Chinese Guanxi versus Russian Swjasi

When searching for a good topic for my blog contribution I came across an article in HBR (1) dealing with a comparison of the networks of Chinese and Russian entrepreneurs. The author Bat Batjargal represents the results of his study evaluating ‘differences in the nature’ of the networks.

Mr. Batjargal characterizes the Chinese networks as those with higher density, higher trust small size networks. The author explains this by a grade of institutionalization (availability of procedures and organizations) and the kind of mentality. He sees China as a country with growing institutionalization. This provides a growing social stability. In addition to this, certain government restrictions reduce the mobility of the entrepreneurs. So the Chinese have smaller networks consisting of ‘family members, friends and colleagues’. In dense networks people are better connected with each other and seem to have entry barriers. The author speaks here about guanxi, saying “the rules of guanxi (informal connections) create barriers to network membership”. The Chinese way of thinking is concrete, characterized by affinity to harmony and balance, so the author.

The Russian networks represent the opposite, i.e. lower density, lower trust and larger size networks. The author explains this as follows. The institutions which used to execute a regulatory function of soviet government continually disappeared during the last 15 years. Low grade of institutionalization forces the entrepreneurs to build and strengthen their networks. Due to the mobility of the entrepreneurs the networks are larger, looser, the entry barriers are lower, as well as the level of trust. According to Bat Batjargal the Russians tend to be abstract thinker. They are quite comfortable to accept existence of contrary ideas.
I found the idea of comparison of the networks belonging to such different cultures very interesting, the way the author chooses the characteristics and performs his analysis quite persuasive.

I tried to imagine, how the entrepreneurs of such different networks and mentality do their business with each other. How they build the intercultural connections between their such a completely different networks. How challenging it might be for a Russian entrepreneur to enter a Chinese network, establish and maintain trust. This could be an interesting topic for a further, deeper investigation.

Agreeing with the results of Mr. Batjargal’s analysis concerning the part dealing with Russian networks I thought that analyzing the differences is a more thankful field. There must be also points of intersection, which may deliver some interesting insights. To my opinion, not only differences, but also certain common features exist between the Chinese and Russian entrepreneurial networks. So I tried to look for similarities.

The function of the social networks in both cases is to protect the group interests and to be able to resist the challenges of the entrepreneurial reality. This seems to be not the only point which both groups share. Discussion about Guanxi in this blog as a cultural phenomenon of “avoiding close Guanxi with outsiders of the family” (2) and mentioning Guanxi once again by Mr. Batjargal in his article (1) made me think about similar phenomenon existing in Russian networks in the soviet time and nowadays. The understanding and handling of the concept was similar in the vertical scale of connection and it was and is different in the horizontal dimension.
I come first to speak about the horizontal dimension of the phenomenon. The Russian ‘Guanxi’ was/is called Swjasi. A well-connected person, a man with ‘swjasi’ was a quite popular and appreciated member of a community in a soviet time (and is sill today). He could get almost everything and establish his life and the life of the members of his network according to the their perception. As you may know, under the soviet state-directed economy it was difficult to buy a certain range of products. It was a minor problem to pay these ‘rare’ products, the problem was to get access to buying them, e.g. to buy a car people waited sometimes for years. To avoid such situations, people searched for a connection to a man with ‘swjasi’. Here is the first difference to the Chinese Guanxi. The people looked for a well connected man and asked for a favor. Their motivation was to get a desired product or service. In such kind of networks certain entry barriers existed, they were defined by hierarchy levels or social status. Daring to ask for a favor was connected to the social status of the favor seeker. If his (favor seeker) connections and estimated value of repayment were strong enough, his wish was fulfilled in sometimes very short period of time. Otherwise a well connected man would not bother to do a favor to somebody, who, according to his estimation was not in the position to repay him on the same level (vertical differentiation according to R. Hanneman and M.Riddle), (4). The degree of estimated repayment should be comparable. This way the well connected people secured a repayment on the appropriate level. I define it as difference number two. The repayment was clearly required. Even more, it was sometimes discussed on thee early stage, when agreeing to deliver a favor to a favor seeker. If it was not quite clear to the point of agreement over a seeker favor, what the repayment should be, the social status of the seeker the warrantor of the appropriate repayment. A small example to illustrate this. A man with a good social status, a doctor, had as a rule connections in his professional field. He could ensure quick access to other doctors without need of waiting hours at the reception desk, which was the case for people without connections to a doctor. Another man, who works in the purchasing department can give a doctor an access to a variety of foods, which are not available for sale in usual supermarkets. So a doctor delivers a quick visit service to any doctor requested by a purchaser, as a repayment he gets foods for his family in the variety and quantity which outsider of the network do not have. Both of them consider each other to be on an appropriate social and are clear about possibilities of each other, so the repayment on the appropriate level is ensured. This connection enjoys long years of fruitful collaboration till one of them dies. No social dilemma of repayment. All important details are clear in advance.

This concept of ‘swjasi’ exist also now days. It has undergone certain modifications due to changes in the society. The level of institutionalization decreased, the social certainty, as it was the case in the soviet time in terms of certainty of getting working place according to qualification and corresponding living standard, is not existent any more. A survey done by Ruta Aidis, SSEES, University College London and FEE, University of Amsterdam andSaul Estrin, London Business School and IZA Bonn (3) reveals a “limited effectiveness of Russia’s networks for supporting entrepreneurial activity in its weak institutional environment.” But the core principle of ‘swjasi’ stayed the same. It does good to be well connected. Russian ‘swjasi’ function also in larger size networks with lower density and lower trust. The receiver of a favor do not consider themselves under a kind of pressure to repay the favor as soon as possible. The receiver would just ‘save’ a credit to the account of this network member and wait till he gets a chance to repay. This kind of understanding does not create a social pressure, like it is the case in the Chinese culture. The people do not tend to avoid connections. They accept favors as long as this happens on the same level.
As soon as it becomes vertical, i.e a favor seeker from a lower social level tasks for a favor somebody from a higher social level, then the things start to look a bit Chinese, i.e. it becomes more similar to the Chinese perception of Guanxi. The same reluctance to accept a favor request and also the reluctance to accept the repayment due to percepted inappropriate level of repayment(5).
In conclusion, I would like to come back to the topic of the HBR article mentioned above. The purpose of this article has a purely practical approach. Knowing differences in cultures and underlying concepts of networks makes it easier to find an appropriate way when trying to establish connections in the corresponding environments.

Sources:
(1) http://hbr.harvardbusiness.org/2008/10/the-difference-between-chinese-and-russian-entrepreneurs/ar/1
(2) http://crtunnard.blogspot.com/2009/11/leader-with-or-without-social-network.html
(3) http://ideas.repec.org/p/iza/izadps/dp2161.html
(4) Robert A. Hanneman and Mark Riddle, “Introduction to social network methods”. Readings delivered to the Course Social Networking at HHL
(5) Empirical research through conversations with entrepreneurs in current Russia, people having their working lives under soviet regime and my own memories.
http://www.life123.com/parenting/tweens-teens/social-networking/advantages-of-social-networking.shtml