Entrepreneurs in Contemporary China: Wealth, Connections, and Crisis 1009316109, 9781009316101

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Entrepreneurs in Contemporary China Entrepreneurs in Contemporary China explores emerging business practices and related phenomena in contemporary China. It examines new forms of business practices and argues that an emerging strata of private entrepreneurs has entered the economy in recent decades, an under-researched sector of Chinese society. It draws on extensive interviews with business founders and CEOs in present-day China and shows why business-related themes are important in understanding society itself, the forces that underpin social relationships more broadly, and the basis and nature of social change. In capturing the experiences of individuals and their companies amid social and economic challenges, and by uncovering innovative strategies employed by business owners, this book makes a significant contribution to the sociological as well as the business studies literature both through its empirical richness and theoretical innovation regarding considerations of trust, social networks, crisis, gender, and social exchange. Xiaoying Qi is Associate Professor at the Australian Catholic University. Her first book, Globalized Knowledge Flows and Chinese Social Theory, was awarded the Raewyn Connell Prize Special Commendation of The Australian Sociological Association. Qi’s most recent book, Remaking Families in Contemporary China, won the Stephen Crook Memorial Prize of The Australian Sociological Association in 2022.

Entrepreneurs in Contemporary China Wealth, Connections, and Crisis

XIAOYING QI Australian Catholic University, Melbourne

Shaftesbury Road, Cambridge CB2 8EA, United Kingdom One Liberty Plaza, 20th Floor, New York, NY 10006, USA 477 Williamstown Road, Port Melbourne, VIC 3207, Australia 314–321, 3rd Floor, Plot 3, Splendor Forum, Jasola District Centre, New Delhi – 110025, India 103 Penang Road, #05–06/07, Visioncrest Commercial, Singapore 238467 Cambridge University Press is part of Cambridge University Press & Assessment, a department of the University of Cambridge. We share the University’s mission to contribute to society through the pursuit of education, learning and research at the highest international levels of excellence. www.cambridge.org Information on this title: www.cambridge.org/9781009316101 DOI: 10.1017/9781009316132 © Xiaoying Qi 2024 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press & Assessment. First published 2024 A catalogue record for this publication is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Qi, Xiaoying, author. Title: Entrepreneurs in contemporary China : wealth, connections, and crisis / Xiaoying Qi. Description: 1 Edition. | New York, NY : Cambridge University Press, [2024] | Includes bibliographical references and index. Identifiers: LCCN 2023016410 (print) | LCCN 2023016411 (ebook) | ISBN 9781009316101 (hardback) | ISBN 9781009316132 (ebook) Subjects: LCSH: Businesspeople – China. | Entrepreneurship – China. | Social change – China. | Nouveau riche – China. | Social networks – China. | Business ethics – China. Classification: LCC HF5387.5.C6 Q5 2024 (print) | LCC HF5387.5.C6 (ebook) | DDC 338/.040951–dc23/eng/20230414 LC record available at https://lccn.loc.gov/2023016410 LC ebook record available at https://lccn.loc.gov/2023016411 ISBN 978-1-009-31610-1 Hardback Cambridge University Press & Assessment has no responsibility for the persistence or accuracy of URLs for external or third-party internet websites referred to in this publication and does not guarantee that any content on such websites is, or will remain, accurate or appropriate.

For Jack, again

Contents

Acknowledgementspage ix Introduction: An Invention of Entrepreneurs in Marketized China Popular Perceptions From Taboo to Envy, and the Growth of Entrepreneurial Activity Entrepreneurs as a New Class? Research Methods and Fieldwork Overview of the Book 1 E-Commerce: Social Embeddedness Through and Behind the Screen Introduction An Absence of Networks Embedded Online Networks Building Relationships and Networking Personalized Anchoring Reputation The Liebian (Fission) Approach Conclusion 2 Making Social Networks: Agency, Norms, and Costs Introduction Varieties of Networks Guanxi as a Network Form The Agency of Network Actors in Network Making Forming and Transforming Network Norms Social Engagement and Membership Management Conclusion 3 Trust, Broken Trust, and Trust Renegotiated Introduction Trust and Exchange Relations

1 1 4 8 15 19 23 23 26 28 29 33 36 38 40 40 43 44 45 50 53 56 57 57 60 vii

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viii uanxi and Trust G Power and Dependency Obligations and Face Costs and Benefits Conclusion

4 Family Business and Its Management Introduction Family Business and Trust Pseudo-Families ole Obligation, Assurance, and Interrelated Interests R   Role Obligation  Assurance   Interrelated Interests The Development of Emotionalized Guanxi   Kinship Address Terms   Displaying and Performing Intimacy   Orientation to the Future Conclusion

63 64 67 70 73 75 75 77 79 81 82 84 85 87 88 90 92 96

5 Female Entrepreneurs: Doing Gender and Displaying Gender as a Strategy 98 Introduction 98 Masculinity and Femininity 99 Female Entrepreneurs in China 102 Innovative Strategies 105 Displaying and Doing Gender 110 Spousal and Intergenerational Dynamics 113 Conclusion 117 6 Crisis as Opportunities: The Chinese Practice of Weiji119 Introduction 119 Crisis as Tensions and Incompatibility 121 Crisis as Paradoxical Integration and as Process 126 Combination of Old and New 129 Calling on Guanxi 133 Reflexivity 138 Conclusion 140 Conclusion: Rethinking Entrepreneurship: Trust, Networks, Crisis, and Gender 143 Appendix155 References159 Index201

Acknowledgements

In conducting research for and writing this book, I drew upon the support of many people. The greatest contribution to my efforts came in abundance from the many entrepreneurs who were prepared to talk with me and allowed me to observe their practices and those of their colleagues and employees, to whom I am also grateful. My debt to all respondents, who shared their experiences and told me of the pleasures and travails of doing business in China today, and the strategies they employ, is immense. It is literally the case that this book could not have been written without the cooperation of the entrepreneurs I met and their employees. To these persons, who must remain anonymous, I owe my deepest gratitude and give them my most heartfelt thanks. I also thank the key informants who mobilized their networks and facilitated interviews, with attention to stringent selection criteria. In particular, I give heartfelt thanks to Feng Yi, Wang Peng, and Zhang Linlin for their meticulous and thorough organization in making interviews possible. Many colleagues provided encouragement and support throughout research and writing, to whom I extend my sincere thanks. They are, in alphabetical order, Yanjie Bian, Patrick Baert, Raewyn Connell, Gerard Delanty, Rachel Murphy, Douglas Porpora, and Yunxiang Yan. In addition, my gratitude goes to the anonymous reviewers who read an early manuscript, for their very helpful comments. Less anonymous at Cambridge University Press is my editor, Robert Dreesen, for whose advice and support I am most grateful. My thanks are extended also to editorial assistant Sable Gravesandy for her facilitation of a smooth production experience. There are also a number of unnamed conference and seminar participants who have my appreciation for their questions and comments that provoked and stimulated my thinking. While all of these have played a positive role in the generation of this book, none of them have responsibility for what is in it, especially its errors and flaws. ix

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It is necessary to acknowledge that an earlier and much briefer version of Chapter 2 is published in Current Sociology 70(3) in 2022 and that Chapter 3 develops a number of ideas first indicated in an article published in Sociological Review 70(3) in 2022. Finally, I wish to thank my family for their enduring support during the period of research and writing of this book. My thanks go to my parents and sister for their love and continuing encouragement. Last but by no means least, I owe a special thanks to my husband, Jack, for his constant support during my absences while conducting fieldwork and for his inspiration and unfailing faith in me.

Introduction An Invention of Entrepreneurs in Marketized China

Popular Perceptions As a result of more than four decades of economic reform and ‘opening up’ China has experienced extensive and significant economic, social, political, and cultural change. Indeed, in many ways, China’s economy and society have undergone a historically unique transformation. In transiting from a centrally planned administrative system to a socialist market economy (Barbieri et al. 2010), China has evolved from one of the world’s poorest economies into a major economy with global influence (Berger et al. 2018: 344). An important development in this regard, with much social and political significance, is the advent of a section of the Chinese population possessing massive private wealth, some of it transferred from the public sector (Alvaredo et al. 2017). The privatization of economic activity since the 1980s and the growth of private economic entities signifies that market entrepreneurship has come to play an essential role in economic organization and growth (Bruun 1993; Huang 2008; Kraus 1991; Krug 2004; Nee and Opper 2012; Odgaard 1992; Tsai 2002, 2007; Wank 2001; Young 1995). The private sector of China’s economy produces, on various estimates, between two-thirds and seven-tenths of national GDP (Gross Domestic Product) and employs approximately 90 per cent of the workforce (Lin 2017: 2). Private accumulation of unprecedented wealth due to rapid growth has yielded newly emerging economic and social forces, including the new rich. In the 1980s and 1990s, entrepreneurs were characterized as baofahu (get rich overnight); they typically had modest if not deprived social backgrounds, poor education, lacked cultural capital, were incapable of displaying pinwei (good personal tastes) or demonstrating sushi (personal quality). Melvin Kohn (2019), a leading American sociologist specializing in studies of social class and personality, shows that compared to their counterparts in Western countries 1

2

Introduction

Chinese entrepreneurs at the time of his research had a significantly low-class status. Kohn et al. (2007, 2012) reports that Chinese entrepreneurs in the first decade of the present century lacked confidence, independence, and a sense of security, qualities characteristic of entrepreneurial classes in the West. Indeed, Kohn’s survey evidence shows that at this time Chinese entrepreneurs have a class-status below that of skilled workers in China. While private business continues to be a means of livelihood available to socially marginalized and politically ‘dubious’ persons, the growth of China’s market economy and the burgeoning sophistication of its production and organization has increasingly meant that educated, sophisticated, and socially well-placed individuals are drawn to private business. Since the 2000s wealthy entrepreneurs are portrayed in the media, not only in TV shows and magazines, but also in advertisements and in popular culture, as trendsetters in consumption and fashion; they are seen as patrons of exclusive nightclubs, expensive restaurants, and high-end department stores (Osburg 2013). In addition, it is reported in news articles – and academic research – that entrepreneurs regularly engage in extravagant entertainment and leisure activities including frequent banqueting, extensive drinking, immoderate gambling, and receiving massages and footbaths. These and associated activities are directed to the cultivation of guanxi or social connections with officials and also fellow businessmen in order to cement business deals (Liu 2002; Osburg 2013; Uretsky 2016; Zhang 2001; Zheng 2006). A widely held assumption is that entrepreneurs amass their wealth through unsavoury practices and with little direct effort. The images of entrepreneurs in popular accounts and the media did not exactly match the experiences of the entrepreneurs I encountered in the fieldwork I conducted between 2017 and 2019 in the cities of Changshu, Hefei, and Shenzhen. Popular imagery is typically based on notable cases and provides a mix of representations of exceptional occurrences, simplifications of complex circumstances, and distortions of particular realities. It tends to focus on some aspects of entrepreneurial activity and life-style, the sensational being the most notable, while ignoring the more mundane. Certainly, entrepreneur respondents in my fieldwork invariably looked glamorous on their company’s websites and at formal business events, but most of the time the majority dressed like ordinary people, in and outside the company. Mr Gao, a co-founder of a large company wore a ¥ 20.00 (US$3) T-shirt when I interviewed him. When I commented on his casual dress, he told me that he bought an additional six similar T-shirts so that he could dress comfortably every day of the week. Like many of my entrepreneur respondents, he often worked all seven days of the week. While the entrepreneurs I interviewed did engage in banqueting, drinking, and various entertainments in order to initiate and maintain guanxi networks, they tended to have simple meals at work, including meals from local fast-food restaurants. One aspect of the popular image of business life in China, also reported in scholarly publications (Liu 2002; Osburg 2013; Zhang 2001; Zheng 2006),

Popular Perceptions

3

is the prevalence with which entrepreneurs entertain officials, business partners, and clients in drinking clubs and karaoke bars in which heavy alcohol consumption occurs and prostitutes are routinely engaged. This aspect of the business life-style, and especially concerns regarding ‘temptation’, were particularly prevalent among the families of businessmen (Qi 2021). A number of female respondents expressed to me their concern regarding this culture of pleasure which is common in the business community. One respondent, Mrs Ling, was particularly animated in relating the dangers to family life of business involvement. Mrs Ling (aged 37, Bachelor’s Degree) and her husband Mr Lu (aged 38, Bachelor’s Degree) were ‘childhood sweethearts’ as they began dating when they were at high school. As a couple, they together established a successful electrical products business, but Mrs Ling ceased working in their family business when their two children reached school age in order to support their education. She later set up an m-business on her own behalf selling shoes, socks, bags, scarves, and so on. Their family business continued to do well and a branch was opened in another city, which led Mr Lu to be frequently away from home. One evening, when Mrs Ling called her husband, a woman answered his phone. He later explained that he was at a dinner party and the woman sitting next to him had drunkenly picked up his phone. Mrs Ling called again later that night but her husband’s phone seemed to be dead. The next morning Mr Lu returned home on an early high-speed train. Mrs Ling recollected: Although he swore that he wasn’t in an affair with that woman, the dark cloud over us didn’t easily go away. I told him that going to these events not only caused harm to his health but also to our relationships and put our family at risk. The family we built together through nearly 20 years could be destroyed in a second. He realized that the only way to restore my trust in him and to return to our previous happy relations was to change his business practice. Since the incident he seldom accepts invitations to parties and business events in the evening.

Mrs Ling was very pleased that withdrawal from this aspect of business culture brought an immediate and lasting effect. She said that her husband now spent much more time with her and their two children. Mrs Ling’s story points to certain complexities in the lives of entrepreneurs in China. People in business, like people in general, are typically married with children, with all the accompanying cares and responsibilities of spouses and parents. Business people, especially in China, are also required to work hard in establishing and then maintaining connections with officials and business partners in order to access opportunities and the means necessary to conduct business, provide employment, and make a living. While Mr Lu, as reported previously, was able to minimize participation in business-related entertaining, an important aspect of the facilitation of business in China today does involve banqueting, toasting with high-alcohol spirits, and participating in various

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Introduction

entertainments some of which are decidedly nefarious, including providing the services of prostitutes to officials and clients. It will be revealed in the following chapters that these activities are time expensive, carry significant opportunity costs, and can have detrimental health and personal consequences. At the same time, they are difficult to avoid and require careful management by the participants. The construction and maintenance of guanxi relationships are not the end of entrepreneurial activity but one of its means, and there is much more to business and the management of a business career, than the activities required to participate in guanxi networks. My fieldwork observations and the interviews I undertook with entrepreneurs revealed that people in business are without exception hard-working in building their businesses, very competent and often highly qualified, and sincere in their commitment not only to expanding their business but also to improve the material, social, and cultural circumstances of their families. At the same time, it is not unusual for entrepreneurs to work long hours, including on weekends, and to forego monetary rewards in order to devote resources to improving their business as well as the situation of those who work for them. In what follows of this Introduction something of the historical, social, and cultural background of the contours, developments and unexpected aspects of business in China since the economic reforms will be outlined. Also, the empirical material that this book draws upon will be described, and an account of the research methods employed in the study reported in the book are additionally outlined and discussed. This Introduction will go on to provide a summary of the six chapters that follow, including a preliminary discussion of the issues treated throughout. By presenting select examples of fieldwork findings, presented in the context of a broader background indicated in official and related sources of data, as well as findings and theories presented in the published literature, this Introduction details the range of substantive issues that are the focus of the six chapters to follow.

From Taboo to Envy, and the Growth of Entrepreneurial Activity In the discussion earlier the term ‘entrepreneur’ had been used without comment. What is meant by the term has been the subject of a good deal of debate and interpretation (Bonnell and Gold 2001; Bowman 2007; Gartner 1989; Lambing and Keuhl 2007; Shane and Venkataraman 2000). Some accounts focus on the entrepreneur’s ‘role or actions’, while others emphasize their ‘personal characteristics’ (Bowman 2007: 386; see Thornton 1999). The economic roles of entrepreneurs are seen to be distinctive, which set them apart from other actors in different sectors of society (Kaish and Gilad 1991; Low and MacMillan 1988). Entrepreneurship is also characterized by some researchers in terms of particular psychological traits, thus pointing to propensities for

From Taboo to Envy, and the Growth of Entrepreneurial Activity

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risk taking, achievement orientation, and inclinations to seek control of circumstances and resources, as hallmarks of the entrepreneur (Begley and Boyd 1987; Knight 1985; McClelland 2010; McGarth et al. 1992; Stevenson and Gumpert 1985). In a classic statement, the early twentieth century economist Joseph Schumpeter (2008: 84–87) saw the essence of entrepreneurship in innovation. Entrepreneurs, then, may be characterized in terms of the initiation of new activities resulting in a viable business start-up (Aldrich 1999: 77) or the discovery of opportunities through which new goods and services may be introduced into the economy (Legge and Hindle 1997; Shane 2003: 4). It is in this spirit that Kirzner (1985) regards entrepreneurship in terms of the capacity to utilize information for the discovery of new opportunities. It is along these lines that economic sociologists understand entrepreneurs, as actors who initiate and adopt practices in accommodating to the social and structural nature of markets. The question of social structure is particularly important in sociological considerations of entrepreneurship. Ronald Burt (1992) has argued that the emergence of entrepreneurial opportunities in marketplaces are directly related to state-imposed structural constraints, which shape the extent to which managers can act to fashion, mould, and reshape the organizations they develop and inhabit (see also Dobbin and Sutton 1998; Fligstein 1990; Guthrie 1999; Guthrie and Roth 1999). Entrepreneurs are here understood as persons who initiate business activities, including recognizing if not encouraging economic opportunities, utilizing financial and material resources and inputs for economic innovation, recruiting personnel, and negotiating with suppliers, customers, and government agents (Jones and Sakong 1980: 180–181; Kilby 1971: 27–28). They do this in a context shaped by social and institutional structures, by navigating relations with the central state, local government, and market forces, and in doing so reshape not only the economic environment but also the social and institutional conditions in which they are embedded. This is a particularly useful perspective through which China’s entrepreneurs can be understood. The place of China’s entrepreneurs in the country’s transitional economy and society from the 1980s is quite unlike the situation of capitalist entrepreneurs in Western societies (Lu and Fan 2020: 148; Pe’rez-Cerezo 2013). With the advent of the People’s Republic of China in 1949 the country’s private entrepreneurs have been officially regarded in quite different ways at different times, successively experiencing strict prohibition, tolerance, accommodation, and finally encouragement. During the collective era from the late 1950s to the 1970s, the socialist transformation of China required the Communist Party’s total dominance of economic activity so that private business was prohibited from 1956 (Davis 1990; Guiheux 2006; Kraus 1991; MacFarquhar and Fairbank 1987; Shue 1980; Solinger 1984). Restrictions against private ownership began to relax in 1978 when Deng Xiaoping launched the economic

6

Introduction

reform program which became known as the ‘marketization’ of China’s economy (Dickson 2008; Garnaut and Song 2004; Garnaut et al. 2001, 2005; Tsai 2002, 2007; Whyte and Parish 1984; Young 1995). Market engagement by private households first occurred in rural areas during the last years of the 1970s, and although initially resisted by the authorities the success of family farms in raising output and productivity by defying collectivization soon led to official acceptance of what became known as the ‘household responsibility system’ and to the de-collectivization of China’s agriculture (Kelliher 1992; Lin 1988; Liu 1992; Puffer et al. 2010: 452; Watson 1988; Zhou 1996). The subsequent rise of market-oriented rural industry led to major transformations in rural areas (Huang 1990; Lin 1995; Nee and Matthews 1996; Parish 1994). The seismic shift in the nature of economic activity with the rise of market-oriented rural industrialization, which benefited rural communities, can be measured by the fact that these new developments were soon managed and encouraged by party cadres, whose own economic well-being and career prospects were tied to the success of the market and those private businesses operating through it (Byrd and Gelb 1990). Return migrant entrepreneurs have played a significant role in the industrialization of rural China. Rachel Murphy (2000: 236) has shown that rather than ‘the apathy of national governments toward returnees, and the resistance and resentment of local authorities toward innovators, returnee entrepreneurship in China is sponsored by all levels of the state hierarchy’. Indeed, migrant entrepreneurs lobbied the local state to make changes creative of an environment conducive for business (Murphy 1999, 2000). At the same time, the local state’s support of return migrant entrepreneurship is ‘a response to upper-level directive’ as well as an opportunity for the generation of revenue that will ‘augment the power base of the local state and increase funds for local welfare expenditure’ (Murphy 2000: 246). Through such corporatization, return migrant entrepreneurs are able to generate not only economic capital but also symbolic capital, including face enhancement, through their own financial success and creation of employment for rural workers. Such win-win situations for both return migrant entrepreneurs and local government are emblematic of China’s successful marketisation. In the cities, self-employment – and therefore small-scale and family business – was encouraged by reform leaders. The justification for this development was the fear of unemployment that arose as massive numbers of ‘sent down’ urban youth returned from the countryside where they had been consigned during the Mao era (Peng 2004: 1054). In 1980 the State Administration for Industry and Commerce formally legalized self-employment by creating a new category of business licensing: geti gongshang hu or simply getihu, which means self-employment entities in industry and commerce, limiting the size of their workforce to no more than seven employees including one to two helpers and three to five apprentices (Lin 2017: 32). Constitutional amendments in 1982 stipulated that the rights of self-employed individuals should be protected, and

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their economic activities were officially regarded as a supplementary segment of China’s socialist economy (Dong 1999: 416). These developments soon took on a dynamism of their own. In 1988 China’s Constitution was again amended in order to raise the limit on the numbers of persons employed in self-employed entities. The 1988 amendments created a new category of siying qiye (private enterprise) in the licensing and registration of industrial and commercial organizations, with private enterprises now officially described as useful supplements to socialist public ownership (Lin 2017: 33). Siying qiye received official legal sanction, as Murphy (2000: 235), put it, and were allowed to legally hire more than eight employees. It can be seen that China’s transition to a market economy was built from the bottom up, but it was permitted to do so because there was also a component of topdown support and ‘guidance’. New opportunities to sell goods not supplied by public sector production led to a surge in the emergent population of private entrepreneurs which exceeded the expectations of reformers (Gold 1991). The wave of expanding industrialization driven by grassroots private entrepreneurship was key to China’s economic growth up to the early 1990s. In 1992 Deng Xiaoping undertook a symbolic ‘southern tour’ to Guangdong Province, a stronghold of economic reform (Fewsmith 2008). Deng’s tour inspired a tidal wave of private entrepreneurial activities, including a large number of university intellectuals and employees in state organizations ‘jumping into the sea’ of market opportunities. Private enterprises formally shook off their ‘supplementary’ status in 1997 when the 15th Party Congress proclaimed non-public ownership as a key and integral component of China’s ‘socialist market economy’ (Peng 2004: 1055). A further development which encouraged the growth of private business and the expansion of the market economy from the mid to late 1990s was the privatization of state-owned enterprises (Lu et al. 2021: 559). The state launched a privatization campaign in 1997 heralded as ‘zhuada fangxiao’ (holding on to the large and letting go of the small) in order to restructure and eventually privatize large numbers of small and medium-sized state-owned-enterprises (Lin 2017: 34). At the same time, many urban and rural collective enterprises were closed down or sold in order to be transformed into shareholding companies. Within six years, the dominance of state ownership was reduced to ‘a handful of strategically important sectors, such as banking, telecommunications, utilities, energy, air and rail transport, warehousing and storage, tobacco, and armaments’ (Lin 2017: 3). On 1 July 2001 CCP General Secretary Jiang Zemin delivered a keynote speech at the ceremony celebrating the 80th anniversary of the founding of the CCP. Many party members were surprised by his announcement that the Communist Party would welcome, indeed encourage, the membership of private business people (Peng 2004: 1055). The positive contribution of entrepreneurs to the country’s development was not only publicly acknowledged by the Communist Party leadership, the Party’s bylaws were changed in 2002 to

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Introduction

facilitate the membership of private entrepreneurs (Pomfret 2001). Not only were private entrepreneurs encouraged to join the Party, Party members were encouraged to go into business. Further assurance of political respectability was given to private owners in 2004 when the National People’s Congress adopted a constitutional amendment which emphatically stated for the first time in the history of the PRC that ‘citizens’ lawful property rights are inviolable’ (Lin 2017: 35). Institutional protection for private ownership was consolidated in 2007 with the enactment of the Real Right Law (Lin 2017: 38). The Communist Party’s business-friendly policies and its encouragement of an increasingly free-market economy has thus led to what many argue a new social class in the People’s Republic, a class of private business entrepreneurs. Official recognition of the entrepreneur as a valuable member of Chinese society has shifted public perceptions of the entrepreneur from an entirely negative assessment to one that is increasingly positive (Puffer et al. 2010: 452). Since private capitalists are now acknowledged to be among the Party’s most important bases of support and source of revenue, China’s media has abandoned the overwhelmingly negative image of private business which characterized the Mao era and replaced it with more positive representation (Kong 2010: 92). Indeed, the media has played an important role in depicting entrepreneurs as ‘advanced productive forces’. One aspect of this trend is the promotion in popular television programs of traditional merchants. Such characterizations not only implicitly acknowledge that today’s private entrepreneurs represent the interests of ordinary people and the nation, they at the same time encourage the idea that traditional entrepreneurs may be models for present-day entrepreneurs to emulate, thus improving their suzhi (quality) and adhering to a positive collective identity, as a newly emergent economic and social force (Kong 2010).

Entrepreneurs as a New Class? China’s transition from a state managed to a market economy has been gradual compared with the radical shifts experienced by former Soviet economies (Barkhatova et al. 2001). The failure of the ‘big bang’ approach in Eastern Europe suggests that the complexity of economic reform involving interrelated institutional changes requires incremental transition in order to achieve success (Murrell 1992a, 1992b). According to one commentator, instead of focusing on ‘the destruction of socialist institutions’, ‘China has concentrated on construction of market institutions, namely private enterprises, investment systems, stock and bond markets, workable price mechanisms, and most recently modern banks’ (Overholt 1994: 34; see Nee and Stark 1989). In China, the timing and sequence of reform measures were managed through the politics of a Communist elite in command (Shirk 1993) and major property forms, including land, remain in public ownership (Nee and Matthews 1996: 415). Gradualism in liberalizing the market and privatizing state assets have been instrumental in China’s successful transition to a market system (see Ang 2016).

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China’s transition to a market economy was achieved by a gradual and evolutionary process in which a new order emerged alongside an existing one, a strategy of ‘crossing the river by feeling the stones’ as Deng Xiaoping put it (Yang 1997). While China’s post-1978 economic environment was largely improved by market reforms, institutional uncertainty at the same time increased as a result of three major reform strategies (Bian and Zhang 2014: 432). The first strategy is captured by the term ‘reform without design’ through which market institution building lagged behind emerging market activities, leading to institutional non-transparency and institutional voids (Bian 2002; Lin 1989). The second strategy, gradual reform by trial and error, resulted in an open-ended evolutionary process of institutional change (Lin 1989, 1995) which permitted the coexistence for decades of incompatible state-redistributive and market institutions, permitting loopholes which encouraged official corruption and illicit business operations (Shirk 2007). The third strategy, in which regional governance rather than functional authority dominated, encouraged local governments to identify and advance their own interests, including corrupt associations between local authorities and business interests (Nee and Su 1996; Oi 1992; Qian and Xu 1993). While this local autonomy led to increased local revenue and institutional innovation as well as the local containment of failure (Qian and Xu 1993), the strategy gave rise to institutional ambiguity and implementation variation across localities (Naughton 2007). The institutional uncertainties generated by the multifaced reform measures indicated previously are subject to regulative adjustments at the five-yearly Communist Party Congresses. These adjustments, however, are not always able to keep up with the rapid and ever-growing development of markets. Another means of oversight was put in place at the end of 2001 with China’s membership of the World Trade Organization (WTO), through which international standards would inform the structure and practice of market institutions. Nevertheless, the WTO’s reach and influence have been limited due to China’s large size and interregional variation. Whereas institutional uncertainty is expected to decrease for well-developed market activities in certain localities and for certain industries, institutional uncertainty persists or even increases in other localities and for other industries in which new developments are concentrated under mixed institutional arrangements (Bian and Zhang 2014: 432). A factor encouraging institutional ambiguity is that the policy enforcement of business and markets is achieved not through legal regulation but regulative documents and administrative orders (Zhao and Qi 2020) which are amenable to negotiation when locally implemented. In Western societies, highly developed governance systems require markets to operate on the basis of legally enforceable written contracts which presuppose and require transparent and legally-binding property rights (Choi 1994). In China, on the other hand, private property rights do not operate on the same trajectory as in Western industrialized countries (Delios et al. 2006; Hamilton 2006). The Western concept of private property rights cannot be

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Introduction

separated from that of a legal system with an independent judiciary and credible machinery to enforce its judgments. Since the concept of private property in transitional economies is fragile, and supporting formal institutions including an effective judicial system are underdeveloped if not lacking, an entrepreneur’s property may be at risk of confiscation or subject to other forms of compromise. Entrepreneurs may therefore create defence mechanisms to protect their property, including ‘concealing assets, creating dual accounting systems, listing stock on foreign exchanges, [or] partnering with foreigners to gain visibility’ (Puffer et al. 2010: 459). The market economy of China has evolved from its socialist past and therefore cannot be understood apart from the historical legacies of the socialist period (Walder 1996). In an advanced capitalist society, political capital may become subordinate to economic capital, but in a socialist transitional economy such as China’s, politics continues to dominate many aspects of social life and has determinative effects on markets and market actors (Lu et al. 2021: 545). China’s embrace of the market economy since 1978 has been described as leading to a society with three layers of institutions: the state, the market, and guanxi networks (Boisot and Child 1996). Rather than a distinct institutional layer, though, guanxi networks are embedded in both the state and the market. It is important to note that in China the state and market, while notionally distinct, are not separate but interconnected. Chinese entrepreneurs, as market actors, are required to navigate their relations with both state authorities and guanxi partners. In discussing private business in China it is impossible to avoid the notion of guanxi, which literally means relationship or connection and, in this context, indicates long-term and networked associations between persons who share not only common interests but affectively-based obligations to share favours and benefits, so that guanxi may be described as a particularistic instrumental relation (Barbalet 2021; Bian 2019; Qi 2013). Guanxi-facilitated business arrangements are not necessarily cost effective, but in many instances are practical and efficient, especially when legal frameworks remain weak or ambiguous (Keister 2001, 2002; Lin 2001a; Standifird and Marshall 2000). It was mentioned earlier that a local government may increase its revenue, and enrich local officials, by encouraging market development. This is achieved through guanxi between those officials and obliging private entrepreneurs. Indeed, in order to engage in business China’s entrepreneurs are dependent on the state for capital in the form of loans or joint venture, certain commodities including land, beneficial or enabling policies, and access to business opportunities. At the same time competitive advantage is with those entrepreneurs who have guanxi relations with officials (Osburg 2013: 9; Wank 1996; 2002). Because a number of post-1990 entrepreneurs are former government officials (i.e., red capitalists) (Dickson 2003; Lu and Fan 2016), and the children of high-level Communist Party officials, known as taizidang (princelings), tend to hold well-paid private sector jobs (Lin 2011), and former state-owned

Entrepreneurs as a New Class?

11

enterprise (SOE) managers became wealthy by acquiring assets through privatization sell-offs of their organizations (Pei 2016), the term ‘political capitalism’ is frequently invoked to explain the rise of private owners – and their significant personal wealth – in China’s present-day economy. The notion of ‘political capitalism’ arose to characterize the new class of private wealth holders or oligarchs who emerged from the collapse of communism in Central Europe and Russia (Blasi et al. 2018; Frydman et al. 1996; Hanley 1999). The political capitalism narrative, however, provides an incomplete explanation of the origins and structure of China’s private wealth holders (Fan and Lu 2019; Lu et al. 2021: 544). A collective feature of business owners in China’s private sector is the diversity of their demographic and prior occupational background, and also of the sectors of the economy in which they are active as well as their approaches to business (Tsai 2007: Chapters 4 and 5). Some entrepreneurs in today’s China can be classed as super-rich (Keister and Lee 2017; Lu et al 2021), but the vast majority are not in that category. Indeed, without exception, the entrepreneurs reported in this study are ‘self-made’ without the advantage of inherited political capital, and while varyingly successful do not command large fortunes. More than anything what constitutes a common element of doing business in China is the uncertainty inherent in market engagements and the various difficulties businesspersons are almost constantly forced to encounter. ‘Economic transition’, as Bian and Zhang (2014: 436) appropriately observe, ‘is full of all sorts of crisis’. If there is a common feature of business life in China it is the challenge of operating in a context of institutional unreliability in which political favour is an important ingredient for success. It is for this reason that in order to set up and develop a private business there is an unavoidable need to initiate and maintain guanxi networks. This is the most pervasive feature of doing business in China. It is often assumed that China’s entrepreneurs typically acquire wealth and what produces it through ‘shady’ means, including bribery, smuggling, and unfair appropriation of state assets through personal favour and influence (Gilley 2001; Kong 2010: 92). Corruption, deception, and cheating are thought to be socially endemic, and the world of business chaotic and unregulated. While there is some truth to such claims, taken at face value they are at the same time misleading. Certainly, in the early days of marketization, from the late1970s to the early-1990s, an absence of institutional stability and an ill-­defined ­permissibility meant that the market economy was home to shoddy goods and improper practices. While these early entrepreneurs were largely modest operatives, more elite players came to prominence in the 1990s economy when the privatization of state enterprises provided opportunities for erstwhile managers and senior officials to get rich quickly by what politely might be called unfair practices. After 2003, however, with the presidency of Hu Jintao and his ‘harmonious society’ model of China’s development, restraint on the excesses of the previous ‘get-rich-quick’ ethos was nuanced and to a degree successful.

12

Introduction

After 2012, on becoming President, Xi Jinping launched an anti-corruption campaign which led to the arrest and sentencing of many government officials as well as wealthy entrepreneurs. These measures had significant though uneven effects on market development (Chen and Kung 2019; Xu and Yano 2017). More recently Xi’s anti-trust campaign against big technology companies, effectively launched through a draft announcement in November 2020 (Anti-monopoly Bureau 2020), as well as other measures put forward the following year to regulate markets in a number of sectors (Colino 2022; Goldkorn et al. 2021; Hancock and Orlik 2021) were designed to ensure fair competition in the social market economy in order to promote ‘common prosperity’ among the population. My fieldwork revealed that entrepreneurs are aware of and sensitive to the strengthening of the legal regulation of business and consciously avoid breaking the law even though they are aware that it remains possible to manoeuvre through grey areas. Whilst at company A, a fashion company, I observed that the president Mrs Ming (aged 46, Bachelor’s Degree) maintained close guanxi with the Director of the Tax Office, Mrs Chang, from whom she obtained ‘privileged’ advice about tax matters, especially how to avoid some taxes and pay minimum contributions on others while remaining within the boundaries of the law. An assumption long held by certain Western researchers supposes that with the rise of a new ‘class’ of entrepreneurs in China pressure for political democratization will be high and possibly irresistible. The underlying argument is that markets and democracy are inextricably linked as the freedom essential for market operations supports and requires political liberties. Indeed, comparative evidence suggests that the rise of a new entrepreneurial class, as a result of economic reform, contributed to democratization in Taiwan and South Korea (Moore 1996: 53; Perry and Fuller 1991). It was anticipated that the emergence of an entrepreneurial class in China will give rise to new behaviours and beliefs among them (Gold 1990) and in turn create a fertile ground for democratization (Santoro 2000: 41–43). In particular, it is held that market reforms alter relations of dependence on the communist party, tending to undermine its ability to monitor, sanction, and reward those subject to it, and that this, in turn, reduces the party’s capacity to govern, as both its legitimacy and its monitoring and enforcement capacity decline (Nee and Lian 1994; Walder 1994). There are several strands of this argument that lead the American political scientist Margaret Pearson (2001: 150), for instance, to write that ‘the direct link between the rise of entrepreneurs and democratization that is often assumed is facile and probably flawed’. An implicit assumption regarding the rise of a market-based middle class is untenable if, as David Goodman (2008, 2014) argues, a ‘middle class’ in the Western sense has not emerged in China, but rather a middle stratum without a cohesive identity or interest, self-awareness, or unifying background has emerged from state-managed marketization. Unlike the communist systems of Eastern Europe and the former Soviet Union which had been destabilized and disintegrated by marketization,

Entrepreneurs as a New Class?

13

‘the Communist Party in China has remained hegemonic in the political sphere’ (Bonnell and Gold 2001: xiv) and the party state ‘retains the authority to define the moral parameters of economic behaviors’ (Jeffery 2001: 330). At the same time, large business entrepreneurs have limited political participation and their interests lie in gaining privileged access to local and translocal political leaders and party-state organizations for business rather than political gains, including seeking to acquire private investment in state monopoly sectors, access to loans, and industrial innovation. Their political aspirations are limited to such things as the institutionalization of private property rights, and possibly the creation of channels permitting entrepreneurs to assert their opinions and influence the political process in their favour (Chen 2015; Chen and Wang 2013; Schubert and Heberer 2017). But should such expressions go beyond what the party is prepared to permit, the sanctions are swift, forceful, and complete. Domestic and foreign firms have typically been partners of the regime as it focuses on economic growth (Pearson et al. 2021). There is widespread apoliticism and political passivity among managerial elites in joint ventures and in ­foreign-owned enterprises (Pearson 1997, 2001). Not only do entrepreneurs not pose a threat to the Communist rule, ‘as many Western observers would like to see them’ (Osburg 2013: 9), entrepreneurs understand that such behaviour may endanger their own prosperity. Instead, entrepreneurs devise diverse and ingenious strategies to conduct and grow business ‘behind the state, with the state, and despite the state’ (Tsai 2002: 264). A large part of their political strategies, however, ‘involved efforts to neutralize and/or manipulate state authorities, as invisibility from the state tended to decline with the growth of a business and there was a limit to what could be achieved through open defiance or confrontation with an organizationally potent state apparatus’ (Lin 2017: 11). Informal, non-organized and non-coordinated action across time and space advances the interests of private entrepreneurs and strengthens their collective identify as a group. Private entrepreneurs differ in terms of company size, business significance, and sociopolitical and geographical background. As they are a very heterogeneous social constituency characterized by significant differences in terms of origin, educational background, and behaviour, the political scientist Kellee Tsai (2005: 1135–1138) argues that Chinese private entrepreneurs lack a ‘common basis for identity and interaction’. In a similar vein a number of researchers hold that private entrepreneurs in China are a largely atomized group of people focused on their individual interests and reluctant or unable to engage in collective action (Tsai 2007: 145; see also Zhao 2006; Zhang 2015). The status-consciousness of entrepreneurs as a group does not translate into unity, organized and coordinated action, and the social heterogeneity of this group entails the lack of entrepreneurial class consciousness in China (Tsai 2005, 2007). In fact, there is an absence of coordinated and organized activities or confrontational actions against the state. On the contrary, entrepreneurs frame their political requests carefully in order not to

14

Introduction

be seen to challenge the state regime. Private entrepreneurs increasingly pursue their interests and gain social and political status as an economic category rather than as a social group in an uncoordinated and yet strategic way through formal and informal channels in order to possibly achieve policy change that would improve the business environment. According to German political scientists Thomas Heberer and Gunter Schubert (2019: 495), ‘the “weaponry” China’s private entrepreneurs use to assert and expand their influence within the existing regime coalition has been effective and is becoming increasingly more so’, however, ‘[t]heir strategic weapons do not challenge the power of the CCP but rather help to bring about business-friendly policies and promote the privileges and opportunities of doing business in China’. Heberer and Schubert conclude that ‘[a]s the driving force of China’s economy, the strategic group of private entrepreneurs seems to contribute to the stabilization of the political system, even though signs of intensifying crony capitalism suggest the contrary’. Self-protection, expanding their economic interests and wealth preservation, but carefully not challenging the regime, together identify the outlook of entrepreneurs as a ‘status conscious’ group. Within the collective category ‘entrepreneur’, my fieldwork has identified three distinct types of political characterization. First is the sense that they have benefited enormously from the party’s economic reforms. They are highly supportive of the existing political structure. Zhou’s (aged 52) remarks are representative of such views: Generally speaking, I’m grateful for what the government has done. I’ve had opportunities to do a lot of things. I’ve been given rongyu (honors), for example, I’m a provincial representative of People’s Congress. Of course, not everything is smooth; I’ve had times of difficulties and distress. But I’m content.

A second group supports the economic reform policies but has concerns regarding the political dominance of economic and business affairs and has concerns regarding the possibility of loss of their wealth overnight. The attitude of this group confirms the notion that private entrepreneurs are not against the regime in their qualified support of the political system (Chen 2002; Chen and Dickson 2008, 2010; Dickson 2003, 2007, 2008, 2010). McNally and Wright (2010) note that the regime embeddedness of entrepreneurs is ‘thick’ in the sense that it encompasses an intertwined amalgam of instrumental ties and affective links to the agents and institutions of the party-​ state. Such close relations, therefore, work against the potential interest that private capital holders might have in leading or joining efforts to press for fundamental political liberalization. This second group engages a strategy of making the best of current opportunities for making money and at the same time have a ‘back road’ to secure their wealth should fortunes change. Many may send their children overseas for education, and their spouse and children hold non-mainland passports. Because

Research Methods and Fieldwork

15

state and local governments are responsible for administering many aspects of their economic activities members of this group also build and maintain guanxi relations with officials in order to achieve business effectiveness. As Scott (1990: 136) points out, ‘most of the political life of subordinate groups is to be found neither in overt collective defiance of power-holders nor in incomplete hegemonic compliance, but in the vast territory between these two polar opposites’. On the one hand, members of this group pursue their economic interests and on the other hand, their family members’ foreign passports are a means to preserve their wealth. They are fully aware that the ‘growth of gray area in the institutional space for property rights’ and that this ‘undermines the enforcement of existing rules’ (Lin 2017: 9). A third group goes beyond the equivocal ambiguity of pragmatic alliance combined with foreign insurance of the second group. This third group is clear in not being in favour of Communist Party rule; but neither is it a politically oppositional group. Accepting that the Communist Party is secure in its political position members of this group are committed to doing business rather than being involved in political activities. Strategically they safeguard and expand their economic interests (including property rights security, tax benefits, land and credit access), their political interests (protection from the government and influence on policy) and social interests (public and official attribution of face) (Heberer and Schubert 2019: 473). In this case, dissatisfaction with the political structure of present-day China leads not to political activism but to political alienation and it poses no direct threat to communist party rule and therefore no direct threat to their engagement in business.

