This paper explores expatriates’ ethical evaluations of and responses to guanxi in China through the lens of integrative social contracts theory. We conducted in-depth interviews with 14 expatriate managers who had spent, on average, 6.5 years working and living in China. Based on the content analysis of these interviews, we identified two different uses of guanxi: defensive and competitive. In general, the respondents found defensive guanxi moral in the Chinese context, while they considered competitive guanxi immoral. Based on our findings, we identified fair competition as the substantive hypernorm that governed most respondents’ ethical evaluations of guanxi. The study has implications for all scholars who seek to utilize integrative social contracts theory to study the relationship between informal networks and corruption in developing countries.
This is a preview of subscription content, access via your institution.
Buy single article
Instant access to the full article PDF.
Tax calculation will be finalised during checkout.
Subscribe to journal
Immediate online access to all issues from 2019. Subscription will auto renew annually.
Tax calculation will be finalised during checkout.
Ethical imperialism is sometimes called ethical universalism, because the universal standards imposed on host countries typically originate from home country standards (Horak 2018).
The insights gained from the wider field research that this study was a part of, as well as from the interviews that were conducted for this study, suggest that expatriates from Japan and Singapore face cross-cultural ethical dilemmas similar to those of Western expatriates. Although it can be argued that Japan and Singapore have more in common with China culturally and hence have practices similar to guanxi, the two countries are known to be closer to the West than China in terms of the strength of their formal governance practices. In the World Justice Project’s Rule of Law Index (2019), Singapore and Japan ranked 13th and 14th, respectively, while the US ranked 19th. Moreover, Singapore was ranked as the third cleanest country in the world in Transparency International’s Corruption Perception Index (2019), while Japan ranked 18th. Both countries were above the US in the index, which was in 22nd.
These include the rights to:
freedom of physical movement,
ownership of property,
freedom from torture,
a fair trial,
freedom of speech and association,
Ang, S. H., & Leong, S. M. (2000). Out of the mouths of babes: Business ethics and youths in Asia. Journal of Business Ethics, 28(2), 129–144.
Au, A., & Wong, D. (2000). The impact of guanxi on the ethical decision-making process of auditors: An exploratory study on Chinese CPAs in Hong Kong. Journal of Business Ethics, 28, 87–93.
Beauchamp, T. L., & Bowie, N. E. (2001). Ethical theory and business (6th ed.). Upper Saddle River, NJ: Prentice-Hall.
Brand, V., & Slater, A. (2003). Using a qualitative approach to gain insights into the business ethics experiences of Australian managers in China. Journal of Business Ethics, 45(3), 167–182.
Bu, N., & Roy, J. P. (2015). Guanxi practice and quality: A comparative analysis of Chinese managers’ business-to-business and business-to-government ties. Management and Organization Review, 11(2), 263–287.
Chen, C. C., Chen, Y. R., & Xin, K. (2004). Guanxi practices and trust in management: A procedural justice perspective. Organization Science, 15(2), 200–209.
Chen, C. C., Gaspar, J. P., Friedman, R., Newburry, W., Nippa, M. C., Xin, K., & Parente, R. (2017). Paradoxical relationships between cultural norms of particularism and attitudes toward relational favoritism: A cultural reflectivity perspective. Journal of Business Ethics, 145(1), 63–79.
Chen, Y., Friedman, R., Yu, E., & Sun, F. (2011). Examining the positive and negative effects of guanxi practices: A multi-level analysis of guanxi practices and procedural justice perceptions. Asia Pacific Journal of Management, 28(4), 715–735.
Donaldson, T. (1996). Values in tension: Ethics away from home. Harvard Business Review, 74, 48–62.
Donaldson, T. (2001). The ethical wealth of nations. Journal of Business Ethics, 31(1), 25–36.
Donaldson, T. (2008). Hedge fund ethics. Business Ethics Quarterly, 18, 405–416.
Donaldson, T., & Dunfee, T. W. (1994). Towards a unified conception of business ethics: Integrative social contracts theory. Academy of Management Review, 19, 252–284.
Donaldson, T., & Dunfee, T. W. (1999a). Ties that bind: A social contracts approach to business ethics. Boston, MA: Harvard Business School Press.
