracts and those in purchasing department are primarily targeted at suppliers for identifying the relevant suppliers and securing a safe supply of goods.

Guanxi as an imperfectly substitutable resource
The interview results regarding possible guanxi substitutes are summarised in Table 9. On one hand, the majority of interviewees (A, B, C, D and E) felt that there is nothing that can directly substitute the guanxi practice. They perceived that guanxi is deeply enrooted in their culture and common practice for centuries and thus almost impossible to substitute. Respondent C expressed: It has been done since a long time ago. We cannot change it! It's 'Gen Shen Di Gu'. -Respondent C 'Gen Shen Di Gu' (根深蒂固) is a Chinese idiom and can be translated as 'it is deeply ingrained in people's mind' or 'such a culture is hard to change' (Kingsoft Corp 2010).
On the other hand, some respondents (C, E, D and F) reflected that guanxi alone is not sufficient to bring long-term success. In the end it is the product or service, which is sold to the customer for a particular price and with a particular quality. They highlighted that a fair deal, e.g. the right price and quality of a product or service, is still the main selection criterion of most customers. Even if they have some guanxi connections to a customer company they still have to deliver a high-quality product or service at a right price in order to satisfy the customer, achieve the customer's trust and secure the contracts over the long run. Some of them have concluded that sometimes guanxi relationships utilised for the purpose of acquiring contracts with the customer might be substituted by a fair deal.
One reason could be the price quote. The potential customers will choose the lower one, so that's all about business, it is not guanxi. -Respondent D Respondent F also explained under what circumstances the fair deal might be considered as a substitute: In the world there is sometimes a fair deal. If everything is black and white, everything is open and transparent then your good quality, your good service and your good price have a chance to substitute. Then you do not have this kind of guanxi advantage. -Respondent F However, the same interviewee also emphasised that if guanxi relationships are accompanying a fair deal, the guanxi benefit can always be secured.
In a fair deal, the guanxi definitely helps. This is how important the guanxi is. Without this kind of guanxi, then you might lose the business. -Respondent F

Concrete examples
In addition to the above process, a survey was carried out amongst seven people from different SMEs within the Shenzhen Region. The results from this primary research was coded in the same manner as above (see Section 3.2). Please see Table 10  The table above serves to reinforce the findings from the first-phase primary interviews. In addition the participants recounted several concrete examples that explain further how guanxi works as a useful business tool: We have a small company and it is very important to have good relationships with our workmates and we have got more choice if we have good relations with our customers and suppliers because they can go to lower price for their products than others and they can sell them at a lower price than others which means that we can earn more money. Respondent T A good relationship with a business partner can provide extra profit for the company's success because they have a strong relationship with customers, suppliers and so they can use this resource to make a strong network and making a strong network is good for the company's success.
If we don't have strong relationships we can lose the chance to make more customers. Because we just sell the same products we need the necessary guanxi relationships with customers and suppliers. For example, for the suppliers, we have strong relation with the suppliers so we can go to lower price on materials to make the product and for the customers we have strong relations with the customers, we can sell more products for them and it's a good long term development if we have good relationships with suppliers and the customers. Respondent U I come from a medical family and my role is tax manager in my company. In China, the interpretation of taxation rules may vary by different tax officers. In order to develop good guanxi with them and get most valuable interpretation of taxation rules, I take the in-charge tax officer to see doctors if necessary. Respondent V The most important thing is to increase communication, maybe some people they work for a long time they will become friends from work partners, so they will know each other and maybe they will have dinner, have lunch, they will play together so they build a good relationship with the organisation. Respondent W Guanxi means networks for me. It can help you to get things done quicker and better if you use it in the right way. I would feel the need to use my personal guanxi in daily business practice when things are getting out of control under the normal business procedure. For example, something urgent comes up and there is no way you can get it done under normal procedures. Also, I might have to use it when I know it can help me to get things done sooner.
Our company has sales team who have good relationship with customers. Therefore they use this relationship to build-up more guanxi relationships which is good for selling properties. Respondent X Guanxi connections cannot be made unless you know someone who has guanxi to the right decision makers. So the difficult part of it is finding the person who can provide you meeting chances to talk to the right decision makers. Sometimes, in order to contact with the right decision makers you may have to meet a few people prior to that. Respondent Y We should be good friends and not just workmates and have some dinner for example. Sometimes we give them some gifts for our business partners, it is very important you know. For example my workmates (customer) son might get married and we give about 10,000 RMBS. It is very important, you know, to develop a strong relationships. Respondent Z The examples stated above, from the participants, provide some very candid insights into the actual application, use, custom and practice of guanxi in China. Common perception on replaceability of guanxi Guanxi as a cultural product is difficult to replace A, B, C, D, E 5 Similar guanxi substitutes 'Quality' and closeness on guanxi as a barrier mechanism against competition* A, B, C, D, E, F 6