Research Methods and Fieldwork By drawing on extensive field-generated data this book explores the complexities and dynamics of business and social relations responsible for the transformation of China into a historically successful market economy. The fieldwork on which this book is based was conducted between 2017 and 2019 in three Chinese cities, namely Changshu, Hefei, and Shenzhen. Changshu is a commercial city, Hefei an ever-developing inland city, and Shenzhen a boom coastal city designated as a special economic zone. In these locations, a total of 65 semi-structured in-depth interviews were conducted with founders and CEOs of small and medium private enterprises. Small and medium enterprises account for 90 per cent of all enterprises in China, contributing to more than 60 per cent of China’s GDP and 50 per cent of tax revenue (Zhu et al. 2020: 13). Zhu et al go on to indicate that small and medium enterprises employ over 80 per cent of the urban and township workforce, making small and medium enterprises China’s largest employer sector, and, even more impressive, China’s small and medium enterprises are responsible for 70 per cent of the country’s technology innovation. A summary profile of entrepreneur interviewees, indicating their gender, age range, and educational level, is in

16

Introduction

Table 1 (see the Appendix). In addition, the author informally interviewed 51 employees occupying various positions in the firms studied. Finally, four companies served as sites of participant observation. Promotional and associated material, including webpages, concerning the companies of respondents who agreed to participate in the semi-structured in-depth interviews, were collected and their content qualitatively analyzed. The interviewees included both men and women, which permits exploration of gender issues. In capturing the experiences of individuals and their companies in dealing with the social and economic changes underpinning their business-situations, and by uncovering innovative strategies employed by both women and men in their management of changing circumstances, this book makes an original contribution to the sociological literature as well as the business studies literature. It does this not only through the empirical richness of the accounts it provides, but also as a result of the theoretical apprehension of emerging innovations in trust, social networks, crisis, gender, e-commerce, and family business. As mentioned, the chapters to follow draw on semi-structured in-depth interviews, informal interviews, and participant observations. While quantitative methods are particularly useful in providing statistical evidence in mapping out a trend and demonstrating structural properties of business, when considering the active role of individuals in the formation, maintenance, and operation of business, in their dealing with difficulties and working through crisis, in building, maintaining and managing social networks, qualitative methods are particularly effective. Employment of qualitative methods, therefore, permits nuanced examination of individual orientations and behaviour (Keim et  al. 2009; Liamputtong 2019), and especially encourages understanding of the complexities of business. Such methods provide opportunities to refine existing theoretical perspectives and prepare the ground for an empirically-based and theoretically-informed examination of business in mainland China. Sixty-five entrepreneurs, including founders of businesses, co-founders and CEOs, were interviewed for this study, including 30 male and 35 female businesspersons aged from 29 to 61 years. Gender-related issues are informed by the representation of men and women in the interview sample. Many had at least one career change, and although their careers led to the market sector, they have not always taken a straight path in arriving there. For example, some interviewees left their government jobs, became top managers in multinational companies, and then started their own private businesses. Such multiple career experiences generate distinctive social resources, reflecting numerous habitus and lifestyles and can function as ancillary means of capital accumulation and expansion (Burt and Opper 2017). The advantages of working previously in the state system, as in the case of some respondents, should not simply be regarded as a form of exchange of political capital for economic capital (Eyal et al. 1998). Unlike in the former communist regimes of Eastern and Central Europe, many Chinese businessmen who worked in the party-state system did not

Research Methods and Fieldwork

17

directly transform SOEs into private companies but resigned from their original positions to start their own businesses. These mainly middle- and lowlevel officials included many ‘intellectual workers’ (such as middle-school teachers or doctors), and their political power was very limited; more often deployed in developing their own businesses were their acquaintance networks (guanxi) and the informal channels of Chinese society. Indeed, a number of entrepreneurs have ties with and therefore access to local state officials, three respondents served as local Renda (People’s Congress) representatives. Nearly half have Communist Party membership. Some were awarded government privileges, from special license plates to beishu (official commendations). The sectors in which their businesses operate are diverse, including building and construction, industrial and electrical products, commodities (clothing, food, beverage, furniture, jewellery, etc.), real estate and hotels, health and medical services and products, import and export, cultural products, and ­education-related ­services. A summary profile of private entrepreneur interviewees by sector is in Table 2 and their company information is presented in Table 3 (see the Appendix). Initial contact with entrepreneur respondents was made through key informants. During participant observation and by attending entrepreneurs’ business and after business events, social functions, luncheons, dinners, and informal parties I was able to meet other entrepreneurs. As an academic, working in a university in Hong Kong and then in Australia, I received from entrepreneurs the respect due to a university teacher. My key informants introduced me not only as an academic working in a university in Hong Kong or Australia but added the cachet information that my husband is a ‘foreigner’ and an ‘acclaimed scholar’. This not only suggested the international reach of the introducing entrepreneur, giving face to both the person who introduced me as well as to the introduced. Such status markers and assumed acclamation or approval meant that respondents felt comfortable confiding in me when being interviewed, keen to share with me their experiences, views, and inner thoughts. Twenty-four companies were visited, through which information regarding business operations and managerial practices was acquired. Participant observation was conducted in four of these companies, namely a beauty salon chain, a fashion company, a company which wholesaled and retailed through e-commerce fashion related accessories of its own brand and other brands, and a company which designed and manufactured personal items it wholesaled and retailed through e-commerce. The author spent over two weeks in each company during different periods of fieldwork, amounting to a total of ten weeks. These episodes provided opportunities to observe the day-to-day activities of respondents and their business engagements. Fifty-one informal interviews were conducted with employees from various sectors. Invitations to business luncheons, dinners, and company parties permitted observation of informal activities of various sorts. The major instrument of research was

18

Introduction

the semi-structured in-depth interview, each one lasting approximately two hours although some were longer, the longest being six hours. The majority of the formal interviews with entrepreneur respondents were, by their agreement, audio recorded, and then transcribed. For those which were not recorded I made written notes. Regarding informal interviews with employees, I wrote notes immediately after the interviews. Entrepreneur respondents were selected on the basis of initial contact with key informants and then through subject referral sampling. Respondent’s names reported in this study are pseudonyms. All of the formal interviews with 65 entrepreneur respondents and 51 informal interviews with employees occupying various positions in the firms studied were drawn on in the book except for Chapter 1. Chapter 1 is based on formal interviews with 13 founders of online businesses, a journalist with extensive knowledge of e-commerce markets, and informal interviews with 28 employees working in different departments of two e-commerce companies, including web design, customer service, finance, warehouse (product storage, distribution, packaging, and so on) and logistics. These respondents except the journalist are included in the total numbers of the formal and informal interviews. Informal interviews were used to ascertain employee experience, their thoughts and feelings regarding such experiences, how they performed their respective roles, the strategies they employed in developing and maintaining relationships with customers, problem-solving strategies, and approaches to communicating and interacting with managers, supervisors and executives. Formal interviews with entrepreneurs were concerned with the respondent’s business type, their strategies for initiating and developing their business, business partnership formation, as well as matters related to the employment of family members and non-­family members, practices related to tie-formation and relationship maintenance strategies, difficulties encountered in business relations, negotiating practices, conflict resolving strategies, crises experienced and crisis management strategies, guanxi-related issues, trust-related issues, gender-related issues, and other thematic influences. The data generated through the interviews was then analyzed through a process of emergent coding, following the analytical strategy of grounded theory (Bryman 2016). Conceptual analysis, based on Charmaz’s (2021) constructivist grounded theory, was also followed in order to identify evidence that related to conceptual and theoretical issues in the literature, for instance, trust, social networks, crisis, power, gender, guanxi, face, obligation, among other themes, and to move back and forth between data and theory iteratively. Abductive analysis (Timmermans and Tavory 2012) was particularly useful in analyzing anomalous and surprising empirical findings, for instance, against a background of existing sociological research in which core ideas associated with broken agreements and opportunistic behaviour or malfeasance require fundamental re-evaluation, reported in Chapter 3. In this way, grounds were laid for theoretical formulation and refinement.

Overview of the Book

19

Overview of the Book Behind the discussion of business and social relations in this book is an awareness of the importance of explanation. It is necessary to indicate that the theories that are applied to the understanding of such apparently straightforwardly comprehendible experiences required of business, such as exchange, recruiting employees, forming partnerships, and so on, have their own origins and histories that are seldom apparent in the exposition and application of the theories themselves. By placing these histories and related phenomena at the forefront of reflections about theorizing, the case of China’s business entrepreneurs and their particular practices and orientations, the argument of the proposed book is concerned not only with the empirical landscape of the emergent market and business cultures in contemporary China but also provides a discussion of theories about social change that is sensitive to the underlying suppositions of the actors, their practices, and the institutions involved. The present book, then, has a number of things to say about sociological theory, including about the received theories of relations between social networks, trust, and social exchange as they touch on the practices of doing business, and also about re-visioning theory in understanding economic and social transition in China, and expanding our understanding of social economics in general. A new and increasingly important area of business activity is e-commerce, the world that includes large tech-platforms owned and managed by entrepreneurs responsible for massive financial turnovers and commensurate market and political power, as well as small-scale m-commerce entrepreneurs working from their mobile phones whose financial reach is modest even though they contribute to the steady expansion and stability of the sector. The relevance of social embeddedness in online communication and interaction is widely acknowledged in the literature, and studies have been conducted on how online networks are affected by existing offline networks. Sociological research on e-commerce, however, remains underdeveloped. Little is known about how individuals take initiatives to create, expand, and maintain online social networks behind the screen in online markets. Chapter 1 uncovers hidden social embeddedness that can be located in online markets. A concept of personalized anchoring reputation is developed. In addition, an approach reported by entrepreneur respondents, namely liebian, which they employ in integrating characteristics of face-to-face transaction with online exchanges, is presented and analyzed. Business networks are arguably an aspect of the sustaining framework of business success. The enabling and constraining properties of networks, their effects on participants, and their subsequent social consequences have all been extensively explored in a large and growing literature. A feature of social network analysis lies in its tendency to deploy structural perspectives in explaining social outcomes. Chapter 2 below highlights the ways in which social networks operate as a context in which individual initiative and engagement lead to the

20

Introduction

making and remaking of business networks in particular and, by extension, social networks in general. An empirical examination of business networks in Chinese cities reveals the way in which the formation and maintenance of networks require the conscious contributions of network members or participants, how network norms are produced by the expressed preferences of individual members, and finally, how network membership involves management of network participants themselves. In contractual relations, malfeasance is subject to sanction by formal institutions. Trust is widely held to be an informal basis of non-contractual exchange, in which breaches of trust lead to exposure, resulting in the perpetrator’s loss of reputation and likely exclusion from future exchanges. Chapter 3, on the other hand, shows that breaches of trust may lead to neither of these outcomes. Data reported here shows that individuals who experience violations of agreement may develop coping strategies that do not include exposure of betrayal, confronting the trust breaker, or retaliation. A contribution of this chapter is to show that these differences can be conceptualized as involving either alter-focused strategies, in which betrayal leads to the betrayer’s punishment that may be formally or informally delivered, or to ego-focused strategies, in which betrayal leads to changes in the trust expectations and the more general behaviour of the betrayed. A second contribution of this chapter is to show how trust may be sociologically understood as a continuously negotiated rather than a concluded commitment. It is widely accepted that trust is a key factor in the employment of family members in business establishments. As a business expands, more and more non-family members are typically employed. It is a standard practice in China, although the practice is not exclusively to Chinese companies, that kinship forms of address may be used irrespective of kin status in creating a situation of familiarity and closeness. It is supposed in a significant literature that by these means a pseudo-kinship or quasi-familial relationship is formed in order to cultivate trust with non-kin individuals. Chapter 4 challenges this taken-forgranted assumption. It is argued, first, that among family members in China, rather than trust being the affective bond between persons, family relations – and especially within a family business – are governed by a sense of assurance supported by compliance with role obligation, and a monitored form of reliability, xinyong. In this way, persons in close family networks are subject to constant monitoring of their behaviour, and transgressions are sanctioned through such mechanisms as face, among others. Second, as the family business grows, and non-kin employees are recruited, it is shown in the chapter that neither pseudo-kinship nor quasi-familial relationships is assumed nor merely market exchange relations engaged; rather, non-kin members of family firms are subject to an intentionally cultivated emotionalized guanxi relationship with core managers and supervisors. This arrangement means that non-market relations operate in conjunction with market relations in terms of remuneration, with a consequence that work-time and free-time become blurred.

Overview of the Book

21

A gendered dichotomy persists, in both popular and scholarly understanding, of entrepreneurial endeavour and achievement. Entrepreneurial success is predominantly understood in gendered terms as a consequence of qualities associated with masculinity; financial gain, an orientation to expansion, control, independence, and market impact in particular are seen as aspects of male performance. Femininity, on the other hand, and by implication female entrepreneurs, are regarded as typically embracing flexibility, an orientation to family needs, with less attention to strident competition for economic advantage. Women are assumed to play supportive roles in family firms, while men play leading roles. While successful female entrepreneurs are increasingly acknowledged to be capable of performing as business leaders, their ability to do so is typically associated with their emulating masculine ideals of success, of being career focused and power-seeking. Based on empirical data Chapter 5 challenges such persistent dichotomic approaches to gender and entrepreneurship. On the basis of substantial evidence reported in the chapter, it is shown that women and men, in the sample of respondents interviewed, strategically position themselves in their company and in the marketplace, in a manner that will maximize the growth and profit benefits for their firms. These women and men are not constrained by stereotyped gender ideals but rather utilize existing imagery and norms, and when necessary create new ones, in their doing business. It is shown that while businesspeople in the study engage in displaying gender, such displays are subordinate to the purpose of business success and do not underlie a gendered dichotomy as usually understood. Theoretical suppositions of business crisis largely draw from studies conducted in North America and Western Europe. Chapter 6 examines a Chinese approach to crisis which informs not only crisis management in China and East Asia, but has general application. The Chinese engagement of crisis is perhaps most evident in practices described by respondents as weiji, the Chinese word for crisis. This term is formed by two characters wei (danger) and ji (opportunity). Weiji expresses a paradoxical integration and captures the Chinese view that adversity and opportunity are inextricably linked in a dynamic relationship. Crisis is therefore not simply treated as an outcome or a consequence of discord or disruption, but rather understood as an aspect or phase of an unfolding process, even in the most difficult circumstances. In this way, respondents reported that business failure, bankruptcy, and closure, were regarded as ambiguous and even potentially positive outcomes, manifestations of a course of development in which a dynamic process necessarily generates beneficial opportunities for change without forcing unnecessary risks. This approach, then, offers a course toward future business success even in the face of significant loss. Three strategies which entrepreneurs adopt are examined in the chapter, namely, the combination of the old with the new, or path dependence; second, seeking facilitating relationships with other members of a business community, or guanxi seeking; and finally, reordering priorities and available resources both familial and personal, or self-reflexivity.

22

Introduction

The Conclusion provides a summary of what has gone before by indicating the significance of the themes pursued in the preceding six chapters and by outlining the research implications of the findings reported in them, as well as the value of the theoretical perspectives encouraged by the research reported in the book. It is shown how this book contributes to clarification and extension of the conceptualization of a number of core theoretical notions by drawing on the details of the many cases that are explored in the chapters described earlier. The Conclusion highlights how an examination of entrepreneurs in contemporary China, as well as a careful and empirically grounded account of their business and social relations, challenges many conventional approaches to research and to research findings on social networks, for example, and trust, crisis, family business, and also women in business, and shows how standard conventions that are widely accepted in the scholarly and research literatures are in need of revision. It is shown how the research findings reported in this book will serve the purpose of stimulating and encouraging further research on erstwhile neglected aspects of business relations as well as the development of new theoretical frameworks for understanding social exchange dynamics, not only in China but more generally.

1 E-Commerce Social Embeddedness Through and Behind the Screen

Introduction This chapter begins our discussion of entrepreneurship in China by concentrating on an emerging and novel area of the economy, and by considering a number of issues that are characteristically connected with it. E-commerce is of global significance and is not a specifically Chinese arena of business. Like all entrepreneurship, it requires a particular set of skills and a specific flair. It also requires what might paradoxically be called a virtual reality. The importance of this latter factor at this stage of the discussion is to acknowledge the importance of context, and its specificity, in understanding entrepreneurship and business. The obvious context of business activity is the market in which the entrepreneur in question is active. We have to be careful with such concepts as ‘the market’ though, as we shall see. As one economist reminds us: whatever difficulty we have in defining firms and households, they exist – they are ­entities. ‘Markets’, on the other hand, are largely figures of speech in economics. (­Auerbach 1988, quoted in Sawyer 1993: 24)

With this qualification in mind, hallmarks of the market mechanism, to borrow another figure of speech from economics, include competition between businesses or firms, say, and price sensitivity through which the market demand for an item and therefore its level of production might change. The market context of entrepreneurship, then, determines opportunities for doing business and the resources, organizational as well as material, that may be drawn upon in the generation of income and, through investment, wealth (Ireland et al. 2001; Puffer et al. 2010: 441–442). The last point mentioned previously indicates a context for business in addition to the market in which entrepreneurs operate. In the mainstream economics literature markets are distinguished from organizations or ‘hierarchies’ 23

24

E-Commerce: Social Embeddedness Through and Behind The Screen

on the basis of whether the price mechanism, on the one hand, or organizational authority, on the other, determines processes and outcomes (Williamson 1975). The institutional environment of business and not only the market is a major factor that determines the behaviour of entrepreneurs, and their successes. To be successful entrepreneurs must appropriately understand, and exploit the prevailing institutional arrangements to which they relate (Beamish and Biggart 2010: 272). Indeed, economic action has been conceived as ‘institutionally embedded behaviour – environmentally influenced, network structured, socially organized, and materially present’ (Beamish and Biggart 2010: 270–271). Reference to networks here makes the point that networks are a key social institution contextually influential on economic engagement, a proposition that will be developed in this chapter and the next. Indeed, it can be shown that entrepreneurship is inherently a network-dependent phenomenon as it entails novel combinations of ideas and/or commodities that are acquired and developed by associating, that is networking, with others (Burt 1992). This last point builds on Joseph Schumpeter’s (2008) classic characterization of the entrepreneur in terms of their combinations in new ways of existing facilities and opportunities generating new products, methods of production, markets, sources, and industry organization (see Greenberg 2019: 296; Swedberg 1991). The relevance of context – market context, organizational context, and network context – for the entrepreneurs that are discussed in this study comes across in the interviews they have provided and the practices in which they engage. In China, networks are pervasive partly because the institutional context is either relatively underdeveloped, especially in the area of law and rights, or where forcefully present may work against the individual entrepreneur and their interests, indeed, against entrepreneurs in general, as reported by interviewees in this study and shown by an extensive research literature (Gold 2017; Heberer and Schubert 2020; Tsai 2007). The networks engaged by businesspeople in China, with each other and with their customers, and also between entrepreneurs and officials, are known as guanxi, connections based on personalized relationships mobilized to satisfy instrumental purposes through the means of favour exchange (Barbalet 2021; Bian 2019; Qi 2013). Being highly personalized, guanxi networks require the real presence of individuals, particular in their characteristics and what they have to offer. It might be expected that such concrete attendances are confounded by such market developments as e-commerce that operate in the virtual world of anonymous exchanges conducted on the computer screen rather than in face-to-face spaces. Indeed, it has been suggested that the appeal of e-commerce is precisely the opportunity it provides to escape interpersonal interactions (Tian 2018). Let us turn then to the virtual world of e-commerce. Over the last decade, e-commerce has expanded rapidly, with the numbers of participants and the value of sales more than doubling. In terms of the global reach of e-commerce, the share taken by the United States and Europe has undergone a relative decline as global growth elsewhere, especially but not

Introduction

25

exclusively in Asia, has ballooned (Keenan 2022). The COVID pandemic has contributed to the continuing trend of e-commerce growth (Kitukutha et al. 2021). E-commerce can summarily be understood as online marketplaces constituted by internet technologies in which communities of buyers and sellers exchange product information, coordinate sales and purchases, and engage in transactions (Pavlou and Genfen 2004). There is a tendency, therefore, to view online markets as consisting of technological platforms that coordinate the distribution of and payment for products between sellers and buyers. Unlike market exchanges typically conducted in physical premises, online markets are not characterized by customized and complex exchanges of repeated interactions between sellers and buyers. The embeddedness of market actors who meet face-to-face in physical premises is assumed to be unlikely in online markets. It is held that the absence of social embeddedness in online exchanges is compensated by the development of online reputation systems (Diekmann et al. 2014). In contrast with the view, indicated earlier, of an absence of online social embeddedness, there is acknowledgement that the Internet has spatial characteristics in common with real-world locations (Hunter 2003). Indeed, it is possible to identify in online markets actions displaying relational characteristics. Network embeddedness is demonstrated to be important for understanding the online gig economy, for instance (Wood et al. 2019). In the physically isolated situation of online financial transactions, lay traders similarly take account of and are oriented toward the behaviour of other traders (Preda 2009a). In their transactions, and in their calculations prior to acting, online traders must not only observe market developments but also assess the activity of other traders (Ailon 2019). It has been shown that offline networks have an impact on online behaviour and interactions (Fine 2010; Wellman and Gulia 1999). Little is known, though, about the mechanisms through which offline social networks impact online behaviour and the associated patterns of agency (Matzat 2009: 86). To put it slightly differently, there is presently a research gap concerning the embeddedness of individual behaviour behind the screen. The research question addressed in this chapter concerns the actions of individuals in shaping online markets and e-commerce in general. At the start of 2022, 70.9 per cent of the total population of China, comprising 1.2 billion persons, used the Internet; this is an increase of 5.9 million from 2021 (Digital 2022). China has the largest population in the world engaged in online purchases, involving more than 780 million people (Ma 2022). In 1999, not long after Jeff Bezos launched Amazon, Jack Ma established Alibaba.com in China, a business-to-business e-marketplace (Luo et al. 2019). In 2018, during its Singles Day sale, Alibaba netted $30.8 billion in transactions, doubling the combined sales for the two biggest sales days in the United States, Black Friday and Cyber Monday (Taylor 2018). According to a World Bank report, the e-commerce market in China has grown significantly since the beginning of the century: the ‘annual total e-commerce trade volume in China increased thirtyfold from RMB 930

26

E-Commerce: Social Embeddedness Through and Behind The Screen

billion in 2004 to RMB 29,160 billion in 2017, a compound annual growth rate of 30 percent’ (Luo et al. 2019: 4–5). Over the past decade, the express delivery industry in China has grown rapidly in response to the demands of online shopping (Liang et al. 2016). Express mail service exceeded 30 billion pieces in 2016, of which approximately 60 per cent related to e-commerce (SPBOPRC 2017). In 2021, China contributed to more than half of the world’s e-commerce retail sales, with a value surpassing the combined total sales of Europe and the United States (Ma 2022). As the largest e-commerce market in the world, China has the most developed cashless economy, signifying a new era of its economy. In 2020, the added value of the digital economy accounted for more than 38 per cent of its GDP; nearly a quarter of physical goods retail sales were through online purchases, far above the global average of 18 per cent (Ma 2022). It is appropriate, therefore, that discussion in the present chapter draws on cases from China in examining the embeddedness of e-commerce actors. While online communication has attracted some research attention (Matzat 2009; Tian 2018), sociological research on e-commerce curiously remains underdeveloped. This chapter draws on semi-structured in-depth interviews and participant observation in Hefei and Shenzhen, Chinese cities of 8 and 12.5 million people, respectively. The research reported here contributes to the identification of embedded social relations in online marketing through exploration of e-commerce entrepreneurs’ activities behind the screen. A nuanced and novel approach to e-commerce embeddedness through development of the concept of ‘personalized anchoring reputation’ is advanced in the discussion to follow. Additionally, the chapter examines the ways in which e-commerce entrepreneurs combine features of face-to-face and online exchanges in order to develop, maintain, and disseminate perceptions of their reliability or trustworthiness. Finally, an approach developed by e-commerce practitioners working exclusively from mobile phones, m-commerce, which they identify as liebian (fission), is examined.

An Absence of Networks Overshadowed by the engineered structure and operation of online transactions, human-to-human interactions on the Internet are at best seen as technologically mediated, so that directly social relations are assumed to be unattainable in this arena. It follows that studies focus, rather, on the relationship between humans and technological systems (Cheshire 2011: 55). Online commerce is no exception to this general pattern. Indeed, the unique context of online interaction, in which eye contact is absent, tonal inflections impossible, and the ability to adjust behaviour or orientation on the basis of interactive feedback is extremely limited (see Menchik and Tian 2008: 334), supports the image of a person in online situations as technologically managed or circumscribed. There is therefore an assumption that exchange partners appear to

An Absence of Networks

27

online traders as anonymous, faceless, and voiceless strangers lacking physical co-presence in their brief and fleeting encounters (see Ailon 2019: 928). Online markets are thus characterized in terms of an absence of factors giving rise to a sense of attachment or empathy, absence of signs of common identity, facial expression, human voice, and so forth (see Preda 2009). Online markets, therefore, as depersonalized, fragmented, and competitive, are seen to presuppose and encourage relational dissociation between traders, and between buyers and sellers (LiPuma and Lee 2004; see Ailon 2014). In online markets, tens of thousands of anonymous buyers and sellers trade with each other every day. A resulting perception is that in the majority of cases, interaction between the same buyer and seller is highly infrequent (Resnick and Zeckhauser 2002) and that any repeated interactions between the same two traders are typically not connected through a social network (see Diekmann et al. 2014: 66). Moreover, because online trade may occur across extensive geographic distance, it is held that offline commitment relations (Brown et al. 2004; Kollock 1994; Yamagishi et al. 1998) or trust networks (DiMaggio and Louch 1998), which would allow traders to obtain and disseminate information about their interaction partners, are unlikely to form (Diekmann et al. 2014: 67). This contrasts with the view that economic transactions require an element of trust to offset opportunistic behaviour (Williamson 1985). It can be assumed, then, that online transactions are risk prone; neither product characteristics nor seller identity can be adequately assessed prior to or during a transaction, increasing opportunities for cheating or fraud (Pavlou and Genfen 2004). Also, the online environment is devoid of social cues, such as body language, which might otherwise be used to ascertain whether a trading partner is reliable or can be trusted (Ailon 2019). As online marketplaces lack the legal surety of traditional marketplaces in safeguarding transactions (Pavlou and Genfen 2004: 40), self-interested selling agents may act opportunistically by supplying products of a quality lower than promised. It can be concluded that peer-to-peer online transactions carry significantly greater risk than faceto-face exchanges, that engaging with faceless strangers across the Internet – separated in both time and space – requires a leap of faith greater than the trust exercised in face-to-face interactions conducted in physical premises (Kuwabara 2015: 1398). To mitigate the risks of anonymous transactions, many online markets that are too large and decentralized for contractual enforcement or centralized policing rely on reputation systems to curtail fraud and sustain buyer trust (Kollock 1994; Resnick et al. 2000). Cooperation in peer-to-peer online markets is sustained by electronic reputation systems that collect and disseminate information about traders’ past behaviour (Kollock 1999; Resnick et al. 2000). Such reputational presentation is seen as a viable source of generalized trust and trustworthiness inculcating a sense of security, stability, and efficiency in the online environment in which there is not only sanction against provision of poor-quality products but also encouragement to improve both product and

28

E-Commerce: Social Embeddedness Through and Behind The Screen

service quality (Adamopoulou and Symeonidis 2014: 368; Wang and Zhang 2017). According to these arguments, traders need not be embedded in offline social networks in order to access information about other traders as long as they have access to the online market platform. Lack of social embeddedness is therefore compensated through electronic rating systems that efficiently and systematically disseminate information concerning traders’ performance-based reputations (Resnick et al. 2000).

Embedded Online Networks Rather than viewing online exchanges as absent of relational associations, as outlined previously, studies have increasingly recognized the presence of relational properties. Not necessarily as revolutionary, unprecedented, and novel as initially regarded, virtual spaces are now acknowledged to be anchored in real-world infrastructures (Baym 2009). The genuine novelty of technological developments, therefore, does not necessarily lead to the generation of a parallel novelty in real-world relationships. The underlying structure of the Internet in terms of the nature and design of the virtual spaces in which it subsists, it can be argued, is created, sustained, and transformed through social action (Arora 2012; Knorr Cetina and Bruegger 2002a, 2002b; Sassen 2002). In this sense, then, virtual space is not a monolithic structure but rather a plurality of networks shaped by its actors (Haythornthwaite 2005). Online activities, therefore, are not separate from other aspects of human actions and experiences, but rather are a part of them (Garcia et al. 2009). The patterns of online activity in many ways reflect the offline networks of online users (Tian 2016, 2018: 553). Virtual communities, for instance, are formed not with inherently new and noble social rules but rather are built on and extend offline relationships (Baym 1998). Offline social networks have an impact on relations and interaction online (Wellman and Gulia 1999; Wellman et al. 1996). Online communication is affected by social networks that exist offline (Matzat 2009: 64; Wellman and Gulia 1999). Labour outsourcing in the online gig economy, for instance, is embedded within interpersonal relations and specific geographies with distinct spatial scales (Wood et al. 2019). In a similar vein, online purchasing by consumers is influenced by word-of-mouth communications between and among consumers, which may take place in face-to-face spaces, as well as in online exchanges that are either personal or remote (Zhang and Deng 2016; Zuo et al. 2014). The British-based economic sociologist Alex Preda (2009a) argues that even in the case of the most physically isolated arrangements, trading transactions are relational. Exchange regarding online financial trading, for instance, tends to be a physically solitary activity: lay traders are not employed by financial institutions and tend to conduct their trading in real places, such as homes or cafes (Roscoe 2013). Traders’ actions, at the same time, take account of and are oriented toward the behaviour of other traders (Ailon 2019: 930). In order to calculate and transact, they must observe market

Building Relationships and Networking

29

developments and assess the moves of others (Ailon 2019). In other words, they ‘must face unseen strangers as being there’ (Preda 2009a: 678). Although the relevance of social embeddedness in online exchanges is acknowledged, as noted in the literature cited earlier, studies typically focus on how online networks are affected by existing offline networks. Little is known about how individuals take initiatives to create, expand, and maintain online social networks behind the screen, especially in online markets. An investigation of the activities of e-commerce entrepreneurs in terms of their social networks will contribute to a better understanding of social embeddedness in online markets. In what follows, relationship building with online buyers is examined in exploration of the hidden social embeddedness that can be located in online markets. A concept of personalized anchoring reputation is then developed. It is shown that the strategy of anchoring reputation is a means of gaining assurance, and recruiting and securing potential buyers. Finally, an approach that integrates characteristics of face-to-face transactions with online exchanges, developed by the so-called m-commerce entrepreneurs, is analysed. Participants identify their approach as liebian, fission, a means to secure and extend assurance in online transactions.

Building Relationships and Networking The standard lay representation of online transactions, frequently replicated in scholarly discussion, holds that as a result of browsing product information on a website, buyers decide on a purchase that is secured through the use of an automated payment system. In this scenario, human-to-human interaction is unnecessary and avoided (Laudon and Traver 2016; Poon and Albaum 2019). Through fieldwork, on the other hand, it was revealed by all of the online business entrepreneurs interviewed that customer service was essential to their business model and highly significant in their day-to-day commercial practices. Indeed, the qualifications for customer service employment in the companies participating in this study are higher than those for employees in other divisions of these firms. Employees in customer service are required to have high levels of communication and problem-solving skills, a capacity for and predisposition to establish and maintain online relationships (guanxi) with buyers, and detailed familiarity with products. A number of entrepreneur respondents indicated that customer service was so pivotal to their business’ success that they took direct personal responsibility in the training of customer service staff. The view expressed by Xie (aged 29, Bachelor’s Degree, owner of a personal accessories company) was shared by other entrepreneur respondents: A customer service employee must be good at tong kehu liaolian (chatting with customers). They must understand the customers’ thoughts, meet their needs in different ways, including recommending products. Customer service people must cultivate return customers, and also attract potential customers through existing customers’ circles.

30

E-Commerce: Social Embeddedness Through and Behind The Screen

One company employed a classic maxim as an informal motto, de minxin, de tianxia, which literally means ‘win peoples’ hearts, win the empire’ but in the context of their usage has the figurative meaning of ‘win customers’ hearts, win everything’. The requirement that customer service employees build enduring relationships (guanxi) with customers involves more than what the communications scholar and Principal Researcher at Microsoft Nancy Baym (2015, 2018) calls ‘relational labour’. In her study, Baym (2015: 16) acknowledges the pecuniary basis of a musician’s connections with an audience, built through relational labour. Tang’s (2023) research on the guanxi dynamics between an educational consultant and her clients in an online platform highlights an integration of both instrumental and expressive engagements. The point to notice here is that guanxi operates on the basis of long-term relationships sustained through trustworthiness, mutual obligation, and reciprocity. This entails that individuals bonded through guanxi are obliged to provide support to each other. Guanxi mobilizes not merely an instrumental means of acquiring material benefits but includes building, reinforcing, and sustaining the relationship itself (Barbalet 2021: 23–31). It is not unusual for employees in the customer service section of the companies studied to work long hours, as a consequence of persistent engagement with customers. Qian, a customer service employee at firm B, recounted that she had been providing service for a young female customer from 12:00 midnight to 1:00 am. The customer asked Qian why she was working at such a late hour. Qian reported in an informal interview that she had replied that she had to work hard to support her family, to which the customer confided to Qian that she herself didn’t have to ‘slave’ because she was financially comfortable through support from her husband. Qian remarked: I complimented her to enhance her face: ‘You must be maomei ruhua (as beautiful as flowers). Unlike you, naturally born beauty, I have no other way but to work hard!’ Delighted with my response, she bought many products which I recommended, more than she initially intended. In the end she promised me that she would recommend our products to her friends.

Face is a key mechanism in building and maintaining guanxi. Face is the social standing a person possesses through the recognition they receive from others, including a specific person on a given occasion (Ho 1976). Face arises in social interactions or relationships that are in turn responsible for particular emotional experiences, and these latter underlie the processes of face. Qian’s complimentary remarks resulted in raising the customer’s sense of face, which induced feelings of self-confirmation, as well as sympathy for Qian. The feelings of self-assurance and self-gratification led the customer to increase her purchases of the company’s products, more than ‘she initially intended’. The demonstration of her capacity to purchase abundant high-quality products, and in doing so help a ‘poor’ hard-working woman, further enhanced her

Building Relationships and Networking

31

face. Self-satisfaction through enhanced face also led to the customer’s promise to bring in new customers. The emotional components of face are the drivers of the dynamism of face states and changes in them (Qi 2014: 159). Although face is an underlying aspect of all social behaviour (Goffman 1972), face may also be a distinct and distinguishable cultural object, in which an explicit concern for face is itself a factor in motivating the actions and influencing the behaviour of individuals (Qi 2014: 147; Qi 2021: 173). Whereas face aligns a person’s behaviour with their public perception, an analogous albeit mechanical operation is arguably found in online marketing platforms, which typically provide a messaging function inviting users to communicate with an ‘online team’ which provides immediate responses to queries, irrespective of the time of day or day of the week. In this sense, online markets actively encourage a relational association between (potential) buyer and seller embedded in performative actions of participants. Rather than merely computerized automation, then, online transactions are mediated and influenced by actors, corporeal rather than merely virtual. Technological systems used in online e-commerce markets do not therefore necessarily dispense with embeddedness inherent in social relationships (Granovetter 1985); rather, the medium of the Internet masks what is salient in face-to-face transactions. Social embeddedness in e-commerce is not confined to business-to-consumer trade, but is also important in business-to-business interaction. The two biggest and most influential online shopping websites in China are Taobao and Jingdong, so that customer access and the business prestige desired by e-commerce entrepreneurs leads them to aspire to trade from either one of these platforms. A number of entrepreneur respondents indicated that their business success depended on establishing a contact and maintaining guanxi with individuals they described as ‘neimu xiaoer’ who worked on either the Taobao or Jingdong sites. The term ‘neimu xiaoer’ is a neologism which combines a traditional term ‘xiaoer’, referring to a young man who serves customers in an inn, with neimu which literally means ‘inside’ or ‘behind the scenes’, so that neimu xiaoer indicates a company insider supportive of a business client. The term ‘neimu xiaoer’ is used to refer to Taobao and Jingdong service sector employees, irrespective of whether they are in marketing, routine business operations, warehouse, or some other division of a company. Ma (male, aged 41, Bachelor’s Degree, owner of industrial products company) indicated the importance of developing a good relationship with neimu xiaoer in order to enhance sales: Having your company’s webpages on Taobao or Jingdong is the first step to business success, but it is not enough. Any company who pays the license fee may appear on their website but not all company’ webpages are noticeable and displayed in an inviting way. Websites are managed by the marketing neimu xiaoer, who I need to have good guanxi with. So, I have to give many dinner parties and gifts that are necessary to cultivate the neimu xiaoer.

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E-Commerce: Social Embeddedness Through and Behind The Screen

Given the prevalence and role of neimu xiaoer, and the need for e-commerce entrepreneurs to cultivate them in ensuring a facilitating relationship for the marketing of their products, online business cannot be adequately dealt with simply in terms of the system-focused notions of an ‘apparatus’, to borrow the term employed by Scott and Orlikowski (2013: 78). The operation of technologies and systems requires human actors, whose performance is not completely explained by the machinery they deploy and who are subject to incentives that relate as much to their own interests as to the formal structures in which they are employed. By paying attention to how offline performances overlap with online behaviour it is possible to understand how social practices provide the real-world accomplishment of the so-called virtually real, extending its reach and effectively realizing its potential (Arora 2012: 601). It is shown here that the operation of a seemingly objective and virtual e-commerce system is embedded in interpersonal networks through which individual participation is necessary. Dominant approaches in economic sociology regard economic relations as comprised of social interaction built on face-to-face contact. While face-to-face embeddedness is more or less manifest in co-locational spaces, e-commerce embeddedness operates without regard to geographical position, but is no less social than that which occurs in face-to-face exchanges. Peng (male, aged 36, Bachelor’s Degree) is co-founder and co-owner of an online wine retailing business which markets its products on the Jingdong website. He reported: I need to establish and maintain good guanxi with probably 30 neimu xiaoer. Each is in charge of a different sector of the platform. If I take them to dinner and provide them with gifts, then my business runs smoothly; if I fail to maintain these relationships, then it is likely that I shall experience difficulties.

When asked what sort of difficulties might arise, Peng responded: We need to have our wine delivered to Jingdong’s warehouses in five cities, from where the wine will be delivered to buyers in these different locations. If things go smoothly the neimu xiaoer will tell us promptly which type of wine is low in stock and needs replenishing, if there are problems with packaging – we had an issue with damaged packages that needed to be dealt with. There are lots of seemingly small problems that need to be dealt with, before they become big problems. The neimu xiaoer can deal with these things promptly, or not; good relations with the neimu xiaoer means that things aren’t left but dealt with properly. Also, the neimu xiaoer can make sure that the wine is dispatched to the customer quickly.

From this account, it can be seen that online e-commerce activities are reliant on human intervention resulting from socially embedded relations which are part of, rather than separate from computer mediated interaction (Garcia et al. 2009). Online activities, therefore, need to be understood by locating the social and cultural contexts (Ailon 2019). The term guanxi has been mentioned earlier and is frequently referred to by informants in discussing their facilitating relations with neimu xiaoer. Guanxi, a form of long-term interpersonal

Personalized Anchoring Reputation

33

relation, is formed in conformity with and governed by implicit social norms, including xinyong (trustworthiness), mianzi (face), renqing (norms of interpersonal behaviour), bao (reciprocity), and obligations based on exchanges of favour and gifts (Barbalet 2021; Bian 2019; Qi 2013). Obligations generated in guanxi exchange are social resources frequently applied to achievement of instrumental purposes. The cases presented here reveal how online transactions may be shaped and sustained by participants in guanxi exchanges. E-commerce entrepreneur respondents with sufficient resources would send a trustworthy staff member to the city of Hangzhou, where neimu xiaoer are located; the purpose of such a visit is to treat the neimu xiaoer to a meal and provide them with gifts in establishing and maintaining a guanxi connection in order to benefit the development of their business. Smaller e-commerce entrepreneurs, who lack the necessary resources are excluded from such privileged networks. Contrary to democratic and utopian notions of an even playing field created by the digital world (see Arora 2012), online e-commerce systems tend to reproduce old inequalities, albeit in new forms and possibly less overtly.

