A model of networking by privately owned businesses within mainland China

Abstract

Within China, the transition from state ownership has seen the growth of Chinese-based, small and medium, privately owned businesses (POBs). Published research about the business behaviour of the POBs appears lacking and, within this broad domain, their networking behaviour and its links to their performance have been subject to only limited study. Drawing on relevant Western and Chinese literature pertaining to business networks, this study develops a model that seeks to explain networking as factors of coordinated strategic actions by the POBs and how such actions impact on their performance. The model's purpose is to ascertain whether the POBs engage in networking, to determine the main factors of this networking behaviour, and to examine whether and how this networking behaviour impacts on their performance. This model is tested using a sample of POBs drawn from the Shanghai and Zhejiang regions. This study employed a mixed-methods methodology. The measurement model was based on the outcome of a qualitative study which involved in-depth interviews with five POB managers. The qualitative study ensured linguistic equivalence between the English and Chinese versions of the survey instrument, as well as further identifying the POBs' common networking practices in relation to the networking factors identified in the literature. In 2008, a sample frame of 408 POBs in large commercial centre-style wholesale complexes in Zhejiang and Shanghai were contacted, leading to 203 valid responses. This high response rate (49.8%) was achieved through systematically canvassing and personally delivering the survey instrument. The testing of the model followed procedures using structural equation modelling. The staged confirmatory analyses using AMOS detected that the Timing in Reciprocation construct excessively and outstandingly covaried with other networking constructs, which caused the model to misfit with the data. Timing in Reciprocation was dropped based on the model modification guidance from AMOS as well as support from further literature review and a re-examination of the qualitative data. The revised model was accepted as the final model. The findings confirm that five networking factors have a positive impact on POB performance. The total impact of the five factors is positive and significant. However, the unexplained performance variance (30%) suggests that a POB's networking is but one set of managerial practices that impact on its performance. The findings only apply to small and medium POBs privately owned or operated by Chinese individuals operating within mainland China. The outcomes contribute to knowledge about how POBs view networking thus providing a basis for comparison against Western literature as well as improving understanding of POB managerial practices. The model identifies a set of networking factors and verifies that these factors impact on performance; which is a contribution to normative knowledge about Chinese POBs. Managers of POBs, and Western businesses which work with POBs, can benefit from understanding the performance implications of consciously coordinating these networking factors.

Date of Award	2011
Original language	English