Dissimilar substitutes
Fair deal as potential dissimilar substitute C, E, D, F 4 *See above -Guanxi as an imperfectly imitable resource.

Discussion
Fundamentally this is a practitioner paper not conceptual one. In order to clearly add value and make a defined contribution within the confines of the necessary word limitation we have arranged the discussion around the research questions and the RBV construct.

5.1.
Research question 1: How does guanxi in buyersupplier relationships act as a source of competitive advantage for Chinese SMEs?
According to Barney's (1991) RBV framework the criteria that constitute a source of competitive advantage are based on strategically important organisational resources that possess valuable attributes.
5.1.1. Guanxi as a resource 5.1.1.1. Guanxi as an organisational resource. Similar to Fan's (2002) argument all senior managers in this study recognised that business guanxi cultivation by their employees contributes to their employees' personal value enhancement, which is similar to the notion of the investment into social capital (Luo 1997a;Tsui and Farh 1997;Nahapiet and Ghoshal 1998;Fan 2002). Moreover, some of the SMEs were identified as evaluating potential Chinese owned, Shenzhen Region T = furniture, 15 employees U = pharmacy supplier, 10 employees V = accountancy firm, 30 employees W = real estate, 25 employees X = real estate, 10 employees Y = property development, 30 employees Z = manufacturer, 45 employees Guanxi as an Organisational Resource Utilisation of guanxi contacts in daily business practice T, U, V, W, X, Y, Z 7 Encouragement for using your own personal guanxi contacts for companies' purposes U, V, X, Z 4 Guanxi as tool implementing strategies U, V, W, X, Y, Z 6 Imperfect mobility Preservation of important guanxi connections before employees leave the company T, V, W, Y, Z 5 Valuable attributes Guanxi with business partners contributes to companies' success T, U, V, W, X, Y, Z 7 Drawbacks associated with using guanxi in business practice T, U, V, W, X, Y, Z 7 Sustainability -Rareness Difficulties establishing a guanxi connection to the right decision-makers T, U, V, W, X, Y, Z 7 Lack of necessary guanxi relationships T, V, X, Y, Z 5 Sustainability -Imperfect Imitability Maintenance of guanxi relations to business partners T, U, V, W, X, Y, Z 7 Importance of trust in guanxi relationships with business partners V, W, X, Z 4 Sustainability -Imperfect Substitutability Other strategies for achieving same results as guanxi T, U, X, Y 4 Suppliers (or customers) not giving the company preferential treatment T, U, V, W, X, Y 6 employees as to whether they possess any necessary guanxi connections before hiring. Consequently, guanxi can be perceived as an important attribute of the human resource. Secondly, guanxi was also identified as an organisational resource, which is different to Fan's (2002) argument that guanxi is solely personal in nature and cannot be transferred to or sustained on the organisational level. This study strengthened the position of Park and Luo (2001) and Standifird (2006) that guanxi can be an organisational resource when it is utilised for the purpose of the organisational goal achievement or as a way of finding business solutions. All of the participating SMEs encouraged their staff to utilise their personal guanxi. Some of the companies even provided incentives to their employees for establishing important guanxi connections with the potential to generate revenue. The encouragement of the employees to establish more guanxi connections may increase the potential to get exposed to more opportunities for exchange and thus increase the value of the human resources and the company. Luo (1997a) considered business guanxi to be an organisational strategic resource. Similarly, guanxi was identified, on the one hand, as playing an important strategic role in identifying and approaching potential customers (Davies et al. 1995;Yeung and Tung 1996;Luo 1997b;Luo and Chen 1997;Fock and Woo 1998;Yi and Ellis 2000;Park and Luo 2001). As guanxi connections to customers play an important role, some of the SMEs in China also establish formal budgets for establishing and maintaining this kind of strategically important guanxi. Guanxi connections to suppliers also play a strategic role. Some of the small-sized companies rely heavily on guanxi connections in order to achieve flexible agreements with suppliers in order to secure a safe supply of goods despite a high minimum order quantity required by suppliers. This kind of guanxi reliance may also be interpreted as back-door facilitation through creating flexible agreements, long-term cooperation and surpassing arms' length dealings (Ambler 1994;Xin and Pearce 1996;Su, Sirgy, and Littlefield 2003). 5.1.1.2. Guanxi as a heterogeneous organisational resource. Similar to Park and Luo's (2001) findings, this study revealed that guanxi application is situationally dependent, heterogeneous across firms and depends on the institutional, strategic and organisational settings of each firm (Hunt 1997;Park and Luo 2001). For instance, guanxi with government officials will be differently approached than guanxi with suppliers or customers. Guanxi in different departments is utilised for different purposes.
5.1.1.3. Guanxi as an imperfectly mobile organisational resource. Fan (2002) argued that guanxi is mobile in nature and does not fulfil the RBV requirement. Yet, guanxi in this study was identified as possessing the characteristic of being imperfectly mobile when the personal guanxi connections are transferred to the organisational level. All companies participating in this study have established a similar approach described initially by Tsang (1998). By involving multiple employees in the guanxi process, guanxi relationships are transferred from the single guanxi 'gate keeper' towards multiple 'gate keepers' within the company. Consequently, when the 'gate keeper', who initially brought the guanxi connection into the firm departs, the guanxi connection or the access to it can still remain within the organisation. For strategically important guanxi connections, it is usually not enough to transfer the guanxi to other staff. Rather top management and, in case of SMEs, even the owners of the company usually engage with the guanxi process in order to secure the connection by asking the particular employee to introduce the important guanxi contact to him/her and anchor the important guanxi connection within the company.