Personalized Anchoring Reputation The relevance of reputation for online trade, mentioned previously, has become a topic of interest among sociological researchers (Diekmann et al. 2014; Gandini et al. 2016; Kas et al. 2020; Kuwabara 2015). Entrepreneur respondents in the present study developed relational strategies for reputation building in order to promote their products. Reputation is typically associated with the regard of others concerning the subject’s trustworthiness. Entrepreneur respondents were not indifferent to this element of reputation, on the contrary; but they understood the question of reputation in term of image presentation and were preoccupied with what information they provided on their webpages that would best fit with their customer base of potential online buyers. A number of companies in this study are owned by married couples, but in presenting themselves on their webpage they typically highlight either the wife’s or the husband’s profile, omitting reference to the other, in order to consolidate a reputation for qualities commensurate with their products. Company B, for instance, which markets high quality fashion related products, displays only the female owner’s profile on its webpage and other promotion links, highlighting her attractive appearance, her academic qualifications (she has a PhD) and business awards, leaving her co-owning husband invisible on the company’s website. Customer appreciation surveys conducted by Company B and made available for this research indicate that featuring an attractive, intelligent, and successful female image as representative of the company was efficacious in capturing a substantial female ‘following’, responsible not only for repeat purchases of their products but which was also disseminated to the customers’ own social circles. Indeed, some degree of familiarity with a given stimulus increases the likelihood that it will be processed more quickly and more easily

34

E-Commerce: Social Embeddedness Through and Behind The Screen

remembered (Matzat 2009: 71). One feature of online settings, as distinct from face-to-face interaction, is that such information is disseminated instantly to a much wider audience than conceivable in mere face-to-face interactions. The public presentation of Company B is maintained with some consistency. When invited to present a talk to other companies or address a public gathering, only the female co-founder attends. The way in which entrepreneurs construct an online presence in representing their companies and build a reputation based on a successfully personalized image, is conceptualized here as developing a ‘personalized anchoring reputation’. Purchasing from a company led by an attractive, intelligent, and successful woman encourages affective responses in customers, the vast majority of whom are women, which includes aspiring to and identifying with the personalized image representing the company online. Companies effectively engage in what communications researcher Brooke Duffy (2017: 44) calls ‘aspirational labour’ in order to convert their digital and cultural capital to economic capital. Such emotionally significant information can facilitate awareness even in situations where attentional resources are limited (Phelps 2006), compared with face-to-face interactions, and effectively negates what the British anthropologist Daniel Miller (1998) describes as alienation and abstraction typically presupposed in marketized ‘virtual’ transactions. The concept of ‘personalized anchoring reputation’ links the cultural meaning of a product with the online reputation of the e-commerce entity from which it emanates. It has long been appreciated that products are cultural objects, imbued with meaning based on shared understandings and are themselves symbols or representations of such meanings (Fligstein and Dauter 2007: 115). Among other things this argument supports the idea that online exchange is driven not by abstract and standardized estimates of monetary value or even usefulness or utility, but by social values including status, social recognition, and self-realization (Jarrett 2003: 340). In this context, while helping a company build and maintain a characteristic profile for reliability and esteem, personalized anchoring reputation serves to infuse products with affects and attach to them a sense of identity. In this way, identity is produced, represented and actively negotiated through digital space (Kanai 2019: 15) between a company and its customers. The general qualities of personalized anchoring reputation can be seen by considering the following cases. Ang (aged 41, Bachelor’s Degree) is an m-commerce entrepreneur, that is a person whose business is based on mobile phone communication. M-commerce entrepreneurs include those who provide commentary on current and popular cultural items or events. Ang’s visibility and reputation derive from the fact that for many years she has been host of a popular program broadcast by a major TV station. Anchored on her established reputation as a TV personality, her m-business is based on having hundreds of thousands of ‘followers’. When asked how her m-business made money, Ang showed her webpage on her mobile phone. She explained that while access to her webpage is without

Personalized Anchoring Reputation

35

charge there is an option for ‘dashang’ (literally, make a reward), so that a payment of CNY 5 (approximately 60 pence or 70 US cents), CNY 10, or more, or a subscription, may be made instantly through an app on a mobile phone. When asked why anyone would pay, given that her program is free, Ang replied: Those who like my program want me to continue to produce. The payment is affordable, it costs a person practically nothing. I have so many followers, though, that the accumulated figure of many small payments enables me to make a fortune. My colleagues who work at the TV station cannot afford to buy an apartment of their own in this expensive city. I have no financial worries. I’ve bought a very nice apartment, and I can afford to travel anywhere I like.

I was introduced to Ang by another e-entrepreneur, Geng (aged 36, Associate Degree), who I had interviewed on an earlier occasion. On our meeting with Ang, Geng introduced me to her and gave Ang two umbrellas, one for sun screening and the other for rain, and then she left. During our interview, Ang mentioned that if she found the umbrellas useful then she would recommend them to her followers. Given the established reputation Ang has with her followers, a recommendation to her audience of Geng’s umbrellas would have the dual consequences of realizing Ang’s reputation as symbolic capital (Bourdieu 2005), from which both Ang and Geng benefitted, and additionally, her recommendation would serve as a proxy for the reputation of Geng’s products (Tirole 1996). In the absence, on the part of Ang’s followers, of any prior knowledge of Geng’s umbrellas, and therefore the absence of any possibility of trust in them or in Geng, Ang’s assurance functions as a substitute for trust, assuring potential customers of the reliability and value of Geng’s products. Research concerning the development of trust in online markets is appropriately focused on reputational systems (Adamopoulou and Symeonidis 2014; Dikeman et al. 2014). The case of Ang’s relationship with her followers, though, and Geng’s relationship with Ang, points to what is frequently overlooked in these accounts, namely the social embeddedness through which cognitive appraisals of trust emerge and are grounded. Ang’s reputation and status are signalled by the influence she has over her followers. This reputation is dependent on her customers’ sense of a relationship with Ang and therefore is potentially vulnerable to changes in taste, distraction, and competitors through which relationships, in general, are subject to similar changing fortunes. Ang is aware of both the power of her influence and also its source, and therefore vulnerability, in the support she receives from her followers. Ang needs to reconcile and negotiate between two roles as both cultural commentator and promoter of consumption items, what Arriagada and Bishop (2021) characterize as contradictory positioning of ‘authenticity’ and ‘commerciality’. If the products which she recommends fall short of her promise then the consequences are not simply related to the market fortunes of the products themselves, but more completely to Ang’s own personalized

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E-Commerce: Social Embeddedness Through and Behind The Screen

reputation. As the Australian ethnographer of internet cultures Crystal Abidin (2020: 84) notes, ‘networked capillaries of gossip, rumour, lore, and scandal’ among influencers and followers, would carry significant consequences. In this way, the concept of ‘personalized anchoring reputation’ draws attention both to the power and the vulnerability of the principal’s influence, and also to its source in the interactive associations of e-commerce entrepreneurs behind the screen. In this way, it is possible to appreciate the frequently neglected phenomenon of the agency of social actors in e-commerce as well as the role of social embeddedness in the development of assurance in online markets.

The

liebian

(Fission) Approach

Personalized anchoring reputation operates in a hierarchical manner with regard to an individual’s influence on another, either another person in direct contact with the principal or another person as a member of a mass audience. A quite different approach was revealed in fieldwork which has developed among self-described weishang or m-commerce operatives, entrepreneurs who sell products through webpages on mobile phones. Chinese m-commerce entrepreneurs engage in a group-focused practice called liebian, a concept which captures the essence of m-commerce operations. Liebian is formed by two characters lie (split) and bian (change), indicating that ‘one can become two and two can become four’, and so forth. Ling (referred to in the Introduction) reported that she had engaged in m-commerce for more than three years, selling through her mobile phone webpage what she described as ‘daily goods’, including shoes, socks, bags, scarves, and so on. She purchases these products at relatively low prices from a friend who owns a company specializing in manufacturing these and related items for export. Ling indicated how liebian works by demonstrating on her webpage as she explained: I circulate my webpage among the circles of my friends and relatives. Look, these are the dianzan (favourable comments) from friends who have purchased my products. Some of them have sent my webpage to their friends and relatives, who also make purchases. It is likely that some of these would also recommend my products to their friends and relatives.

Through the mobilization of contacts in this manner, ‘one connection becomes two, two connections become four’, so that by adding a member to the recipients of her webpage Ling increases the chances of their forwarding the webpage and recommending her products to an expanding circle or group, which in turn may attract additional customers, generating expanding chains of potential customers. Risks faced by online buyers concerning the quality of goods and their delivery are necessarily much greater than among those who participate in face-toface trade in physical premises, as noted previously. Even when information about reputation through online feedback systems is reliable, the incentives

The Liebian (Fission) Approach

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to trust are lower than those that occur in traditional markets, where longterm relationships resulting from co-proximity provide a stable and therefore reliable basis of trust (Bolton et al. 2004). At the same time, because there is a tendency to have greater confidence in information provided by ‘a trusted informant’ (Granovetter 1985), especially close friends and relatives, then the liebian approach of Chinese m-commerce entrepreneurs provides advantages over the standard internet reputational systems; assurance embedded in interpersonal networks is both more effective and more reliable than the trust that is generated through automated reputational devices. In anonymous online markets, traders who act opportunistically are unlikely to be identified, sanctioned, or disciplined by a third party authority (Przepiorka 2013). Those relationships which occur within a social network, on the other hand, are less likely to experience maleficence, and if such behaviour were to occur it is likely that information regarding it would be disseminated through the network generating punishments and corrective actions of various kinds, thus encouraging members’ trustworthiness (Raub and Weesie 1990). This is effectively the mechanism underlying the liebian approach, through which participants’ trustworthiness and reliability are enforced through interpersonal network visibility and sanction. This approach, then, operates through both direct and indirect enforcement. If the seller behaves opportunistically, she loses face among her friends and relatives with a subsequent loss of future business opportunities. If a customer recommends a product of poor quality to a friend or relative, she loses face among her peers and the trader loses future business opportunities. The liebian approach is more cost effective than standard reputational approaches in its development and maintenance of assurance between sellers and buyers through embedded networks of friends and relatives. Its method of disseminating information is also cost effective in so far as expenditure on advertising is redundant for m-commerce entrepreneurs as the iterated network building through and between friends and relatives disseminating commercial information to their friends and relatives incurs no additional expenditure for m-entrepreneurs themselves, as the ‘living adverts’ of associates and associates of associates provide instantaneous dissemination of reputation and product information carrying the reliability of privileged network information. While the formal advertisements of larger firms are sent through alien devices to strangers, the liebian approach disseminates information between persons already known to and vouched for by the recipient. It is worth dwelling on the effectiveness of the liebian approach as it capitalizes on both strong ties and weak ties. A recommendation from a friend or relative serves as a reputation voucher for the quality of goods and the seller’s reliability in a typical strong tie relationship. Through friends’ and relatives’ contact with their friends and relatives, information regarding both the sellers and their goods reaches persons who are likely to be strangers to the seller. Such weak ties tend to be heterogeneous in nature for new information

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E-Commerce: Social Embeddedness Through and Behind The Screen

to reach diverse networks (Granovettor 1973). Through the chain of friends and relatives, and their friends and relatives, information advantageous to the sellers are likely to extend to social circles and groups otherwise outside the m-entrepreneurs’ reach. By their using the liebian approach, though, m-commerce entrepreneurs implicitly but effectively have their own close contacts engage in the activity, on their behalf, of bridging what the network scholar Ronald Burt (2004) famously calls ‘structural holes’. Unlike the e-commerce entrepreneurs treated earlier in this chapter, whose social standing was enormously enhanced by their business success, some m-commerce entrepreneur respondents reported that they were initially subject to disapproval if not ridicule for engaging in ‘small item’ trade, especially when they first undertook such entrepreneurial endeavours. One m-commerce entrepreneur respondent reported: Some of my close acquaintances laughed at me when I told them that I was selling socks on my webpage. I sort of understood why they found it strange, but I was also angry that they were unsympathetic and not supportive. What’s wrong with selling socks! I did harm to no one, I didn’t steal or cheat; I make money legally through my own laodong (literally, labour). It’s different now; they can see how successful I am (Ting, female, 29 years, Bachelor’s Degree).

In a sense, m-commerce entrepreneurs such as Ting and others like her are truly Schumpeterian entrepreneurs, who in ‘breaking up old, and creating new, tradition’ must overcome ‘resistance’, namely ‘the reaction of the social environment against one who wishes to do something new’ (Schumpeter 2008: 92, 86).

Conclusion Research on online markets has widely focused on the interplay between technology and human agents. The present chapter, on the other hand, has been concerned with interaction between social agents in their deployment of web technology. Research reported here departs from the widely held assumption that the transaction systems of internet markets do not encourage social ties between buyers and sellers, in the manner of face-to-face producer markets (White, 2008: 68), and that a social network basis of internet commerce is unnecessary if not redundant. It is shown in the discussion earlier, though, that social networks are in fact the means through which entrepreneurs disseminate information regarding reliability and product quality. While researchers have increasingly acknowledged that online interaction is influenced by offline behaviour, little is reported about the relevant mechanisms of such operations. This chapter makes a contribution to the relevant discussion by revealing how individuals create and maintain social networks in order to control and give direction to online transactions. In online markets, in which very large numbers of anonymous agents buy and sell a plethora of goods, malfeasant agents may deliver substandard

Conclusion

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products, overcharge, or in other ways behave inappropriately or dishonestly. Trust, then, is particularly difficult to attain when the exchanges are between unknown operatives, and at the same time, more critical than in the case of co-locational market spaces in which face-to-face interactions are typically repeated and between agents with pre-existing histories of familiarity. The existing literature is focused on how reputation systems are used to mitigate the risks of anonymous transactions, providing platforms for collecting, aggregating, and displaying numerical ratings and reviews of products and services from buyers (Adamopoulou and Symeonidis 2014; Dikeman et al. 2014; Kuwabara 2015). Little research has been reported on how entrepreneurs employ strategies to build their reputation. The concept of personalized anchoring reputation, developed in this chapter, fills a gap in research on web-based markets by showing how companies anchor their reputations on a prominent representative figure in framing their company. Another solution to the problem of market reputation identified in the chapter is the emergent approach of liebian, or fission, developed by m-commerce entrepreneurs, which deploys aspects of face-to-face network interaction in the development of online markets. The ‘split and expand’ strategy of generating chains of friendship and familial networks utilizes trust assumptions inherent in these networks and at the same time provides assurance against defection and malfeasance through face-based assurance and sanction, in which obligation and reciprocity are maintained in an online environment. In this way, social embeddedness in online markets operates through the networks of micro-level interactions. This chapter began with acknowledgement that the concept ‘market’ is more opaque than generously recognized. In the most abstract sense, market relations are made up of purchases and items purchased. Economists conventionally underplay social relationships in understanding markets. It has been shown in this chapter that e-commerce, typically understood as excluding social relations, is significantly dependent on them, and that the market is effectively displaced by its ostensible alternative, networks, through the innovations of e-commerce entrepreneurs.

2 Making Social Networks Agency, Norms, and Costs

Introduction As indicated at the beginning of Chapter 1, business cannot be understood simply in terms of employment and production because it operates in contexts through which all of the other aspects of business are influenced. The market situation is obviously crucial but so is the social context of institutions which govern the expectations and behaviour of persons who are subject to them. A key institution relevant to understanding entrepreneurs and business engagements, in general, are the social networks in which businesspeople participate, with others in business, with their customers, and with officials. In this chapter, the discussion of social networks begun in Chapter 1 will be continued and extended. Indeed, it is necessary to say a good deal about networks before the discussion of entrepreneurs in networks is undertaken. In considering social networks three key ‘received wisdoms’ stand out as defining the field. First, it is universally appreciated that networks are beneficial for those who participate in them, enhancing individual and collective outcomes. This quality of social networks is accepted in a number of academic fields, including business and management studies, social psychology, and sociology. The benefits of social networks are shown to be extensive, including physical well-being, social solidarity, economic prosperity, innovation and entrepreneurship. Such benefits derive from network-born access to valued resources, including information, transaction-cost savings, and otherwise unavailable opportunities for not only business involvement and entrepreneurial pursuits but all kinds of occupational engagement and market activity. A second, although less frequently stated received wisdom is that networks may be mobilized to achieve, or incidentally and possibly unintentionally may produce negative outcomes for particular categories of members of such patterned relationships and especially for those outside established networks. 40

Introduction

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Like other social phenomena, social networks manifest contradictory and interdependently generated tendencies, with paradoxical consequences. As the American sociologist, the late Alvin Gouldner (1955: 503–506) classically demonstrates, the ‘iron law of oligarchy’ in which ‘organizational needs inhibit democratic tendencies’ operates in a context which includes contrasting forces of change and contestation: When, for example, Michels spoke of the ‘iron law of oligarchy’, he attended solely to the ways in which organizational needs inhibit democratic possibilities. But the very same evidence to which he called attention could enable us to formulate the very opposite theorem – the ‘iron law of democracy’. Even as Michels himself saw, if oligarchical waves repeatedly wash away the bridges of democracy, this eternal recurrence can happen only because men doggedly re-build them after each inundation. Michels chose to dwell on only one aspect of this process, neglecting to consider this other side. There cannot be an iron law of oligarchy, however, unless there is an iron law of democracy (Gouldner 1955: 506).

This same idea, although on a different basis, has become a general principle of sociological analysis since the publication of Anthony Giddens (1979), Central Problems in Social Theory; namely that ‘structure is both enabling and constraining’ (Giddens 1979: 69). This is a generalization from which networks as social structures cannot escape (Huang et al. 2019; Schrank and Whitford 2011). The constraining aspect of social networks may be experienced by those subjected to it as a ‘dark side’ of social networks, which may be manifest through a number of factors. First, privileged or dominant networks restrict membership access, so that persons in subordinate social classes, members of ethnic communities, and women may be denied network benefits (Arun et al. 2016; Bloch and McKay 2015; Bott 1971; Cranford 2005; Fritsch 2015; Ibarra 1997; Li et al. 2003; Ridgeway and Kricheli-Katz 2013; Ryan 2007; Thieme and Siegmann 2010; Zontini 2010). If social networks have exclusionary consequences, then it is likely that resources will be mobilized in the generation of unequal and possibly undesirable outcomes (Portes 1998). A combination of network effects, including social homophily through which contact between similar people in terms of their social and cultural endowments is more likely than between people with dissimilar qualities, may lead to significant inequality even when initial differences between individuals are modest (Bian et al. 2015; DiMaggio and Garip 2011, 2012). Restrictive consequences of social networks include the ‘exclusion of outsiders, excess claims on group members, restrictions on individual freedoms, and downward leveling norms’ (Portes 1998: 15; see Grabher 1993). Similarly, ‘the same social relations that … enhance the ease and efficiency of economic exchanges among community members implicitly restrict outsiders’ (Waldinger 1995: 557). Resource monopoly through network membership leads to social isolation of the less-well-off (Blokland and Savage 2008), producing reduced access to resources, including information (Briggs 2005). Differential power

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and focused benefits derive from network privilege necessarily denied to those outside the network. There is no incentive for members of privileged networks to generate common outcomes for non-members. This is highly visible for Chinese guanxi networks, which constrain those poorly positioned in the networks of social relationships. Guanxi therefore effectively exacerbates social stratification and inequality (Bian et al. 2015), a pattern not confined to Chinese networks. Social networks may thus contribute to disadvantageous stratification (Anderson and Jap 2005; Cranford 2005; Daly and Silver 2008; DiMaggio and Garip 2012; Erikson and Occhiuto 2017; Portes 1998; Velayutham and Wise 2005). Implications of social networks for class inequality are also well documented (Hayton et al. 2017; Meghji 2017; Pichler and Wallace 2009). Moreover, networks comprising members with lower socio-economic status, in both relative as well as absolute terms, may reinforce social marginalization rather than enhance such persons’ access to resources (Offer 2012; Ryan 2011; Villalonga-Olivesa and Kawachibs 2017). In other ways social bonds may have detrimental consequences, producing social liability rather than social capital (Gargiulo and Benassi 2000). Close relationships that seem to be the most stable can also be the most vulnerable to decline and destruction (Anderson and Jap 2005). Social networks may entail debilitating demands, conformity pressures and loss of personal freedom (Daly and Silver 2008; Portes 1998). The closure that facilitates trust and cooperation within a network simultaneously erodes the probability of cooperation beyond the network, thereby reinforcing a social boundary around the network (Burt et al. 2022). In this sense, then, social networks may function as liabilities and even traps (Uzzi 1997). A third received wisdom concerning social networks is that they are based on underlying latent structural factors. Contingent on this is the idea that quantitative methods are most suitable for investigating networks, required for measuring distributions of network properties, the number of connections within or the ‘density’ of a network, the frequency of flows between members or ‘tie strength’, the variable flows between nodes or ‘centrality’, and so on. Because social network research tends to focus on structural characteristics, ‘it is often proposed [in network analysis] that network structure alone virtually determines action’ (Uzzi 1997: 63). This latter proposition not only underlies research on those networks integral to career advancement and business opportunities, it is also taken for granted in studies that regard networks as crucial for innovation. Randall Collins (1998: 44–45) argues that intellectual advantage is available to those ‘who are tightly connected in social networks’ and emphasizes that an ‘individual’s trajectory of action at any given moment depends on where that person is situated in relation to the local social structure, the networks in which one participates’ (1998: 29). Creativity and its enthusiastic expression, according to Collins (1998: 52), ‘is nothing but the emotional energy specific to intellectuals who are in those crucial network positions where they have the cultural capital that will appeal to key audiences’. Again, structure is emphasized rather than agency.

Varieties of Networks

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The present chapter effectively modifies these three received wisdoms, in different ways. While the ‘dark side’ of social networks is now widely understood, a contribution of the discussion to follow is to demonstrate that negative network effects may impact on successful members of beneficial networks. Studies which draw attention to negative consequences of social networks typically focus either on the adverse effects of exclusion from networks or the way in which disadvantaged members of networks may experience a ‘capital return deficit’ (Lin 2001b: 120–122; see also Chang, Wen and Wang 2011; Zhang 2011). It will be shown here, on the other hand, that negative network consequences are not necessarily an alternative to beneficial social networks but may be experienced by members of advantage-conferring networks. In this manner both the first and second received wisdoms of social network ties, mentioned above, are amended. In understanding the complex workings of individual actions in creating and maintaining networks, in-depth interview data and field observations are presented in considering not the structural basis or effects of networks but rather the contribution that network members make to the operation of the network itself. This is a significant contribution to the literature in so far as networks are typically treated as pre-existing formations into which members are inducted and whose behaviour is explicable in terms of network effects. In the discussion to follow the agency of social actors in contributing to network formation in three distinct forms is considered, as ‘initiators’, ‘norm generators’, and ‘managers’ of network members. In particular, it is shown that network making is an explicit activity undertaken by individuals, an activity that has costs as well as benefits. Second, it is shown that network norms are not residual components of networks but constructed and modified by participants. Finally, it is shown that network membership is not a qualification but rather a practice, involving social engagement including management of network participants.

Varieties of Networks Social networks in the Chinese context are distinctive insofar as they are influenced by cultural elements sufficiently characteristic to lead to their being almost universally described as a variant form of social network known as guanxi (Burt et al. 2018). As indicated in Chapter 1, the concept of guanxi refers to personalized instrumental relations which take a network form that is typically based on affective bonding and favour exchange (Barbalet 2021; Bian 2019; Qi 2013). It is therefore necessary to indicate the way in which network forms are differentiated and to identify the special features of guanxi networks. The purpose here is to provide an indicative model of network types rather than a comprehensive analysis, in order to situate guanxi as a network type.

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Social networks may broadly be distinguished in terms of the extent of their membership or membership scope and also tie strength. Tie strength will be dealt with later, when considering guanxi networks. Membership scope is arguably a feature of social networks in the sense that their membership is limited to circumscribed groups, as implied by Pierre Bourdieu’s (1986) characterization of networks in terms of social class reproduction and explicitly stated by Nan Lin (2001b: 24). Going from this particular characterization of membership scope to a more general understanding, social networks may be distinguished in terms of whether they are based on kinship, for instance, residence or neighbourhood, workplace, business association, political affiliation, and so on. Relatedly, networks may be distinguished in terms of the extent of their membership. Because of the instrumental potential of social networks, access to membership is a social resource through which other social and possibly material resources become available. Bourdieu (1986: 249–250) refers to ‘the aggregate of the actual or potential resources which are linked to possession of a durable network of more or less institutionalized relationships of mutual acquaintance and recognition’. Through such networks, individuals ‘gain access to embedded resources to enhance expected returns of instrumental or expressive actions’ (Lin 2001b: 29). As network members access embedded resources, including information, influence, or credentials, the extent of membership is a significant network characteristic. guanxi

as a Network Form

Guanxi networks, while decidedly instrumental in the manner just now indicated, operate with resources that are in a sense less ‘embedded’ than the networks described by Bourdieu and Lin as they derive from favour exchange rather than pre-existing solidarities of kin or class (see Barbalet 2021, chapter 6). In the simplest terms, a guanxi relation is dyadic, between a requester of favour and a (potential) provider, through which obligations of reciprocity arise (Qi 2013, 2014, 2017b). Any single participant in a guanxi exchange may have similar relations with a number of other guanxi partners. Indeed, a successful guanxi participant is attractive as a prospective guanxi partner because a shared guanxi provides access to a person’s other guanxi partners. In this way, a guanxi network emerges. Implicit in this characterization is the idea that unlike the networks described by Bourdieu and Lin referred to above, guanxi networks have a membership size which depends on the strategic considerations of its individual members. One feature of network analysis, as noted earlier, is a tendency to emphasize the structural properties of networks in detailing their effects on members (Pizarro 2007). With guanxi networks, on the other hand, members are active in shaping the networks in which they have membership. It will soon be shown how this is achieved in three areas of engagement, namely consciously making network ties, constructing network norms, and by explicitly managing network members.

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The networks considered by Bourdieu and Lin mentioned earlier are based on strong ties between members. Mark Granovetter (1974) famously contributed to social network analysis by showing how weak ties between acquaintances may provide non-redundant information convertible to labour market benefits. Weak ties, it has been shown, provide a ‘bridge’ between otherwise unconnected actors and thus impart access to resources newly-available, traversing ‘structural holes’ (Burt 1980). Granovetter’s inventive focus on weak ties has been seen as a means of introducing agency and culture into network analysis (Emirbayer and Goodwin 1994: 1419; see also Erikson 2013), even though these factors are at best dependent variables in the established structural approach from which neither Granovetter nor Burt departs (Krippner 2001). Indeed, in social network analysis tie strength is a consequence of latent structural properties of the network in question (Granovetter 1973: 1361; Marsden and Campbell 1984, 2012). Guanxi networks are not meaningfully framed in terms of tie strength. This is because guanxi ties are not latent in structures but self-consciously cultivated by participants, so that in guanxi ‘weak and strong ties are not permanently distinct categories’ (Smart 1998: 561). This has led to the argument that ‘the conventionally understood tie-strength characterization of its network links is redundant’ for guanxi networks, and that the effective bond between participants is an evaluation regarding exchange obligation and how it may be discharged (Barbalet 2015: 1040–1043). This has been described as ‘tie-multiplexity’ in which social actors are connected through multiple channels, characteristic not only of guanxi networks but also ‘old boy/girl’ networks in which friendship and common association may be strategically utilized for achieving expressive as well as instrumental purposes leading to meaningful outcomes (Bian 2018: 605). While guanxi networks are distinctive in a number of ways and are rationalized by their practitioners in largely cultural terms, their formal properties are amenable to sociological analysis, and the institutionalized practices that characterize guanxi networks highlight a general pattern of tension at the intersection of structure and agency and especially the agents’ contribution to network formation and configuration that may inform researchers about network-significant practices relevant for understanding the behaviour of network members in general.

The Agency of Network Actors in Network Making Interviews among the sample of entrepreneurs in my fieldwork all indicated that they spend much time and energy building and maintaining their networks. In China social networks are predominantly based on guanxi, a form of long-term interpersonal relation which operates in terms of implicit culturally-informed expectations, including xinyong (trustworthiness), mianzi (face), renqing (human sentiment), and bao (reciprocity) (Bian 2018;

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Qi 2013). Obligations generated through guanxi exchanges effectively serve as a social capital resource, that is as a social means used to access social benefits, frequently applied to realizing instrumental purposes (Gold 1985). The initiation and maintenance of a guanxi network ‘incurs [for participants] heavy social investment’ (King 1991: 76; see Wank 2009). The cases reported from my fieldwork show how network members consciously create and maintain their guanxi through strategies that are modified over time as a result of ongoing experiences of the performance of others as well as developments in self-understanding, both of which are practical consequences of ongoing network participation. This interactive basis of entrepreneurs’ network-making will be explored in more detail in Chapter 3. The focus here is on the way in which advantageous participation in networks has a cost, a cost which may have significant personal impact and therefore affect entrepreneurial performance. The last point mentioned above is demonstrated in the case of Mrs Tan. Before owning her own export/import company Mrs Tan (aged 40) worked for a Shanghai-based Hong Kong business. When first employed she believed that she would be primarily responsible for sending sample products to (potential) clients and negotiating the terms of transaction. As it turned out, a lot of her time was occupied with establishing, consolidating, and expanding guanxi networks in four cities in the Huadong region of East China. She would rent accommodation in one city, live there for several months to establish and maintain guanxi networks with clients, then moved to the next city in order to do more or less the same thing there. Tan remarked: I got promoted due to my hard work. However, as a consequence of my frequent travelling between the four cities, my personal relationship broke down as I couldn’t have enough quality time with my then boyfriend.

Through participation in guanxi networks individuals gain access to information and resources crucial to facilitate or complete deals, provide career opportunities, and access a range of other advantages (Ruan 2021; Wank 2001). That these engagements incur personal costs reinforces the idea that network making is an activity requiring conscious commitment. This is especially true for people in business, who, in building and maintaining their networks must attend frequent lunches, dinners, and after dinner parties. Mr Chen (aged 36, Associate Degree) established an abattoir, which he described as a food products processing company, in 2012. The company has an annual turnover of approximately three billion yuan yielding an acknowledged low annual net profit of 3 per cent. He then went on to open a beverages company while retaining the abattoir. In response to the question ‘How frequently do you attend formal dinner parties?’ Chen replied: ‘Practically every day, I rarely eat at home’. He added: ‘It’s a burden. I often attend two or three dinner parties almost every night, “walking” into this one, “running” from another.’ When asked: ‘What time does the last party end?’ Chen responded:

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That depends. Generally speaking, it will end around midnight, but sometimes one or two o’clock. They generally involve all kinds of activities, not just eating, including Karaoke, going out to have fun … It won’t work for a Chinese who doesn’t know how to ‘eat’, as it also involves jiuzhuo wenhua (the culture of drinking table) … As a medium-sized entrepreneur I’m not a billionaire but richer than small entrepreneurs. I find it impossible not to be involved in this every day guanxi life and have to ‘study’ a lot, including jierendaiwu (norms of treating people) … It all requires ‘expert ­knowledge’!

The assumption that social networks, as repositories of social capital, are a collective or societal good, may lead to the supposition that membership incurs no costs to individuals, and that social networks can be freely accessed and exited without imposing depreciation costs or liabilities on members. It can be seen from this case, though, that Chen’s social network is maintained through personal endeavours which indeed incur personal costs. Network membership in general requires long-term commitments of attention and resources. As one analyst observes, social networks ‘must be constructed through investment strategies oriented to the institutionalization of group relations, usable as a reliable source of other benefits’ (Portes 1998: 3). Individuals must not only exert time and effort to create or access guanxi networks but also maintain or expand existing guanxi networks. Benefits ‘gained by embeddedness in a given network were indeed not without corresponding costs’ (Woolcock 1998:163). Benefits are gained not through passive embeddedness in the social network, which provides a material context, but by the tireless expenditure of purposeful energy by individuals. The costs of network membership for the individuals involved thus include expenditures of time, focus, and emotional commitment, without which entering, maintaining, developing and managing a network, and its constitutive relationships, could not occur. One particular cost incurred in network maintenance mentioned by a number of entrepreneur respondents is the cost to their health. Accepting and giving repeated toasts at a business dinner signifies a person’s sincerity. Failure to participate invites an appraisal of being bu zhangyi (not generous and frank) because not giving ‘face’ to companions means that one is not worthy of ‘friendship’ and therefore network membership (see Fang and Jin 2019; Jayne et al. 2022). Male respondents indicated that drinking leads to health problems ranging from vomiting and dizziness, hangovers, and even gastric perforation. While social drinking rules do not necessarily apply to women, Mrs Deng (aged 36, Associate Degree, owner of transport company) reported an experience echoed by other female entrepreneur respondents: ‘I got so drunk at a business dinner that I had to be carried home. My husband, who cared for me, was very upset – not good for my image and also put me at risk’. Mr Zhao (aged 41, high school graduate, owner of medical health products company) explained the ‘drinking table’ culture in terms similar to those presented by other entrepreneur male respondents:

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Jiupin ru renpin (the character of drinking reflects the character of a person). At the table, people become relaxed and also excited by the effect of alcohol; they reveal themselves sincerely. I become ‘naked’, exposing my inner sentiments, and others do the same. We’re no longer strangers, but friends. The barriers between us are removed, so it is much easier to build trust. Officials become less guarded; business persons would rather do business with people they really know rather than strangers.

During research I attended business luncheons, dinners, and company parties, and observed the ‘drinking table’. During the meal an individual will stand, approach another or a couple, and offer a toast as a gesture of respect, thereby giving them face (Qi 2011). Both parties are expected to ‘bottom up’ small glasses of high-alcohol liquor. After a number of such toasting rounds drinking continues, alcohol consumption is high and drunkenness common, circumstances which indeed make gastric problems likely. The power of social networks is understood to be in associated norms which govern the practices of the actors in the social networks. In this sense, social power is ‘primarily exercised by and through networks’ (Castells 2011: 774). But Castells’ observation would be misleading if he were taken literally; networks themselves cannot exercise social power, rather they provide a context in which network members exercise their agentic capacities, capacities that are context dependent. The point to be developed here relates to how individuals, as members of networks, exercise power. A convention among entrepreneur interviewees in one of the cities in which research was conducted included playing cards, usually prior to dinner and possibly afterwards as well. Mr Fang (aged 39, overseas PhD degree) recounted that some years ago his bridge construction business faced difficulties that would have led to the closure of his company if no new projects were contracted. In order to acquire new contracts, and build his network, he initiated dinner parties with officials, which involved drinking and playing cards. The role of the Communist Party in state administration creates an arena in which political capital plays a significant role in the market economy (Bian 2019; Osburg 2013; Wank 2001; Zhang and McGhee 2017). The private sector is subject to extensive administrative control such that an entrepreneur’s connection with political capital is crucial in order to obtain a license, a permit, or participation in a government project (Osburg 2013; Paik and Baum 2014; Sun et al. 2014). Private business people endeavour to secure from local officials not simply tolerance of their money-making but facilitating administrative and regulatory actions and policies beyond centrally imposed restrictions; such rule-bending behaviour stems from a convergence of shared interests between local officials and private entrepreneurs (Lin 2017). The generation of regional employment and revenue growth are the key criteria in the assessment of the performance of local officials. Regional competition drives local authorities to go beyond centrally set restrictions and by bending rules these officials seek to expand local production, ensuring the growth in employment and revenue just mentioned, and also providing opportunities for the officials’ self-enrichment as well as

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administrative promotion (Lin 2017; Zweig 2002). This situation encourages the particularistic relations between entrepreneurs and officials that are realized through guanxi networks, called ‘commodified networks’ by one experienced researcher (Wank 2001: 226). Being adept at mathematics Mr Fang was able not only to win card games, but also to ensure that those with whom he played might instead win. As a result of his development of guanxi with officials, and thanks to his skill in playing cards, Fang was awarded government contracts which saved his business. There were, though, unintended consequences in this success. Fang reported: I’d been playing cards with lingdao (officials) as well as teaching them how to play for around three years. They called me zhipai dashi (‘master of cards’). I played cards every evening until around three o’clock, with little sleep during the evenings and irregular sleep during daytime. As a result of this lifestyle of heibaidiandao (black and white upside down), my hair turned white – tebie zihui (self-destruction) … Later on, if the word ‘card-game’ was mentioned I would be overwhelmed by a sickening sensation.

Networks operate through their members’ acknowledgement of and conforming to norms, which may be explicit or implicit. Network membership, then, entails compliance with these norms or ‘network rules’, and their fulfillment is an obligation coterminous with network membership. The power of social networks operates through the actors’ expectations concerning other network members, and the level and degree to which these expectations are fulfilled. A number of male entrepreneur respondents indicated that it was almost impossible to avoid participation not only in heavy drinking but also attendance at karaoke establishments in which prostitutes were employed in the course of engaging in the ‘entertainment’ of clients or officials. Guanxi networks that result in political favors for the businessmen which are built on liquor, cigarettes, meals, and sex are ever likely to turn into health hazards (Uretsky 2016). Not to participate would contravene accepted norms of the network and thus jeopardize business deals and contracts (Osburg 2013). As indicated earlier, unequal or exploitative patterns of interaction within and through networks may have negative outcomes. Stating the issue in terms of direct financial cost encourages specification of some important distinctions. Investment of resources in networks may return benefits in excess of costs. In this case the network in question is an asset. It is possible, though, that investment in networks may return benefits that in many ways are lower than the costs. In this case the network is a liability, as when actors become over-committed to and therefore over-invest in particular types of relationship. It is important to acknowledge that network liabilities may be experienced by members of successful social networks. This is not a reference to exploiting the vulnerabilities of others, leading to what has been called ‘capital return deficits’ (Lin 2001: 120–121; see also Chang Wen and Wang 2011; Zhang 2011), but rather to the costs of network membership for those who ostensibly benefit from participation in them, who enjoy positive capital returns. The

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point of indicating unintended negative network effects for those who enjoy positive capital returns is to reinforce the fact that individual effort which necessarily incurs costs is required in network building, and especially in the building of business networks.

Forming and Transforming Network Norms Entrepreneurs network with each other in order to acquire benefits which include privileged access to information, facilitating partnerships, alliances which enhance strategic business practices, and so on. While there are obvious benefits to be gained from membership of a network there are also costs. Some of these costs are contingent, such as the health costs of participating in network rituals, including those mentioned earlier, while others are related to the intrinsic nature of networks themselves, including the need to adhere to network norms. The term ‘norm’ refers to a voluntarily accepted set of practices or behaviours which are means of non-coercive compliance (Jasso and Opp 1997: 948). A failure to operate within the norms of a network may lead a non-compliant member being excluded from future network participation. In general terms norms are typically assumed to operate as an element of social structure, ensuring individual compliance with widely accepted expectations, but more localized normative structures and patterns operate in providing a distinctive ethos to such meso-level phenomena as ethnic communities, formal organizations, sporting codes, and, of course, social networks. Indeed, the power of social networks operates through their members’ compliance with network norms. The norms of guanxi networks can be quite precise in their prescription of appropriate behaviour. This was revealed to me in an interview with Mrs Tan, who was referred to earlier: I learned a lot from my previous supervisor about how to build guanxi networks, but I didn’t have a chance to learn how to give hongbao (money placed in a red envelope). It isn’t appropriate for a third person to be present when a hongbao is offered. Giving hongbao is a kind of art. If one gives hongbao too early, it may da shuipiao (literally, ‘throw onto water to make empty circles’; figuratively, to spend without getting a return). I gradually figured out what’s a ripe time to offer hongbao. I would wait until the salesman had visited our company, examined our products and indicated a genuine intention to place an order. I still remembered the first time when I slipped a hongbao with ¥2,000 into a salesman’s hand, I was overwhelmed with embarrassment and said something like ‘This is xingku fei (a token of thanks for hard work)’. I was full of apprehension about whether he would accept the hongbao. He took the hongbao without any fuss, it was simply a taken-for-granted practice.

Tan was afraid that if the hongbao had not been accepted she would lose face, the regard of others (Cheng 1986; Earley 1997; Goffman 1972; Ho 1976; Qi 2014). Tan was aware that the cost of not following the norm of providing

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hongbao would be more significant than her loss of face, jeopardizing her employment. Norms are not laws, enforced by state instrumentalities, nor are they rules, enforced by organizational administration; rather, norms are informally enforced in group interaction and through network ties (Horne and Mollborn 2020: 469). If Tan had violated the guanxi norm of providing hongbao she would have been punished by her employer because she contravened a behavioural expectation required of participation in a guanxi relationship. Indeed, norms and their enforcement reflect not merely a social convention and avoidance of its breach but more fully the structure of a social relationship and its prospects of continuity (Horne 2009). The power of social networks is not only reinforced through observance of and deference to existing norms but also realized through the generation of new norms which may regularize otherwise inappropriate behaviour. All entrepreneur respondents indicated that it would be very difficult for their businesses to develop if they operated only through formal procedures. Mr Liao (aged 41, technical education certificate, owner of a number of furniture companies) remarked: In the past officials directly requested material benefits from you or, in the name of ‘borrowing’, would take a loan without any expectation of paying it back. Since the anti-corruption campaign started officials have stopped acting so flagrantly. They won’t now request direct benefits but will, of course, accept what is freely offered. If you provide what is expected they won’t find fault with you and you will have no trouble.

The expectations that are realized in informal settings have a contagious influence on the behaviour of network members (DiMaggio and Garip 2012) so that even if the associated conduct is irregular it becomes part of the pattern of interaction and takes on the quality of a norm, a standard of customary behaviour. Such norms and expectations underpin guanxi networks. Norms cannot be taken for granted, as James Coleman (1990: 241) notes: Much sociological theory takes norms as given and proceeds to examine individual behavior or the behavior of social systems when norms exist. Yet to do this without raising … the question of why and how norms come into existence is to forsake the more important sociological problem in order to address the less important.

Respondents indicated how network members adopted behaviours, and the norms underlying them, through accommodation to the needs and purposes of other members of their network. The establishment of a new norm may result from initiatives taken by strategically located individuals who, through their behaviour and the way in which they interact with others, influence expectations and how particular actions and their consequences are evaluated and regarded. In this way certain practices within social networks are encouraged, ultimately through individuals’ performance of engagements that effectively represent new norms which may regularize otherwise inappropriate behaviour. The power of a social network,

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in influencing the behaviour of its members, is thus expressed through participants’ compliance with network norms. Emergent patterns of behaviour and their underlying implicit but predictable normative standards become consolidated in the sense of what is acceptable if not required of networks members, and in that regard determinative of their behaviour. In this way new norms characteristic of business guanxi networks are formed and disseminated. The norms that are generated by individuals in guanxi networks and adopted by network members operate in a way which ensures that those who follow such norms benefit, in one way or another. As Mr Liao indicated: How much you pay will determine how much help you will get: it goes without saying. Like everyone else, officials are concerned with face, so he won’t take without giving what is due. Permits for environmental pollution treatment may take a year or more but took me only two months as the key officials were sought through guanxi.

I asked another entrepreneur respondent what would happen if two or more companies bid for a project and all provided officials with gifts and and treated them to banquets. After saying that this type of situation frequently occurs Mr Hu (aged 51, high school graduate, owner of a construction company) continued: In bidding for a government-contract a competitor and I both gave gifts to the same official. In such a case, the project may be awarded to him but next time to me … Or he gets the contract for installation and I get the contract for providing material.

