Negative externalities of close guanxi within organizations

Chao C. Chen, Xiao Ping Chen

Research output: Contribution to journalArticlepeer-review

86 Scopus citations


In this conceptual article we present a critical analysis of close guanxi, i.e., close personal connections, in terms of their negative externalities on organizations. We adopt a social dilemma perspective and examine how close guanxi parties, while cooperative toward each other, may nevertheless defect against the organization, causing negative externalities. We contend that relationalism exacerbates such negative effects of close guanxi and propose various institutional mechanisms and individual variables that can reduce them. Finally, we discuss research and practical implications of solving social dilemmas of close guanxi in Chinese organizations and strong ties in Western organizations.

Original languageEnglish (US)
Pages (from-to)37-53
Number of pages17
JournalAsia Pacific Journal of Management
Issue number1
StatePublished - Mar 2009

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Economics, Econometrics and Finance (miscellaneous)
  • Strategy and Management


  • Favor exchanges
  • Guanxi
  • Individualism relationalism and collectivism
  • Negative externality
  • Organizational social capital
  • Social dilemma
  • Universalism-particularism


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