Guanxi as a valuable resource
According to the RBV theory, company attributes must be valuable in order to be considered strategically important (Barney 1991;Yang 2008). In consensus with the academic literature, the most cited valuable attribute of business guanxi is its function for the attainment of valuable information, e.g. information about the market, potential business opportunities, customers, suppliers, competitors, etc., which can result in a first-mover advantage if the information is acquired at the right time (Davies et al. 1995;Yi and Ellis 2000). Guanxi connections were also confirmed to be useful in gaining important information about suppliers as they serve as an important and reliable source of information (Luo 1997a;Millington, Eberhardt, and Wilkinson 2006). Secondly, another important benefit refers to its potential to enhance business in terms of gaining access to new deals and maintaining existing ones (Yeung and Tung 1996;Luo 1997b;Luo and Chen 1997;Park and Luo 2001;Gu, Hung, and Tse 2008). Further, similar to Standifird and Marshall (2000) the evidence from this study indicates that having the appropriate guanxi could reduce opportunistic behaviour. SME suppliers in China are also unable to secure their position once the personnel changes at customer companies. Having the appropriate upper level guanxi, was shown to help prevent a sudden loss of business to competitors. Moreover, this study also confirmed that guanxi has the potential to reduce transaction costs (Standifird and Marshall 2000;Park and Luo 2001;Millington, Eberhardt, and Wilkinson 2006), a smoothing effect on transaction arrangements between the buying and supplying firms (Davies et al. 1995;Leung, Wong, and Wong 1996;Nassimbeni and Sartor 2006;Lee and Humphreys 2007;Humphreys et al. 2011), a potential to enhance corporate reputation through guanxi networks (Davies et al. 1995;Yi and Ellis 2000;Standifird 2006;Fan 2007) and the capacity to provide access to resources in general terms (Davies et al. 1995;Xin and Pearce 1996;Pearce and Robinson 2000;Yi and Ellis 2000;Su, Sirgy, and Littlefield 2003).
Nonetheless, guanxi processes were also identified to have opposing costs such as time input, financial cost, personal effort, the returning of favours and the bearing of uncertainty about the outcomes and time span of the return favour (Luo and Chen 1997;Fock and Woo 1998;Yi and Ellis 2000;Fan 2002). Most participants perceived these opposing costs as an investment rather than expenditure, yielding more advantages than the financial outlay. The opportunity cost of not having particular guanxi connections to buying or supplying firms were perceived to be high. The common impression was that if one does not go the guanxi way, the competition will and gain the guanxi-based advantages, thereby eroding one's potential success factor for a thriving business in China. All in all, guanxi was revealed to have the potential to be a strategically important organisational resource with valuable attributes for Chinese SMEs.