Though discussing social order rather than networks, Ahrne’s (2015) insights are relevant here, regarding the way in which reflexivity and agency allow participants to influence the prevailing norm and use elements of emerging norms as functional equivalents of (future) action (see also Laamanen et al. 2020). By making sure that no one experiences ‘being a “loser”’ this type of practice reduces the possibility of resistance, so that ethically dubious or possibly illegal behaviours become routinized and normalized. It is not surprising that those ‘deeply embedded in an existing network’ may experience what has been referred to as ‘loss of objectivity’ (Locke 1999). Individuals who are embedded in social networks cease to question emergent conventions because abandoning the related practices, which are crucial to routine business operations, would itself be unacceptable. As indicated earlier, since the anti-corruption campaign initiated by President Xi in 2012, officials’ rent-seeking behaviour has become more covert. Another consequence of the anti-corruption campaign is the emergence in local government bureaucracies of caution and reserve, in order to avoid risk and ensure political survival (Wang and Yan 2020). Mr Song (aged 46, high school schooling, owner of agriculture products company) remarked: I thought that with back-up from the government my company would be in a strong position. After two years of private operation, I was elated when the municipal government invested in the company, which now constitutes ten percent of the total share. It turned out to be a big mistake to allow the government to be involved. Every time we have a meeting for a big decision, a representative from the government has to

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be present. The representative will report the decision back to his immediate lingdao (official-in-charge). This decision is subject to approval from different levels of hierarchical departments requiring countless meetings among officials. Few lingdao want to take responsibility for any risks. Everyone is concerned with making a wrong decision which may lead to investment loss and being accused of zhengfu zijin liushi (loss of government money). We made an innovative proposal more than six months ago but still haven’t received a reply. It’s really frustrating!

Song’s initiative in securing a political alliance met with unexpected constraints, limiting access to new ideas and entrepreneurial advancement. Echoing Song, many entrepreneur respondents indicated that it has become a new norm in guanxi networks that officials are seldom prepared to make significant decisions, fearing future career implications. Policy changes, then, may induce officials to initiate unexpected norms, replicated among guanxi networks involving officials, in diverse cities and regions (see Bendor and Swistak 2001).

Social Engagement and Membership Management The more extensive the overlaying multiplex elements of network membership the more locked-in members become; the most common collateral element of network membership that inhibits departure from a network is kinship. Network analysis incorporates kinship as an archetypical strong tie (Marsden and Campbell 2012: 20, 21). The situation is complicated in the Chinese case as guanxi networks are regarded as either kinship based (Fei 1992) or acquire a kinship form, so that non-kin relations articulate as ‘pseudo-kin’ (Bian 2019: 8–9, 21). In China kinship is understood to incorporate both the reproductive unit of parents and offspring and also to extended as well as affinal relations, so that kinship ties are variable, strongest with immediate family and weaker the further one moves away from the reproductive unit (Fei 1992: 63). Many businesses in this study are family owned and many business networks are layered with familial elements. Indeed, entrepreneur respondents frequently reported that they employed a number of relatives at the early stage of business development, achieving ‘flexible’ working hours and conditions, low recruitment costs, and a willingness on the part of employees to endure hardship. This pattern is common to migrant entrepreneurship not only in China (Guo and Miller 2010) but in general (Bloch and McKay 2015). Mrs Ke (aged 47, Master’s Degree) and her husband Mr Kong (aged 52, Bachelor’s Degree) established a company in 1995 making aluminium-alloy products, including doors and windows. Mr Kong, from the countryside, was the only member of his family with a university education. He employed his elder brother and sister-in-law, two younger brothers and sisters-in-laws, a widowed elder sister, and a younger sister and brother-in-law. His parents were responsible for recruiting workers from their local village when the company required labour to meet increased production for a large order. Mr Kong’s elder brother was in charge of door and window cutting and installation. Two younger brothers were in charge of ordering material and monitoring

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shipments. His younger sister and brother-in-law were in charge of a branch company. His elder sister, who is illiterate, was employed as a cook. Family members are typically thought to be loyal and reliable, and the division of labour in this company seemed to work well. A number of problems, though, soon became evident. According to Mrs Ke: My husband’s father is an unsophisticated peasant who gave employment to people who sucked up to him … His younger brothers in charge of sales acted as if the company’s money was their own. For example, his brother put ¥2,000 from a single sale into his own pocket. His relatives formed a belief that they were entitled to do anything in their elder brother’s company, including not turning up for work, getting reimbursements for their restaurant meals without providing receipts, and so on.

Mrs Ke reported that her husband had a strong sense of filiality, cared about family harmony and would not – indeed, could not – dismiss a family member. She reported that she made it clear to her husband that if his relatives remained in their company she would leave, a threat which she carried out. The ensuing disruption led her husband to agree to ‘release’ his relatives from employment. In her account, Mrs Ke reported: We borrowed more than ¥2,000,000 so that the relatives would receive ¥300,000 each as a condition of their leaving the company … On the contract they all signed they agreed that they would not do similar business as ours … Immediately after receiving the severance money they all, except his elder sister, started similar businesses … They even sought business from our friends on behalf of their brother and me … When my friends sought my confirmation, I found it impossible to say that I had no relationship with them as I’m not heartless, and also I care for my husband’s feelings and face.

Although in this case a reorganization of network membership was painfully achieved, being unavoidably locked into an obligatory relationship has clear social and financial costs. The form or extent of certain social networks, especially those involving kin, may effectively limit exits from the network in question. In such a situation network membership constitutes a network trap, a special instance of a case in which the cost of network membership constitutes a liability so high that there is limited or no possibility of alternative options. A number of entrepreneur respondents shared their stories of similar predicaments of network ‘traps’ that resulted from a mistaken acceptance of a relationship based on assumptions of trust. Mr Yang (aged 49, Associate Degree) established his own company in road and bridge construction in 2012: ‘I employed family members, in particular, in charge of finance and purchases. I thought that family members wouldn’t do anything harmful to my company’. As the business grew so did the problems. Mr Yang recounted: My relative in charge of purchase behaved well for the first two to three months. I later found that the price of the material through his purchase was higher than it should have been. In addition, he urged early payments for this particular supplier, against our practice which was four-month installment payments. I discovered that he received a

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big amount of commission from the supplier, which I actually paid for through a higher supply price … The company suffered other problems. When we were deciding on a list of material suppliers involving more than ¥20 to ¥30 million, my wife’s relatives would unanimously put their hands up for a supplier. It was later revealed that they divided between them the commission from the supplier.

Yang regretted the high trust he placed in his relatives, which cost him dearly. Though noting that networks of ‘social relations, rather than institutional arrangements or generalized morality, are mainly responsible for the production of trust in economic life’ Granovetter (1985: 491) at the same time cautions that it is a mistake to assume that trust has only positive network consequences. Trust can ‘be characterized as dependency … on another’, so while trust may facilitate engagements otherwise not possible, it also entails a serious cost of vulnerability (Barbalet 2009: 368–369). As noted in the previous section, the norms and practices created and implemented in networks are capable of encouraging malfeasance. In addition to malfeasance and the need to manage it, social networks may create conditions for division in spite of apparent unity. Yang remarked: We had 40 to 50 employees including 10 or so relatives from my father’s side, 10 or so from my mother’s side and 15 or 16 from my wife’s side. They formed three factions. The faction from my wife’s side is more powerful than the other two. These factions couldn’t stop fighting with each other. They also pushed out outsiders.

It is frequently noted that networks may generate or strengthen emotional factors including heightening interpersonal trust, group bonds and solidarity (Hackett et  al. 2008: Shapin 2008). Social networks may thus generate a fragmented-solidarity in which bonding of particular groups emerge within the network to the exclusion of other groups, and at their expense. Network ‘factions’ thus form which may create, augment, and encourage division, hereby heightening the potential for intra-network conflicts. Emotional bonding in networks may entail what have been called the ‘band of brothers dilemma’ (Jasper 2004: 13), leading to disunity and schism (Parker and Hackett 2012: 25). This is distinct from those more frequently discussed situations in which network members unreasonably resist outside views (Janis 1972; Schrank and Whitford 2011), and may even bar outsiders and repel challengers (Collins 2005; Simmel 1964). Yang expressed his dilemma and frustration: Business needs to develop but much time and energy was spent on balancing the relationships between relatives. My wife would quarrel with me if she thought I was too strict with so and so … During the festivals it’s our custom to have big gatherings with relatives, but senior family members would take these opportunities to speak on behalf of others. What’s more, a sense of imbalance was growing among some relatives as they believed that they should have a big share of my business as it grew.

Network commitments form webs with double-edged consequences. Not only is there benefit from mutual assistance but also entanglement and social

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pressure which comes with a burden of high expectations. Under these circumstances, the individual, as King (1991: 76) puts it, ‘will lose autonomy and freedom’. In these ways, guanxi networks make explicit what is possibly less noticed in networks in general. Network operations entail change, quantitative and qualitative, which require management by network members.

Conclusion The purpose of this chapter is show how entrepreneurial network activity brings consideration of agency to our understanding of such networks and the consequences of network membership for individuals and the networks in which they operate. Significant previous studies have focused on structural features of social networks. Research on negative consequences of networks typically indicate the adverse effects of exclusion from networks or negative network returns in the case of disadvantaged members. The account presented here, on the other hand, identifies negative network consequences experienced by those advantaged by network membership. By shifting the focus from structural attributes of networks to agentic practices within them the narrative here illuminates the ways in which network formation and processes result from the actual practices of network members themselves. This is a significant contribution to a literature which typically treats networks as pre-existing entities through which members’ behaviour is an effect of network embeddedness. It is shown in the present chapter that network-making includes self-conscious activities undertaken by individuals as network members, activities which carry costs as well as benefits. It is shown that network norms are not merely antecedent elements of networks but constructed and modified by participants. Network membership is not simply a credential, then, but an active practice involving social engagements which include the management of network participants. Data supporting the argument presented in this chapter draws on experiences of Chinese entrepreneurs whose network participation is informed by guanxi practices. An obvious question is how useful are findings regarding guanxi networks for understanding social networks per se? All practices have distinctive cultural aspects that may set them apart from others; in that sense, guanxi networks have unique and therefore non-comparable qualities. In terms of more general network processes, though, guanxi is arguably equivalent to ‘old boy/ girl’ networks that operate in the United States and Europe (Bian 2018: 605, 607) which, in terms of their broader properties, manifest features continuous with networks in general (Healy 2015). The peculiarity of guanxi networks is not in their uniqueness but in the high visibility guanxi practices provide to network features that while universal may be less obvious in other settings.

3 Trust, Broken Trust, and Trust Renegotiated

Introduction Needs, desires, wants – There are three words that relate to human requirements which seek satisfaction. Today, many of the things we seek are typically provided by the ‘market’, as either commodified goods or services. This cannot be entirely true, of course, as many of the things that people require may come to them through non-market relations, including their relations with family members and friends. Nevertheless, the market as the source of the ‘satisfactions’ or goods we acquire and consume can safely be taken for granted, and they typically are taken for granted. Production for the market is arguably all-encompassing, especially if we think of not only directly-related production but also indirectly-related, such as the role of modern medicine and medical practitioners in servicing the provision of a physically fit workforce and therefore the labour market, and certifying fitness for work, or the role of education in preparing young people for entry into the workforce. Thus it seems that business, the effort of producing goods and services for market sale, has a solid basis or foundation that will preserve its presence in the world because it supplies those things for which there is a continuing demand, the satisfaction of our needs. But in a fundamental sense, nothing could be further from the truth. The production of things for market sale is like a little ship which requires an ocean, but not any ocean; the waves must be not so large or powerful that the ship is at risk of being overturned or swamped, the tide must not pull the ship to shore, and the rocky outcrops and reefs must be away from the shipping lanes or sufficiently deep so as to avoid damaging the hull. The ocean on which business sails consists of similar multiple requirements. They can be classified into two groups, institutions on the one hand and relational assurances on the other, such as interpersonal trust. Perhaps the major institutional basis of business, although by no means the only one, is the right 57

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of ownership of private property. Without private property rights, the right to acquire, retain, and dispose of the means of production and the fruits of such production, especially the profit generated through the activation of these means, then business would be a precarious activity which would attract and retain few participants. While marketization began in China in the late 1970s it was only in 2004 that the right to own and inherit private property was supported by an amendment to the Constitution of the People’s Republic (Gold 2017: 469) and further guaranteed with the passage of the Property Rights Law of the People’s Republic of China at the 10th National People’s Congress in 2007 (NPC 2007). Economists and many economic sociologists assume that when private property rights are guaranteed and accompanying legislation supporting contracts between private entities and laws facilitating bankruptcy, which has existed in China since 1986 (Hsu 2005: 45), then market transactions are legally secure and informal relations between market actors are unnecessary to secure market exchanges (Powell 1990: 301; Williamson 1993). At best, trust, as an informal relation between market participants, maybe a ‘lubricant’ which can ‘increase the efficiency of the system’ (Arrow 1974: 23) but is not itself necessary for markets to function. While it is possible to conceptually distinguish markets and the legal institutional framework which provides formal surety to market transactions, on the one hand, and the informal relations of personal connections and networks which rely on trust, on the other, in the actual operations of market exchange, between market actors, then the institutional structure is unavoidably infused with personal relationships. Trust is indispensable when entrepreneurs seek facilitating relations with investors, for instance, when business partnerships are sought and developed, and when businesses work with suppliers (Ali and Birley 1998; Bammens and Collewaert 2014; Batsaikhan 2017; Bergh et al. 2011; Welter 2012). The contrast between contract-based market agreements and trust-based market agreements can be characterized in terms of the difference between formal and informal regulation. Relations subject to legal contract are supported by formal institutions which provide third party enforcement of agreements. The behaviour of participants in contractual agreements thus become more or less predictable, with expectations of agreed outcomes realized through regulations that have legal form and sanction. In this way opportunistic behaviour, should it occur, typically results in the disciplining of the offender by an external authority and the possible termination of the contractual relationship. The behaviour of participants in non-contractual or informal relationships, on the other hand, is regulated by trust, a belief on the part of one party in the reliability of the other, rather than by formally constituted third parties supported by the force of law. Decision-making based on trust relations encourages cooperation under perennial business conditions of uncertainty and risk and, at the same time, reduces transaction costs, the costs associated with the preparation and enforcement of contracts (Froud et al. 2012). As

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the generation and maintenance of interpersonal trust is regarded as a consequence of embeddedness in social and economic exchanges (Granovetter 1985), then participation in such relations is based on and encourages familiarity, interdependence, and continuity. These latter constitute incentives for trustworthy behaviour, including the encouragement of the reliability of participants. Such factors concurrently operate as informal social control mechanisms, deterring any abuse of the trust between participants (Kuwabara 2015). Should opportunistic behaviour or some other violation of trust occur in these circumstances it is assumed that it would be exposed, with a likely loss of the perpetrator’s reputation and therefore their probable exclusion from future exchange opportunities. Much is known about trust as an element of embedded social exchange, but the consequences of broken trust remain empirically neglected since Peter Kollock’s (1994) frequently cited experimentally-based research findings, and only recently addressed theoretically (Barbalet 2019: 86–89). A feature of trust is its future-oriented nature because of the associated dimensions of anticipation and risk (Gambetta 1988). In his classic study of trust, Niklas Luhmann (2017: 10, 25) notes that trust bridges the present and the future, that trust is a price paid ‘as an advance on [future] success’ (Luhmann 2017: 28). Because it is not possible to predict the future behaviour of another to whom one has given trust, trust is therefore not merely a belief but a process, one of imaginative anticipation of the reliability of the other’s future actions (Khodyakov 2007: 127). It is widely acknowledged that trust is implicit in networked relationships, including guanxi. As discussed in earlier chapters guanxi is an informal connection between participants based on favour exchange and reciprocal obligation which is supported by each participant’s affective commitment to the relationship (ganqing) and norms of decorum (renqing) to which they are subject (Barbalet 2021: 13–42; Bian 2019; Gold et al. 2002; Lin 2001a; Qi 2013). Guanxi networks represent ‘traits of social exchanges in general … [in which] a sentimental basis [can be located] and obligations are very much in line with the theory of trust’ (Lin 2001a: 159; see also Bian 2019: 122–126). The present chapter makes a significant contribution to the understanding of trust in business relations by examining the consequences of breaches of trust in market exchange relations. First, it is shown that the consequences of breaches of trust are not necessarily exposure of malfeasance nor withdrawal from the relationship in question. This finding challenges the standard view that once trust is given it is either maintained and cherished, or broken and then abandoned; that is all. Second, the chapter identifies and examines the social mechanisms which come into play when breaches of trust are experienced; these include management of face, reassessing the sense of related obligation and power disparities, and deliberation concerning collateral costs and benefits. Third, the strategies engaged to preserve the relationship that has suffered trust-breaches are identified, including the disappointed party’s reinterpretation of their expectations of the trust-breaker and therefore their

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renegotiation of trust or their redefinition of the situation. A significant finding of this research, for understanding trust behaviour, is recognition of the fact that persons who experience breaches of trust do not necessarily direct their effort to restraining or impeding the trust-breaker’s actions but rather focus on their own capacity to effectively deal with possible future contingencies in a continuing relation with a trust breacher. This chapter thus addresses a neglected but significant aspect of trust. By empirically investigating instances of broken trust, trust is reconceptualized in acknowledging that trust is not simply given or broken but is subject to contingent reworking in ongoing relations between exchange partners.

Trust and Exchange Relations Trust has long been treated as a core element in understanding social relations, including relations in markets and between market actors. Various functions of trust are manifests at all levels of society (Möllering 2001: 405). Georg Simmel’s (2004: 178–179) statement, ‘Without the general trust that people have in each other, society itself would disintegrate’, is frequently quoted to indicate the undeniable social significance of trust. The capacity of trust to engender in social actors a sense of certainty and therefore social continuity is captured in Luhmann’s (2017: 27) observation that trust reduces system complexity: ‘The system substitutes inner certainty for external certainty and in so doing raises its tolerance of uncertainty in external relationships’. This notion compliments Arrow’s (1974: 23) summary of the advantages of the ‘pragmatic value’ of trust mentioned earlier, that Trust is an important lubricant of a social system. It is extremely efficient; it saves people a lot of trouble to have a fair degree of reliance on other people’s word.

Trust is considered to be the core of social capital that can facilitate cooperation and collective action (Anheier and Kendall 2002; Fukuyama 1995; Putnam 2000; Uslaner 2002). The role of trust in relation to democracy (Moore 2018) and the maintenance of social order (Misztal 1996) are also frequently indicated. In general terms, then, trust plays an important role in decision making, reducing transaction costs, and in encouraging actors to assist each other in ways that otherwise would not occur (Ailon 2019; Coleman 1990; Molm et al. 2009). A large literature presents a variety of competing conceptualizations of trust. Not only is there a multiplicity of specific meanings or definitions of trust, but the conflation of ‘trust’ with distinct concepts, including ‘confidence’ and ‘faith’, simply adds to the confusion (Tonkiss and Passey 1999: 258). Many publications on trust are concerned with identifying, classifying, validating, and generalizing ‘good reasons’ for trust, which results in a plethora of typologies and measurement scales for various bases and modes of trust (Möllering 2001: 413). In spite of the variety of definitions and measures of trust, there is an implicit consensus that trust is a belief about or a feeling of expectation

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concerning the likelihood that the actions or consequences of the actions of another person, group or organization will be acceptable and possibly beneficial (Hardin 1993; Lewis and Weigert 1985; Luhmann 2017). With regard to exchange relations, trust means that the exchange partner can be relied upon to behave at least benignly and possibly favourably toward the trustor and that exploitation will not occur within the relation (Molm et al. 2009: 6). In addition to the value of trust in interpersonal relations, empirical evidence from a wide range of settings indicates that established legal ­systems can increase the overall likelihood of entrepreneurial success (Ingram and Silverman 2002). Legal systems can sustain the effectiveness of contracts and impose constraints on cooperating parties’ inappropriate behaviours (Cao and Lumineau 2015; DiMaggio and Powell 1983). Institutions therefore serve as the ‘humanly devised constraints [and incentives] that structure human interactions’ (North 1990: 33). With well developed legal systems, companies and business persons can depend on contracts to safeguard against opportunism, as sanctions can be sought against a defecting party. But it is a mistake to conclude that formal institutions are entirely responsible for such requirements (Lerner 2009). Indeed, a recent literature shows that business may be supported by informal institutions, agentic practices which emerge in situations characterized by an absence of strong formal institutions, such as in developing economies, through which effective market transactions are sustained (Li et al. 2022; Puffer et al. 2010; Tsai 2006; Webb et al. 2020). The point here is not that formal institutions are irrelevant for business success or the conduct of business. Rather, it is to caution against those arguments which assume the exclusive reliance on formal institutions, and which neglect informal relational elements of business practices. Informal arrangements, including the trustworthiness of participants, what might be described as relational governance, which either dispense with formal contracts and third party legal enforcement or see such mechanisms as ineffective in generating optimum conditions for the conduct of business, play a significant role not only in situations of formal institutional ‘void’ but in general terms, because contracts can never cover all contingences, and, in addition, may – and often are – seen as signals of distrust (Lumineau 2017; Malhotra 2009). Trust is a belief about or a feeling of expectation concerning the likelihood that the actions of another person, group or organization, will be beneficial in enhancing cooperation and reducing complexity (Gambetta 1988; Luhmann 2017). While trust is defined as ego’s optimistic expectation regarding the behaviour of alter, ego’s own actions in a trust relation will include a willingness to accept vulnerability through dependence on alter, based on an expectation that alter will act favourably toward ego or in other ways serve or at least not contravene ego’s interests. This aspect of trust, of deciding to be dependent on another, corresponds with the notion of voluntarism, in contrast to formal constraint (Seligman 2000). This suggests another aspect of the trust relation indicated previously, namely that trust is distinct from those relations secured through

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contract and underpinned by confidence in abstract systems of law and related institutions (Tonkiss and Passey 1999: 259). Trust is a type of expectation directed to alleviating the fear that one’s exchange partner will act opportunistically (Bradach and Eccles 1989: 104). Lewis and Weigert (1985) contend that trust is characterized by a cognitive ‘leap’ beyond the expectations that reason and experience alone would warrant: where opportunism might be rationally expected, trust prevails. Trust can be thought of as entailing a mental process of ‘leaping’ – enabled by suspension – from interpretation of alter’s current or past behaviour to expectations regarding their future and therefore presently unknowable behaviour (Möllering 2001: 412). In these ways, trust relations are distinct from those secured through contract underpinned by confidence in abstract systems of law and related institutions. Trust is necessarily relational and contingently transactional, and it is implicit in social exchange, and social exchange is frequently regarded as depending on and also generating trust. This is captured in Blau’s classic statement: Since there is no way to assure an appropriate return for a favor, social exchange requires trusting others to discharge their obligations [and while social exchange] may originate in pure self-interest [it generates] trust in social relations through their recurrent and gradually expanding character (Blau 2017: 94)

In his highly influential treatment of economic exchanges as embedded in social networks Mark Granovetter (1985: 491) shows that ‘social relations, rather than institutionalized arrangements or generalized morality, are mainly responsible for the production of trust in economic life’. Repeated episodes of cooperation between persons increases the probability that they will trust each other. The existence of such strengthened relationships, based on trust, secures future cooperation (Burt and Knez 1995: 258). As Granovetter (1985: 490) puts it: ‘continuing economic relations often become overlaid with social content that carries strong expectations of trust and abstention from opportunism’. Trust thus arises in socially embedded exchanges and, in turn, such exchanges are reinforced and encouraged by trust. If trust facilitates relations between persons by providing a sense of assured expectation that one will not be subject to incompetent support or betrayal, there is a correlative expectation that an absence of trust would jeopardize cooperation between the persons involved and ultimately threaten their relationship. Relationships based on familiarity, interdependence, and continuity not only provide strong incentives for trustworthy performance but also engender a number of informal social controls that when activated can punish an abuse of trust (Froud et al. 2012; Zucker 1986: 60–63). Engagement through repeated interactions with familiar partners enables relational enforcement and sanction through reciprocity. Should opportunistic behaviour occur it would be exposed, generating in others prosocial conduct through a fear of acquiring a reputation for unreliability or untrustworthiness, with consequent loss of future transaction opportunities (Granovetter 1985: 487–493). Through

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positive reciprocity, actors reward each other by offering continued cooperation; through negative reciprocity, actors punish each other by reducing cooperation or terminating relationships (Kuwabara 2015: 1399). The findings of experimental studies suggest that emotional (Lewis and Weigert 1985) and moral elements (Fukuyama 1995) may colour the experience of violation of trust (Bradach and Eccles 1989: 112). For instance, buyers betrayed by a seller advertising high-quality goods but providing low-quality goods appeared disturbed and wrote notes in the margins of their data sheets such as ‘Never trade with C again!’ (Kollock 1994: 337). Reactions to a breach of trust may lead to costly consequences for both parties. A classic and frequently cited experimental study demonstrated that violations of fairness norms lead persons to respond with a form of ‘mutually assured destruction’ in which violators are punished even if the cost to the enforcer is ‘irrationally high’ (Kahneman et al. 1986). guanxi

and Trust

China presents a case in which relations of exchange in business communities operate neither in the standard form of institutionalized relationships based on third party legal sanction nor on the basis of embedded informal relationships founded on trust, as typically represented in the literature. Since its membership in 2001 to the World Trade Organization, China’s legal reforms have been entirely consistent with neo-institutionalist expectations of global convergence, and its legal institutions appear to conform to a standardized global model. However, there are many – often contradictory – institutional logics at play in China’s recent legal development, which are incongruous with the institutional logic of a market economy (Hawes 2022; Michelson 2007; Wang 2017). The codification of laws and regulations in some contexts are intentionally ambiguous, raising questions as to how individuals may navigate equivocal frameworks (Woodman 2011). In coping with either a formal regulatory void or political overdetermination of decisions in formal structures: Many business transactions in China appear to be settled through negotiation within a system of networked relations based on interpersonal reciprocal obligations (guanxi), with local government being a major player as resource provider, facilitator, and tax collector. These transactional arrangements, ‘weak’ in Western terms, appear to have considerable latent strengths. Thus the institutionalized use of negotiation between enterprises and local authorities appears to introduce flexibility into regional property rights and to allow for the reconstitution of transactions to meet new opportunities and changing circumstances (Boisot and Child 1996: 612).

In this way, guanxi networks provide benefit through access to privileged information and resources, and members of such networks obtain protection when legal rules are weakly enforced or capriciously interpreted (Bian 2019: 191–200; see also Tsai 2007).

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Guanxi involves personal connections between individuals, who form and maintain long-term relationships. These relationships follow implicit social norms, including sentimental attachment between individuals (ganqing), human feelings of obligation to others (renqing), and face (mianzi). Guanxi both arises from opportunities provided by bureaucratic control of production and distribution, and, in circumventing such control, reveals its incongruency with the system of law and formal regulation (Qi 2013, 2021). Guanxi operates in contrast to ‘Clear property rights, an independent judiciary, and predictable impersonal enforcement of regulations [which] provide institutional protection that does not depend on the particularistic knowledge of others’ (Xin and Pearce 1996: 1645; see Gold et al. 2002). The use of guanxi in business includes utilizing social capital through personalized networks to facilitate, say, obtaining a license or permit to build facilities, winning government contracts, and securing finance from government-owned banks (Wank 2001). Both formally institutionalized contractual relationships and trust-based informal relationships are designed to protect against the possibility of default; they share, then, an alter-based orientation in response to opportunistic behaviour. The present chapter identifies another and almost wholly overlooked type of response to broken agreements; namely, an ego-based orientation to the management of an opportunistic breach of agreed expectation. The argument to follow demonstrates how individuals in guanxi networks deal with opportunism and broken expectations that is different from both the formal institutional and informal trust-based management of malfeasance as it is represented in the literature. Instead of focusing on alter and implementing sanctions against opportunists, the ego-orientated approach develops strategies to strengthen the capacity of the betrayed to minimize costs and maximize resilience, while at the same time avoiding damage to the relationship. In this case, trust is renegotiated at disjunctive stages in the development of the relationship in question.

Power and Dependency All entrepreneur respondents reported that they had experienced some violation of an agreement in their dealings with a trading partner, client, or employee. Interviews surprisingly revealed that breaches of agreement might not necessarily lead to exposure of the perpetrators nor to termination of the relation or disruption of future exchanges. Mrs Ye (PhD degree, aged 36) and her husband Mr Yu (aged 39) own a very successful e-commerce company. Mrs Ye talked about their experience with a supplier from another region of China: Those Inner-Mongolians tebie bushou xinyong (were particularly not trustworthy), women diaole wushu keng (we have fallen into their pits countless times). For instance, as they assured us that the cashmere scarfs which we ordered were on their way to our warehouse we put them on the ‘shelves’ on our webpage. To our surprise, the scarfs

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hadn’t arrived even after three days. We had already been paid for more than one hundred scarfs, but had none to deliver to customers. When we contacted our supplier, could you imagine what their response was: ‘Oh, I forgot to send the scarfs’. We were furious. Our customer service staff had to work over many days until midnight, apologizing to every single customer.

Trust functions at a level of subjective probability, through which an agent assesses the future performance of another actor prior to the possibility of monitoring such action (Gambetta, 1988: 217). Trustworthiness (xinyong), on the other hand, derives from reputation based on publicly visible behaviour (Barbalet 2021: 135–140; see also Tullberg 2008; Yamagishi and Yamagishi 1994: 139–140). The supplier’s failure to demonstrate their xinyong meant that misplaced ‘trust’ led to unanticipated costs for Mrs Ye and Mr Yu. Mrs Ye continued her account of the consequences of the unreliability of the supplier: One customer in Beijing wouldn’t budge, even though we tried various approaches to appease her disappointment including an offer of a full refund. We sought a friend in Beijing to visit her as a gesture of our sincere apology. On another occasion, to our indignation, the cashmere scarfs delivered by this Inner-Mongolian supplier were different from what we had actually ordered. Another issue is that they did not always supply the numbers that we had ordered and they’d agreed to send. As they were unable to produce enough scarfs during the peak season, they would prioritize their largest client, a Japanese company.

Mr Yu reported that he had lost his temper many times, shouting on the phone, swearing and cursing. When asked why they did not terminate their business with this supplier after repeated breaches of agreement Mr Yu said: ‘Their cashmere is unsurpassable. The textile technology which they developed through generations is top quality’. According to this case, then, it is not breaches of xinyong that affects the future relations between participants so much as the impossibility of forming an alternate relationship. Broken agreements will not adversely impact on a relationship if the xinyong dependency between the participants corresponds with a material dependency in which the other party has a relative monopoly on which the ‘betrayed’ person depends. Dependency on a supplier who holds a monopoly of a desired good creates barriers against departing the relationship, even if there are repeated breaches of agreement. An asymmetry of resource availability creates costs that constrain exit from such a relationship, a situation rooted in the exclusive resource advantage one party may have over another. A feature of such embedded relationships lies in a power disparity between participants. The Inner-Mongolian supplier’s power is not manifest in their exerting any one of what are generally regarded as an exhaustive description of forms of power, namely ‘coercive’, ‘utilitarian’ or ‘symbolic power’ (Etzioni 1964). Moving from a categorial to a consequential understanding of power, Lukes (2005: 66) notes that the powerful can be those ‘whom we judge or can hold to be responsible for significant

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outcomes’. It can be seen that an unequal power relationship between the Inner-Mongolian cashmere-scarf supplier on the one hand and Mrs Ye and Mr Yu, on the other, constrains the possibility of a termination of a relationship marked by repeated broken agreements. Though having endured many episodes of broken agreements by their supplier, Mrs Ye and Mr Yu were forgiving rather than threatening. Mrs Ye said: These Inner-Mongolians may be the worst business traders, but actually they are very nice people. If you go to Inner-Mongolia, they would be very warm to you – like brothers and sisters – and generously treat you with food and drinks. As nomadic people, they aren’t focused on making money but on enjoying life. They only work for half a day and all the machines are turned off in the afternoon.

Experience of countless repeated breaches of agreements did not in this case lead to a cessation of exchange relations but rather to a reappraisal of not only the behaviour of alter but more importantly to a modification of ego’s expectations and actions. Mrs Ye and Mr Yu came to attribute the broken agreements to the cultural expectations and life style of the perpetrator rather than to malevolence or a desire to exploit. Indeed, it has been shown that culture can be understood as a constitutive dimension of ‘trust’, rather than as an extraneous factor which determines social action (Ailon 2019; Rubbers 2009). While Mrs Ye and Mr Yu regard the actions of their Inner-Mongolian supplier as bushou xinyong (not trustworthy), they came to realize that their exchange partner might not share that understanding of their behaviour. In the course of the business relationships with their Inner-Mongolian supplier, who seemingly operates with a cultural repertoire that is different to the one accepted by Mrs Ye and Mr Yu, the latter began to reshape their own behaviour in order to achieve more satisfactory business outcomes. In general terms, there is evidence that it is not unusual for people to adapt their own behaviour according to the revealed norms of other interactants and what they might perceive to be situational norms (Anheier and Kendall 2002: 355). Indeed, Mrs Ye effectively reflected the last point mentioned previously when she recounted, with a sense of pride: We have learned through our pitfalls and devised a number of strategies. We now wouldn’t put any cashmere scarfs on the ‘shelves’ until we’ve confirmed the details of delivery and are absolutely sure that they are coming. Our business has been getting bigger and bigger and we have now become their top client. During the peak season we expect to be their priority instead of the Japanese company. We have also bought shares in their company.

The embeddedness approach suggests that opportunism is reduced through ego’s knowledge of alter’s behaviour and ego’s preparedness to expose malfeasant behaviour on the part of alter. In this case, attention is focused on alter’s behaviour and ego’s efforts in impeding, restraining or penalizing alter’s violations of trust. The case discussed here, on the other hand, redirects attention

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to ego’s behaviour as a consequence of their experiencing broken agreements, and in particular to the way in which ego’s behaviour is itself modified in order to reduce their own vulnerability. The decision to enter a relation of trust suggests that the actors involved anticipate only positive consequences from such a relationship and are prepared themselves to act as if the other person can be trusted (Uslaner 2002). Mrs Ye and Mr Yu have continued their relations with the Inner-Mongolian supplier. They continued their exchange relationship after repeated breaches of trust not because the other’s trustworthiness has been simply restored, but because they have reshaped their own expectations and behaviour. In doing so, the nature of the reliability of their supplier has been reinterpreted. In the light of previous broken promises, their exchange partner’s trustworthiness has been reimagined, and not repudiated.

Obligations and Face While Mrs Ye and Mr Yu experienced violations of agreements associated with differences of cultural repertoire, many entrepreneur respondents shared their stories of breaches of agreements resulting from alter’s self-interest. Mrs Liu’s case is typical of such experiences. Mrs Liu (PhD degree, aged 47) was president and founder of a culture IP investment group. One of her early projects was the production of a cultural TV program. In interview, she reported that her business partner in this venture, Mr Heng, highly recommended a young woman, Miss Pu, for appointment as hostess of the program. Mrs Liu trusted Mr Heng’s judgement, but Miss Pu proved to be not suited for this position. Out of consideration for Mr Heng’s face, Mrs Liu did not dismiss Miss Pu but again consulted Mr Heng. After another interview with Miss Pu, she was employed as a screenwriter. Miss Pu indicated that she was qualified to write scripts for TV productions, which she said was her true passion. Her salary was more than ¥10,000 (approximately £1,200) per month, and at her request was given a studio in which to work. After a year, Miss Pu had failed to produce a single completed script. Trust grounded in beliefs concerning another’s judgement and reliability was breached as a result of a third party’s failing to meet expectations (see Molm et al. 2009: 7). Ego’s expectations are commonly formed as an elemental component of alter’s trustworthiness (Hardin 1993); expectations also arise as a consequence of ego’s trust in alter’s technical competency for specialist performance of valued activities (Barber 1983: 165). Xinyong is based on demonstrated reliability, consisting of ‘a reputation for meeting one’s obligations’ (DeGlopper 1995: 205–206). Mr Heng’s xinyong lies in the reliability of his appraisal of Miss Pu’s capabilities. Miss Pu could show xinyong by carrying out the tasks in which she claimed to have expertise. Neither case of failed xinyong led Mrs Liu to communicate disappointment or disapproval of Mr Heng, nor to dismiss Miss Pu. Mrs Liu explained:

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I couldn’t afford to upset Mr Heng, who was important for the production of the TV program. In fact, without his participation it would have been difficult for me to complete this project. Also, Miss Pu’s parents were very close friends of Mr Heng. Bu kan sengmian kan fo mian (You have to give face to Buddha, even if you didn’t care about giving face to the monk).

Mrs Liu reported that had she dismissed Miss Pu she would effectively have publicly acknowledged not only Miss Pu’s incompetence, but also Mr Heng’s poor judgement. Such action would inevitably have led to Miss Pu losing face and, more importantly, to Mr Heng’s loss of face. Additionally, if Miss Pu had been dismissed for incompetence then her parents would also risk losing face (see Qi 2017a), and the relation between Mr Heng and Miss Pu’s parents, which he highly valued, would also be affected. Such action would in turn result in undermining the business relationship between Mrs Liu and Mr Heng, which Mrs Liu wished to avoid. A feature of trust in standard network relationships is a dyadic structure involving trustor and trustee. It can be seen that when face is in play, guanxi relationships are not merely dyadic but multi-dimensional (Barbalet 2014). This complex of social obligations and the pressures on relationships through face considerations means that breaches of agreements or failure to deliver expectations could not be openly exposed nor could they be the rationale for withdrawal from relations based on failure to meet agreed expectations. In this situation, there occurred not a renegotiation of trust but its deferment through loyalty. As Mr Heng was central to Mrs Liu’s project, each was circumstantially loyal to the other. Loyalty maintains ‘global trust … even in circumstances where local disappointments might encourage its withdrawal’ (Gambetta 1988: 218 n.9). This assessment supports the idea that loyalty, by raising the cost of exit from a relationship, increases the ‘chances for voice as a recuperation mechanism’ (Hirschman 1970: 82). Loyalty, then, overcomes the negative consequences of broken trust by implicitly projecting to a future situation of reconciliation through which trust may be restored through renegotiation. Guanxi networks operate through provision of personal favours which raise a person’s face state and in which failure to provide favour leads to a loss of face (Bian 2019; Yang 1994). Many respondents indicated that participation in guanxi created what might be called a web of constraints or trapped predicaments, making disclosure of violation of agreement difficult, and termination of relationships in which breaches of xinyong occur virtually impossible. Mr Wang (aged 43, Master’s Degree, owner of real estate), for instance, reported that when he established his first business he was assisted by a friend, Mr Mai, who introduced him to a number of investors. When the company began to do well Mr Mai indicated that he wished to ‘purchase’ a 15 per cent share in the company, valued at ¥1,600,000 (£184,000). But as he had only ¥600,000 Mr Mai requested that Mr Wang provide the shortfall of one million yuan as a ‘loan’. Mr Wang reported that such a loan would be ‘rebaozi dagou, youqu wuhui (throwing hot steam-buns to a dog, a guarantee of no return)’. Mr Wang was not only

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furious with Mr Mai for his lack of integrity, but also felt himself a fool as he took Mr Mai’s initial support as an indication of genuine ‘warm-heartedness’ of a true friend, without realizing that he was being manipulated from the beginning. A founding tie receives from entrepreneurs the highest level of trust (Bian 2019: 125). Broken trust indicates not only the trustor’s error of judgement concerning the transgressor but also the trustor’s own poor judgement (Barbalet 2019: 88). Misplaced trust may induce feelings of embarrassment, indignation, even shame or humiliation (Lewis and Weigert 1985; Möllering 2001). Mr Wang reported that although he experienced emotional shock in being tricked out of a million yuan, he neither revealed his indignation at Mr Mai’s lack of integrity, unconscionable between friends, nor did he break his relationship with Mr Mai. Instead, Mr Mai was given a 15 per cent share in the company and Mr Wang wrote off the million yuan shortfall. Mr Wang said: Many of the investors were introduced to me by Mr Mai. I felt obliged to him. He had a sense of entitlement that without him I wouldn’t have an opportunity to meet those investors. If his request was not met, he could damage my reputation by saying I was ‘ungrateful’, which would have a negative impact on my business and my relationship with investors. Wode mianzi wang naer ge (literally, where should I hide my face). Of course, people would believe him, as he has strong guanxi with the investors.

In guanxi relations a person who receives renqing (favour) or assistance from another acquires a sense of indebtedness to that person (Bian 2019; Yang 1994). The morally infused mutual exchange carried by renqing is the dynamic force behind guanxi. Mr Wang, who received a favour from Mr Mai, was obliged to reciprocate the favour. Thus, the renqing obligations of guanxi networks create a bond between participants that at the same time constitute a barrier to exit from the relationship in question. What is described earlier indicates another element of loyalty in interpersonal exchanges, when face is implicated. Trust and loyalty can be distinguished in the following way: Whereas trust is concerned with one’s reliance on another, loyalty is concerned with one’s identity through another. Trust assumes individual autonomy in social relations of exchange; loyalty assumes social heteronomy in individual commitments to solidarity (Barbalet 1996: 87).

Face relations, implicated in renqing obligations underlying guanxi, require an overarching intersubjectivity in which the fate and fortune of one is irretrievably implicated in the behaviour of the other (Qi 2017a). Public reputation or face is an aspirational outcome of guanxi networks (Barbalet 2019; Hwang 1987; Lin 2001a). Mr Wang’s fear of potentially tarnishing his own reputation as ‘ungrateful’ impeded his response to Mr Mai’s taking advantage of him; he could neither refuse to provide a ‘loan’ nor end his relationship with Mr Mai. A loss of reputation or face would be worse than the distaste of continuing to associate with an untrustworthy person. Mr Wang thus found himself

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trapped in a situation from which he could not be extricated; the options of giving voice to a violation of trust or exiting a relationship marred by broken trustworthiness were not available to him. In Mr Wang’s words: ‘Instead of chewing the “bitter fruit” slowly, I had to quickly swallow it’. He reported that since this incident good guanxi with his investors have been independently built, and he now feels that he is free of Mr Mai’s face-related ‘coercive’ power.