Donaldson, T., & Dunfee, T. W. (1999b). When ethics travel: The promise and peril of global business ethics. California Management Review, 41(4), 45–63.
Dunfee, T. W. (2006). A critical perspective of integrative social contracts theory: Recurring criticisms and next generation research topics. Journal of Business Ethics, 68(3), 303–328.
Dunfee, T. W., & Warren, D. E. (2001). Is guanxi ethical? A normative analysis of doing business in China. Journal of Business Ethics, 32(3), 191–204.
Fan, Y. (2002). Guanxi’s consequences: Personal gains at social cost. Journal of Business Ethics, 38, 371–380.
Fan, Y. H., Woodbine, G., & Scully, G. (2012). Guanxi and its influence on the judgments of Chinese auditors. Asia Pacific Business Review, 18(1), 83–97.
Fan, Y. H., Woodbine, G., & Scully, G. (2014). Guanxi, a two-edged sword: How Australian accounting professionals view the process within a moral framework? Managerial Auditing Journal, 29(8), 695–716.
Gilbert, D. U., & Behnam, M. (2009). Advancing integrative social contracts theory: A Habermasian perspective. Journal of Business Ethics, 89(2), 215–234.
Glac, K., & Kim, T. W. (2009). The “I” in ISCT: Normative and empirical facets of integration. Journal of Business Ethics, 88(4), 693–705.
Guo, Y., Rammal, H. G., Benson, J., Zhu, Y., & Dowling, P. J. (2018). Interpersonal relations in China: Expatriates’ perspective on the development and use of guanxi. International Business Review, 27(2), 455–464.
Han, Y., & Altman, Y. (2009). Supervisor and subordinate guanxi: A grounded investigation in the People’s Republic of China. Journal of Business Ethics, 88(1), 91–104.
Hartman, L. P., Shaw, B., & Stevenson, R. (2003). Exploring the ethics and economics of global labor standards: A challenge to integrated social contract theory. Business Ethics Quarterly, 13(2), 193–220.
Hoivik, H. V. W. (2007). East meets West: Tacit messages about business ethics in stories told by Chinese managers. Journal of Business Ethics, 74, 457–469.
Horak, S. (2018). Join in or opt out? A normative–ethical analysis of affective ties and networks in South Korea. Journal of Business Ethics, 149(1), 207–220.
Husted, B. W. (1999). A critique of the empirical methods of integrative social contracts theory. Journal of Business Ethics, 20(3), 227–235.
Jackson, M., Harrison, P., Swinburn, B., & Lawrence, M. (2015). Using a qualitative vignette to explore a complex public health issue. Qualitative Health Research, 25(10), 1395–1409.
Leung, T. K., Wong, Y. H., & Wong, S. (1996). A study of Hong Kong Businessmen’s perceptions of the role “Guanxi” in the People’s Republic of China. Journal of Business Ethics, 15(7), 749–758.
Liu, J., Wang, Y., & Wu, L. (2011). The effect of guanxi on audit quality in China. Journal of Business Ethics, 103(4), 621–638.
Lo, C. (2018). China’s anti-corruption war – progress, outlook and implications. Hong Kong: BNP Paribas Asset Management.
McCracken, G. (1988). The long interview. Newbury Park, CA: Sage.
Millington, A., Eberhardt, M., & Wilkinson, B. (2005). Gift giving, guanxi and illicit payments in buyer–supplier relations in China: Analysing the experience of UK companies. Journal of Business Ethics, 57(3), 255–268.
New York Times. (2013). On defensive, JPMorgan hired China’s elite. Retrieved February 12, 2019, from https://dealbook.nytimes.com/2013/12/29/on-defensive-jpmorgan-hired-chinas-elite/.
Nolan, J. (2011). Good guanxi and bad guanxi: Western bankers and the role of network practices in institutional change in China. The International Journal of Human Resource Management, 22(16), 3357–3372.
Park, S. H., & Luo, Y. (2001). Guanxi and organizational dynamics: Organizational networking in Chinese firms. Strategic Management Journal, 22(5), 455–477.