Research question 2:
When is the guanxi-based competitive advantage sustainable?
The RBV theory proposes three criteria; resource rareness, imperfect imitability and imperfect substitutability, all of which need to be fulfilled in order to prove the sustainability character (Dierickx and Cool 1989;Barney 1991;Yang 2008).

Guanxi as a rare resource
The majority of managers in this study perceived a lack of necessary guanxi relationships which is in analogy with Park and Luo's (2001) point that guanxi processes in Chinese society can be found in every corner of daily social life and businesses, and that organisations have diverse needs and capacities for cultivating their guanxi relationships. Even an experienced managing director (F) with 25 years of work experience in China expressed the lack of necessary business guanxi connections.
The difficulty lies in identifying and establishing guanxi connections with the 'gate-keeper' of the particular business guanxi with the necessary relational resources (Yeung and Tung 1996;Dyer and Sign 1998;Wong and Chan 1999). Having guanxi with the right decision-maker usually requires access to upper level guanxi, which is very difficult to achieve (Tsang 1998). Some study participants stated that it is also necessary to have guanxi connections at lower levels, especially to the operations area; decisions in this area can have an impact on the flow of goods between supplying and buying firms. On top of that, even in cases where the guanxi 'gate-keeper' was identified a difficulty persists, especially regarding the establishment of a guanxi relationship to a person one never knew or met before (Fock and Woo 1998). Moreover, the difficulty of establishing new and influential guanxi can also be traced back to the guanxi competition, which might have an existing, stronger and higher 'quality' guanxi to the same key decision-makers (Fock and Woo 1998;Yi and Ellis 2000).

Guanxi as an imperfectly imitable resource
Imperfect imitability might exist if the resource is shaped by a unique historical path, social complexity or casual ambiguity (Barney 1991). 5.2.2.1. Historical path dependence. The interview findings accentuated the long-term nature of guanxi relationships. Some of the guanxi connections may even exist from the foundation of the company or, in case of friendship, before that. Consequently, this long-term nature may be subject to what Barney (1991) termed as historical path dependencies. Competitors may face the challenging barrier to replicate this kind of historical path, e.g. sharing the same experiences, feelings and long-lasting mutual benefits, in order to establish the same 'quality' guanxi.

5.2.2.2.
Social complexity. Establishing a high 'quality' guanxi was also confirmed to be a socially complex process which requires continuous communication, face-toface interaction and a high degree of sociability in order to strengthen the connections and establish the required ganqing as well as mutual trust (Yeung and Tung 1996;Fan 2002;Ramasamy, Goh, and Yeung 2006;Wong et al. 2007;Humphreys et al. 2011).
Social and cultural complexity can also be seen in the common perception that the word 'relationship' by far does not capture the complexity and the obligatory power of guanxi as well as the various social attributes such as face giving, personal trust but also mutual ganqing (affection), which includes the feelings and emotions of the exchange partners (Tong and Yong 1998;Yau et al. 2000;Fan 2002). These social attributes make it difficult to distinguish between where business purpose tends to play a role and where friendship starts to emerge. Usually, while business purposes tend to be subconsciously present, the time during which guanxi maintenance is taking place is more considered to be a friend-to-friend interaction. Thus, in the case of longterm guanxi relationships the boundaries between a business relationship and friendship tend to be blurred. The notion of time compression diseconomies embodies the idea that the 'quality' of a one-year guanxi relationship will be inferior to the 'quality' of a ten-year relationship (Dierickx and Cool 1989;Barney 1991;Tsang 1998). Analogically, the research results proposed that the 'quality' of guanxi tends to influence the guanxibased exchange outcome. The existence of a mutual ganqing tends to contribute to a positive achievement of business objectives. If ganqing is developed, the guanxi relationship becomes closer, more dependable and valuable for both parties (Tong and Yong 1998). Ultimately, strong and high 'quality' guanxi tends also to serve as a barrier for competitors to establish the same high 'quality' guanxi and conduct exchange (Yi and Ellis 2000).
Within the literature, mutual trust was also argued to be a further social barrier mechanism (Dierickx and Cool 1989;Barney and Hansen 1994;Humphreys et al. 2011). While new guanxi tends to have no or low trust within the relationship, existing long-term guanxi, with several prior cooperations and interactions, tends to have mutual trust in it (c.f. Tong and Young 1998;Lee and Dawes 2005;Leung et al. 2005). Thus, according to Dierickx and Cool (1989) trust between guanxi partners, which is cultivated over a longer time period, can be perceived as socially complex. 5.2.2.3. Casual ambiguity. Finally, causal ambiguity exists when the link between organisational guanxi resource and a firm's sustained competitive advantage is not understood or understood imperfectly (Barney 1991). We demonstrated above that guanxi application at an organisational level is heterogeneous in nature, situationally dependent and can vary according to different organisational settings. Consequently, the social complexity and situation-specific application of guanxi at the organisational level can make it casually ambiguous; it is difficult for competitors to understand all the key factors required for cultivating, nurturing and accumulating high 'quality' guanxi with key decision-makers.