Costs and Benefits While a sense of renqing obligation may lead a person to refrain from disclosing an incident of malfeasance or punishing a betrayer, other types of considerations regarding costs and benefits might have the same effect. Mrs Geng (referred to in an earlier chapter) and Mr Guan (aged 42, Bachelor’s Degree) own a company specializing in the design and manufacture of personal products including umbrellas and raincoats. They had been in business for seven years. They supply products to brand name clients and also manufacture products for their own brand which are sold online. During an interview Mrs Geng reported: Mr Zheng, a long-term client, once called saying that he urgently needed an additional 5,000 umbrellas on top of his original order. We emailed the agreement without asking for a signature and company stamp because he was a long-term customer. We worked overtime to make sure that those 5,000 umbrellas would be ready on time, but when we notified him that we were ready to deliver, to our astonishment, ta bushou xinyong, shuo na wuqian ba yusan buyao le (he broke xinyong saying he no longer wanted these 5,000 umbrellas). The umbrellas are still piled up in our warehouse. We can’t sell them because they were manufactured with their company logo. It has cost us over ¥100,000. Apparently, he had trouble with some clients; instead of warehousing these umbrellas he simply shifted the full cost to us.

Acts of trusting another, and attributions of their trustworthiness, relate to situations in which a potential partner has an opportunity if not an incentive to exploit the actor in question; trust is justified when instead of taking these opportunities the other acts benignly toward the trustor (Molm, Schaefer and Collett 2009: 6). While trust is based on an expectation that alter will act favorably toward ego or in other ways serve rather than contravene ego’s interests, xinyong is based on alter’s actions that fulfill ego’s expectations. Mrs Geng and Mr Guan were in no doubt that Mr Zheng violated their agreement and failed to uphold his trustworthiness. When asked whether they stopped doing business with Mr Zheng, as he had broken xinyong and led to their financial loss, Mrs Geng said that ‘We are still doing business with him, but we’ve changed our approach’. She was asked: ‘Do you now require him to sign a formal contract?’ Mrs Geng explained: No. A signed contract doesn’t guarantee anything; in fact, it shows that we don’t trust him anymore. With a signed contract we could go to court, but it would be very costly; actually, a waste of time and energy. We’ve now made it clear that we need cash flow, so

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that he understands that we can’t proceed with an order unless we first have a deposit. This is more effective than a contract.

Mr Guan continued: ‘We have also been negotiating with him a way so that the 5,000 umbrellas can be sold, even at a reduced price’. It is assumed that legal arrangements, especially contracts, are one way of safeguarding against opportunism, and in doing so effectively reduce the need for trust (Meyer 1983; Sitkin and Roth 1993). As trust involves giving discretion to alter, in satisfying ego’s interests, then trust relations are inherently subject to a potential risk that alter will abuse their power of discretion through incompetence or self-interest (Molm et al. 2009; Yamagishi and Yamagishi 1994). Granovetter (1985: 491) recognizes that ‘while social relations may indeed often be a necessary condition for trust and trustworthy behavior, they are not sufficient to guarantee these and may even provide occasion and means for malfeasance and conflict on a scale larger than in their absence’. Contracts, though, cannot specify possible future contingencies, nor adaptations to them (Macaulay 1963; Shapiro 1987; Williamson 1985). When trust is disrupted organizations or their principals may adopt legalistic remedies in attempting to restore trust, but such impersonal measures are frequently ineffective (Granovetter 1985; Shapiro 1987; Sitkin and Roth 1993). Indeed, as noted earlier, legalistic interventions frequently fail because they actually reduce the level of trust between participants rather than provide grounds for assurance or support for trust relations. This is because legalistic forms have the unintended consequence of operating as an interactional barrier between the parties involved and thus promote formality and distance between participants (Macaulay 1963) rather than a sense of mutual reliability and trust (Granovetter 1985; Zucker 1986). The practice of Chinese law contrasts sharply with the tradition of legal formalism which developed in Europe; while in the latter case law and the operation of the court system principally functions to enforce a rights-based decision, in the Chinese case legal disputation is directed to finding a compromise rather than establishing a right. Court procedures emphasize mediation and arbitration, with adjudication applied only when arbitration has failed (Huang 2006). Legal disputation is typically lengthy and costly, including finding lawyers with privileged access to court insiders in order to secure a favourable outcome (He and Ng 2017; Michelson 2007; Zhao 2019). Seemingly aware of the issues outlined previously, Mrs Geng and Mr Guan, and entrepreneurs like them, employ strategies that while designed to prevent future financial loss avoid any adverse impact on their ongoing relationship with xinyong breakers such as Mr Zheng. They provide themselves with adequate means of protection and at the same time avoid the undesirable consequences of formal procedures. Rather than attempting to directly control or constrain the behaviour of an exchange partner through legalized contract, they employ strategies which enhance their economic position. While unavoidably relying on the trustworthiness of their exchange partners, they pragmatically engage with the limitations of that trustworthiness where they must, and renegotiate the relation of trust between their exchange partners and themselves where they can.

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While Mr Zheng’s case seemed to be one of an occasional violation of trustworthy behaviour, many entrepreneur respondents reported that cases of repeated breaches were often tolerated. Mr Yang (referred to in an earlier chapter), who established his road and bridge construction company in 2012, reported: I found that the price of material from a particular supplier was much higher than it should have been. My purchasing manager in fact received a big commission from the supplier, which I was paying for.

This person was subsequently recruited by the supplier in question, with whom Mr Yang has continued to do business. In response to a question as to why he tolerated breaches of xinyong from both his own staff and the supplier Mr Yang said: I have been doing business with this supplier for many years. Sipolianpi dui dajia dou buhao, bu hesuan (tearing off ‘face’ is not good for either, not worth it). I later negotiated with them about the price and they did reduce it to an acceptable level. Actually, it is not uncommon for a purchasing manager to take commission from a trading partner. I tolerated it as long as it remained within acceptable limits. I did not sack the person but moved him to another position in the company. He didn’t like his new job, left my company and joined the supplier who schemed with him in the first place. I make it a practice not to dismiss employees who perform poorly or who are unsuitable, but instead I move them to other positions. If they don’t like their new job they will leave the company, but it is not me who has forced them out.

If the response to violations of agreements is to create rule-based legalistic controls, directed to punishing transgressors and managing future transgressions, then a possibility arises of an inflationary spiral of escalating governance measures that might lead to loss of face and create hostile feelings between supervisors and employees. Instead of exposing and punishing breaches of agreements, the entrepreneurs reported here employ strategies designed to minimize the social costs to themselves of future breaches while at the same time maintaining the face of violators as well as their own. Punishing a violator may not only involve social costs for all parties, but also financial losses for the entrepreneur. The entrepreneurs interviewed for this study overwhelmingly report that they invest time and resources in their employees and business exchange partners. Cultivating new employees and business partners in response to broken agreements would generate unnecessary or avoidable additional costs. For these business persons, the perceived costs of relationship termination in response to breaches of trust may exceed the benefits. In Chinese culture, malfeasance tends to be dealt with by attempting to return disrupted relations between persons to harmony not by correcting wrongs with rights but through compromise (Zhang and Yang 2009) and preservation of face, including for the wrongdoer (Barbalet 2019). Xinyong violations are resolved not by punishing the violator but through managing

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disputes and avoiding what would be perceived as injuries to the other’s face, effectively preserving the relationship, but in a modified form. Under these circumstances, ‘courtesy’ has a role in maintaining harmony between participants. Instead of focusing on punishing a trust violator, these entrepreneurs shift their attention to their own behaviour in order to reduce costs, and in doing so optimize benefits. It is much easier to manage one’s own actions than regulate the actions of others. Rather than exposing violators and discontinuing relations with them, a rational response to violations is to reduce opportunities for future possible violations to effectively impact on the relationship in question. This requires a sense that breaches of trust need not lead to termination of such relationships, and an understanding of trust as a circumstantially revisable basis of reliability.

Conclusion A central tenet of current sociological reasoning is that contract exchanges are safeguarded by formal institutions, and that non-contractual exchanges are maintained by interpersonal trust. Should a violation of trust occur, it is widely assumed that exposure would lead to loss of reputation and exclusion from future exchange opportunities. There are clear reasons, however, why breaches of trust and untrustworthy conduct may not have these consequences. Unequal power relations may place constraints on persons in embedded relationships, preventing their terminating a relationship in which they are subordinate. If an embedded partner has a monopoly regarding a valued good the betrayed person requires, this latter’s exit from the relationship is effectively restrained. Also, complex social pressures are nested within embedded networks which render exit or retaliation neither viable nor attractive responses to opportunism or malfeasance. Obligations and face concerns may create powerful counterincentives to disclose or punish deceptive behaviour. Perceived costs of relationship termination may exceed the benefits. Consideration of harmonizing rather than escalating disputes may prioritize continuation of an exchange relationship through compromise and preservation of face, rather than by coercive enforcement. An appropriate response to betrayal may therefore include renegotiation of the terms of trust itself between exchange partners. The situations described here point to the importance of the distinction, uniquely identified in the present chapter, between the alter-focused strategies located in both formal and trust-based responses to malfeasance as identified in the standard literature, and ego-focused responses reported here by guanxi participants, although by no means exclusive to them. Experience of opportunism or deception invariably provokes re-evaluations of not only the competence, reliability and honesty of violators, but also of ego’s own judgement. In addition, the present chapter also shows, in contributing to the literature, that rather than disclosing or punishing breaches of trust, betrayed persons may direct their attention to what they can do to preserve advantage in existing

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relationships, modifying their own behaviour and in doing so effectively renegotiating, even redefining, the terms of trust with exchange partners. A very high premium is placed on trust by sociological researchers. To paraphrase Simmel cited near the beginning of this chapter, without trust society is not possible. And yet, trust ‘varies in relation to the structure of society’ (Morgner 2013: 510). Researchers report that there is low trust or a lack of trust between African entrepreneurs in the Congo, for example, and also in Ghana, Nigeria, Zaire, and Zambia (MacGaffey 1988; Rubbers 2009). Similarly, experience of low trust or even a lack of trust is reported for Israel (Ailon 2019) and Russia (Guseva and Rona-Tas 2001). While there is a relatively low level or absence of trust in these countries, social relationships continue and business exchange operate within them. While familiarity with others through sustained interaction may give rise to a sense of trust, a subsequent loss of trust will not necessarily disrupt the relationship in question. A declaration that ‘I don’t trust him or her’ is not necessarily an indication of an absence of a relationship so much as an evaluation of a person with whom the speaker has, in all likelihood, a continuing relationship. There can be bases for their continuation of a relationship in which trust is broken. Business persons may calibrate the relative advantage over an ensuing disadvantage of continuing to engage with buyers and sellers and employees even when trust is misplaced or violations of trust occur. While it is true that trust ‘varies in relation to the structure of society’, (as noted above), it can also be mentioned that within the structure of an ongoing relationship, the trust between participants may similarly vary, with breaches of trust precipitating a reconfiguration of the elements of the trust relation in question. Trust, as something given by one person to another, is not simply consummated or betrayed, it may be subject to redefinition – when assumptions of reliability are replaced with a requirement of sureties in the form of cash deposits, as indicated earlier. It has been shown that between trustfulness and betrayal of trust there are a number of possibilities, as long as the participants are focused on maintaining their relationship, with its benefits as well as its disappointments. In this case, for a relationship to endure, there is a requirement that over time its terms may require modification. By focusing primarily on their own interests and capacities, rather than prioritizing the veracity and trustworthiness of an exchange partner, entrepreneur respondents in this study demonstrated that another’s reliability may be ‘encouraged’ by how one relates to an exchange partner, rather than what is passively expected of them. As it is between persons, trust is not simply given by one to another; either party may affect its operation, and contribute to a transformation of its terms. As a basis of enduring cooperation, trust is unavoidably subject to situational adjustment, which is supported by a calculus of self-interest as well as cultural enactments.

4 Family Business and Its Management

Introduction It is not surprising that definitions of family business vary (Irava and Moores 2010). What is meant by family depends on whether the focus is on blood relations, marital relations, intergenerational or sibling connections, and so on. In addition, a business may be established by members of a single family, have an ownership structure in which an identifiable family name has a visible component, or may be managed by a family group. In everyday speech, the notion of ‘family business’ is typically associated with such entities as the corner store and almost always small or medium-sized enterprises, and it is widely assumed that family involvement is generally limited to a single generation as inheritance problems prohibit or limit second and successive generational ownership. It is important to keep in mind, though, that the Ford Motor Company was founded by Henry Ford in 1903 and remains today a family-owned business. The current Chair of the company, Bill Ford  – the great grandson of Henry Ford – is the company’s biggest individual shareholder (Wayland 2022). While it is true that small and medium-sized businesses may tend to be family owned it should not be forgotten that some of the world’s largest are also family owned (Church 1993; La Porta et al. 1999; Zeitlin 1974, 1989), including newly established global companies, such as Huawei (Jiang 2019). A family business can be understood as a business in which ‘the owners articulate the desire to maintain family ownership, [and] is run by a family member with an entrepreneurial mind-set and engages in innovative activities’ (McGrath and O’Toole 2018: 196; see also Hoy and Sharma 2010; Salvato et al. 2010; Sirmon and Hitt 2003). As suggested earlier, family businesses are not the exception; they constitute a significant portion of businesses in both established market societies (Botero et al. 2015; De Massis et al. 2018; Muske and Fitzgerald 2006) and in developing societies and transitional economies 75

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(De Massis et al. 2018; Duh et al. 2009; Jurik et al. 2019; Petlina and Koráb 2015). Family businesses contribute significantly to the global economy (Jurik et al. 2019). It has been reported that ‘family firms account for two-thirds of all businesses around the world, generate around 70–90 per cent of annual global GDP, and create 50–80 per cent of jobs in the majority of countries worldwide’ (De Massis et al. 2018: 3). One-third of the companies listed on the S&P 500, a stock market index of 500 large companies listed on stock exchanges in the United States, are owned, controlled, or managed by the founding family (De Massis et al. 2018: 3). Given this background it is not surprising that entrepreneurship, innovative entries into markets, and family business are taken to be the subjects of overlapping fields in research (Anderson et al. 2005; Arregle et al. 2013; McGrath and O’Toole 2018; Stewart and Hitt 2012; Zahra and Sharma 2004; Zellweger et al. 2010, 2019). Another thing concerning research in this area worth noting is that ‘the dominant literature on family business has used the family firm in North America and Western Europe as its reference point’ (Khavul et al. 2009: 1219; see also De Massis et al. 2012). The present chapter draws on cases of Chinese family business and in doing so identifies properties of and relations in family business that mainstream research has neglected. The family businesses reported in this chapter are more than 50 per cent owned by a family unit, generally a married couple, with members of that family occupying top management positions. The history of private business in China during the twentieth century, in which family ownership and management predominates, is a history of political permissibility followed by political suppression followed by political permissibility again followed by limited and then expanding political encouragement (see Kraus 1991: 49–66; Wright 2010: 37–46). At the founding of the People’s Republic in 1949 and up to 1953 the ‘national bourgeoisie’ of business owners was tolerated, but by the end of 1956, private business was decidedly ‘counter revolutionary’ and politically exorcised so that it soon practically ceased to exist in China. At the end of the 1970s, though, as a result of the government’s endorsement of private ownership under ‘socialist market economy reform’ (Pistrui et al. 2006), family businesses, as well as enterprises formed by young peasants pooling their resources, began to grow in number even though at first at a modest rate. Since that time ‘family businesses have [become] an important component of the Chinese economy in the last four decades’ (Xian et al. 2021: 161) with more than 85 per cent of private business in China at the present time family owned and managed (Li et al. 2020). In such businesses the majority of shares are controlled by the family and family members play a significant role in firm related decision-making (Pan et al. 2019: 116). It is widely accepted that trust is a key factor in the employment of family members in business establishments. In his discussion of ‘Chinese Entrepreneurs and Business Trust’ the eminent Hong Kong sociologist Siulun Wong (1996: 19–20) regards personal trust as an exclusive property of

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familial relations. In an earlier study, Wong (1988: 143–144) notes the benefit to family businesses in their employment of family members, which serves the purpose of cost-effectiveness and therefore enhances the competitiveness of family enterprises. At the same time, Wong (1988: 144–145) adds, the employment of family members in managerial or strategic positions, which he says does not necessarily mean neglect of ability or training, provides ‘more [trustworthy and] highly motivated … employees’. Familial trust relations are widely seen to be the basis of the viability and success of family business in general, not simply in China (Azizi et al. 2017; Eddleston and Morgan 2014; Pearson et al. 2008; Ram and Holliday 1993; Sirmon and Hitt 2003; Sundaramurthy 2008; Wang and Shi 2021). As a family business expands, non-family members are increasingly employed. In these circumstances, it is standard practice in China, although not exclusively in China, that kinship forms of address are used irrespective of kin status in creating a situation of familiarity and closeness, and by hypothesis, enhanced trust. It is supposed that by these means a pseudo-kinship or quasi-familial relationship is formed in order to cultivate trust with non-kin individuals (Guo and Miller 2010). These taken-for-granted assumptions are subject to empirical assessment and significant revision in the discussion to follow. It is argued in this chapter that rather than trust being the affective bond and means of surety in China between family members, including family members who are together engaged in business, it is a sense of assurance supported by compliance with role obligations, and a surveilled form of reliability, xinyong, which ensures their steadfastness and commitment to the interests of the family business. In this way, persons in close family relations are subject to constant monitoring of their behaviour, and if a transgression should occur the threat of a loss of face, mianzi, is sufficient sanction to maintain adherence to established expectations and conforming practices. It is also shown in this chapter that as a family business grows, and non-kin employees are recruited, neither pseudo-​ kinship nor quasi-familial relationships effectively manage the behaviour of the newcomers, and neither are market exchange considerations relating to pay and conditions of employment understood to ensure that a non-family member will serve the needs and interests of an employing family business. It is shown, instead, that non-kin employees in family firms are subject to an intentionally cultivated and emotionalized guanxi relationship which ensures loyalty to the employing company and a melding of interests between employee and employer.

Family Business and Trust An entrepreneurial venture is an economic activity which necessarily involves risk and uncertainty, which entrepreneurs attempt to reduce with the aid of various strategies and means. A typically deployed means of reducing some of the risks entrepreneurs face is reliance on strong ties with those whom they engage (Ingram and Roberts 2000; Lerner et al. 2007). Weak ties are perceived

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as ‘superficial or casual and normally involve little emotional investment … they can be thought of as arm’s-length relationships whose handshake we seek but whose support we cannot count on’ (Aldrich 1999: 84; Aldrich and Ruef 2012). Kin ties, on the other hand, are ascribed, enduring, and imbued with bonding emotions. This is explicated sociologically by the British family researcher Janet Finch (1994) in terms of a number of factors. First, a family of origin is the source of an ‘irrevocable membership’ which ‘places each person in series of two-way relationships with a number of individuals’ (Finch 1994: 234). These relationships are both socially visible and enduring, thus entailing an irrevocable membership with special responsibilities that arise from ‘emotional ties and the history of relationships in which they are embedded’ (Finch 1994: 235). On this basis the bonds between family members, especially parent-child and sibling bonds, are prior to any request for support and should support be required or called on it is ideally provided without qualification. It is necessary to say ‘ideally’ here because while it is possible to identify an expectation on the basis of the nature of the relation in question there will always be exceptional cases arising from one or more of the conditions not being met. The expectations of close kinship mentioned previously are in China overlain with a ‘culture’ of kinship which has traditionally had a significant role in the daily life of Chinese people, including their education, who they may interact with and how, and even their consumption practices (Lin et al. 2016; Peng 2004; Su et al. 2011; Xu and Yao 2014). Because the Chinese family is traditionally organized in terms of patrilineal descent, blood relations are taken to be a source of implicit or ‘natural’ trust between kin (Pan et al. 2019; Zhang 2003). This ‘natural’ propensity is supported by a number of interconnected ritual activities, including paying respect to ancestors, compiling genealogies, and building and repairing temples and their lineage halls (Su et al. 2011). It is therefore no accident that since the beginning of China’s economic reform lineage networks and their symbolic as well as their material resources have been mobilized in the promotion of private entrepreneurship (Peng 2004: 1048; see Herrmann-Pillath et al. 2021). While this pattern may be associated historically with Confucian norms, ‘from which it draws its imagery’, its basis today is in the current structure of legal and administrative institutions and practices (Qi 2015: 157). Due to the absence of alternative arrangements in China, the family remains a primary source of social and economic support. This not only relates to such general factors encouraging a strengthening of self-reliance among family members such as the lack of comprehensive state-provided aged care and related social goods, but also the hesitancy or refusal of banks to provide start-up funds to small business. In such situations, close family relations remain a major source of material support. Under these circumstances, it is not surprising that high levels of commitment to principles of family obligation are consistently reported in China-based studies (Fuligni and Zhang 2004; Lin and Yi 2013;

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Whyte 2005). According to the American sociologist Martin Whyte (1995, 1996), familism and kinship loyalty are ‘the social roots of economic development’ that distinguishes the successful Chinese reform path from the unsuccessful post-Soviet reform experiences. As noted earlier, it is widely assumed that trust between kin almost exclusively provides solidarity and resources, including labour, to Chinese family businesses (Li et al. 2002; Li and Zhang 2005). Positions of trust are understood to be given to relatives, and jobs that require the handling of money are most frequently assigned to close kin (Tong 1996, 2005; see Hofstede 1980). There is an associated belief that non-family members cannot be trusted, and that when compared to outsiders relatives are inherently dependable and trustworthy (Li et al. 2020; Liu 2008: 56–60; Tong 2005: 66; Wong 1996). In this way, trust in China is regarded by a number of writers as more or less confined to relations between family members. Indeed, a prevalence of family involvement in business is likely to mean that non-family members tend to be regarded with suspicion (Ermisch and Gambetta 2010; Whyte 1996: 3–4). There can be no doubt regarding the continuing importance of family bonds in all areas of social and economic life in China today. In Chinese cultural construction, blood ties (xueyuan) are defined as the strongest, and they can be graded in terms of descending solidity from immediate family members, to close relatives, and most remotely distant kin (Fei 1992: 63–64). According to the preeminent twentiethcentury Chinese sociologist Fei Xiaotong (1992: 127) ‘Blood ties provide the foundation for status in Chinese society’. It will be shown below that while it is true that family ties and the obligations associated with them continue to play an important role in contemporary China, even though economic, social and cultural changes modify the expectations, attitudes, and emotions through which such obligations operate (Qi 2015, 2016, 2018, 2021), the evidence on which this book is based shows that it is not trust, as the term is normally understood, which holds Chinese families together nor underpins the operations and management of family businesses in China. Before that evidence is presented it is important to continue laying out the conventional assumptions regarding family business and how they relate to not only kin members but also non-kin persons who may join a family business and find employment in it.

Pseudo-Families As a family business grows, non-kin employees are recruited to fill the new roles created by the expansion or development of an enterprise, not only in China (Guo and Miller 2010) but generally. Research conducted in Britain and the United States indicates that firms may adopt an ‘as-if-family’ or ‘pseudo-family’ practice so that employees not related to owners or key members of the family firm could nevertheless be identified as ‘one of the family’ (Ram and Holliday 1993: 631; Dick and Morgan 1987). An ‘as-if-family’ firm

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has been framed as a ‘moral community’ in which employers relate strategically to non-kin employees through family values and feelings such as compassion, loyalty, shame, deference, care, and even love (Ingram and Lifschitz 2006; MacKenzie and Millo 2003; Mizruchi and Marquis 2006). In doing so, the employer’s orientation to non-kin employees supposedly attracts the same commitment in a family firm as that given by kin, through which support for business growth is achieved. In a study of Scottish family-business owner-managers it is reported that as more non-family members were employed the family business ethos was maintained through a manufactured commonality of ‘family’ emotion that entails behaviour oriented by shared values (Bika and Frazer 2021: 1985). Such practices not only overcome what has been described as an ‘“empathy gap” between economic elites and others’ (Cousin et al. 2018: 240), but in an ‘as-if-family’ employers and employees experience a closed and affect-based cohesion that can overcome barriers to entry into the business elite, while the business in question may remain a family business even though the bio-legal relations are effectively supplemented with if not substituted by collaborative and affectively laden commonalities in which members purposefully ‘perform’ family values appropriate to their class destination (Bika and Frazer 2021: 1983). In this way, kin and non-kin members of the business subscribe to common values through the sharing of relevant emotions by means of which they develop trust and decision-making commonalities, rather than the other way around. According to Bika and Frazer (2021: 1983) the ‘as-if-family’ grows out of a transition from traditional like-mindedness, entitlement, and trust based on literal kinship and class origin to a new set of affective bonds underlying networks better equipped to operate, indeed survive, in a ‘new socioeconomic context characterized by neoliberalism, globalization and the rise of the professional-executive class’ (Bika and Frazer 2021: 1986), all of which make exclusively family-based recruitment prohibitive of business growth. In Chinese society, the notion of the ‘as-if-family’ form is familiar in the idea and practice of ‘fictive kinship’ (Baker 1979: 162–167): The pervasive influence of the family in Chinese society did not stop at the boundaries of physical kinship. The Chinese applied kinship terms to people who were unrelated to them, and they also had a penchant for organizing non-kin institutions along kinship lines (Baker 1979: 162).

A similar term used in the context of Chinese social relations is ‘pseudo-family’ through which ‘outsiders are transformed into members of a family-like structure [by] the sharing of life experiences’ and the ‘application of kinship names’ to non-kin associates and contacts (Lin 2001a: 154–155). If in China personal friendship grows particularly strong between non-kin individuals, it is often overlain with fictive-kin ties, the most developed form being sworn brotherhood, through which participants become like siblings with blood ties (Peng 2004: 1049; see Jordan 1985; Santos 2008). But in less compelling contacts,

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including shop sales, kinship terms may be applied strategically in claims of familiarity and politeness (Chan 2009: 739; Pan and Kádárb 2011: 1534; Wu 1990: 86). Through these various means a ‘family tie’ comes to include both ‘real- and pseudo-family ties’ through which are maintained ‘loyalty … unlimited … [and] complete and unbreakable responsibility to each other’ (Luo et al. 2016: 651). In this manner family ties ‘are characterized by unconditional loyalty and involve social obligations that are not based on reciprocity’ (Guo and Miller 2010: 270). Indeed, Guo and Miller continue by noting that ‘people cannot solely rely on family in dealing with everyday life, and therefore … “quasifamilial” relations can be created to cultivate trust among non-kin’. While there is an assumption on the part of many writers, then, that the strategies of fictive kinship do indeed generate a quasi-family relation so that non-kin persons participate in relations with each other that take on the force of a kin-tie, others indicate caution. For instance, after introducing the term ‘pseudo-family’, mentioned previously, Lin (2001: 155) is clear that the relations of a pseudo-family form must be distinguished from real family relations; rather they form ‘parallel rather than integrated networks’ (Barbalet 2021: 158). Similarly, Fei (1939: 91) notes that the addressing of non-kin persons with kinship terms or names ‘does not necessarily involve an extension of specific privileges and obligations. It does not imply a real extension of kinship relations’.

Role Obligation, Assurance, and Interrelated Interests While family business is assumed to be supported by relations of trust between kin, as shown in the discussion earlier, a closer examination of the operations of such businesses reveals that principles of reliance and certainty other than trust underpin the relationships that support an enterprise. A generally accepted feature of trust is that it is given by one person to another as a matter of individual choice and that compulsion can have no role in a person trusting another (Luhmann 2017: 45). Indeed, it is ‘not possible to demand the trust of others’ (Luhmann 2017: 47). In Chinese society, on the other hand, relationships between family members and close associates entail direct personal monitoring, pervasive hierarchy-based dependence, and role obligation which together mean that inter-personal trust as it is normally understood is almost impossible (Barbalet 2019). Fieldwork on which this chapter is based, in conformity with findings reported in the literature, revealed that at the early stage of the development of family business, there is a tendency to employ mainly relatives, but as the business succeeds and grows, expansion of the workforce means that increasingly non-relatives are employed. As we shall see, business owners expected from kin and non-kin alike a commitment to the interests of the firm, assurances of reliability, and a sense of obligation to the employer. If elements of trust

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can be located in the relationships internal to these family businesses, interviewees seemed not to be aware of them. Quite different sources of assurance and certainty in interpersonal relations were revealed by both entrepreneur and employee respondents in fieldwork which explain the solidarity between employers and employees in family businesses in China and possibly elsewhere. Role Obligation Entrepreneur respondents shared the view that at the early stage of establishing a company, it is essential that employees are willing to work under arduous conditions and were not overly concerned about the immediate benefits of employment but rather had a longer-term view regarding the advantages of working for this particular employer. The people most likely to be suitably orientated, on these terms, are family members. Mr Bo (aged 35, Associate Degree, owner of food and beverages companies) remarked: At the initial stage, when we were establishing our enterprise, we were fumbling, there was no ready-made textbook for us to copy. We needed to form a team within a short period of time who were in our command and wouldn’t leave when things got tough or really difficult. Relatives were the best choice.

Indeed, when businesses are just starting, before cash flows are certain and long-hours are called for to establish new practices and learn new skills, it is difficult to recruit personnel (Aldrich and Ruef 2012; Behrends 2007; Greer et al. 2016). In these circumstances, family bonds are a rare means of not only acquiring a workforce otherwise almost impossible to attract but amenable to compulsion and possibly forceful direction, including working long hours and being paid lower than market rates. Mr Mao’s (aged 52, high school graduate, founder of a vehicle repair company) views were shared by other entrepreneurs: During the earlier stage of business establishment, relatives played an important role. Most of them were hard-working, prepared to endure unfavourable conditions, and work in the evenings, and on weekends.

Indeed, employees working for an entrepreneur not yet established in the market are likely to experience uncertainty regarding retention, minimal prospects for career advancement as well as low wages and few benefits (Block et al. 2018; Coad et al. 2017; Tumasjan et al. 2011). Mrs Rang (aged 33, Bachelor’s Degree, co-founder of online leather products company) said: In particular, on sale days including yuandan (New Year Day), Christmas, shuangshiyi (11th of November, double 11 shopping carnival), we would da jixue (literally inject a little cock blood; figuratively boost morale with unusual means), shouting slogans, working throughout the night, virtually 24 hours a day. We were like soldiers on a

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battlefield, requiring incredible iron-will to fight to the end. The relatives were the first to take on the toughest tasks and the last to get off work. They really showed solidarity and commitment.

What is described here by entrepreneur respondents regarding the qualities of family members they rely on when setting up a business is clearly not trust. Among other things, ‘trust is committing to an exchange before you know how the other person will reciprocate’ (Burt and Knez 1995: 256). The employment of relatives by business persons was practically the reverse of this characterization of trust as it is on the basis of a clear knowledge of the employees’ preparedness to put up with harsh conditions, long hours, and low pay – because they are kin. Trust is a disposition regarding the reliability of another, but its context is a certain relational uncertainty regarding the outcome of the provision of trust; the measure of giving trust is accepting the risk that the trust may be broken. The reliability of kin is not premised on the risk of trusting another in order to achieve an otherwise unobtainable objective but is an assumed expectation of compliance within a social role. Kinship roles entail obligations to satisfy the needs of kin as an ‘ideal norm’, as Finch (1994: 236) puts it, which are most clearly defined in the dependency roles of parent-child and in the mutual support experienced by siblings and first cousins. These propensities implicit in kinship roles may be described as ‘ontological security’, a term used by Giddens (1990: 92–100) to describe an ‘aspect’ of trust. While ontological security may be a consequence of successful trust it cannot be an inherent feature of trust given the nature of the circumstances in which trust is called for or required, namely contingency, uncertainty, and an absence of pertinent knowledge (Giddens 1990: 33–36). Role obligations, then, rather than trust, provide confidence and assurance to entrepreneurs that their kin will be committed to their work in a family business, even if the conditions are arduous and the returns less than those provided by market provision. Rang continued: Warehouse work is very tiring and repetitive. Smoking is not allowed. One needs to carry heavy loads, pack and unpack, and be on your feet all the time. It is not unusual that the skin on one’s hands peels off and feet get blisters.

Feeling obligated and providing support to family members involves complex emotions and beliefs (Finch and Mason 1993; Unger 1993). Close family ties, those between parents and offspring, brothers or sisters, and cousins, have been appropriately described as ‘endowed’, that is, they are ties which are ‘ascriptive and produced by birth’ (Wank 1996: 826–827). Wank (1996: 826, 828) goes on to point out that such bonds are ‘forthcoming with little or no need to offer material reward’ because ‘intimacy can be more or less taken for granted’ and there is, therefore, no need ‘to spend resources on deepening the ties’ because ‘explicit reciprocity … [between] endowed ties’ is simply superfluous and unnecessary.

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Assurance In addition to the preparedness of kin to commit to hard work, a related shared perspective of entrepreneur respondents regarding kin is that relatives are zhigen zhidi. The phrase zhigen zhidi, which literally means knowing the roots and ends, indicates in this context having a thorough knowledge of a person. Mr Nong (aged 56, high school graduate, owner of a clothing company) remarked: At the early stage of establishing our business we didn’t have a regulated system, no inventory, and we didn’t have the time or the staff to regularly check the stock. A reliable warehouse staff must be willing to live onsite and ensure that nothing goes missing or gets stolen or is damaged. For this impossible work we hired a relative, zhigen zhidi.

Entrepreneur respondents tended to assign jobs which carried significant responsibilities to family members. Due to the enduring relationship between kin, and therefore the more or less complete knowledge of their personal history and background, there is an inherent basis to ‘the social definition of kin as people whom you treat differently’ (Finch 1994: 235). In an employment relationship, then, the ‘sense of the “ideal norm” of kinship obligations’ that we saw Finch (1994: 236) refer to earlier, means that there is an inescapable moral quality to kin relations that adds a layer of assurance such that relatives perform a work task not simply to execute a labour or perform a chore but to satisfy the needs of a family member. Kin relations operate as ‘a necessary mechanism for continually recreating and sustaining a sense of social identity’, as Finch (1994: 235) reminds us. A family business provides family members with employment and a level of financial security (Chen and Chen 2014), but it is also a context in which employers and employees alike express their responsibilities to kin; managing a family business and working for a family firm each represents a discharge of market roles and at the same time expresses the connectivity of blood lines. Chinese culture explicitly symbolizes the responsibility and moral obligations shared by kin (Greif and Tabellini 2017), arguably an aspect of family relations which is general and not confined exclusively to family relations in China (Sirmon and Hill 2003). Mrs Qiu (aged 60, primary school graduate, owner of a hotel) reported a practice which a number of entrepreneur respondents referred to: We usually hire a relative to be in charge of the business’ finance. Firstly zhigen zhidi, so it’s unlikely that ta (he or she) would try to cheat you. Secondly, if your relative even thinks of cheating, he knows he’d be exposed among relatives, ta meilian jian qinqi (he will lose face and won’t dare to meet his relatives). If you cheat jialiren (family members), nobody would want to have anything to do with you!

Entrepreneurs appoint their relatives to jobs of significant responsibility not because of a trust-related expectation of goodwill but because they have a full

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knowledge of the person involved and therefore have a strong sense of the suitability of the appointee. This is reinforced by the added assurance of reliability based on the shared knowledge that transgressions against a family member carry the severest of consequences, loss of face among kin, including beyond the immediate family circle; this is effectively expulsion from society. The distinction between trust and assurance implicit in the discussion previously is clearly articulated in a frequently cited article by Toshio Yamagishi and Midori Yamagishi (1994: 132): Trust is … an expectation of goodwill and benign intent. Assurance, on the other hand, is … an expectation of benign behavior for reasons other than goodwill of the partner. Trust is based on an inference of the interaction partner’s personal traits and intentions, whereas assurance is based on the knowledge of the incentive structure surrounding the relationship.

As noted here, assurance is distinct from trust in that assurance relates to an incentive structure external to the two discrete individuals who participate in exchange relations and goes beyond their personal expectations of others in the network of relations in which they are involved (Barbalet 2021: 136). Malfeasant behaviour of a non-family member would lead to dismissal from the job. The consequence of malfeasance of a kin member, on the other hand, is not simply discharge from employment. A breach of obligation between kin in an employment relation is not simply a material disjuncture but a serious moral infraction and an emotional disruption, both of which extend far beyond the employment setting itself. It is frequently reported that in China persons are not simply family orientated but that pride and shame are family infused, so that the behaviour of a family member may be the source of a person’s own experience of pride or shame, that is, the behaviour of a family member can cause a person themselves to experience pride or shame (Wang et al. 2020). A family member’s face-state and her prospective loss of face may not be an outcome of her own behaviour but is contingent on the behaviour of her family members. The importance of face in an individual’s own self-image and behaviour is widely acknowledged; less frequently discussed is the importance of face which results from an individual’s relational image, which is linked to the behaviour of those who are close to him or her (Qi 2017a). It is precisely this highly emotional and moral monitoring and associated sanctions which provide assurance to entrepreneurs in terms of assignment of significant jobs to their kin. Interrelated Interests In conducting research for this book participant observation, formal interviews with entrepreneur respondents, and informal interviews with employee respondents all revealed that the family businesses that were studied operate in large part through the performance of familial role obligations on the part of

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both employers and employees, the monitoring of the behaviour of others, and (fear of) sanctions. Research also revealed the significance of interrelated interests between employers and employees of the same family in their performance of work roles in the business. Mrs Shen (aged 39) said: The relatives bushi baigan, shouhuo shi changyuan de (don’t work for nothing, they have harvested long-term benefits). Most come from the countryside, where they were confined to a small world with few opportunities. We provided a life-changing opportunity for them. They were fully aware that if our company did well, they would have a good future. They therefore exerted their utmost energy in working for the company. All of them now own apartments and cars and have done far better than their peers in the countryside.

While kinship bonds are universally taken to imply unconditional obligations of support for family members on the basis of need without regard to recompense, this does not mean that such support is guaranteed. Family ties are a necessary but not a sufficient basis of assured provision of support between kin. This fact, too, is acknowledged in the literature. It was noted earlier, for instance, that ‘people cannot solely rely on family in dealing with everyday life’ (Guo and Miller 2010: 270). Again, this is a possibility regarding families not only in China but elsewhere (see Finch 1994: 236). The added factor, which ensures support between family members, is whether persons have an interest in providing such support to the other. This is succinctly stated in Bourdieu’s (1977: 39) observation that genealogical relatedness does not guarantee what he calls ‘unificatory efficacy’; as he notes ‘the closest genealogical relationship, that between brothers, is also the point of greatest tension’. This means, of course, as Bourdieu goes on to say, that ‘the genealogical relationship is never strong enough on its own to provide a complete determination of the relationship between the individuals which it unites, and it has such predictive value only when it goes with [their] shared interests’. The accuracy of Bourdieu’s statement is confirmed by respondents who were employees in businesses owned by a family member. Mr Tian (aged 35), for instance, indicated: I’m truly grateful for being given such an opportunity to come to the city. My hometown friends and previous neighbours were very envious of me. I’ve settled in the city, youche youfang (having a car and an apartment). My son has better education opportunities in the city.

Participation in family business entails not only expressions of emotional attachment but also the satisfaction of interests. Family business entrepreneurs and their kin are not only genealogically related but also processually and instrumentally interrelated in a society in which geographic and social mobility are interconnected in a context of rapidly changing economic relations and opportunities. This study not only reports on the continued importance of kinship-based networks of family-controlled firms, which is widely understood

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and reported (Kuusela 2018; Le Breton-Miller and Miller 2018; Lester and Cannella 2006), but reveals what actually makes it work, thus moving beyond the ‘often deployed conceptions of an ascribed grouping’ and shows how it turns into an achieved commonality.

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It is a common feature in the development of family-owned businesses that in the early stages of enterprise ready access to kin satisfies the need to recruit compliant and hard-working employees. As the business grows, however, and its workforce requirements change, the employment of family members may change from being a solution to a problem to being a manifestation of a problem. Mrs Wei (age 37, Bachelor’s Degree, founder of an industrial products company) reports a situation which a number of other entrepreneurs similarly indicated: During the earlier stages of setting up our business, relatives played an important role. The business did well, and as we grew, we felt the pressure of competition more intensely. This wasn’t a problem in itself because we had a strategy which included recruiting staff with technical qualifications and suzhi (high dispositional qualities). Most of our relatives who expected us to recruit them were from the countryside, with little education and no refinement. So we faced a predicament. We have gradually moved to a position where we no longer depend on relatives. Xianzai peiyang de jingbing qiangjiang – zhuguan he gaoguan dou bushi qinqi (Now a majority of key managers and executive members whom we have trained and cultivated are not relatives).

The distinctively different phases in the changing circumstances of family business, from being reliant on the employment of relatives to being less reliant, even avoiding employment of relatives, is a common aspect of enterprise growth in which family relations in the context of business may create dependencies that constrain autonomous action (see, e.g., Ingram and Lifschitz 2006; Yu et al. 2019: 156). A common problem for family businesses is management of the employment of relatives over the period of business development in its distinctive phases. The initial significant benefits of reliance on family ties may over time become a cost on the business’ operation. In this way, business performance may develop to a threshold, from which positive effects may be reversed as a result of network strong-tie effects (Uzzi and Spiro 2005). This problem, that dependence on family ties can become a source of weakness (Jack 2005; Pollak 1985), has been characterized in different ways. It can be acknowledged that strong family ties are associated with intra-network knowledge sharing and commitment which impedes extra-network access to new information and opportunities. Such a situation may encourage reliance on redundant and overlapping knowledge and information that may be overcome by seeking, acquiring, and employing external knowledge to deal with change (Arregle

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et al. 2007, 2013; Stewart 2003). This problem can alternatively be characterized as an interest-switch problem. Family members involved in the initial formation of business have common interests as employers and employees; employers draw on family networks for direct recruitment of their workforce. As the business grows, and employers have new needs requiring a qualified and otherwise specialist workforce, the interests of family members as employers and (potential) employees now diverge, and hostility and even conflict become a possible element of intrafamilial relations as the employer’s need for a workforce drawn from their family network diminishes. Like Mr Wei, many family businesses face such an interest-switch by employing non-kin employees to take on key roles. Kinship Address Terms My fieldwork observations revealed that many family companies adopt a number of practices to promote the commitment and loyalty of their non-kin staff. One such practice is deployment of kinship forms of address. During my casual conversation with an employee in company C, a beauty salon chain, she addressed the founder as Hong jie, elder sister Hong, and I naturally assumed that she was particularly close to Hong. After speaking with other members of staff, all of whom referred to the founder of the company as Hong jie, I realized that use of the honorific jie, in this case, was unlikely to indicate personal closeness. Hong (aged 37, Associate Degree) resolved this puzzle: I insist that yuangong (staff) call me Hong jie or Hong mei (younger sister). It is important to build good relations with the staff, make them feel you’ve qinhe li (power of making others feel close), which creates a sense of belonging within the company.

