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The Chinese apparel industry has been in a growth phase since the late 1970s, when an economic open-door policy was launched. In recent years, it has developed at an accelerating speed. Most companies in the Chinese apparel industry are new ventures (companies established fewer than five years ago), playing an important role in both promoting economic development and maintaining social order (Feng, 2008). More importantly, it is found that firms’ external networks, called “guanxi,” are critical for new venture success in China, as “knowing the right people” is a key (Zhuang, Xi & Tsang, 2003). Although guanxi is often said to be the source of sustained competitive advantage for most Chinese businesses, there is (a) little theoretical basis for this view in entrepreneurship settings, especially for apparel new ventures, and (b) little understanding of how guanxi helps these apparel new ventures’ success. To gain a deep understanding of these topics, Barney’s (1991) resource-based view of the firm was used as a theoretical framework. That is, a firm’s external network is considered as a unique, rare, and costly-to-copy resource by which firm is configured. This network then helps new ventures reduce business uncertainties and improve their decision-making processes.

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Nov 12th, 12:00 AM

Importance of Guanxi in Chinese Apparel New Venture Success: Mixed Method Approach

The Chinese apparel industry has been in a growth phase since the late 1970s, when an economic open-door policy was launched. In recent years, it has developed at an accelerating speed. Most companies in the Chinese apparel industry are new ventures (companies established fewer than five years ago), playing an important role in both promoting economic development and maintaining social order (Feng, 2008). More importantly, it is found that firms’ external networks, called “guanxi,” are critical for new venture success in China, as “knowing the right people” is a key (Zhuang, Xi & Tsang, 2003). Although guanxi is often said to be the source of sustained competitive advantage for most Chinese businesses, there is (a) little theoretical basis for this view in entrepreneurship settings, especially for apparel new ventures, and (b) little understanding of how guanxi helps these apparel new ventures’ success. To gain a deep understanding of these topics, Barney’s (1991) resource-based view of the firm was used as a theoretical framework. That is, a firm’s external network is considered as a unique, rare, and costly-to-copy resource by which firm is configured. This network then helps new ventures reduce business uncertainties and improve their decision-making processes.

 

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