Guanxi as an imperfectly substitutable resource
Answering the sustainability question also requires analysing whether the organisational guanxi resource is subject to substitution (Barney 1991). The common perception among the interviewees was that guanxi is deeply ingrained into people's minds and into Chinese culture as a common practice of doing business for centuries (Luo 1997a;Park and Luo 2001). Such a cultural product is difficult to change or substitute. However, despite this common perception a deeper analysis of potentially similar or dissimilar substitutes was conducted. With regards to similar resource substitutes, one could refer to situations when competitors try to develop guanxi with parties similar to or even stronger than the firm's guanxi partners (Tsang 1998). Similarly, competition on guanxi was perceived in this study to move towards competing on the strength and 'quality' of guanxi that results in a barrier and the ultimate difference to the final outcome of the guanxi exchange. Thus, strong and high 'quality' guanxi, especially close guanxi with a high degree of mutual ganqing, tends to have the potential to be imperfectly substitutable and thus sustainable. Weak and distant guanxi, on the other hand, tends to be more easily substitutable through stronger guanxi and thus is less sustainable.
With respect to dissimilar substitutes, this study highlighted that guanxi alone is not sufficient to bring longterm success. In the end, it is the product or service, which is sold to the customer for a particular price and with a particular quality. Thus, the fair deal, especially the right quality at lowest price, remains the main selection criterion for most customers. Consequently, this study found that even when a supplying company has some guanxi connections to a customer company it still has to deliver a high-quality product/service at the right price to satisfy the customer, achieve the customer's trust and secure the contract over the long run. A fair deal could be considered as a dissimilar substitute for guanxi relationships to customers. This point could be analogically linked to Park and Luo's (2001) argument that firms with superior technological skills might have a stronger bargaining power and less need for guanxi relations. Here superior technological skills could be regarded as a reflection of the ability to deliver products or services at higher quality and lower prices.
Nevertheless, the authors argue that a fair deal should be considered subject to some restrictions in the business environment. A fair deal might be subject to a perfectly transparent business environment where business decisions are made on the merits of objective performance and not subject to any influence through other factors, especially relational factors, such as guanxi. However, as previously mentioned, guanxi relationships in the Chinese business environment have been common practice over the centuries (Luo 1997a;Park and Luo 2001). On top of that, where a fair deal might still be considered to substitute the guanxi relationship for the customer company, it still does not substitute the guanxi relationships to the suppliers, which is needed to achieve a safe supply of goods and facilitate back-door access to resources. It also does not substitute guanxi used for other purposes such as gaining valuable information and the resulting potential first-mover advantage, or other value-adding benefits. Where a fair deal is accompanied by guanxi relationships and is competing against similar deals, with weaker or without any guanxi relationships, the guanxibased advantage can be utilised to its full extent.
Finally, we acknowledge that both service and manufacturing companies have been included within this research and that the focus of these two groups' strategic attentions, in terms of the point of creating business success and competitive advantage, would be different. For example, it is possible that the importance of guanxi in service providers is different from that in the manufacturing sector; guanxi could be more important for service providers and for business start-ups. However, the authors believe that, in identifying the paper as practitioner-based and not fully conceptual, it makes a contri-bution through examining how guanxi works as a resource in business activities of SMEs.