Peng, M. W., & Heath, P. S. (1996). The growth of the firm in planned economies in transition: Institutions, organizations, and strategic choice. Academy of Management Review, 21(2), 492–528.
Peng, M. W., & Luo, Y. (2000). Managerial ties and firm performance in a transition economy: The nature of a micro-macro link. Academy of Management Journal, 43(3), 486–501.
Phillips, R. A., & Johnson-Cramer, M. E. (2006). Ties that unwind: Dynamism in integrative social contracts theory. Journal of Business Ethics, 68(3), 283–302.
Provis, C. (2008). Guanxi and conflicts of interest. Journal of Business Ethics, 79(1–2), 57–68.
Radavoi, C. N., & Bian, Y. (2016). Home countries and transnational bribery: China’s changing approach. China and WTO Review, 2(1), 7–32.
Rowan, J. R. (2001). How binding the ties? Business ethics as integrative social contracts. Business Ethics Quarterly, 11(2), 379–390.
Scherer, A. G. (2015). Can hypernorms be justified? Insights from a discourse–ethical perspective. Business Ethics Quarterly, 25(4), 489–516.
Selmier, W. T. (2014). Writing the social contract: Integrating the UN Global Compact into mining CSR. Beyond the UN Global Compact: Institutions and multinationals social, labour and environmental auto-regulations, Emerald Publishing (2015).
Shaw, B. (2000). Book review dialogue: Ties that bind. American Business Law Journal, 37(3), 563–578.
Soule, E. (2002). Managerial moral strategies—In search of a few good principles. Academy of Management Review, 27(1), 114–124.
Spicer, A., Dunfee, T. W., & Bailey, W. J. (2004). Does national context matter in ethical decision making? An empirical test of integrative social contracts theory. Academy of Management Journal, 47(4), 610–620.
Su, C., & Littlefield, J. E. (2001). Entering guanxi: A business ethical dilemma in mainland China? Journal of Business Ethics, 32(1), 1–12.
Tan, D., & Snell, R. S. (2002). The third eye: Exploring guanxi and relational morality in the workplace. Journal of Business Ethics, 41, 361–384.
Transparency International. (2019). Corruption perceptions index 2018. Global corruption report 2018 (pp. 237–239). Berlin: Transparency International.
Van Oosterhout, J., Heugens, P. P., & Kaptein, M. (2006). The internal morality of contracting: Advancing the contractualist endeavor in business ethics. Academy of Management Review, 31(3), 521–539.
Warren, D. E., Dunfee, T. W., & Li, N. (2004). Social exchange in China: The double-edged sword of guanxi. Journal of Business Ethics, 55, 355–372.
Witt, M. A., & Redding, G. (2009). Culture, meaning, and institutions: Executive rationale in Germany and Japan. Journal of International Business Studies, 40(5), 859–885.
World Justice Project. (2019). Rule of law index 2017–2018. Washington DC: The World Justice Project.
Xin, K. R., & Pearce, J. L. (1996). Guanxi: Connections as substitutes for formal institutional support. Academy of Management Journal, 39, 1641–1658.
Zhang, L., Deng, Y., & Wang, Q. (2014). An exploratory study of Chinese motives for building supervisor–subordinate guanxi. Journal of Business Ethics, 124(4), 659–675.
Dr. Tolga Ulusemre thanks Dr. William Rhey and Dr. Harm-Jan Steenhuis, the former Dean and the current Associate Dean of the College of Business at Hawaii Pacific University, respectively, for their encouragement and support.
This study was funded by a SPARC Graduate Fellowship from the Office of the Vice President for Research at the University of South Carolina.
Conflict of interest
The authors declare that they have no conflicts of interest.
All procedures performed in studies involving human participants were in accordance with the ethical standards of the institutional and/or national research committee and with the 1964 Helsinki declaration and its later amendments or comparable ethical standards.
Informed consent was obtained from all individual participants included in the study.
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
About this article
Cite this article
Ulusemre, T., Fang, X. How do Expatriate Managers Draw the Boundaries of Moral Free Space in the Case of Guanxi?. J Bus Ethics (2021). https://doi.org/10.1007/s10551-020-04720-0
- Informal networks
- International business ethics
- Integrative social contracts theory