The development of industrial buyer-seller relationships in a Chinese context
Research output: Book/Report › Doctoral thesis › Monograph
|Place of Publication||Tampere|
|Publisher||Tampere University of Technology|
|Publication status||Published - 2010|
|Publication type||G4 Doctoral dissertation (monograph)|
|Name||Tampereen teknillinen yliopisto. Julkaisu|
|Publisher||Tampere University of Technology|
Studies concerning industrial buyer-seller relationships have focused on the Western world. However, when conducting business in, for example, China, one should acknowledge the role guanxi, briefly translated as connections, plays in the society. In China, relationships are not limited to the buyer and seller, but governmental officials, customs officials, and trade associations also influence the smoothness of the business activities of the companies.
This study explores the manner in which industrial buyer-seller relationships develop in a Chinese context between a China-based buyer and a Finnish seller with presence in the Chinese market. The main research question of the study is: How do industrial buyer-seller relationships develop in a Chinese context? This question is divided into three research subquestions: (1) How does the relationship between a Chinese industrial buyer and a Finnish industrial seller develop? (2) How does the relationship of a Chinese industrial buyer and a Finnish industrial seller develop according to the current industrial buyer-seller relational process models? and (3) How does the relationship of a Chinese industrial buyer and a Finnish industrial seller develop based on the current development models of guanxi?
In order to answer the research questions, an action-analytical approach was chosen. The research was conducted as an inductive multiple case study. Four case relationships were studied: (1) a former Sino-British joint venture as the buyer and a Finnish seller based in China, (2) a Hongkongese buyer and a former Asian-Finnish joint venture as the seller, (3) a Chinese distributor as the buyer and a Finnish seller based in China, and (4) a Chinese subsidiary of an originally U.S.-based parent company as the buyer and a Finnish seller based in China. The companies participating in the four case relationships vary with regard to industrial type and international experience. The commonalities are that all the Finnish sellers are based in the Greater Shanghai area providing both products and services and all except one of the buyers have a plant in mainland China.
From the empirical and theoretical data, it was noted that the development of successful industrial buyer-seller relationships in China follows a common path for the first three states, which was depicted in a framework. Firstly, one of the actors needs to acknowledge the other in the Searching State. If the two parties do not share common background, they remain as outsiders to each other, existing in each other’s tertiary network with only instrumental ties. Otherwise, the actors are already associates within each other’s secondary networks with both instrumental and personal ties. Secondly, the actor contacts the prospective business party and tries to attract the other by, for example, having a local plant and R&D center. As the parties get to know each other more, the parties move to each other’s secondary networks as outsiders. The ties are now mixed, instead of only instrumental. If the parties are confident enough in each other, first orders are made and delivered. Thirdly, the relationship between the actors will continue to grow if the first order is handled well. The company representatives remain in contact at least at a biannual rate or more preferably at a bimonthly rate, and possibly new orders are made. As the parties trust each other more, they become associates instead of only outsiders. If the actors had a previous mutual background, they may have remained as associates in each other’s secondary networks with mixed ties. From this point onwards, the relationship may develop in any manner through different middle states or it may end.
Another main finding is that the Dormant or Inert State of relationships, which was previously considered to be only an end state, should be seen as a hybrid state being both a middle state and an end state. The relational actors may choose to have a quiet period in the relationship due to the inability of either to contribute to the relationship during a certain period, although they see a prosperous future for the relationship in a couple of years. The actors, hence, do not decide to end the relationship but just to have a short break from it.
Government officials and customs officials may affect the relationship by causing a slowdown for no apparent reason. Hence, it is important to cultivate and maintain relationships with these actors. However, as such they do not participate in the particular industrial buyer-seller relationships. Overall, the time in which the relationships remain in certain states may be longer in China than in the West due to, for example, bureaucratic issues in both the government and the organizational culture of the local companies.