The formation of social bonds is widely understood in China to be achieved by the use of kinship terms of address between persons who do not share kin ties, as noted earlier in this discussion. While addressing the founder as Hong jie does not provide staff with access to the resources and privileges of being a family member of Hong, it may be regarded by those who are formally employed by Hong’s business that there is a sense of regard between them for which the employee may experience a feeling of gratitude and therefore commitment to the employer and an obligation to give their best in serving the business. Use of kinship terms of address has an obvious role in affecting the structure and depth of relations between addressee and addressor. As Barbalet (2021: 158) has put it, the ‘use of kinship terms between persons who have no kin relationship is an extension outward of a kinship vocabulary rather than incorporation of persons into a kinship form of relation’. The intention in these instances is not to extend kinship but to achieve an extrinsic purpose; in Chinese ‘this is known as tao jinhu “to try to win someone’s friendship” or “to butter someone up”’ (Wu 1990: 86–87). Such everyday rituals, including the

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use of kinship forms of address, while appearing relatively meaningless because apparently unthinking and habitual, in fact, plays a central role in sustaining social interaction, as Erving Goffman (1972) has convincingly shown. The use of kin terms between entrepreneurs and their employees builds ganqing, feelings of personal closeness, entailing a commitment to their relationship, thus turning a working relation based on economic interests into a personal relationship of warmth, care, and common interest. In this way kin address terms used within the environment of the business departs from and reverses the otherwise taken-for-granted ‘images of entrepreneurial work as sealed off from the social world of emotions and intimacy’ (Thurnell-Read 2021: 49). The emotion invoked by the application of kin terms to non-kin persons is ganqing, as noted previously. The importance of ganqing in building significant affective attachment between persons has been reported in an extensive literature (Fried 1969; Kipnis 1997; Yang 1994) and it is widely agreed that ganqing is a constitutive element of guanxi, the connection basic to particularistic ties that are widely mobilized to serve instrumental purposes (Barbalet 2018; Smart 1993). Guanxi ties are open to anyone sharing a common interest and affective capacity, unlike kin ties which are confined to blood relatives and therefore closed; the obligations of kin are role-based whereas guanxi obligations derive from exchange of favours between persons (Barbalet 2021: 66). Indeed, guanxi resources are more highly embedded in non-kin ties (Bian 2001: 292). The relations generated by the application of kinship terms to nonkin may therefore be conceptualized not as quasi-family relations, as typically occurs in the literature, but as an emotionalized guanxi relationships which, in the case referred to here, entrepreneurs build and maintain with their staff. What is being described here as emotionalized guanxi should not be confused with the paternalistic relationship between owners and their staff which the literature on Chinese family business has identified (Chen et al. 2014, 2019; Cheng et al. 2004, 2014; Cheng and Wang 2015; Wang et al. 2018, 2020; Zhang et al. 2015; Zheng 2005). Paternalistic leadership is widely regarded as a leadership style typical of Asian cultures that is held to be rooted in Confucian principles (Cheng et al. 2004; Pellegrini and Scandura 2008; Zhang et al. 2015) and is defined as combining strong discipline and authority with fatherly benevolence exacting the loyalty and obedience of subordinates subject to the leader’s authority (Farh and Cheng 2000; Zhang et al. 2015). What is described here, on the other hand, to be explored more fully below, is a newly emergent form of guanxi relationship between employers and employees. Guanxi relations have been distinguished in terms of a horizontal exchange of favours between peers and a vertical relation in which a subordinate seeks favour from a senior person. The situation described here, though, is distinct from these and historically recent, as it is a guanxi in which a person of higher standing builds and maintains relationships with persons in subordinate positions. This dyad is between a company, personified in the CEO, and its members rather than between two individuals.

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Displaying and Performing Intimacy All of the companies in which I conducted fieldwork observation regularly organize events and activities for their staff, and staff are encouraged to attend with their families. These events include local occurrences as well as trips to another city or province. Activities include such things as climbing mountains, boating expeditions, attending exhibitions, picnics, and cultural experiences. The scheduled character of these events not only synchronizes work and leisure on a collective level but also adds to it a sense of anticipation and a measure of excitement, what might be called ‘periodic emotional arousal’ (see Zerubiavel 1981: 65–68), which is core to feelings of belonging and solidarity (Collins 2005; Durkheim 1964). The intended effect of such activities and their collective emotional arousal is to contribute to the enhancement of the integration of the individual into the company. Chao (aged 37, owner of a personal products company) said, Through these events and activities, we demonstrate to our staff that we care for them and appreciate their contribution to the company. They also give us an opportunity to have a better understanding of each other, not only as boss and staff but as ordinary people. For instance, through the trip to Huangshan (Yellow Mountain), I was surprised to learn that Xiao Li is a very competitive runner, a real athlete. Also, my staff get to know me better as a wife and mother. You know, some of the women confided in me their own experiences of raising a child.

Intimacy, according to Lynn Jamieson (1998: 8), is a ‘form of close association in which people acquire familiarity, that is shared knowledge about each other’. Through the sharing of personal information regarding their personal lives, including their marriages and childrearing, the CEO – the personification of the employing company  – and her staff in their company-sponsored leisure activities experience a sense of intimacy between them. Of course, by its nature, intimacy relates to a private experience but it is not necessarily confined to the discrete physical space of the family home. Even though it may be overlooked, relational intimacy may occur in roles and practices conducted in public arenas (Jamieson et al. 2006). By sharing personal information with her staff in the public spaces of organized events, including a display of care and concern, entrepreneurs finesse their market-based relations with employees to an emotionalized guanxi. Through such ‘affective labour’ (Thurnell-Read 2021: 44), these entrepreneurs provide outside-workplace activities and events in order to perform and inculcate intimacy for instrumental purposes. It is common practice, at a lower level of engagement than the organized outside events mentioned previously, that an employee’s birthday is celebrated with the business’ staff and their family members. Similarly, events of cultural significance including festivals and holidays, and in some workplaces even engagements and weddings, provide opportunities for top-down displays of care, ganqing, and a rudimentary building of guanxi to occur in the place of

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employment (see Bian 2001; Bian et al. 2005). These small rituals provide an avenue for entrepreneurs to display their affective attentiveness toward their employees and in doing so create in their workforce a sense of belonging to the business or company. On one occasion that I observed, the employer organized a birthday party for an employee. The party was held in an onsite conference room, decorated with balloons and with a big cake on a table in the middle of the room. The CEO was present with the managerial team as well as the company staff, their spouses and their children. The founder of the company made a short speech about the promising future of the company, and then offered positive and humorous remarks about the man whose birthday it was. This was followed by short speeches by two employees and a short response by the birthday ‘boy’ who then blew out the candles on the cake. While eating cake and snacks social levelling prevailed with managers and lower-level employees chatting together as their children played. The atmosphere was that of a pleasant and enjoyable family gathering. It has long been recognized that formal employment relations governed by market logic may be embedded in or complemented by reciprocal exchanges, such as reliable signals of safeguarding jobs even at high cost, with loyalty provided in return, expressed in voluntarily maximizing work effort, which may not even be observable (Akerlof 1982). The building of guanxi between entrepreneurs and their staff interviewed and observed in this study, by displaying and performing intimacy in the public space of the work site or at a work-related event, strategically elicits commitments from employees and encourages their devotion to the employing company in a manner which could never be formally specified in a written employment contract. The exchange of ganqing in these affective interventions, productive of a circumscribed guanxi between employer and employee, can be described as the generation of emotional capital which sits alongside the economic capital of the business enterprise and becomes infused with it in extracting an optimum performance from the workforce in their employment relation, which has become an employment relation permeated with positive feelings, of care from the boss and appreciation motivating work commitment from the employee. The notion of emotional capital, as indicated earlier, is appropriate in this context and it is therefore necessary to specify its nature. The events that are described earlier as productive of emotional capital are all characterized by a significant ritual component. Earlier we described the addressing of non-kin persons with kin terms as a form of mundane ritual, mundane in the sense indicated by Goffman (1972) in his demonstration that in everyday life various forms of routinized interactions consolidate individual expectations and social solidarity. Since Goffman Randall Collins has developed more fully the theory of mundane ritual. Collins (1989: 18) has shown that interaction engenders (1) a common focus that actors recognize, (2) common feelings (uplift, confidence) that motivates action toward that common focus, and (3) a sense of a ‘shared reality’ manifest in the salience of common foci and the intensity of

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the emotional uplift. These actors therefore come to ‘feel like members of a little group symbolized by whatever they focused on’ (Collins 1989: 18) and in the case discussed here, they feel a greater moral obligation to the company. The more fully developed theory of interaction ritual chains underpinned with emotional energy (Collins 2005) has gained increasing attention in organizational studies (Baker 2019). In economic contexts, ritual can be regarded as an exchange relation in which ‘emotional energy’ is traded among actors (Baker 2019; see also Caspary and Herrmann-Pillath 2021: 9). One consequence of the generation and expression of emotions in these interaction rituals is a generation of group identity that binds them together (Lawler 2001: 348–349). While it is correct to understand the relations between the company and its employees, through the events organized by management, as generating a ‘group identity’ it is at the same time important to appreciate that the purpose and effect of these interactions remain instrumental on the part of both employers and employees. The emotionalized guanxi between the founder as representative of the company, on the one hand, and the company’s employees, on the other, is particularistic in the sense that it draws on the emotions of the persons involved. The mobilization of these effects, though, is instrumental. On the part of the employer, it is to achieve a commitment from the workforce to the company’s interests in market performance and growth, and on the part of employees, it is to achieve assured employment under conditions of consideration and ‘care’ from the employer. This is very unlike the development of community relations in Japanese family businesses reported by Caspary and Herrmann-Pillath (2021). In this latter case rituals of reciprocal exchange generate a shared identity and a shared purpose, morphing relations based on employment contracts into a community in which the members share common interests (Caspary and Herrmann-Pillath 2021: 20). In the Chinese case discussed here, though, through a company sponsored emotionalized guanxi employees do not necessarily share common interests with the company but through the guanxi relation, the distinct interests of employers and employees are addressed and possibly satisfied. Orientation to the Future As indicated earlier, guanxi does not require the abrogation of self-interest, which rather is a requirement of community, but instead is an instrument for the realization of self-interest through the affectively-based support of others. No better indication of self-interest in employment relations is an employee’s departure from one employment relation in order to seek advancement through employment in another. Such an event may negatively impact on the original employer as a talented employee’s resignation may result in a decrease of productivity (Samuel and Chipunza 2009). To retain and prevent the loss of competent employees, companies draw on a number of strategies (Bansal 2014). Studies point to the role of financial compensation in retaining employees

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(Bansal 2014; Chew and Chan 2008; Das 2013; Rombaut and Guerry 2020). Flexible work conditions have also been introduced to enhance staff retention (Bansal 2014; Curtis and Wright 2001; Dex and Scheibl 2001). Individualized recognition is another device applied to motivate employees to stay with a company (Danish and Usman 2010; Das 2013; Rombaut and Guerry 2020). Among respondents interviewed for this study the issue of staff retention was frequently mentioned. One owner of a family business, Mr Zhang (aged 42, high school graduate, founder of a health equipments company), reported a case that gave him much concern: We had a key technician, Lao Tao (Old Tao). My company was in need of his expertise and through an intermediary I invited him to join my company. I paid him well, ¥15,000 a month, ¥5000 more than he’d get in his home town. During the Spring Festival, staff have a 10-day holiday but we give him a month because his wife and children live in another province. We took on two apprentices to learn from him so that production wouldn’t be disrupted when he is away. He liked drinking, which wasn’t a problem if he was sober at work. But one day he was in fact drunk at work. His supervisor reprimanded him, as much out of fear that he might injure himself as anything else. This made Lao Tao angry and he left the company and went back to his hometown. I suppose he couldn’t bear losing face in front of his apprentices. After he left, the quality of our products declined. You know, he didn’t pass on his skills to the two apprentices.

Lao Tao was enticed to join the company with a high salary, flexible work arrangements, and personal recognition. These strategies seemed to be not sufficient in themselves to retain him and for him to share his crucial skills with apprentices. I asked Mr Zhang whether he sacked Lao Tao and employed another technician. Zhang shook his head and explained: It would take time to find a replacement technician who had Lao Tao’s skills and knowledge of our operations. Even if we could get a replacement, there might be problems with the new one. Rather than look for someone else, his supervisor and I flew to his home town. Because we made this trip to express our high regard for his expertise and his contribution to the company, Lao Tao felt that he had regained face. We also explained that for his safety it was best that he refrained from drinking on work days. We brought presents for Lao Tao’s family and learned that it happened to be his wife’s birthday, so we took the whole family out to celebrate. Lao Tao’s wife was moved by our sincerity and helped persuade him to return to the company. Now, when his wife visits him, we make special arrangements so that she has a pleasant stay. Lao Tao appreciated our thoughtfulness and even properly trained the apprentices.

Lao Tao’s face loss in front of his juniors was recovered by a gain of face secured through the visit from his seniors at the company and their invitation of his return to work. Face is an image of self that is possessed by a person through their interest in how they are regarded or judged by others; face is thus a social representation, reflecting the respect or regard, positive or negative, others have for a person (Qi 2011). The evaluations leading to gaining,

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recovering, and maintaining face function in terms of the self’s successful performance of actions that are socially understood as representing or reflecting prevailing values. Face can be lost through unsuccessful performance, negligence, or negation of those values as reflected in a person’s actions and interactions with others. Although face is an underlying aspect of all social behaviour, face can also be a distinct and distinguishable cultural object, through which an explicit concern for face is itself a factor in motivating the actions and influencing the behaviour of individuals. In Chinese society, face is an explicit object of social relations, and not simply a means through which social relations are conducted (Qi 2011). While face loss and face gain are well researched topics, the role of third persons in these processes is less frequently discussed. The way in which Mr Zhang went out of his way to build a long-term affective relationship not only with Lao Tao but also with Lao Tao’s wife was important in reinstating the employment relation. Field observations indicate that those companies which do well in retaining employees practice dadong renxin (touching people’s heart). In discussing these issues entrepreneur respondent Mrs Hong insisted that retaining valued employees is a managerial art – she said: Rang yuangong jinli you jinxin shi yimen yishu (To retain employees who are both excellent and spare no effort is an art). Indeed, I heard many employers say that a strategy they must employ to both retain staff and encourage the best from them is gongxin, winning the other’s heart. While companies will naturally attempt to retain competent employees, in a dynamic and expanding economic climate the most able members of staff are also the most likely to leave a company, often in order to start a new company of their own. In this latter case, it is likely to be in competition with that of their recent employer. Indeed, successful companies are unavoidably training grounds in entrepreneurial-mindedness, innovativeness, and self-empowerment (Marshall et al. 2019; Sessions et al. 2021; Urbig et  al. 2021). It is therefore to be expected that the most able employees may desire to start a company of their own. When it is clear that an employee is forming their own entrepreneurial intentions, employing companies might ‘act as filters that either block or support this, therefore influencing the form in which entrepreneurship emerges’ (Urbig et al. 2021: 2). Research shows that the more central in an industrial sector a business is situated, the greater the risk that their material resources, contacts, intellectual property, and customers might be competitively appropriated by an ex-employee’s new venture (Klepper and Sleeper 2005; Walter et al. 2014; Vaznyte et al. 2021). At the same time, though, if an ex-employee’s new business is not directly competitive with the previous employer’s business, borrowed ideas and contacts might not hurt the ex-employer, but could even enhance complementarity between the old and the new businesses (Urbig et al. 2021). My fieldwork revealed instances in which a departing employee starting a business within the same market niche as that of their previous employer led

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to a situation in which the ex-employer provided support to the new entrepreneur and their relationship developed from potential competitors to one of collaborators with leader-follower involvement. Entrepreneur respondent Xie (referred to in an earlier chapter) in interview revealed a remarkable success story. After she had worked in company B for less than a year, she expressed to her employers an intention to start her own company. The cofounders of company B, a married couple Mrs Ye and Mr Yu (referred to in an earlier chapter), were surprisingly supportive of Xie’s intentions. Xie reported: Ye jie (addressing Mrs Ye as sister, though they are not relatives) truly looked after me. She would have some popular goods delivered to my warehouse first then to her own warehouse. They didn’t charge me upfront; I didn’t have to pay for these goods until I sold them. When large sales events came up Ye jie would tell me beforehand so that I could put popular items on my webpage first. Meiyou tamen, jiu meiyou wode jintian (Without their help I wouldn’t have all I have today), a successful business, as well as owning several apartments.

During my fieldwork I heard a number of such stories, expressing their gratitude to Mrs Ye and Mr Yu for the support they provided to emerging entrepreneurs. The market environment of growth and innovation has to be seen as part of the situation which encouraged such generosity on the part of Mrs Ye and Mr Yu. At the same time, Xie’s success story was reasonably well known, with the effect that it led to a number of qualified, innovative, and entrepreneurial employees being drawn to employment with company B, a consequence of positive signalling to prospective employees and other audiences (Pitsakis et al. 2015; Umphress et al. 2013). In an interview, Xie reported that when her business began to prosper, and she and her husband bought a three-story building; one floor of which was rented as offices to company B’s fenxiaoshang (retailers) with the remaining two floors used for warehousing goods, including goods belonging to company B. In this way, Xie’s success also served the interests of company B. This type of cooperative and symbiotic relationship, in fact, is characteristic of guanxi relations. A person who has guanxi with another receives support from that person and in doing so acquires a sense of indebtedness generative of reciprocation of support over the course of an expansive relationship (Bian 2019; Yang 1994). Xie, who owed her success to the backing and assistance of Mrs Ye and Mr Yu was morally obliged to reciprocate support to them. This case indicates that encouragement for an employee to found a company of her own, even in proximity to the ex-employer’s business, does not necessarily lead to a situation of detriment but, on the contrary, to a win-win outcome for each of them. When in an interview I asked Mrs Ye why she did not try to prevent her employee leaving but instead helped her do so she explained: Doing business for me is like enjoying a pancake. The conventional thinking is that we share a piece of pancake, if someone else takes a portion, you’ll be left with a reduced portion. I look at it differently. Rather than making a portion smaller for others, so we

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can have a bigger portion, it is much better to see how we can make a bigger pancake, so that we can all have a bigger portion. We don’t focus on blocking others or destroying them, but on building good relations and maintaining cooperation.

In a similar vein Mr Yu said: ‘If you block others, you’ll eventually be blocking your own way’. I found in my field work that the most successful entrepreneurs exercised this type of forward-thinking attitude; certainly, they were orientated to successfully growing and expanding their businesses but seemed not to be concerned to monopolize markets or create barriers to others, by blocking their entry to the market or relating to competitors with hostility. The Chinese entrepreneurs I interviewed expressed the view that holding a monopoly position would attract opposition and in the long run would place them in a vulnerable situation. They held the view that companies which developed together would share strength and blocking or destroying competitors would undermine relational harmony, which they valued as a source of communicable well-being and mutual growth.

Conclusion The literature on family business, as noted at the beginning of this chapter, draws extensively on US and European experiences from which it develops theories about family business in general. The cases reported here, on the other hand, are drawn from present-day China. They detail characteristics and properties of family business largely overlooked in the mainstream literature. It is widely accepted in established research that family enterprises rely on trust between family members, but examination of the Chinese cases reported here shows that family businesses do not necessarily rely on trust but rather on role obligation, kinship network monitoring and assurance, as well as shared or mutually supportive interests. Family role obligations are entirely unlike market exchange relations which may be ignored, avoided, or subverted in relations between kin. Family members, unlike non-kin employees, are prepared to work under arduous conditions in return for below-market wages, especially in the early stage of operations in family businesses. As a business grows, non-kin employees are increasingly likely to be recruited. Such non-family employees in a family business are typically addressed by their employer and possibly other employees with kinship terms. A significant literature treats such phenomenon as leading to the formation of an as-if-family, a pseudo-kinship or quasi-familial relationship, supposedly in order to cultivate trust with non-kin individuals. The present chapter challenges these widely taken-for-granted assumptions. It is shown that in family businesses in China, neither pseudo-kinship nor quasi-familial relationships can be assumed, nor are merely market exchange relations engaged. Instead, non-kin employees in family firms are subject to an intentionally cultivated emotionalized guanxi relationship with the company’s owners and managers, and through them with

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the company itself. Adoption of kinship terms of address does not invoke role obligations or provide resources and privileges of the kin system. Unlike the bonds of kinship which are compulsive and enduring, the obligations which form among non-kin while encouraged by the use of kinship terms are voluntary and closer to market exchanges than they are to family connections. The present chapter shows how entrepreneurs build and maintain guanxi relations with their employees. It is important to appreciate that the guanxi in question cannot be understood in terms of the established models of principal-agent relations of the ‘western’ capitalist firm (Hamilton 2006). In economic exchange relationships, members provide service with the expectation of receiving comparable benefits in return or a monetary payment (Clark 1984; Clark and Mills 1979; Clark and Waddell 1985). The economic exchange relationship tends to involve financial resources or values-in-kind that are readily quantified. Persons in economic exchange relationships tend to keep track of the give-and-take practiced with different exchange partners and aim, at worst, to maintain a balance and optimally to gain more than they expend. In contrast, guanxi relationships involve emotion and obligations that are difficult to quantify and because they are inherently cooperative aspire to win-win outcomes comprising interest satisfaction of values not necessarily qualitatively comparable. Shared ‘blood’ or kin affinities and non-kin status are harmonized if not equalized in family businesses in China through pervasive guanxi relations encompassing both employer-employee interactions and to a lesser degree employee-employee interactions. Guanxi is thus a mechanism which enables individuals to move from a set of bonds built around kinship to a network of obligations that incorporate both kin and non-kin participants in a business. The use of kin terms by entrepreneurs in building ganqing (feelings) with their staff converts an economic relation to one in which a sense of personal warmth and care predominates. Through ritualized activities around managerially organized events entrepreneurs display and perform intimacy with their employees in order to maintain and strengthen emotionalized guanxi relations governed through reciprocal exchange. Through such emotional labour, entrepreneurs endeavour to retain their competent employees. In the event of such an employee wishing to leave the company to start a business of their own, forward-thinking entrepreneurs may provide emotional and instrumental support rather than blocking a departure or attempting to sabotage a new enterprise.

5 Female Entrepreneurs Doing Gender and Displaying Gender as a Strategy

Introduction Female entrepreneurs, one of the fastest growing entrepreneurial populations globally, have continued to make significant contributions to innovation, job creation, and poverty reduction worldwide (Alvarez and Barney 2013; Wang and Lin 2019). Historically, though, women’s entrepreneurship has been neglected by researchers (Hamilton 2013; Ogbor 2000; Xian et al. 2021). The discursive representation of entrepreneurship as a male construct sustains a normative model of economic rationality allegedly universal and applicable regardless of differences in context, class, gender, and race (Ahl 2006). This view has been persistent (Julik et al. 2019), and draws from a generic outlook, as Raewyn Connell (2000: 51) has observed. Though research on female entrepreneurship has in recent years gained increasing attention it remains the case that the gender dynamics within this category continues to be under-investigated (Constantinidis 2021; Hamilton 2013, 2014). This background, which includes both the enduring presence of female entrepreneurs as well as their relative indiscernibility, and, when noticed, their misrepresentation, raises questions concerning how knowledge is produced and in particular ‘what has been obscured or made invisible’ (Fletcher 2001: 23). Theories regarding female entrepreneurship have predominantly drawn on the experiences of business and society in North America and Western Europe, where it is characterized historically by individualism and more recently by neo-liberal discourses (Jimenez 2009). It is appropriate to call for a better understanding of the ‘culture and context’ of entrepreneurship in order to address and redress the Western-centric bias as it relates to gender as well as to family (Campopiano et al. 2017; Marlow 2020). Despite the rise of female entrepreneurs in the era of economic reform in contemporary China very little is written about female entrepreneurship as a research topic in its own right 98

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(Chen et al. 2018: 182; Xian et al. 2021: 159). The present chapter contributes to the literature by focusing on female entrepreneurs in contemporary China and in so doing revises and refines the theorization of the related gender dynamics. Writing directed to presenting the attitudes and practices of entrepreneurs understandably tends to be the preserve of the ‘management literature, business journalism, corporate self-promotion, and … studies of local business elites’ (Connell 2000: 52; see Bowman 2007; Burt 2019). Sociological research on female entrepreneurship is particular scant. A gendered dichotomy persists, in both popular and scholarly understandings of the constitution and anatomy of entrepreneurs and their achievements. Entrepreneurial success is predominantly understood in terms of qualities associated with masculinity, including such factors as control, independence, striving for gain, orientation to expansion, and so on. Femininity, on the other hand, and by implication female entrepreneurs, are regarded as flexible, oriented to family needs, and less attentive to striving for competitive advantage. Women are assumed to play only supportive and subordinate roles in family firms, with men playing the leading roles. While female entrepreneurs are increasingly acknowledged to be capable of performing successfully as business leaders, their ability to do so continues to be predominantly associated with masculine ideals of success, of being career-focused and power-seeking, and therefore accomplishing an imitation of masculinity in their doing business. Drawing upon Chinese cases, this chapter challenges the persistent dichotomic stereotypical approaches to entrepreneurship in standard gender terms. It is shown here that while businesspeople in the study do engage in displaying gender, such displays are subordinate to and in service of the purpose of the business success of female entrepreneurs in particular, and do not underlie a gendered dichotomy as it is usually presumed.

Masculinity and Femininity Gender can be understood as an institutionalized system of social practices for constituting persons as being in one of two significantly different categories, to which are attached socially distributed qualitatively different dispositional and constitutive characteristics leading to unequal outcomes (Ferree et al. 1999; Glenn 1999; Lorber 1994; Ridgeway 1997; Ridgeway and Correll 2004; Risman 1998). Gender norms influence social expectations and cultural beliefs regarding the type of jobs widely believed to be appropriate for either men or women. Such norms are associated with occupations which tend to be dominated by members of either sex, leading to the occupations involved being stereotyped as either male or female occupations and therefore imbued with what are regarded as predominantly masculine or feminine characteristics, with success in these occupations believed to derive from the incumbents expressing appropriate gendered qualities (Heilman 1997).

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Entrepreneurship is widely stereotyped as a male rather than female field of activity, and it is believed to require characteristics that are typically masculine (Heilman et al. 1989; Powell et al. 2002). Through the lens of prevailing gender norms women are seen as inferior to men in terms of the qualities believed to be required for success in the business world, and the talents and skills of female entrepreneurs are accordingly less valued than those of men (Marlow 2002; see also Hamilton 2013, 2014). What has been described as ‘transnational business masculinity’ is characterized in terms of ‘increasing egocentrism, very conditional loyalties … and a declining sense of responsibility for others – except for purposes of image-making’ (Connell 2000: 52). The persistence of such prejudices is understood to derive from the influence of the neoclassical and neoliberal economy and its assumptions of egoistic individualism (Ahl 2006; Bowman 2007; Connell 2000; Thompson 1989). The cultural presence of a hegemonic gender hierarchy, which holds that men possess greater capacities for initiative and forethought than women, and are imbued with more status and authority, is propagated through the media, institutionalized in government policy, and expressed in normative images of the family and social organization more generally (Ridgeway and Correll 2004: 513). It is not surprising, then, that a field such as entrepreneurship, which carries economic power, social prestige, and organizational authority, is gender stereotyped as masculine (Gupta et al. 2009; Marlow and Carter 2004; Mirchandani 1999). Despite the rise in Western society over an extensive historical period of egalitarian values, ascribed gender attributes remain a principal basis for the distribution of material and symbolic rewards and provide the rationale for assigning leadership (Charles 2011; England 2010; Gorman and Kmec 2009; Ridgeway 2011). Socially current beliefs regarding gender differences encourage low expectations about the competence of women and therefore impact negatively on the opportunities women have relative to men for assuming leadership roles in business (Foschi 2000). Evidence shows that when women co-found new businesses with their husbands, they are significantly less likely to take on leadership roles, reflecting the representation of masculine and feminine accountability norms embedded in spousal relationships (Yang and Aldrich 2014). Those cultural beliefs which define the distinguishing characteristics of men and women and how they are expected to behave remain pervasive (Ridgeway and Correll 2004: 511). Male leaders tend to be portrayed as having authoritative and assertive styles while female leaders are expected to rely on interpersonal and transformational appeals (Bass and Stogdill 1981; Bu and Roy 2005; Hu et al. 2008). Whereas men are mainly characterized as possessing a ‘transactional’ style of leadership involving the exchange of results for rewards and command through control, women are envisioned as displaying distinct abilities in ‘transformational’ leadership which fosters positive interactions and trust relations with subordinates, inclined to share power and information and encourage employees to subordinate their personal aims and interests to collective purposes (Rosener 1990; see Lewis 2013; Simpson and Lewis 2007).

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The prejudiced image of entrepreneurship as a masculine profession shapes the perception of men as agentic actors (Ridgeway 2001, 2014). Male entrepreneurs are located in a space of representation in which business is rational action in a public area, and their ‘private’ features are made invisible so as not to interfere with the entrepreneurial project (Bruni et al. 2004: 262). The gendered pattern of public and out-of-public representations reflects parallel hegemonic cultural beliefs regarding gender. Men tend to be represented in the public eye as most valued in founding a business, dealing with suppliers, and dealing with customers, while women, on the other hand, are more frequently represented as engaged in activities conducted beyond public perception, supporting a business rather than doing business through their involvement with administrative and clerical work, bookkeeping, production technology, and so on (Burt 2019: 48). The consignment of women to supportive functions places them in invisible or ancillary positions within the business organization (Baines and Wheelock 1998, 2000; Cappuyns 2007). The syndrome described earlier is explicated in status expectations theory (Ridgeway 2001, 2014); women are held to conform with communal, nurturing values and organizational behaviours whereas men are ascribed agentic and individualistic behaviours (Heilman and Okimoto 2007). The masculine and feminine ideals of success thus produce a gendered dichotomy of perceptions of entrepreneurial success. The purported characteristics of successful entrepreneurs – agentic, pragmatic, and risk-taking – are stereotypically masculine (Calas et al. 2009). Masculine success centers on financial and growth orientation and the individualistic values of control, independence, and impact (Brush et al. 2006; Cassar 2007; de Bruin et al. 2006, 2007; Kariv 2011). Feminine success on the other hand entails communal values of flexibility and family integration, without regard to economic considerations (Braches and Elliott 2018; Powell and Eddleston 2008). Women tend to be associated with the body and work requiring the intimate care of others’ bodies (Shilling 2003), and therefore possibly disruptive and unwelcome engagements, transgressing social norms of decorum by bringing the private world of reproduction (Ashcraft, 1999) into the public sphere (Meliou and Edwards 2018: 149). Gender roles, related to caring and motherhood, have been assumed to limit the possibilities for entrepreneurial agency, and impact on women’s access to and positioning in business settings (Calás et al. 2009). Family considerations limit women’s economic opportunities, as women are responsible for supporting their husbands’ careers – often at the expense of their own – and caring for their children (Yang and Aldrich 2014: 304). Gender beliefs explicitly and implicitly shape the evaluations and behaviour of individuals (Ridgeway and Correll 2004: 515; West and Fenstermaker 1995; West and Zimmerman 1987). Gender role stereotypes and gender identification are both socially constructed and learned through socialization processes over time (Ridgeway and Correll 2004). Gender identification is the extent to which individuals identify with characteristics attributed to men and women

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(Schmader 2002). Because gender is done or performed rather than something which people have (Bruni et al. 2004; Butler 2010), men and women vary in the extent to which they identify with masculine or feminine characteristics (West and Zimmerman 1987, 2009) and this identification influences their attitudes toward entrepreneurship and how it is socially evaluated (Nosek et al. 2002). We are told that women entrepreneurs tend to identify their career options in terms of masculine ideals of entrepreneurial success (Merluzzi and Burt 2020). It has been shown in one study that while both men and women perceive entrepreneurs as possessing characteristics and attributes commonly ascribed to males, only women acknowledged that entrepreneurs may also possess characteristics and attributes ascribed to females (Gupta et al. 2009). It was noted at the beginning of this discussion that the research conventions and findings regarding entrepreneurship and especially its gendered nature are largely drawn from studies conducted in North America and Western Europe. It will be shown in what follows that these findings and theoretical approaches do not readily match the experience of business and how it has developed in contemporary China. Indeed, the processes underlying entrepreneurship and especially the formation of female entrepreneurs in China encourage significant critical reflection on many of the taken-for-granted notions regarding entrepreneurship that derive from the established sources drawn on in the previous discussion. As well as the culturally distinctive nature of Chinese society, the varied and complex factors generated by the profound economic change that has occurred in China over the past 40 or so years has produced a vibrancy of entrepreneurship and characteristics of entrepreneurs that possess novel qualities, and which therefore encourage new theorization.

Female Entrepreneurs in China Chinese female entrepreneurs have played a noteworthy role in the global economy (Cheraghi 2013). Women are active players in business in contemporary China and their impact has become increasingly noticed (CWEA 2017; Gul et al. 2021; Kelley et al. 2015). Indeed, it has been estimated that approximately 15 per cent of Chinese women engage in entrepreneurial activities, far ahead of other Asian countries (Kelley et al. 2011, 2013) and female entrepreneurs now constitute ‘25% of the total entrepreneurs’ (Gul et al. 2021: 342). Women, in particular, play a significant role in family businesses, with nearly one third of family businesses run by women (Cadieux et al. 2002). A report conducted by Zhejiang University and the All-China Federation of Industry and Commerce reveals that female entrepreneurs are likely to be beneficiaries in family business succession (Chen 2011: 17). Women in Chinese family firms are more likely than in other Asian societies to be active in undertaking important leadership positions (Chen et al. 2018: 182). In traditional Chinese society, there is a long history of male dominance and female subordination. Women as daughters and wives were subordinate

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respectively to their fathers and husbands. Traditionally, daughters were only temporary members of the family into which they were born and a woman entered another family through marriage in which her full membership depended on her producing a son and heir. A woman could have no direct claim to the property either of the family into which she was born or the family into which she married; men alone were endowed with a right to family property (Freedman 1979: 258). A woman could enjoy the material benefits of family only indirectly, through marriage and by producing a male heir. Idiomatic sayings indicate a gendered division of labour, women’s subordination to men and their confinement to the domestic sphere. They include nan zhuwai, nü zhunei (men in charge of affairs outside, women in charge of matters inside) and nangeng nüzhi (men till, women weave). The ‘inside-outside’ distinction is a manifestation of the Confucian notion of female virtue in their obedience and service to men and family (Chen 2011: 4; Siu and Chan 2010). From 1949 massive campaigns were directed against traditional Confucian ideology, among other things. The 1950 Marriage Law and the Constitution of the People’s Republic of China enacted in 1954 both stipulated that women should enjoy the same rights as men, including political, economic, social, and family rights. During the Mao era ideological campaigns and institutional reforms ensured that women were liberated from traditional oppressions, especially those derived from the patriarchal family structure (Xie 2014). From the late 1950s women were encouraged to participate in public life. The Communist Party promoted gender equality by providing equal access to education and by increasing women’s workforce participation. Because they now directly contributed to the family budget, women’s influence within the family grew and women increasingly managed their family’s financial resources. There thus occurred a shift away from a patrilineal emphasis, essential in the Confucian construction of filial piety, which led to a decline in urban parental preference for sons, and daughters became increasingly important in support of aged parents, including in the provision of a home, in both urban and rural areas (Davis-Friedmann 1983; Hansen and Pang 2008: 85). The various revisions of the Marriage Law, of 1980 and 2001, continued to consolidate and enhance women’s rights. The introduction of egalitarian values and economic reforms have significantly changed women’s role in Chinese society (Leung, 2003; Zheng 2012). In contemporary China women have achieved greater equality in the family and in the market (Cooper 2013; Shen and Xu 2009). Chinese women have enjoyed unprecedented equal rights in education, employment, pensions, and social benefits (Cook and Dong 2011; CWEA 2017). The One Child Policy (1979–2015), designed as a temporary measure to curb population growth, had unintended consequences for women. It released women from the burden of reproduction, giving them more time and energy for personal advancement. With a reduction in the number of siblings, girls had access to increased resources (Whyte 1996, 2005). Brotherless daughters receive more resources than sisterless sons since parents ‘invest all

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their savings in their daughters’ education, rather than saving part of it for the purchase of marital housing’, as they would for a son (Fong 2002: 1104). In 2005, 45 per cent of female entrepreneurs in China had a university education and foreign language skills, more than that of male entrepreneurs (Shi 2005). In daughter-only families, the daughters involved are increasingly successors in family businesses (Chen et al. 2018: 187). Through analysis of data provided in the Global Entrepreneurship Monitor on nascent entrepreneurs in 58 countries, surveyed between 2001 and 2013, it is shown that China’s women entrepreneurs score at the upper end on each of five dimensions; participation, education, competence, opportunity-motive, and innovativeness (Cheraghi 2013). Being at the upper end in each of these dimensions indicates that China is quite unique in the increasing prominence of its female entrepreneurs. Research applying high-quality survey data drawn from a large probability sample of Chinese entrepreneurs shows that on average men and women build similar network structures, experience similar distributions of network advantage, achieve similar levels of business success, and experience similar performance returns to their network advantage (Burt 2019). While the research mentioned previously indicates the advantages available to women as entrepreneurs in post-1980s China rapid economic development impacts men and women in general quite differently. It has been argued that while the process of China’s reform has created new opportunities for women, it has also functioned to disadvantage them in a number of ways (Edwards 2000; Gallagher 2001). Focusing on rural China, Tamara Jacka (1997: 1) argues that ‘in a general sense Chinese women have not benefited from the process of reform to the same extent as men, and in numerous ways, the subordination of women has been reinforced and increased since the reforms were introduced’. While China’s government is committed to the ideology of women’s liberation, social inequalities have arisen as a result of marketization, and in cases of the competing priorities between women’s rights, on the one hand, and production and national policy, on the other, women tend to lose out (Chen 2011: 9). While gender equality remains politically important in China, traditional attitudes regarding gender continue to be discernible (Gao 2009; Ji and Wu 2018). Women are more accepted now as leaders than they were previously, but there is evidence that people are more comfortable with men rather than women in leadership roles (Burt 2019: 38). Continuing gender stereotypes of leadership constrain women’s access to power positions, and the effect of gender intensifies when spousal relationships are involved. Women are assumed to be not suited to enact the Chinese model of entrepreneurial masculinity, associated with being knowledgeable, sophisticated, and bold, able to create and maintain social ties of guanxi (personalized connections) with clients or government officials by partaking in after-hour entertainment (Zheng 2012). It has been shown that women prefer their husbands to act as the formal and officially recognized owner of their joint business, and regard it as more

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convenient and proper for their husbands to represent the family to the outside world (Chen 2011). There is evidence that women entrepreneurs tend to regard such responsibilities as management, production, and administration as ‘inside’ work, while other responsibilities, including entertaining clients, dealing with government departments, and settling debts are regarded as ‘outside’ work. It is also noted that women entrepreneurs may be concerned that the socializing required of businesspersons, which is male dominated both numerically and in terms of its practices, would result in gossip and slander against them (Chen 2011: 22; Luo et al. 2012). Chinese women are still expected to associate themselves with family rather than business roles and prioritize the interests of their extended family over their own interests (Woodhams et al. 2015). These women are expected to engage in intentional invisibility and perform largely ‘temporary’ or ‘hidden’ roles in business, aimed at supporting the success of their male siblings and partners.

Innovative Strategies As indicated earlier, a section of the entrepreneurship literature discusses persistent differences between the entrepreneurial activity of men and women and attributes to them gender characteristics (Burt 2019; Carter, Anderson  and Shaw 2001; Greer and Greene 2003; Marlow and Carter 2004; Marlow and Martinez Dy 2018). Asian family business is predominantly characterized as a male-dominated undertaking in which women play only a supportive role, due to the forces of patriarchy and paternalism (Carney 1998; Carney et al. 2009; Danes and Olson 2003; Gupta et al. 2009; Wang et al. 2020; Wong 1993). The existing but limited research on Chinese female entrepreneurs recognizes their increasing role in China’s economy (CWEA 2017) but supposes that female entrepreneurs tend to play a supporting and seldom a dominant role in business (Chen et al. 2018). My fieldwork, however, reveals that the situation is more complex than generally presented and that female entrepreneurs engage in a variety of practices which have hitherto been overlooked in the literature. Entrepreneur respondents who I interviewed reported that they did not necessarily follow conventionally prescribed gender roles but strategically navigate cultural norms finding what they regard as optimal outcomes for their business and also their family. The case of Mrs Ning (aged 38, Bachelor’s Degree, owner of an elderly-care facility) illustrates the point. Mrs Ning, whose parents own a company which makes and sells clothes, told me: I grew up helping my parents with their business and learned a lot from this ‘informal training’. After graduating from university, I worked as an accountant but this type of routine job gave me little satisfaction. My parents suggested that I join their company with a view to me, their only child, inheriting the business when they are too old to

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manage it. I thought about it but was put off by the prospect; bama tuixiu qian bu jiao jingji daquan, wo jiuyao ting tamende (Dad and mum wouldn’t let me have financial control of the company until they retire and I’d have to follow their orders). I have different views than theirs about how to run a business. After careful considerations I decided not to take up their offer but to open a business of my own.

