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The transaction cost advantage of guanxi-based business practices

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  • Standifird, Stephen S.
  • Marshall, R. Scott

Abstract

The purpose of this paper is to provide a theoretical explanation of the perpetuation of China's guanxi-based business practices. As a complement to the social embeddedness- and resource-based explanations, we seek to demonstrate the perseverance and relevance of guanxi in terms of the transaction cost advantages it offers. Specifically, we argue that guanxi-based business practices offer certain transaction cost advantages over existing structural alternatives identified in transaction cost theory. Where the guanxi network is well developed, the transaction cost advantages of guanxi-based exchange are sufficient to warrant the integration of guanxi- and market-based exchange mechanisms.

Suggested Citation

  • Standifird, Stephen S. & Marshall, R. Scott, 2000. "The transaction cost advantage of guanxi-based business practices," Journal of World Business, Elsevier, vol. 35(1), pages 21-42, April.
    • Handle: RePEc:eee:worbus:v:35:y:2000:i:1:p:21-42
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    References listed on IDEAS

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    1. Björkman, Ingmar & Kock, Sören, 1995. "Social relationships and business networks: The case of Western companies in China," International Business Review, Elsevier, vol. 4(4), pages 519-535.
    2. Charles W. L. Hill, 1995. "National Institutional Structures, Transaction Cost Economizing and Competitive Advantage: The Case of Japan," Organization Science, INFORMS, vol. 6(1), pages 119-131, February.
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