Relationship Development of Foreign Firms Operating in China

Abstract

In a networked market, firms build and develop their relationships with surrounding exchange partners. Despite extensive research on relationships, there is still great potential for researchers to undertake a novel approach to address issues in the field. This study explores the relationship development process of foreign firms operating in China. A fundamental claim of the study is that although the economic and social contents in business relationships are outlined in the extant literature, empirical research treating them as distinguishable and examining them in a separate manner remains uncommon. In response to this, a two-dimensional view is presented to understand relationships and their development processes, by analysing the economic and social aspects separately. Particularly, the study focuses on comparisons between Asian firms and Western firms, between small and large firms, and between manufacturing and service firms, and investigates their differences in developing the economic and social dimensions in the relationship development context. The study contains two phases, Phase 1 and Phase 2, undertaking qualitative and quantitative approaches, respectively. In Phase 1, the two-dimensional view is examined in the Chinese setting, and results show that foreign firms put different emphases on the economic and social aspects in developing their local relationships; in Phase 2, it is found that some of the underlying assumptions from the literature that are associated with the three comparisons noted above need to be reconsidered. For example, Western foreign firms appear to emphasise the social aspect of their relationships more than their Asian counterpart at the start of the relationship. Similarly, larger firms and manufacturing firms nurture social content more than their smaller and service counterparts, respectively. These findings are contrary to some of the accepted orthodoxies in regard to firms' relationship development. The results from these two phases respond to the two research questions underpinning the study: 1) Do foreign firms operating in China emphasise their economic ties and social bonds differently in developing business relationships? 2) Are there any differences in the relationship development process of firms that have different nationality and size, and which operate in different industry sectors, with respect to the economic ties and social bonds? If yes, then what are these differences? Discussion of the results for these two questions ties back to the broad research problem of the study – how do foreign firms develop their business relationships in China with local actors? In presenting the findings and insights, the study contributes to the literature in a number of ways that are outlined in the thesis. Most notably, it makes a contribution to the relationship literature, by proposing and confirming the two-dimensional approach to relationship formation and development. Secondly, by exploring foreign firms' relationships in China, the study contributes to the international business literature, providing insights into differences between different types of foreign firms.