Gender assumptions are embedded in family expectations and business practices, which are underpinned by norms, traditions and cultural elements, and this can affect a daughter’s decision regarding claiming a leadership position (Campopiano et al. 2017). Research findings show that daughters in business families tend to adopt one of three possible strategies (Xian et al. 2021: 173). First, such women may follow conventional gender expectations and play the role of an ‘occasional’ or ‘acting’ interim leader. A second possibility is that such women may act as a deputy leader and participate in decision making from a subordinate position. Finally, such women may challenge conventional gender roles and struggle to be a leader in her own right of the family business. Entrepreneurs like Mrs Ning, who was by no means unique among the female entrepreneurs I interviewed, do not necessarily adopt any of these three strategies but employed instead a breakaway strategy of forming their own business. Such an approach may be described as individualistic insofar as it requires an individual’s departure from the family business. Entrepreneurial initiatives are often depicted as an expression of selfhood and individual identity (Bröckling 2015). Certainly, in North America and Western Europe, entrepreneurs are depicted as operating on an individualistic cultural axis, and entrepreneurship itself is conventionally underpinned by the discourse of individualism (Morrin 2018; Taylor 2015). In Chinese society, on the other hand, the behaviour of individuals is unavoidably circumscribed by their social roles, especially in a family context as son, husband, or father and as daughter, wife, or mother; in this way, the meaning of a person’s behaviour aligns with the meaning associated with such roles (Hamilton 1990). The Chinese conception of a person is based on the individual’s interaction with others as bearers of roles and hierarchically structured positions. The maintenance of family harmony, as a social norm, has traditional origins, and though it was given a socialist veneer during the Mao era, family harmony remains a highly valued principle in contemporary Chinese society (Chu and Yu 2010; Jackson et al. 2013; Qi 2021). Mrs Ning was fully aware that as a daughter a challenge to her father’s leadership position in the business would have been considered unfilial and therefore a threat to the stability of both the family and its business (Cao et al. 2015). Aware of familial constraints to which she was subject Mrs Ning was not prepared to play a secondary role in the family firm. By establishing a company of her own she was able to avoid a breach of family norms and at the same time take on a leadership role that did not challenge her father’s leadership. In this way, she was able to navigate cultural norms in order to escape the role

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expectations that would limit her ambitions. Another entrepreneur respondent, Mrs Jia (age 60, primary schooling), reported that her daughter declined to join the family’s textile business and instead set up a hospitality company of her own. Young female entrepreneurs devise and utilize strategies to appropriately perform their roles both as daughters and as leaders in their own businesses. Because business success tends to be measured in terms of goals and behaviour associated with masculinist models (Hamilton 2013), assessments of women-owned businesses focus on women’s conformity to or departure from such masculine models (Marlow and Swail 2014). While successful women are increasingly acknowledged to be capable of performing as leaders, their ability to do so is typically associated with masculine ideals of success, of being career focused and power-seeking; women are thus regarded as successful when they imitate masculinist behaviours. It is understood that women who strongly identify with masculine characteristics (high self-masculine congruence) are likely to have higher entrepreneurial intentions compared with those who do not (low self-masculine characteristics congruence) (Gupta et al. 2009: 400). In the Chinese context successful women tend to be branded as ‘tiger girls’, tough and iron-willed, women who emphasize career instead of and possibly at the expense of family (Chen 2011: 2). My fieldwork indicates that successful female entrepreneurs are not necessarily required to be ‘tiger girls’ in order to achieve business success. Mrs Du (aged 35, Bachelor’s Degree, owner of two cafes) and her husband each ran their own businesses but together had zaochao (literally morning tea, refers to having selections of small dishes while having tea) almost every day. I was invited to join one such zaochao. Mrs Du said: In the Chinese society, it is important to build and maintain renmai (ren means persons, mai denotes mountains, renmai figuratively refers to social connections). As my husband and I have different social and business circles we often attend different dinners and social events. In order to have time together, to chat about everyday things, and discuss things that matter to us, we decided that having zaocha together every morning was the best way. We both think that status and wealth are fuyun (floating cloud) but family is the ultimate shizai (essence).

Entrepreneurs like Mrs Du regard their investment of time in family and the quality of life as important. When I commented on their valuing family harmony Mrs Du’s husband smiled and said that they were not unique in that. Mrs Du continued: My parents’ generation might be too focused on their business and overlook the importance of family. My generation, my circles, regard it as important to have a good life and especially a good family life. Business is only a part of life; it is not everything.

Indeed, the lived experience of the new generation of entrepreneurs challenges the conventional framework of entrepreneurship focused on only competition, profit, growth, and risk (Ahl 2006; Fenwick 2002; Pei and Chen 2019; Watson

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2009). Such frameworks obscure what respondents regard as a meaningful interdependence of work life and family life, a meaningful work-life balance. Rather than a partition between business and family, these entrepreneurs actively engaged in ‘strategies of co-ordination’ (Jarvis 1999). Accordingly, business and family are not necessarily opposed to each other but rather are capable of supporting and enriching each other. Mrs Geng, referred to in Chapter 4, mentioned her gratitude toward her husband Mr Guan. She said: I established a company in 2003 but it did not go well. My husband appreciated how difficult it was for me to run the company. During the early years of our marriage, we lived in different cities. He worked in a foreign investment company and earned a high income. Each time he came to spend time with me he would try his best to do things for my company. As the company didn’t go very well, I closed it and began another business in 2010, which I still have. My husband decided to resign from his job for two reasons: he thought it wasn’t feasible for us to live apart forever and secondly, my new company required his expertise. This company has since then become our company.

It is frequently reported that women make sacrifices for the sake of their families (Carr 1996; Gao 2009; Gorman and Kmec 2009; Jurik 1998), including leaving employment or withdrawing from business in order to support their husbands. While men’s businesses are infrequently impacted by their domestic responsibilities, women’s businesses are much more likely to suffer through such concerns, which are experienced as constraints (Eddleston and Powell 2012; Hundley 2001; Wang and Lin 2019). Whereas previous studies reveal that family circumstances impact a woman’s business negatively, a majority of the female entrepreneur respondents in my study report the support they receive from their husbands and their families. It is argued here that ‘being in the moment’ together and mutually experiencing the highs and lows of entrepreneurial progress (Mason 2018) may be initiated not only by women but also by men. As indicated in the case of Mr Guan, a husband may bring about a career change of his own in order to support his wife’s business. Participant observation in Company D revealed that Mrs Geng and Mr Guan did not necessarily agree with each other on how to run their business. Mrs Geng’s leadership skills included a vision for business advancement. At an executive meeting, Mrs Geng proposed that the company allocate half a million renminbi (approximately USD 70,000) for professional and management training of staff. She envisaged onsite training as well as sending staff to short courses in a business school. Mr Guan objected that his wife’s proposal would incur costs greater than expected benefits. In response, Mrs Geng provided an informed and comprehensive rationale, including the long-term benefits that such training would bring to the company. She concluded by saying: Only if we constantly improve ourselves and our employees and keep up with new and advanced approaches, is our company likely to develop and advance. Otherwise, we will be thrown out of the game.

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Mrs Geng’s training plan won the support of the executive. Against the established stereotype that women’s contributions to family business is either unrecognized or subordinate (Cesaroni and Sentuti 2014; Danes and Olson 2003; Dumas 1992, 1998; Hamilton 2006; Jimenez 2009; Xian et al. 2021: 157), cases such as Mrs Geng’s contravene dominant gender discourses by demonstrating that female entrepreneurs may successfully exercise leadership. The exercise of vision and leadership by female entrepreneurs taking their companies to the leading edge of market developments came across in numerous cases I encountered in my fieldwork. Mrs Ye arranged for me to meet an entrepreneur who I interviewed. Afterwards, the three of us went to a restaurant. During the meal, the two entrepreneurs discussed new developments in e-commerce. The following day Mrs Ye proposed to her husband that they consider adopting changes in their marketing strategy which would put them at the cutting edge of the ever-changing e-commerce industry. During a conversation with the general manager later I learned that the company had implemented Mrs Ye’s proposal. The general manager regularly went to Beijing, Shanghai, and Shenzhen to attended seminars and workshops in order to keep up with updated innovation and technology. She enjoyed showing me on her computer her newly acquired knowledge and skills. Contrary to the research which finds that women are less likely than men to adopt information technology (Mack et al. 2017; Orser and Riding 2018; see Manolova et al. 2020: 488), female entrepreneurs like Mrs Ye are not only able to adopt new technology but have the vision and foresight to initiate changes that lead to innovation and significant technical development in a dynamic industry. In response to my question, whether as female entrepreneurs they experience gender-based disadvantage in business, respondents typically claimed that they personally had not. Research findings, though, indicate that when applying for loans female entrepreneurs often receive lower evaluation scores than men (Carter et al. 2007; Wilson 2016), and female-led firms experience disadvantage when seeking angel investment (Becker-Blease and Sohl 2007) and venture capital (Greene et al. 2001), and in general, are less successful than men when formally seeking external finance (Carter et al. 2007; Fay and Williams 1993; Li et al. 2010). Compared to male entrepreneurs female entrepreneurs tend to start with lower ratios of debt finance and have a much lower likelihood of acquiring external finance such as private equity or venture capital (Carter et al. 2007). Mrs Ke and Mr Kong (both are referred to in Chapter 4) together established a company, the name of which is a combination of each of their personal names. They decided that Mrs Ke rather than her husband approach the bank for their first significant loan. In an interview, Mrs Ke told me, with obvious pride, that: The Director of the Risk Credit sector of the bank was a woman. She told me that she was struck by my ability and courage and that she would strongly support my loan

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application. She must have been true to her word because she phoned me a few days later to tell me that the bank president had approved my application. That’s how we got our first loan, for 3 million renminbi (approximately USD 500,000).

The existing literature reveals significant disadvantages businesswomen face when seeking a bank loan or investment capital. At the same time, there is evidence that such disadvantages are not absolute and that female entrepreneurs experience a degree of success in acquiring funds from institutional lenders, including banks. A number of female entrepreneurs who I interviewed indicated a belief that women with high educational credentials are on that basis provided with discernible market advantage. It was suggested by more than one entrepreneur interviewee that in a context in which attempts at fraud and similar misconduct is rife, a female entrepreneur with high educational qualifications has a special warrant or credential certifying business reliability. Mrs Ye told me: The first time that my husband and I met this particular business provider he was quite unhelpful and seemed to be uninterested in our new company. Their products are well known for their high quality and they are not short of buyers. Although the conversation was not going well it suddenly changed when my husband mentioned in passing that I have a PhD. From that moment everything seemed to change and changhua duanshuo (to make a long story short) we signed a contract.

During my interview with Mr Yu, he mentioned this same episode. Mrs Ye’s academic qualification in the context of the meeting with the business supplier functioned as symbolic capital. Institutional context can shape behaviour and the performance of individuals as well as organizations (DiMaggio and Powell 1991; Peng and Heath 1996). In the case of the meeting reported here the combination of Mrs Ye’s gender and PhD gave assurance of business worthiness. Chinese entrepreneurs look to a person’s xinyong, trustworthiness or reliability, which facilitates the extension of credit, expedites transactions, and serves as a form of guarantee. In this instance, Mrs Ye’s xinyong was generated through her particular symbolic capital.

Displaying and Doing Gender Fieldwork reveals that companies owned by a married couple develop presentation practices which strategically highlight either the wife’s or the husband’s profile, omitting reference to the other, in order to attract targeted customers. We shall see that a female entrepreneur’s performed personae is also implicated in how she relates to employees. As mentioned in Chapter 4, Company B, which markets high quality fashion related products, displays only the female owner’s profile on its webpage and in other promotional material, highlighting her attractive appearance, her academic qualifications (she has a PhD), and business awards, leaving her co-owning husband invisible on the company’s website. Participant observation revealed that when invited to present a talk to other

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companies or address a public gathering, only the female co-founder attends. This departs from those findings which hold that women partners in family businesses remain out of the public eye (Burt 2019: 48; Chen 2011). The public presentation of Company B suggests that gender may be something one does rather than what one is or has (West and Zimmerman 1987). As Helene Ahl (2006: 612) argues, instead of focusing on prescribed gendered assumptions it is more useful to examine ‘how gender is accomplished’. Gender is not simply prescribed behaviour but it requires, or rather it is a performance (Butler 2010). My fieldwork indicates that female entrepreneurs are not constrained by stereotyped gender ideals but utilize and create new norms through their doing gender and displaying gender. Indeed, it is well understood that gender can be present as a backgrounded factor while other attributes are performed in the foreground of social relational contexts (Ridgeway and Correll 2004: 516). The case reported here identifies a distinctive but underappreciated phenomenon whereby gender is strategically performed through a foregrounded display. Employees of Company B wear a uniform in the workplace, something not required of executives. The company held regular social and promotional events for employees, the majority of who were in their 20s or 30s. A regular feature of such events is a short speech by the co-founder of the company, Mrs Ye, followed by a number of visual presentations by employees sharing their specialist knowledge, such as design or financial management, or their personal interests, such as stamp collecting or musical performance. The male co-founder, Mrs Ye’s husband, Mr Yu would seldom attend such events. Participant observation revealed that Mr Yu is an able businessman, well regarded by those who know him, and ready to provide financial and technical support to his business friends as well as his employees. It was especially clear that Mr Yu’s involvement in the business was intense and that he and his wife were equally involved in decisions affecting their business. Together they reversed the well known entrepreneurial myth ‘[a]t one level, “everyone knows” the extent to which men at the top … depend on their wives’ (McMahon 1999: 45). Indeed, in the case of Company B, behind a successful woman there is an invisible husband. At one company event Mrs Ye was dressed in a stylish golf outfit. She delivered a cleverly framed short speech in which she said: What am I wearing today? Yes, a golf outfit. I was an ordinary woman when I started this business and now I’m able to enjoy a good lifestyle, including playing golf. How did I get to this position? Through hard work. But it’s no good just working for yourself. We all rely on others, no matter who we are. Also, it’s rewarding to give and not only take. Songren meigui, shouliu yuxiang (literally, the fragrance stays on your hand if you give someone a rose; figuratively, a person benefits from doing things for others). Whatever your work is it will be rewarded. In our company women and men are equally provided with opportunities to succeed.

Following her short speech, Mrs Ye announced that an employee, who was a woman in her mid-30s, had been promoted to a managerial position. Utilizing

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her own example as a living display as well as announcing the promotion of a female employee Mrs Ye sent a number of messages, including the idea that working diligently for the company will be rewarded, and that there are equal opportunities to excel and be promoted. Female employees, who constitute more than half of Company B’s staff, seem to look up to Mrs Ye and a number of young women workers told me that they were personally inspired by her as an entrepreneur and also as a woman. As an entrepreneur Mrs Ye’s self-identity is not a ‘categorical essence’ which is held within her person, but rather, like identities in general, a ‘mutable achievement in time, space and through relations with others’ (Down 2006: 6). Thus identity is not something that individuals ‘have’ but is performed and displayed (Down 2006: 25). In her relations with her employees, then, Mrs Ye interactively forms her identity so that to them she is not merely a successful entrepreneur but more importantly a successful female entrepreneur. This idea of identity performance is not in itself novel as it was introduced long ago in Erving Goffman’s (1959) development of dramaturgical analysis in which a person’s identity is understood to be performatively created through what might be called ‘identity work’ analogous with his concept of ‘face work’ (Goffman 1972) which bears some relation to self-formation. Another couple who I interviewed whose business requires identity work are Mrs Hong (referred to in Chapter 4) and her husband Mr Huang (aged 41, Master’s Degree) who are co-owners of a string of beauty salons. Mr Huang was heavily involved in the establishment and management of their business, from choosing sites to organizing renovation, and so on. During my interview with them Mrs Hong dominated our conversation, with Mr Huang playing a supplementary role of adding information that Mrs Hong had left out and providing support to things his wife said. Participant observation revealed that while Mr Huang was involved in managerial decision-making he seldom entered a salon, while Mrs Hong was frequently in a salon and was the key contact person for suppliers and staff as well customers. Mrs Hong and Mr Huang behaved strategically in displaying roles that corresponded to gendered cultural meanings. When gender is effectively salient, it is usually the hegemonic form of gender beliefs that are implicitly activated, institutionalized in the norms and structures of public settings (Ridgeway and Correll 2004: 517). As beauty is culturally defined as a feminine form, quality products and services are publicly demonstrated through Mrs Hong’s living personae as a capable beauty. As noted earlier, gender is something one does in interaction with others. Individuals tend to categorize self and other in multiple ways other than gender, according to culturally important and situationally relevant identities and roles including being competent, funny, trustworthy, and so on. Entrepreneurs such as Mrs Hong and Mr Huang, when interacting with staff and customers, though, engage in gender-appropriate behaviours to hold themselves accountable to normative expectations regarding the beauty industry. In this sense, gender is not a stable identity; rather, it is an identity tenuously constituted through a

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‘stylized repetition of acts’ which operate in distinct and different contexts and possibly have a purpose. Entrepreneurs like Mrs Hong and Mr Huang do not necessarily behave in a gender-compatible way to fulfil their perceived ‘nature’ (West and Zimmerman 1987: 125) but rather display gendered roles appropriate to and in the best interests of their business. Aware of the implications of gender beliefs, their situational relevance to and impact on their customers, entrepreneurs seem not to follow expected roles blindly but put on a display through the prism of perceived customer expectations.

Spousal and Intergenerational Dynamics Much research about and policy regarding entrepreneurs presumes models rooted in the experiences of White males in advanced capitalist societies (Marlow and Martinez Dy 2018). The roles of spouses who are in business together are thus conceptualized as either breadwinners or homemakers, indicating the primary responsibility of men for household income and women’s (relative) economic dependency on men (Yang and Aldrich 2014: 308). In this way gender is conventionally encoded in spousal relationships, with husbands and wives under compulsion to adhere to normative expectations for carrying out gender-typical work (Bittman et al. 2003; Schneider 2012; South and Spitze 1994; Thébaud 2010). As women are bearers of children they are associated with the body and the work of care for the bodies of others (Shilling 2003), so that domestic and care responsibilities are not something that women readily overcome on the way to entrepreneurial success (Lewis, 2013). Women are socially inscribed as having restricted access to power positions, especially in the world of business, and gender’s effect intensifies when spousal relationships are involved. It is of interest that my fieldwork among entrepreneurs in China found that spousal relationships do not necessarily correspond with the gendered stereotypes described earlier. Mrs Cui (aged 50, high school) and her husband are co-founders of their personal products business. Participant observation revealed that Mrs Cui was in charge of securing investment, meeting with potential business partners, chairing meetings and decisively involved in corporate decision-making. Mrs Cui’s husband, on the other hand, was primarily involved in specific technical matters relating to the operations side of their business, and from the point of view of employees and customers alike was almost invisible. Curiously, this departure from the stereotypical norm was reflected in the couple’s domestic arrangements. In an interview, Mrs Cui reported: I was occupied with the company’s business matters when our child was small, so I spent much less time with him than my husband did. Actually, I felt a bit guilty at the time because I didn’t give him enough care and attention. My husband was a good father but too indulgent. Our son was a fat child because he didn’t eat properly, too much Coke Cola and instant noodles.

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In this family, then, gender expectations were contravened if not reversed because of Mrs Cui’s deep involvement in business. In this case, gender norms could not be treated as a fixed attribute that the individuals involved brought to entrepreneurship (Bruni et al. 2004). While it is frequently claimed that gender and entrepreneurship are simultaneously constituted in business practice (Julik et al. 2019: 320; McAdam et al 2020), the evidence presented here suggests that spouses’ differential commitments to entrepreneurship creatively shaped their interpretation and performance of gender roles. A female entrepreneur, Mrs Liu, who was referred to in Chapter 4, decided to have a second child at the age of 39. She felt that she was able to return to motherhood while continuing to engage in business because childcare was taken up by her husband. She said: Our daughter went overseas for her university education. My husband was less busy than I was in the business, so he was able to spend time with our new son. Actually, he was very pleased to be a new father and enjoyed laolaidezi (having a son at old age). In this way my husband is happy and I’m happy as well. It’s good for a father to spend time with his son, and it saves me a lot of trouble.

Again, it can be seen from this and other cases presented here that women’s entrepreneurial actions are not necessarily determined by their structural and cultural contexts, by their marital and gendered roles, but are influenced also by their active agency (Clegg 2006) through which they create ‘gendered choices’ (Risman 1998: 297), something affecting not only women but also men. While the literature has focused on women’s reduced chances to be in charge if they co-found new businesses with their husbands, and on the reinforcing effects of family conditions such as husbands’ employment and the presence of children (Yang and Aldrich 2014: 304), the situation of female entrepreneurs in present-day China offers counterexamples suggestive of a looser relationship between gender and entrepreneurship and especially a capacity of female entrepreneurs to redefine their gender roles. Doing gender in the context of the business-family matrix is always situated within a larger social context that includes socio-economic, cultural, and historical considerations, as well as other factors relating to the position of the individual or group that is being considered (Chalmers and Shaw 2017; Martin and Jurik, 2007; Meliou and Edwards 2018: 152). Some researchers have appreciated the importance of cross-cultural comparative studies in understanding the relationship between family dynamics and entrepreneurial structures (Jurik et al. 2019: 320; Welter 2011). When the Western nuclear family model dominates family business research (Alrubaishi et al. 2021; Byrne et al. 2019), the result is a lack of understanding regarding important differences in family structure across cultures (Mussolino et al. 2019). The case of married entrepreneurs in China reported here cannot be understood without referring to a factor simply overlooked by the standard approaches, which is

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the vertical dimension of inter-generational relations and the way in which such relations impact family business in China. In emerging economies such as China’s the supply of formal childcare and early childhood education is significantly underdeveloped (Wang and Lin 2019: 257). This encourages couples who are economically engaged, both as workers and also as entrepreneurs, to rely on their senior parents and parents-in-law to provide domestic service, especially childcare (Qi 2021) but also a superintendence of their domestic sphere, including the management of hired domestic helpers (Pei and Chen 2019). Mrs Teng (aged 42, Associate Degree) indicated that the support she received from her parents permitted her to operate as a leader in the fashion business she co-owned. Mrs Teng recalled: In order to help with my business, my parents decided that my mother would move in to help look after my son. We also hired a domestic helper, who was supervised by my mother. I travelled almost every week to establish and maintain 26 fashion shops across cities in China. ‘Where are you now?’ was a frequent question asked by my husband. Having my mother in the household meant that everything continued to work smoothly at home even though I wasn’t always there myself.

The standard and persisting view of Western sociology, which holds that family and work are distinct and separate spheres, which promotes a dichotomy between economic and non-economic activities, would make us blind to the importance of the vertical axis of intergenerational relations in supporting women entrepreneurs in China. It is true that the perspective which holds that family processes of kinship are antithetical to the concerns of efficiency that are supposed to prevail within the working sphere (Ram and Holliday 1993: 629) is increasingly criticized (Harding and Jenkins 1989; Land and Taylor 2010; Smith Maguire 2017). Indeed, the involvement of grandparents in childcare reported here is a form of reproductive labour which supports their adult daughters’ entrepreneur activities (Misra et al. 2006). Female entrepreneurship in China, where intergenerational support is routine, is thus not simply shaped by horizontal spousal relationships (Baines and Wheelock 2000; Cappuyns 2007; Harris et al. 2007; Jurik et al 2019; McAdam and Marlow 2013) but significantly influenced by intergenerational relationships from which female entrepreneurship draws meaningful support for economic engagement. Some research acknowledges that families remain a central organizing unit in capitalist societies, serving as a recruiting pipeline for team members (Ferraro and Marrone 2016; Ram and Holliday 1993) and a key funding source. The Chinese cases reported here identify the important role of intergenerational relationships on female entrepreneurs’ continuing engagement and leadership in business. Mrs Wu (aged 34, Bachelor’s Degree), through such means, was able to continue to run and lead her health care business during her pregnancy and

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after childbirth. At the time of our interview, her son was nearly three-years old. She said: My parents-in-law relocated to live with us when I was pregnant. They have continued to look after my son from the time that he was born. Each year they go back to their village and stay there probably for a month during the harvest season. They take our son with them when they return to the village.

A similar case of intergenerational family support for entrepreneurship is that of a married couple, Mrs Rang (referred to in Chapter 4) and Mr Ruo (aged 36, Bachelor’s Degree). Mrs Rang has a law degree and Mr Ruo is adept at IT. In 2008 they began an on-line business selling leather products, which they accessed at favourable prices through personal connections. Mrs Rang reported: When we began we sold only a few bags but because of my husband’s IT skills we were getting good market access after only a few months and our daily sales were more than 100 leather bags. By the end of the first year our monthly profits amounted to more than ¥ 20,000 (approximately USD 2,800). We couldn’t believe that we could make so much money! Our business grew so quickly that we hired 6 employees from the beginning of the following year, 2009.

When I interviewed them in 2017 Mrs Rang and Mr Ruo had two daughters, the elder was five-years old and the younger six-months. Mr Ruo and the younger girl were napping when I began my interview with Mrs Rang but he joined us 10 minutes later. I was able to say hello to the younger girl when she was brought to the living room in the arms of their domestic helper. When asked about how she managed to juggle the responsibilities of family and business, Mrs Rang said: My mother helps with childcare, together with a domestic helper. This domestic helper (referring to young woman holding the younger girl) has been living with us for more than five years. She is very able and has a good personality. We are very fortunate to have a very reliable domestic helper. During busy times, we would hire another domestic helper. For instance, we hired a yuesao (domestic helper specialized in looking after a mother and her baby during the first month of childbirth) during the birth of my two daughters.

Mrs Rang indicated that Mr Ruo took and picked up their elder daughter from a childcare facility as their working hours were relatively flexible. The literature on female entrepreneurs is understandably concerned with the different gender characteristics of men and women and how these inform the different roles that men and women occupy in businesses. In particular, the gendered characteristics of spousal relationships of women in business directs discussion of the situation of women entrepreneurs and the capacities they possess to exercise leadership. It is typically assumed that the family system is embedded in economic and social networks and that any change in this

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external context inevitably results in adjustments within the family system, usually to the detriment of initiative on the part of women (Goode 1982; Redding 1990; Wong 1993). It is accepted in the discussion earlier that families and businesses are indeed ‘inextricably intertwined’ (Aldrich and Cliff 2003: 590). But how this last point is understood here, on the basis of the experiences of female entrepreneurs in China, modifies the usual interpretation by appreciating a co-constitution of business, family, gender, and social context (Krippner 2017). At the same time, the understanding of the family when discussing business families in China must move from a conceptualization of the singular family in terms of a horizontal axis relating to men and women of the same generation and add a vertical intergenerational axis in which grandparents operate as a resource for women in business that can be leveraged to enhance the range of options available to them, including leadership roles. Chinese female entrepreneurs are thus able to construct their gender identities with the support of relational resources which depart significantly from the images of gender constructed on the basis of a narrower conceptualization of family, and its relationship with the realm of business.

Conclusion A gendered dichotomic approach continues to dominate both popular and scholarly understandings of entrepreneurship. Entrepreneurial success is linked to qualities associated with masculinity including risk-taking, power-seeking and independence. Femininity, on the other hand, and, by association, female entrepreneurs, are characterized as risk-avoiding, flexible, and family-oriented. Women are assumed to play supportive roles and perform ‘inside’ work including routine administration and management as well as production-related work, whereas men are assumed to play leading roles and perform ‘outside’ work including dealing with banks, government sectors, and business partners. While successful female entrepreneurs are increasingly acknowledged, the portrayal of them is typically associated with masculine ideals of success, of being career focused and power-seeking, thus achieving a female imitation of masculinity. The present chapter has highlighted the fact that female entrepreneurs do not only have the capacity and capabilities required to lead their companies but also can form the vision required to further develop their business. Their performance of the leading roles of entrepreneurship does not require an imitation of the masculine business ‘player’, rather they may act in their own right and on their own terms. It is not doubted that gender beliefs impact behaviour, but how they do so is shaped by the structure of the context in which such beliefs operate and their effect can vary from imperceptible to substantial (Ridgeway and Correll 2004). Neither is it to be denied that a key condition shaping the extent to which individuals are led to play the roles they take on relates to the particular gender expectations they attempt to fulfil. Gender acts in combination with

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other social roles so that ‘the extent to which gender stereotypes modify or bias behaviors or judgments in social relations varies from one situation to another’ (Ridgeway 2011:70). Discourse constructs gender, but discourse can be actively directed and deployed in the performance of gender (Sunderland 2004). It has been shown in the chapter that in their knowing the symbolic meanings of gender female entrepreneurs may actively display and perform gender in their way to optimize the outcomes they seek. In doing so the construction of gender itself undergoes modification, elaboration, and – as indicated – instrumental mobilization. Entrepreneurship is conventionally treated as being independent of family life or at risk of being undermined by domestic concerns and interests. On the basis of this projection, women are portrayed as having restricted access to power positions, and the effects of gender are held to intensify where spousal relationships are involved. The Chinese case reported here shows that spousal relationships do not necessarily correspond with gendered stereotypes, and that business and family are not necessarily opposed to each other. Indeed, family relations may support and reinforce the leadership roles held by women in business. Those studies which focus on family conditions tend to regard women’s chances as negatively impacted by domestic pressures. The Chinese case presented in this study, on the other hand, demonstrates that female entrepreneurs are indeed able to pursue their business goals and in doing so gain support from their husbands. Indeed, entrepreneurial activities are woven through the ‘doing’ of family practice (Thurnell-Read 2021). It is not surprising that theories of entrepreneurship drawn from North American and Western European cases assume individualized social and economic agents and that when the family relations of such persons are considered the focus is on the interaction between spouses, even though the intersection of family structures and entrepreneurship within family businesses has received limited academic attention (Randerson et al. 2015; Thurnell-Read 2021). The Chinese case reported here, though, challenges the dominant discourse of entrepreneurship as an individualistic engagement (Bröckling 2015). The vertical structure of intergenerational families in China means that female entrepreneurs can draw on a resource which frees them from the responsibilities of childcare and domestic management. The involvement of grandparents in supporting their daughters and daughters-in-law who are in business, wholly overlooked in consideration of female entrepreneurs, constitutes a hidden factor in the interplay of constructions of gender, family, and business experienced by female entrepreneurs in China.

6 Crisis as Opportunities The Chinese Practice of Weiji

Introduction The rewards of business are obvious, certainly to those who participate in it. Entrepreneurs, according to the classic account of Joseph Schumpeter (2008: 93–94), are driven by the desire to ‘found a private kingdom’ through which is achieved ‘power and independence’ as well as the satisfaction of ‘success’ and the ‘joy of creating’, of ‘seeking out difficulties’ and the pleasure of overcoming them. Entrepreneur respondents in this study reported that by engaging in business they experienced great satisfaction in pursuing and sometimes achieving these and related pleasures. The prospects of attaining private wealth were often mentioned by entrepreneur respondents, but usually in passing, much in the manner of Schumpeter’s characterization of the financial gains of entrepreneurship as ‘a secondary consideration’ and ‘mainly valued as an index of success’ (Schumpeter 2008: 93). What has to be added to any statement of the nature of the rewards or benefits of entrepreneurship in particular and business, in general, is how precarious are these satisfactions and gains. Errors of judgement on the part of the entrepreneur, or more general incompetence, may bring an end to a business. As well as individual failures there are market factors which can impede or even destroy an enterprise. Failure to acquire new finance to meet the needs of a successful business’s growth, for instance, can be the first step to bankruptcy. As well as what might be described as failures at the individual-level and meso-level there are systemic failures, some of which may be associated with business cycle impediments and in that sense predictable. Another systemic source of enterprise failure is the unexpected and encompassing challenge to business survival of an unforeseen event external to the world of business, such as the COVID pandemic which has disrupted supply chains, prevented customers from accessing sales, and led to employees being unable to work 119

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(Amankwah-Amoah et al. 2021; Zhang and Tang 2020; Zhu et al. 2020). All of these disruptions to business may be generically described as a crisis. For reasons we shall come to appreciate in the discussion to follow, while crisis is a threat to enterprise it is at the same time a measure of the competency of entrepreneurship. The discussion in the present chapter begins with standard notions of crisis in the social science literature, including a brief treatment of the origins of the term ‘crisis’ and its linguistic development. In the simplest terms, crisis refers to an unexpected disruption which may occur in any number of different contexts. What these have in common is subjection of persons caught up in them to a destabilising threat which in all likelihood will culminate in disaster (Boin 2006: 86). Indeed, the term ‘crisis’ is often used interchangeably with ‘disaster’, because ‘disasters are the irreversible and typically overwhelming result of ill-handled emergency and crisis’ (Borodzicz 2005: 81–82). The range of possibilities for what constitutes a crisis is broad because it is unavoidably characterized through socially constructed discourse (Drennan and McConnell 2007; Hay 1996), which is not to say that objective reference point of crisis, including its scale, costs, and timeframe, cannot be identified (Crouch 2011). After examining the standard notion of crisis, the chapter goes on to consider the conceptualization of crisis in China. Entrepreneur respondents in this study regard crisis in a manner which interestingly departs from the standard notion described earlier. The Chinese word for crisis is weiji, made up of two characters, wei (danger) and ji (opportunity). Weiji thus expresses a paradoxical integration of two seemingly opposed but in fact mutually supportive states. In weiji a negative situation of adversity is combined with a positive prospect of possibility previously unnoticed or unavailable, but exposed if not generated by the disruption. These two distinctive states or conditions of wei (danger) and ji (opportunity) are inextricably linked in a dynamic relationship that is weiji or crisis. In the Chinese context, then, crisis is not necessarily regarded as simply a matter of disruption but as a disruption in which new possibilities may arise (Shan et al. 2021; Zhang and Tang 2020). It will be shown how entrepreneur respondents reported that their experience of crisis, in which their businesses failed and were closed, through which they experienced bankruptcy, were taken to be manifestations of a course of development subject to dynamic processes that may possess positive opportunities for change. This approach, then, encourages an orientation toward future business success even as significant loss is imminent. Strategies employed by entrepreneurs facing business crisis are examined in the chapter. Three approaches stand out; first, combining the old with the new, or path dependency; second, seeking facilitating relationships with other members of a business community, or employing guanxi; and finally, reordering priorities and redefining resources, including familial and personal, or self-reflexivity. The present chapter then, in drawing on Chinese cases of crisis and how crisis is to be understood, contributes to the treatment of crisis and augments the

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existing literature by drawing on the understanding of crisis as it is experienced by Chinese entrepreneurs and from their perspective. Such a treatment of crisis and its implications for practical engagement and theoretical apprehension not only contributes to our knowledge of business practices in China – especially in the context of significant demographic, social, economic, and normative change – but will also provide a fuller understanding of the nature of crisis not only in terms of its disruptive elements but also of its consequences, including the new opportunities or possibilities that emerge in situations of disruption or crisis. Drawing on cases of entrepreneurs in China, then, the chapter contributes to a refinement of the standard or mainstream approach to crisis.

Crisis as Tensions and Incompatibility Crisis is a key concept in the human and social sciences (Koselleck and Richter 2006: 399). In English usage, indeed, in Western discourse in general, the notion of crisis has come to refer to a ‘decisive moment’, originally related to a medical condition but then more broadly to emergencies and predicaments in general (Shank 2008: 1091–1092). The word ‘crisis’ is derived from the classical Greek krisis, a term Koselleck and Richter (2006: 358) tell us is ‘central to politics [which] meant not only “divorce” and “quarrel”, but also “decision” in the sense of reaching a crucial point that would tip the scales’. The transition, though, from its original application in the medical sphere to the political, was not immediate. According to the Shorter Oxford English Dictionary, the term ‘crisis’ first appears in English in 1543 to refer to ‘the point in the progress of a disease when an important development or change takes place which is decisive of recovery or death’, and in general to ‘decision, judgement, event, issue, turning-point of a disease’. By 1663 it relates to cosmological determination of a ‘critical point in the course of events’, and by 1715 to ‘judgement’ and ‘decision’. In early usage crisis lies not only in the extreme tensions between life and death but in their being mutually exclusive, a meaning retained in the idea that crisis relates to ‘decision’ in which one course must be taken rather than another. From the seventeenth century, crisis was no longer a predominantly medical term and found its application to developments in understanding the self, community, and society. By the eighteenth century the term ‘crisis’ acquired its modern character as it came to be deployed in the new discourses of the human and social sciences (Koselleck and Richter 2006: 399; Shank 2008: 1092). The concept of crisis, then, is now widely applied to situations in which stark alternatives present themselves as unavoidable imperative courses, and the term is used ‘interchangeably with “unrest”, “conflict”, “revolution”, and to describe vaguely disturbing moods or situations’ (Koselleck and Richter 2006: 399). The characteristics of crisis thus include an unavoidable choice between mutually exclusive courses of action in dealing with events more or less externally imposed on those who must act.

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It should be clear from what has already been said that ‘crisis’ refers not to a particular concrete phenomenon but to a generalized state or condition to which almost any phenomenon may be subject. In this respect, but refracting the notion through a different lens, ‘crisis’ bears a comparison with ‘social capital’. Social capital is a concept used to indicate resources embedded in social relationships which persons may deploy to enhance their purposes. Social capital, then, is a term which draws our attention to the potential benefits of community organizations, say, political parties, and similar organizations which exists as identifiable entities; that they function as social capital is to say that they have qualities that can be identified in addition to their distinctive nature or purpose. In the same way, crisis is never a thing but a condition that may arise from any number of objects or relationships. Take the example of economic crisis. Economic crisis is associated with a number of possible things or events, what makes any one of them a crisis refers not to the substance of the thing in question, its ontology, but to an aspect of process experienced by those subject to the thing in question, which is temporal in its nature, a time of crisis, and disruptive of ongoing, expected, or routine occurrences. A brief statement of three distinctive economic crises will make the point. One of the best-known modern applications of the notion of crisis in the social science literature was developed by Karl Marx, a nineteenth century founder of sociology and critic of the capitalist economy. The idea of ‘accumulation crisis’ is central to Marx’s analysis of modern capitalism, in which he postulates unavoidable tensions, indeed contradictions, that are internal to the production relations of the capitalism system. For Marx, capitalist production involves competition between capitalists who can gain competitive advantage by increasing the productivity of their workforce. This requires the employer to invest in fixed capital in order to gain a market edge (Marx 1976: 772–781). As more productive capital is brought to the worksite, fewer workers are required to operate it and the labour force is therefore diminished (Marx 1976: 781– 794). The unintended consequences of this simple requirement for individual capitalists to remain competitive is a tendency for the workforce to become smaller as investment in productive equipment increases. The first part of this changing ratio includes an increase in unemployment, which in turn means a diminished ability of the increased quantum of goods placed on the market, resulting from increased productivity, to be purchased by the population. The second part of the ratio is that the capitalist or employer has to increasingly expend resources on investment in new and more productive equipment so that while their absolute profit may increase the rate of profit declines as a result of increased capitalization, that is, the capitalist is forced to expend increasingly more on capital equipment in order to maintain a constant level of profit. The combined effects of these two tendencies are that businesses find that they are unable to sell sufficient of their products to remain profitable, and thus face bankruptcy, and that capitalists who experience a decline in the rate of profit are less able or inclined to continue investing in their businesses.

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The effect of these tendencies is a disruption of capitalist growth, manifest as an accumulation crisis. In Marx’s account the crisis of accumulation is endemic in the capitalist system so that while a reorganization of production will eventually overcome a particular episode of crisis, through the destruction of inefficient units of production and the generation of new markets (Marx 1959: 232–240), the conditions are set for a recovery of a present crisis which is only a precursor to a similar but more intense crisis in the future. This is because the structural tensions and imbalances of capitalism are not overcome, according to this account, and they will eventually lead to the revolutionary overthrow of the capitalist system (Marx 1976: 927–930). The crisis Marx points to derives from systemic structural contradictions in capitalistic relations of production. While Marx’s focus is on imminent tensions of production relations and intrinsic and emergent incompatibilities or contradictions within the capitalism system, there are other bases of economic crisis. The global financial crisis of 2008 arose from tensions between regulation and deregulation, and the incompatibility of a free market’s encouragement of irresponsible risk behaviour combined with the failure of government to prevent or manage such behaviour (Abolafia 2010; Guthrie and Slocum 2010; Krippner 2010a, 2010b; Lounsbury and Hirsch 2010; McDermott 2010; Stiglitz 2010; Walby 2015). It has been argued that the deregulation crisis had its origins in economic theory rather than in economic practices, as with Marx’s ‘crisis of capitalism’. Since the 1980s models of the free market developed by economists of the so-called Chicago and Austrian Schools have guided the United States government’s financial policies and enforcement measures, leading to severe cut backs of regulation in the banking and investment sectors, practices that were then disseminated globally (Lounsbury and Hirsch 2010: 5). The cultural diffusion and broad application of these American economic ideas and financial tools are referred to as ‘financialization’, understood as ‘a pattern of accumulation in which profit-making occurs increasingly through financial channels rather than through trade and commodity production’ (Krippner 2005). Under the influence of these ideas the banking and business industries vigorously lobbied for deregulation (Guillén and Suárez 2010). During the early 1990 and 2000s a rapid expansion in the residential real estate and mortgage-backed securities in the United States led mega banks to enter the market and ultimately turn to riskier subprime mortgages when the supply diminished of prime and conventional mortgages (Fligstein and Goldstein 2010). The United States government enacted financial deregulation, permitting expansion of the mortgage-backed securities market and allowing the largest banks to operate without regard to excessive risk, thus generating market dysfunctionality (Guthrie and Slocum 2010: 287). In this case financial crisis is rooted in a failure of market management on the part of government, rationalized as free market doctrine, and the reckless behaviour of financial institutions which ignored the consequences of high risk under the protection of government policy and

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supported by government bailouts (Guthrie and Slocum 2010: 287). The global financial crisis, then, resulted from the narrow self-interest of financial institutions encouraged by an absence of government regulation. It was a crisis of market management resulting from the promotion of an economic ideology by lobbyists and its acceptance by government agencies. It can be seen from these two cases, Marx’s accumulation crisis and the global financial crisis of 2008, that economic crisis arises through developments in the economic system itself, respectively the system of production and of financial regulation. But not all economic crisis is endogenous in this sense. The COVID pandemic which began in 2019 and is still ongoing in 2023 is primarily a crisis of health but it has impacted the economy in a number of ways that have generated a general, indeed a global economic and business crisis. The impact of the COVID-19 pandemic has been felt in practically all business sectors and in almost all developed economies simultaneously (Goodell 2020; Pickersgrill 2020). The depth and severity of the health crisis in most economies justified the use of administrative measures, including lockdowns and social distancing, which in addition to the high levels of infection and death resulting from the virus, significantly disrupted economic activity. The COVID pandemic impacted economic activity in three leading areas which in their cumulative effect produced economic crisis. As noted, in order to combat the rapid spread of COVID-19, governments around the world adopted a number of regulations which have challenged the initiative of business firms, contributing increased uncertainty in business environments. The various lockdown regulations and social distancing measures contributed to increased unemployment and decreased economic growth. In order to inhibit the spread of the virus stay-at-home orders not only prevented workers from attending their workplace and thus experience a reduction in employment hours and therefore a proportionate loss of income, but many workers lost employment either because their work was already precarious or because an employer was no longer able to remain in business. In addition, lockdowns and social distancing regulations prevented retail sales occurring at a level sufficient to ensure the continuation of large numbers of small and medium enterprises. Such local measures as these impacted global supply chains so that not only retail sectors but manufacturing and production was adversely affected, exacerbating the economic crisis that resulted from the pandemic. Having established that crisis may result from quite different sources and cause quite different types of disruption through a brief consideration of systemic accumulation crisis, regulatory financial crisis, and exogenous pandemic impact of supply chain and employment it is appropriate to turn to the way in which crisis is intellectually apprehended in the relevant social science discussions, the most prominent feature of which is variation in the definitions and typologies of crisis. What such accounts have in common is reference to events described as disaster, interruption, catastrophe, emergency, or contingency (Buchanan and Denyer 2013; Doern 2016; Herbane

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2010: 46). Each of these generalize to the common property of crisis as a (i) low-probability event, (ii) generating severe and ambiguous consequences, and (iii) requiring decisions to be taken in a limited time frame (Pearson and Clair 1998; Weick 1988). The term ‘crisis’ thus refers to the possibility of systemic collapse or breakdown which at the most extreme may pose an existential threat to economy, society, or the political state (Walby 2015: 31–32). In this way crisis is a potential ‘tipping point’ or ‘critical turning point’ from which there is a risk of negative change in the wider system (Walby 2015: 27). This aspect of crisis, as responsible for a possible breakdown of a system – economic, social, or political – is an ever-present element in practically all current analyses of crisis. A paradoxical aspect of sociological treatments of modernity is their inclination to remove the first property of crisis mentioned previously, that crisis is a low-probability event, because modernity itself is seen as ‘discontinuous’ in which the pace, scope, and ever-present prospect of change is endemic (Giddens 1990: 4–7). In these circumstances insecurity and danger, indeed a high presence of risk characteristic of modernity (Giddens 1990: 7–10, 124–134), suggest that crisis has now become a high-probability event. This theme is central to Ulrich Beck’s (1992, 2009) well known account of ‘risk society’ in which crisis is a likely aspect of modernity, especially in relation to the possibility of environmental catastrophe. Indeed, the idea that crisis is a high-probability event has been suggested by others who do not theorize modernity but implicitly treat it as a residual social quality. In modern economies business cycles and bubbles generate crises (Perez 2002, 2009), as does financial instability (Minsky 2008), and over-commercialization (Polanyi 1957), and even high technology systems in which ‘normal’ accidents may become catastrophes (Perrow 1999, 2011). In the political realm, revolts provoked by and generating modernizing trends can lead to the crisis of revolution (Goldstone 1991; Skocpol 1979), or legitimacy (Friedrichs 1980; Habermas 1975). Not even nature is immune to a modernizing influence, as human intervention may lead to the crisis of ‘natural’ disasters with varied impact on human populations (Drennan and McConnell 2007). The notion of crisis, then, is often associated with disasters which lead to large-scale disruption and impact, so that crisis can be understood as a collective stress situation, about which there can be either consensus or conflict (Barton 1970). Consensus situations of crisis include natural disasters (e.g., hurricanes, floods) and technological disasters (e.g., explosions, accidents), whereas conflict situations of crisis include civil disturbances, other kinds of human-caused crises such as wars, both external and internal, acts of terrorism, and even a riot may be seen as a crisis or a harbinger of crisis (Quarantelli 1982, 1985, 1993). Despite different approaches, a convergence in understanding crisis is in its detrimental effect on the ecological, economic, political, or social system, with the outcome of disproportionately severe consequences in relation to its cause.