Conclusions
This paper has enriched the guanxi literature with an RBV analysis of the role of guanxi in buyer-supplier relations in SMEs with a Mainland Chinese background. The research highlights the 'how' question regarding the potential of guanxi to be a source of a sustained competitive advantage and also addressed the sustainability question, which previous research failed to address.
Following the theoretical framework of RBV, the discussion revealed that guanxi within buyer-supplier relationships can be considered as a strategic organisational resource with valuable attributes and thus as a source of competitive advantage for SMEs in China. However, the guanxi-based advantage can only be sustainable under certain conditions. Especially the long-term, strong and high 'quality' guanxi connections, e.g. close guanxi, which is surrounded by mutual ganqing (affection), tends to be rare, socially complex and imperfectly substitutable. This kind of guanxi serves as an imitation and a substitution barrier for the competition and thus is sustainable in nature. However, a fair deal, e.g. the highest quality at lowest price, might have the potential to substitute guanxi with customers for purposes of business enhancement, but not other guanxi-based competitive advantages such as information gathering, gaining firstmover advantage, reducing transaction costs, etc. Thus, the guanxi-advantage, in its full extent, can only be sustained over the long-term, when it is accompanied by technical capabilities that allow the delivery of a fair deal (e.g. products or services at the right quality and the right price).
Guanxi is therefore used in daily business practice, helps implement strategies, and contributes to company success. There are drawbacks and difficulties associated with using guanxi and establishing connections to the right decision-makers; plus some suppliers/customers do not automatically give preferential treatment. But company employees appear to strive to maintain guanxi relations, despite the interesting perceptions around aspects of trust shown in the table. However, guanxi should be not considered as the ultimate business solution for everything; guanxi alone does not sell the product or service. Consequently, companies in China need to recognise that firms possessing superior technological skills or capabilities may have a stronger bargaining power (Park and Luo 2001). Superior technological capabilities can be regarded as a reflection of the ability to deliver products or services at higher quality and at a lower price, which results in a higher potential to achieve a fair deal with the customer. Thus, guanxi connections should be considered as one success factor within a portfolio, to create a sustained competitive advantage. Hence, it is the combination of success factors which make the ultimate difference. Table 11 highlights the authors' recommendations and potential implications for practitioners. SMEs need to recognise the importance of guanxi connections for the success of inter-firm relationships in China.
It should be acknowledged that this research faces some limitations commonly found in qualitative studies, and some unique to its setting. Obtaining access to willing respondents proved challenging; gaining their permission to use the data collected was an additional hardship. The small sample size and the lack of a random selection might limit the external validity and generalisability of the research findings. Moreover, the sample was composed of Chinese managers who possessed western educational experience. This might not apply to the broader population of Chinese managers in SMEs. Finally, SMEs constitute the backbone of the Chinese economy and thus deserve more attention for research. For instance, questions such as what is the role of guanxi within the corporate culture and how do guanxi relations or networks act as an information channel? Furthermore, perhaps there is a change of association between guanxi and size (or history) as time passes? Does a dependence on guanxi for business decline with the accumulation of business experiences? Is there perhaps a fundamental dynamic change of business process that affects the degree of dependence and importance of guanxi by time-series analysis (which is not econometric analysis)? These are still undiscovered areas of research within this fascinating field. Note 1. For assumed mechanisms see above, guanxi as a heterogeneous and an imperfectly mobile organisational resource.

Notes on contributors
Wladimir Wiegel is an alumnus of the University of Mannheim, Germany, the Chinese University of Hong Kong, China, Manchester Business School, United Kingdom and Shanghai Conservatory of Music, China. He worked on strategic supply topics of critical materials (e.g. rare earth metals) with the Asia-Pacific Supply Chain Management Team at BASF (China) Ltd. in Shanghai, China. Currently with Infosys Lodestone Consulting he is consulting clients on supply chain planning and optimisation topics. His interests are dedicated to Asian emerging markets, supply chain management topics such as supply chain planning, sales and operation planning, strategic global sourcing, network design, performance optimisation including business process modelling and simulations.
David Bamford is an experienced industrialist/academic with multiple publications to his name, including a co-authored book (Essential Guide to Operations Management: Concepts and Case Notes, 2010). He is a professor of Operations Management at the Business School, University of Huddersfield. His research interests include operations systems reform and review, strategic leadership and sports operations management. In 2010, he was awarded the Economic and Social Research Council (ESRC)