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Again, the emphasis of this widely accepted understanding of crisis is its disruption of an accepted and ongoing normality, suggestive of the unmanageability of crisis, and therefore the significance of its consequence. A missing element here is the possibility of a new order emerging from the crisis in question, that crisis is a reconfiguration of circumstances in which a structure of opportunities emerges. Indeed, the idea of accumulation crisis in Marx’s thought, mentioned previously, is primarily associated with the reordering of capitalist production, not necessarily its collapse. Joseph Schumpeter (1954) was one of the few contributors to the social science analysis of crisis who similarly treated crisis as an opportunity for economic renewal. Schumpeter’s sensibility in this regard coincides with a particular non-Western understanding of crisis.

Crisis as Paradoxical Integration and as Process The Chinese engagement with crisis is evident in weiji, the word for crisis formed by two characters wei (danger) and ji (opportunity), expressing the Chinese view that adversity and opportunity are inextricably linked in a dynamic relationship, as briefly indicated earlier. The term weiji therefore denotes a paradoxical integration of situational negativity and emergent possibility, indeed positivity. This formulation contrasts with the conventional characterization of crisis etymologically derived from the Greek word krisis, in which rupture necessarily leads to detriment and harm, which underpins so much of the meaning of crisis found in conventional Western treatments of the concept. The apparent contradiction internal to the term weiji – danger and opportunity – and the approaches associated with it is a manifestation of what has been called elsewhere ‘paradoxical integration’, by which is meant a situation in which opposites that are logically mutually exclusive and incompatible may relate to each other as interdependent elements in an unfolding dynamic process of change (Qi 2014: 191–221). Three forms of paradoxical integration are particularly relevant to a discussion of crisis. First, ‘interdependency of opposites’, second, ‘generation’ (one thing becoming something else), and third, ‘reversal’ (one thing giving access to its opposite). Each of these can be briefly summarized. The paradoxical integration of an ‘interdependency of opposites’ refers to the ways in which each element of a pair of opposed things requires the other element for its meaning or purpose (Qi 2014: 210–211). In the context of discussion earlier this is an obvious aspect of a paradoxical integration relating to crisis insofar as the concept of crisis is dependent for its meaning on an opposite state, namely non-crisis, a state of functionality and stability disrupted by crisis which in its nature is dysfunctional and generative of instability if not the total collapse of an ongoing system. A second type of paradoxical integration is that of generation (Qi 2014: 211–212), which refers to those situations in which a thing may develop into something else, including its opposite. The idea of unintended consequences is familiar, referring to an outcome of a purposive action

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which was not intended or even anticipated by the actor. Going from an actor to an event there are parallel possibilities, as when a concert gathering turns into a stampede. In this case, a pleasurable event becomes a situation of horror in which attendees are trampled, injured, and possibly killed. In this case, one thing generates something else through the intervention of a particular incident, such as a fire alarm, or a collapse of a row of seating. In a paradox of generation negative outcomes arise out of an ostensibly positive development which must be re-evaluated once the consequences are known. Two of the examples mentioned previously are prime cases of the paradox of generation; Marx’s account of a crisis of underconsumption stalling capitalist production arises from an increase in labour productivity, this latter being a positive outcome of investment in technology and management. Also, environmental crisis arises out of a successful harnessing of nature’s powers in an expansion of resources in order to satisfy human needs. The positive processes of increased labour productivity, on the one hand, and the generation of resources through harnessing the power of nature, on the other, generate their opposites, an idleness of unemployed labour and machinery, and unpredictable and extreme weather events and an inhospitable natural environment. Such generations of irresolvable paradox require reconsideration of the original positively-conceived state of affairs. Finally, the paradoxical integration of ‘reversal’ refers to the way in which one thing gives access to its opposite (Qi 2014: 212–214). The opposition between the elements of this paradoxical integration is one of unlikely complementarity. The opposition between the elements of the paradoxical integration of ‘reversal’ is not necessary, as with the ‘interdependency of opposites’, nor is it the result of a transformation of one element into something else, as with ‘generation’. The integration of the elements in a paradox of reversal derives from a human agent’s exercise of strategic choice in using one element to access its contrary. In a classic Chinese text, Daodejing, is the idea that victory can be achieved by feigning weakness (Laozi 1963: 83; 1999: 184). Such a need for strategic reversal is precipitated by changes in circumstances, an idea captured in Daodejing in the statement that ‘it is on disaster that good fortune perches’ (Laozi 1963: 65). Indeed, it is precisely this idea that Schumpeter (1954: 83) expresses when he points out that capitalist economic change comes through ‘industrial mutation’ in which ‘the economic structure … incessantly revolutionizes … from within, incessantly destroying the old, incessantly creating a new one’. The process of ‘creative destruction’ (Schumpeter 1954: 81–86) is Schumpeter’s development of the idea that the problem is not ‘how capitalism administers existing structures’ but ‘how it creates and destroys them’ (Schumpeter 1954: 84). The closure  – destruction  – of older, less productive industries has the beneficial consequence of freeing up resources for newer and potentially more productive industries. Schumpeter’s focus lies in the outcome as a result of structural system change as much as human agency. It is difficult to avoid

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noticing Schumpeter’s debt to Marx’s idea of accumulation crisis here, but without his acceptance of Marx’s associated idea of a revolutionary overthrow of capitalism (Schumpeter 1954: 82, see also 38–42). The paradoxical integration of ‘reversal’ highlights the fact that human agents exercise a strategic choice in using one element to access its contrary. In order to achieve a purpose, one may apparently move away from one’s goal; in overcoming an adversary, one may be strategically compliant. In neither case is the goal forsaken or ultimate strength absent. As the historian of ancient Chinese thought Angus Graham (1989: 228–229) notes: ‘The reversal smashes the dichotomy of A and B; in preferring to be submissive the sage does not cease to be oriented toward strength, for he recognizes that surviving by yielding to a rising power is the road to victory over it when its climax is past’. The paradoxical integration of reversal is captured in the Chinese rendering of crisis as weiji. That reversal has a largely strategic dimension is indicated in its basis of choice, namely those inherent in a value position or a general social orientation. As we saw Laozi (1963: 65) indicates previously: ‘it is on disaster that good fortune perches; it is beneath good fortune that disaster crouches’. The strategic requirement of flexibility in such circumstances means that one must be supple or pliant rather than hard or stiff, qualities conventionally associated with strength, in overcoming any force – including the force of disaster – that has to be resisted, opposed or generally needing to be dealt with (Laozi 1963: 83; 1999: 184). The paradoxical integration of reversal entails that submissiveness, an absence of assertiveness, and weakness are indicated as strategic choices in overcoming the hardness or strength of an opponent. In the circumstance of subordination or changing fortune, the need to overcome the existing strength or power of an adversary provokes the choice of adopting the opposite orientation of compliant softness. The adoption of such an approach, of employing non-assertive means, in turn, provides access to the power of patient perseverance and ultimate strength, which serves in the end as an exercise of real power over the other. The image of water is used to indicate the force of the paradox of strategic reversal, for there is ‘nothing more submissive and weak than water’ and yet ‘for attacking that which is hard and strong nothing can surpass it’ (Laozi 1963: 85). The strategic reversal of force and submission, power and weakness does not indicate a preference for submission and weakness. It indicates rather an acknowledgement of the importance of an appreciation of the paradoxical nature of each of these things and the inherent possibility of reversal in all socio-political situations. It is important to indicate that the paradox of reversal does not point in the direction of a recurring or repetitive cycle, as some traditional interpretations maintain. Nor does it derive from an idea that, as unintended consequences follow any action, then the best strategy to achieve a purpose is to do the opposite of directly attempting to reach a goal, as Liu (1998: 219–220) mistakenly maintains. Nor, even more pessimistically, is the paradox of reversal

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engaged out of the belief that ‘taking action will necessarily result in failures’, as Ren (1995: 10) supposes, and that ‘for this reason … the negative means of “nonaction” [will avoid] dangers created by transformation’. As we have seen earlier, the concept of reversal is orientated to the awareness that no matter how solid and strong the politically and socially powerful might be, their circumstances will change, and in that change strategic opportunities for reversal can be found. The paradox of reversal teaches that even the most difficult times will manifest a course of development in which effortless actions that follow a natural or unfolding process can achieve change without forcing unnecessary risks. This approach, then, offers a course toward success or victory without unnecessary loss or self-destruction. That the paradox of reversal has been a historically important element of Chinese culture is noted by Dan Lusthaus (1990: 207) when he says that it ‘was frequently seen throughout China’s history as a strategy for subversion, which in a sense it is. What is suppressed and forced under will eventually overcome. This is as much a psychological fact as a political reality’. Instances of paradoxical integration can be located in the way in which entrepreneurs experience crisis. Three strategies employed by entrepreneurs who were interviewed for this study are examined in the rest of this chapter, namely, the combination of the old with the new, or path dependence; second, seeking facilitating relationships with other members of a business community, or guanxi formation and application; and finally, reordering priorities and available resources both familial and personal, or self-reflexivity.

Combination of Old and New All entrepreneur respondents reported that they had experienced crisis of one sort or another. Mrs Teng (who was mentioned in Chapter 5) registered her first fuzhuang zhuanmai dian (fashion speciality shop) in 2005 in Shenzhen, and went on to open further shops in other cities. One of three co-owners, along with her husband and another investor, Mrs Teng was in charge of running and managing the fashion business as the other two were ‘sleeping partners’ whose main interests were in other businesses, including real estate. The fashion business designed and produced all of the items it marketed and sold. As a leading designer and principal co-owner of the company Mrs Teng took great pride in the enterprise, being responsible for the choice of the site of the shops, their interior design, and the products she marketed. By 2008, Mrs Teng, her husband and their co-investor owned 26 fashion shops across first-tier cities of China, with an average investment of ¥150,000 (approximately USD 22,000) in each shop and total assets of more than ¥4 million (USD 600,000). Mrs Teng, with visible concentration, recounted: Every time we decided to open a new shop, I would investigate many different sites before deciding which one would be the most appropriate location for a new shop.

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After that decision was made, I would find a well-suited renovation company and discuss details of fixtures and design with them. I myself chose every display item for the shop, making sure that it presented itself with class and charm. During these past three years I would think only of the business and how to best make it grow, thinking of new locations in new cities. Practically every day, from the time I woke in the morning, these would be the things on my mind.

When Mrs Teng’s business was at its peak, in 2008, when everything seemed to be going from success to success, the global financial crisis struck. The effect of this crisis on the fashion design and retail business was totally unexpected, as Teng explained: In late 2008, the global financial crisis hit us very hard, ba women dade luohualiushui (hit us like fallen flowers in flowing water). Xueshang jiashuang (frost hit after snow), people were fearful of spending and what shopping people did was online. Because they were now careful in ways that were previously unimagined, customers wanted to compare prices and didn’t want to make expensive purchases. From this time the normal practice of going shoping stopped. No one wanted to come to our shops. We had more shop assistants than customers in all of our shops.

Teng reported that by the end of 2008 sales income was practically zero. She continued her description of the industry and the effects of the financial crisis: The fashion business has two seasons a year, a spring-and-summer season starting from February and an autumn-and-winter season that begins in August. Each new season means that new fashions will be in the shops, and all the displays promote the new stock. In that dreadful year, in 2008, we had more than 4 million yuan worth of fashion for the winter season that simply couldn’t be sold. But production for the next season was already going ahead. Employees had to be paid, even as we tried to bargain with suppliers. We simply ran out of all our savings, mine and my husband’s. It was the lowest point imaginable; I cried so hard that I thought I was going to collapse – but I never despaired.

Research on crisis, certainly prior to the COVID-19 pandemic, tends to focus on a particular and singular manifestation of crisis, so that we are familiar with environmental crisis, for instance, political crisis, or financial crisis. Teng’s account, on the other hand, recognizes that crisis is seldom unitary in this sense. Her business had to endure not only the globally induced financial crisis but her business experienced a particular crisis which was an unintended consequence of technological development resulting in a change in consumer behaviour, namely the rapid acceleration of on-line shopping. As a result of the financial crisis and a subsequent fear of loss of income, customers became conservative in their purchasing practices, and therefore reluctant to spend money on high-end fashion items. This, combined with the rise in online shopping meant that retail sales were subject to increased price competition so that fashion houses in premises which had the added costs of high street rents and customer-enticing furnishings and so on were at a material

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disadvantage in competing with online businesses which worked on the model of warehouse-to-customer sales, with much lower overheads. The technology-induced crisis suffered by Mrs Teng’s business is quite unlike those typically treated in the literature, which relate to the consequences of accidents  – malfunctions or mis-operations  – in high technology systems (Perrow 1999, 2011). But the application of online technologies to consumer-market retailing generates another form of technologically-led crisis for businesses based on established retail premises and practices, especially in times of sudden and sever economic downturn resulting, in this case, from a global financial crisis. This crisis is Schumpeterian in the sense that it can be seen as an instance of creative destruction in so far as a new form of business, namely e-commerce, led by a new form of entrepreneur, tends to displace an established form of retail shop-based trade reliant on face-to-face transactions. In this case, a person does not encounter a thing that changes through its internal dynamic or development, but rather the intrinsic or fixed properties of a thing generates its opposite as a consequence of its operation in a given social context (Qi 2014). This is partly the paradox of unintended consequences, but the consequences in the case of generation are paradoxical because they are negative outcomes of an ostensibly positive development that must itself be re-evaluated once the consequences are known. This is an instance of a paradoxical integration of generation. Faced with the impossibility of selling a stock of fashion products worth more than ¥4 million, Teng’s investment partner pulled out the business. Teng reported that in spite of this being an extremely stressful time, not just for her business but for herself, she had a sense that she must not give up and that she would be able to do something even though she was not sure what that ‘something’ would be. She continued: ‘There is a slang saying in Chinese, tian wu jueren zhilu (Heaven will point the way when you reach a dead end)’. To pay her employees, Mrs Teng was forced to sell her firm’s assets to kucun gongsi (a warehouse storage company) below their value, realizing ¥160,000 for fashion items and display fixtures, only 4 per cent of their previous value. Teng recollected: I wasn’t in a position to start a new business; it was simply impractical financially and psychologically – I was very dispirited – but I knew that I needed to find inner strength to work a way out. But actually, it was a regular customer of one of our fashion shops who made all the difference. She was a manager in a state-owned pharmaceutical enterprise and she wondered whether we could supply her organization with uniforms for their staff. She wanted quality and style. The idea of designing and manufacturing stylish uniforms was just what I needed and I got to work straight away. She was very pleased with my drawings and we signed a contract. The order was worth more than ¥4 million and we made a very agreeable profit. Zhenshi juechu fengsheng (A Chinese idiom which means ‘though nearly dead, a person comes back to life’). My design departed from the traditional functional format of uniforms and they had such flair that apparently employees sometimes wore their work uniforms in their leisure activities. I was now strictly in the uniform business.

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Paradoxical integration of generation is captured in this instance. Beyond Teng’s original expectation, her fashion business became a uniform business. Teng was very pleased with this move as it provided her with a number of new advantages: Because of our strengths in design, we pushed the uniform business to a new level, combining style with functionality. Because the contracts were for uniforms, we didn’t need to carry stock or worry about seasonal variation. Instead of relying on sales of items to individual customers we now sold to companies, guaranteeing that our total output would be purchased, and even getting a significant deposit when we signed a contract.

Teng thus employed a strategy of combining the old with the new. This process involves what Stark (1992: 20) calls ‘path dependence’ in his account of the privatization strategies adopted in East Central Europe, in which ‘the introduction of new elements take place most typically in combination with adaptations, rearrangements, permutations, and reconfigurations of already existing institutional forms’. This type of activity not only requires connection and dependence, but also creativity, effectively described in Schumpeter’s (2008: 86–87) classic statement of entrepreneurial activity which points to the way in which the entrepreneur introduces ‘new combinations’ into the economy. Teng said: When I introduced fashion elements to the uniforms I designed, including such simple things as making a waist line to emphasize a woman’s femininity, traditionally oriented clients were a bit unhappy. I enjoy combining classical Chinese features with Western elements. For instance, I designed a jacket in the Tang-dynasty style, but without a high collar, and a qipao without sleeves; they look beautiful and the wearer has much freedom of movement. I used a number of strategies to show that a well-designed uniform can not only be functional but also provide employees with a sense of pride in their appearance. I explain to my corporate customers that this will increase staff morale and improve their productivity.

Although she had never heard of Joseph Schumpeter, Teng’s account of how she developed her new business parallels his account of entrepreneurial activity, of ‘working out the new combination … [and resisting] the reaction of the social environment against one who wishes to do something new [because] even a deviation from social custom in such things as dress or manners arouses opposition’ (Schumpeter 2008: 86–87). A quite different type of business crisis challenged Mr Shang (aged 39, PhD Degree), co-owner of a bio-tech company which focused on developing and producing anti-bacteria products, including hand-wash and sanitizer liquids. Shang was one of four co-owners, each of whom has a PhD Degree and who after graduation continued their research and laboratory experimentation. While scientifically competent and having successfully developed antiseptic products based on their own innovative science, Mr Shang and his associates

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were new to the world of business and paid for the advice of a commercial consultancy. Unfortunately, the business plans devised on the basis of this advice were not successful. In an interview, Mr Shang reported: Our company was established in 2015 and after a year of operation, we faced bankruptcy. On the advice of a consultant, we paid several hundred thousand yuan to supermarkets, to put our products on their shelves. But sales were low, very low, and it was obvious our business model was a failure. We had run an advertising campaign but it didn’t make any difference. We didn’t know what to do; we only knew we faced a crisis and that we were going to lose everything.

I asked: ‘How did you deal with the crisis?’ Mr Shang replied: We didn’t lose faith in our product but realized that we couldn’t break into the retail market and decided to target hospitals because hospitals use handwash and sanitizer all day every day. But because of their long-standing heavy use of antiseptics all the hospitals already had suppliers and we didn’t have much success. We had to demonstrate that we had something that other suppliers weren’t able to offer. Based on our original formula, we developed a formula which has an added function of moisturizing skin. We targeted one municipal hospital and showcased our credentials. All four executive members have PhDs, three of us from acclaimed science and technology universities in China and one from Harvard. After a trial period doctors and nurses wanted our product. You can imagine the benefits of a moisturizer for people who have to use handwash and sanitizer many times a day. We now have a list of hospitals that use our products.

Established knowledge and practice, Schumpeter (2008: 84) says, ‘does not need to be continually renewed and consciously reproduced … [as it] is normally transmitted almost without friction by inheritance, teaching, upbringing, [and] pressure of [the] environment’. The introduction of ‘new combinations’, however, which displace or change established knowledge and practice, requires ‘a new and another kind of effort of will’, which Schumpeter (2008: 86) says must perform two tasks: it must ‘wrest amidst the work and care of the daily round’ a conception and realization of ‘the new combination’, and secondly, it must do this against ‘the reaction of the social environment against one who wishes to do something new’. By combining elements from different contexts, the entrepreneur makes something quite new that was not previously available. This new combination can operate as a newly introduced product only if the initial resistance can be overcome. Hence Mr Shang’s success in overcoming the crisis of not being able to break into retail sales, and his success in marketing his products to institutional customers.

Calling on

guanxi

A second type of response to crisis used by entrepreneur respondents is to draw on guanxi in overcoming an otherwise insurmountable problem. As shown in other chapters, guanxi is a form of particularistic relationship between persons

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that is supported by favour exchange and affective bonds, and which is applied to instrumental purposes. A feature of guanxi is that it provides participants with access to the guanxi partners of the other person, so that much guanxi connectivity is through the use of an intermediary, zhongjianren, literally a middle person (Barbalet 2021: 97). This aspect of guanxi is drawn on in the case of Mr Kong and his wife Mrs Ke (referred to in Chapter 5) who had a company which made and sold aluminium-alloy products, including doors and windows. During an interview, Mr Kong and Mrs Ke indicated that commerce in the city in which they lived was not properly managed during the period 2000– 2010. They were referring to the way in which a local mafia was able to extort protection money from shops and restaurants (see Wang 2017: 97–124). Mr Kao reported that while he and his brothers were away in another city to purchase materials for their business, Mrs Ke and a number of employees witnessed a gang going from one shop to another smashing fixtures, displays, and stock with iron bars and demanding protection money. Her employees were so scared that they hid under a desk. Mrs Ke recalled that she certainly didn’t want to give hard-earned money to the gang, but she knew that she wouldn’t be able to resist them. Rather than yingpengying (head-to-head) confrontation Mrs Ke effectively formed a counter-gang to deal with the mafia, through guanxi. Mrs Ke recollected: I sought advice from my mother, who asked her friends and colleagues who they knew. It turned out that one of my mother’s friends, whom she had previously worked with, was a friend of the Commissioner in the municipal police bureau. Mum’s friend asked his friend, the Commissioner, for a favour – to turn up at my shop. On the day that the gangsters were collecting their protection fees, the Commissioner showed up in my shop.

Mrs Ke continued: The Commissioner came into the shop while his driver and car waited outside. The numberplate on the car would tell everyone that the Commissioner was visiting my business. The gangsters turned away when they saw the car. The Commissioner said that he would phone the Director of the paichusuo (local police station) asking him to watch out for us. The very next day the Director of the local police station visited us. We later invited him for dinner to express our gratitude. From that time, our shop was left in peace.

Mrs Ke knew that confronting the mafia gang would not protect her from their demands for protection money. While the non-confrontational means she adopted was not strictly speaking a show of weakness to deal with strength, her access to relational power effectively served to overcome the gangsters’ predatory behaviour toward her business. The strategic reversal of force and apparent weakness displayed by Mrs Ke did not in any manner indicate a preference for submission. It did, though, reveal the paradoxical nature of circumstances and the possibility of reversal in adverse situations (Qi 2014), being an instance of a paradoxical integration of reversal.

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Mrs Ke not only managed to manoeuvre out of a crisis of mafia predation, but was also able to effectively help adjacent shop owners. She told me: The owners of the two neighbouring shops were amazed that we didn’t have to pay protection money. When we next invited the local police Director for a meal, we asked the two of them to join us. In this way the neighbouring shop owners became acquainted with the Director; they provided him with small gifts, such as cigarettes and wine. Since then, they have had no need to pay the gangsters.

This case brings together a number of different elements at play in guanxi networks. A feature of bureaucracy in China is that it not only operates hierarchically, as with bureaucracies everywhere, but that an element of particularism operates so that the Commissioner’s call to the Director meant that the Director was obliged not only to prove his competence to his superior but to provide support to the Commissioner’s friend. The relationship between the Commissioner and the Director was structurally different from that between Mrs Ke’s mother’s friend and the Commissioner. While the relationship between the Commissioner and the Director operated on a vertical axis the relationship between the Commissioner and his friend operated on a horizontal axis. The Commissioner did a favour for an old friend. Equity is an important characteristic of friendship. Friendship is typically understood to be expressive rather than instrumental (Lopata 1981), but this Englishlanguage understanding is by no means universal (Wierzbicka 1997: 32–55). Among Chinese people friendship can be both expressive and instrumental at the same time (Smart 1999). Certainly, friendship while instrumental should be free of exploitation (Fried 1969: 226) but expressivity and instrumentality are not necessarily alternative modes in guanxi but coexist in its practice (Barbalet 2021: 161–162; see the discussion of ganqing in Fan 2002; Fu et al. 2006; Jacobs 1979; Kipnis 1997; Wank 1996). In Chinese society ‘ties of friendship are of paramount importance in facilitating the normal flow of social relationships in emergency’ (Fried 1969: 208). Indeed, Mrs Ke’s mother sought help from her friend to help her daughter during a situation of criminal crisis. It is of particular interest that through a number of intermediates, Mrs Ke was able to reach the Commissioner. Mrs Ke’s mother acted as a bridge and her mother’s friend as another bridge, overcoming what is sociologically described as a ‘structural hole’ (Burt 1992) which separates two persons who participate in different social networks; in this case bridging the distinct worlds of business and the police. Ronald Burt (1992) argues that weak ties bridge unconnected actors producing social capital in the form of non-redundant sources of new information. Ke’s mother has a strong tie to Ke, of course, and also to her friend; Ke’s mother’s friend has a strong tie to the Commissioner. This case confirms Bian’s (1997) finding that in China strong ties rather than weak ties function as bridges linking otherwise unconnected individuals. As Mrs Ke and her husband Mr Kong received help from the Director, who was previously a stranger to them, they felt that they owed him renqing

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and invited him for a meal to express their gratitude. The morally infused mutual exchange carried by renqing is the dynamic force behind guanxi (Qi 2013). Three separate aspects of renqing can be identified: first, it entails the ‘emotional responses of an individual’ to their situation; second, it is understood as a ‘resource that an individual can present to another person as a gift in the course of social exchange’; and third, it includes the ‘social norms by which one has to abide in order to get along well with other people’ (Hwang 1987: 953–954). A person who receives a favour or assistance from another thereby has a sense of indebtedness to the assisting person (Bian 1994: 972). Without Mrs Ke and Mr Kong also acting as a bridge, the shop owners neighbouring their shop would have little opportunity to make the acquaintance of the Director. As a bridge, Mrs Ke has a strong tie with her neighbours and a weak tie with the Director. Whereas Burt (1992) holds that weak ties bridge unconnected actors Bian (1997) argues that strong ties can function as bridges linking otherwise unconnected individuals, a matter to which we shall return below. It can be seen from the case considered here that a weak tie and a strong tie may work together to bridge unconnected individuals. Another experience of business crisis was reported by Mr Pan (aged 31, Master’s Degree). In 2017 Mr Pan began a company which designed and manufactured industrial and domestic applications of magnetic levitation or suspension, a technique used in devices as simple as a reading-lamp in which the globe is suspended, and as complex as high-speed rail. After only a year in business, it appeared as though Mr Pan’s efforts had come to nothing. He explained: By April 2018 we had simply run out of money. My business partner and our five employees then left the company. For the first time in my life I was overwhelmed by a feeling of weiji (crisis). I was desperate but I would not allow myself to be defeated. Through a friend I learned that the General Manager of an acclaimed company was going to attend a business meeting at a well-known building. I went there and waited at the lift door. As he came out, I introduced myself, mentioned my friend, and told him about my products. Thankfully, he listened to me and he must have been impressed because he asked for my contact details. Anyway, I was invited to their headquarters in Beijing to provide a presentation, which went very well. After a couple of formal meetings they agreed to invest in my company. I began to see dawn in the darkness of my desperation. My company is now growing, my wife resigned from her employment in another city and joined my company, ending the difficult arrangement of our living separately for years with her and the children away from me.

This scenario can be seen as an instance of paradoxical integration of generation (Qi 2014). The significant underfinancing of Mr Pan’s company led to his business partner abandoning him and his employees leaving the company as he could no longer pay their salaries. This desperate situation propelled Mr Pan to draw on his guanxi in order to locate new investment, which resulted in the generation of an opportunity to save his business. This new investment not only saved Mr Pan’s business but in fact led to its expansion and therefore

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an opportunity for his rescuer, what he describes as the ‘acclaimed company’, to return a profit on its investment. An unanticipated consequence of Mr Pan’s company’s new growth was a positive change for his marriage and family life. A desperate situation for Mr Pan thus developed into its opposite. The importance of Mr Pan’s guanxi in his reversal of fortune, from potential bankruptcy to business growth, cannot be overlooked. Although he did not elaborate on the matter in the reported interview extract quoted previously, the friend who informed Pan of the movements of the ‘General Manager of an acclaimed company’ effectively operated as an intermediary, zhongjianren, between Pan and the General Manager, and it was through this friend’s guanxi with each of them that, firstly, Pan was advised of where and how to approach the General Manager and, secondly, why the General Manager listened to Pan when he was approached as he exited the lift after a meeting and went on to invest in his company. This situation is rather dissimilar to the one Mark Granovetter spells out in his important argument based on his research concerning labour markets in the United States. Granovetter (1973: 1371) indicates that ‘those to whom we are weakly tied are more likely to move in circles different from our own and will thus have access to information different from that which we receive’. New information, then, according to Granovetter, is sourced from outside the range of socially bonded groups which are constituted of strong tie between their members. According to this argument, new information is conveyed through weak ties rather than strong ties. This is a different pattern of information flow and tie strength than the one which operated for Mr Pan. The type of information Pan received from his friend regarding the General Manager’s whereabouts could not come from a weak tie. Indeed, particularistic guanxi networks provide information to their members only on a privileged and typically secretive basis (Barbalet 2015: 1046–1048). Granovetter’s argument concerning the significance of weak ties, which has become standard in social network analysis, reflects a characteristic American experience which cannot explain the operations of information flows in China. Indeed, directly referring to Granovetter’s argument Yanjie Bian (1997: 382) has shown that ‘strong ties prove to be necessary to bridge the Chinese guanxi networks … because mutual third parties offer trust and obligation that ultimately connect a [favour-seeker to a favour-provider, whereas] weak ties … lack these characteristics and are therefore not as likely to function as bridges in influence networks’. Information not only has value for its recipient, it also involves reputational costs and reflects on the judgement of the provider, who is likely to restrict the provision of information if there is a risk of misuse (Greenberg 2019). The supposition that information simply flows between weak ties pays insufficient attention to the interest and concerns, motivations and incentives, of information providers. Because information disclosure provides benefits and potentially incurs costs, information providers will act selectively when providing privileged information.

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Reflexivity In conceptualizing different forms of crisis the latter is typically understood as a large-scale event or episode, including ‘natural’ disasters such as an environmental catastrophe, accidents in high technology systems, or as major political events such as wide-spread revolts, or financial collapse, and so on. Relational crisis, while much smaller in their scope and scale, may be total in their effect on the persons involved. They deserve to be conceptualized as a form of crisis in its own right. Indeed, it is probable that in particular cases, relational crisis may underly crisis events of broader and deeper dimensions. Mrs Liang’s case of collective resignation by a workforce, to be considered here, was triggered by the stringently high standards she imposed on a group of young and inexperienced workers. We shall see that her failure to communicate with her staff and to understand them from their perspective, led to a fundamental breakdown in the relationship between employer and employee. It will be shown that her solution to the crisis she faced involved a third strategy, different from the two already treated, a strategy of reordering priorities and redefining resources. Liang (aged 38, Associate Degree) established her first beauty salon in Hefei, a regional city in Eastern China, in late 2008. Eight years later she owned three beauty salons in Hefei. Prior to her business developments in Hefei Liang had been a successful businesswoman, marketing first plexiglass, and then mobile phone covers in Shenzhen and later she owned a furniture exporting business in Shanghai. Liang recounted her experience of first starting a beauty salon in 2008: I purchased the license from what at the time was the most reputable beauty salon chain, with an ambition to establish the best of its type in Hefei. Hefei was pretty backward then, not as well-developed as it is today. I chose an elite district and hired a very experienced designer. I modelled the business on the best salon in Shanghai. The cost of living in Hefei was much lower than in Shanghai, and I paid my employees near Shanghai-level wages. At some time in the third month, in early 2009, not one of my 8 employees turned up for work. I was dumbfounded. They had collectively resigned. For the first time in my life I cried because of my business. I’d experienced difficulties before, but nothing like this. I simply couldn’t understand what had happened. I treated them well, gave them the best work conditions. The dormitory I provided for them had very good facilities, nice furniture, and new appliances.

Liang said that her husband had suggested that if the employees resigned collectively, then ‘it’s likely that it was something you’ve done’. She continued: I came to realize that I had set a standard of work beyond their ability. They were very young, 19- and 20-years olds, they were inexperienced, and at best had a junior high school education. I’d required them to not only serve customers and engage in pleasant conversation but also build guanxi with them, not only to maintain huitouke (return customers) but also to market additional services. An employee needs to know what type of facial is most suitable for a customer’s skin, and to advise about additional services to enhance her appearance. My employees worked long hours because many customers were professional or business women, and made late afternoon or early evening

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appointments. Part of our customer service was massage, which is physically tiring and emotionally demanding. Even if she is fatigued the employee has to put on a smile and talk very pleasantly with customers, baochi hen baomande gongzuo reqing (maintain enthusiasm for work). I came to realize that even though they were paid well, the pressure was too much, and the high standards too difficult. I should have put my feet in their shoes.

New staff were employed and Liang changed her managerial approach. She said: When they first started, I wasn’t rigid about enforcing high standards. When they were able to work well at the preliminary level, then they were ready to learn more difficult tasks. Gradually I lifted standards until they reached the targeted level.

Liang is here describing the strategy of the ‘paradoxical integration of reversal’, although of course, she did not use that term. This is the approach through which a purpose is achieved by apparently moving away from one’s goal (Qi 2014). Findings from my fieldwork suggest that relational crisis, as experienced by Mrs Liang, is in fact a common phenomenon. Mr Meng (aged 63, Associate Degree) has a family-owned mining company which he and his daughter Qing (aged 37, Master’s Degree) had managed for three years until it was sold in 2016. From the beginning, Mr Meng and Qing disagreed on whether a contract be given to Mr Bao. Mr Meng regretted his decision later and reflected on the situation: ‘When Lao Bao (Old Bao) and I drank together with a group of friends, Wo yingcheng le ba xiangmu gei tamen, nanzihan da zhangfu ruguo shiyan buxiang hua (I promised to give the contract to them. As a big man I cannot break my promise)’. When I interviewed Qing, she said, ‘Dad served in the military before going into business and talks about manhood a lot. He is very particular about face, to him face is more important than other things’. Mr Meng’s remarks indicated his concern that choices which do not conform to established convention are likely to be judged negatively, and thus potentially undermining of his self-image of masculinity. A person’s ‘face’ is an image of self which emerges in response to their interest in how they are regarded or judged by others, so that face is a social representation that reflects the positive or negative respect, regard, or confidence that a person receives from others (Cheng 1986; Earley 1997; Goffman 1972; Ho 1976). The evaluations of self that are constitutive of a face state (of gaining, losing, recovering, or maintaining face) are necessarily socially current and never simply personal or idiosyncratic. Face is therefore something that can be socially provided to individuals and, in the same manner, taken from them. When experiencing the pain of a public loss of face, a face-focused individual may jeopardize not only his or her normal social functioning but also his or her own best interests and those of associates (Qi 2011). Qing recalled: Lao Bao bought mining machinery through a bank mortgage. When he couldn’t pay the monthly instalment, which he claimed was ¥70,000, he would ask us to pay for

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him; but he never had the money to pay us back. He threatened that if we declined his request, he would organize a strike. Dad would always make compromises. Dad and I often argued about this. I thought we shouldn’t let Lao Bao get away with his extortionate behaviour.

Mr Meng, who was interviewed at the same time as his daughter, explained when he referred to the case: If we took him to court, we would be locked into lengthy procedures which would be costly in terms of money, time, and energy. Our primary goal was to run the mining company and make a profit. It was not worth shang heqi (hurting each other’s feelings).

Mr Meng was strategically supple or pliant rather than hard, stiff or conventionally strong in order to overcome a problem. The paradoxical integration of ‘reversal’ highlights that human agents exercise a strategic choice in using one element to access its contrary (Qi 2014). Mr Meng reflected: For those three years, both my daughter and I hated having so many arguments. Our home was full of huoyuowei (the smell of gunpowder). Qing is my only daughter and she has no brothers. I came to a point that I decided I had to choose between making profits or having a harmonious family life. In the end we decided to sell the business.

While Mr Meng resolved the crisis of his mining business by selling it he was not mindful of the fact that a relational crisis between his daughter and himself was not necessarily resolved. As Laozi (1963: 65) indicates: ‘it is on disaster that good fortune perches; it is beneath good fortune that disaster crouches’. As Berglund (2007: 77) notes, ‘the world and the objects we perceive exist to us through the meanings we give to them, through an act of interpretation’. In turn, interpretation is the process of developing understanding through self-transformation. Neither Mr Meng nor his daughter undertook this course and while Mr Meng is now retired Qing opened a small wholesale company of her own.

Conclusion This chapter reports on the approaches which Chinese entrepreneurs have strategically employed under conditions of crisis. The examination here of business crisis experienced by entrepreneur respondents in fieldwork undertaken in China contributes not only to our understanding of issues in relation to business crisis, but also to considerations of how crisis might be understood in general terms. The Chinese conceptualization of crisis indicates that adversity and opportunity are inextricably linked in a dynamic relationship. The term weiji denotes paradoxical integration in contrast with a notion of tension and incompatibility and a focus on large detrimental consequence that underpins so much of the way in which crisis is conceived in the mainstream literature. The apparent contradiction internal to the term weiji and the approaches

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associated with it is a manifestation of what has been called here ‘paradoxical integration’. The term ‘integration’ in this context indicates not a resolution of or solution to any given paradox, but the noncontradictory or non-destructive correspondence of opposites in a single thing or event at a given moment in time. Paradoxes are never finally resolved, but continually reproduced in the unending flux and process of the world. The approach of paradoxical integration signifies that opposites are not necessarily mutually exclusive and incompatible and that the mutual dependence of opposites is not aberrant but a necessary aspect of social processes and meaning. Three forms of paradoxical integration are in particular relevant in discussion of crisis, ‘interdependency of opposites’, ‘generation’, and ‘reversal’. The paradoxical integration of ‘interdependency of opposites’ refers to the ways in which each element of a pair of opposed things requires the other element for its meaning or purpose. This highlights the reliance of crisis on the mutual dependence of contrastive terms for its meaning. The paradoxical integration of generation relates to the fact that while a thing may develop of its own accord, its relationship with other things is likely to change as a consequence. On the one hand, technological advancement creates new opportunities for a new form of business, namely e-commerce, and underpins the formation of new entrepreneurs in emerging sectors or industries. On the other hand, a paradoxical generation of an opposite as a consequence of the operation of a business can result from face-to-face transactions. In this case, a fixed human subject does not encounter a thing that changes through its internal dynamic or development, but rather the intrinsic or fixed properties of a thing generates its opposite as a consequence of its operation in a given social context. This is partly the paradox of unintended consequences, but the consequences in the case of generative consequence are paradoxical because they are negative outcomes of an ostensibly positive development that must be re-evaluated once the consequences are known. The paradoxical integration of ‘reversal’ highlights the fact that human agents exercise a strategic choice in using one element to access its contrary. In the circumstance of crisis, the need to overcome the existing strength or power of an adversary provokes the choice of adopting an opposite orientation of compliant softness. In order to achieve a purpose, entrepreneurs may apparently move away from their goals; in overcoming an adversary, they may be strategically compliant. Crisis need not be treated as an outcome or a consequence of discord or disruption, but more comprehensively understood as an aspect or phase of an unfolding process. In this way business failure, bankruptcy, and closure, may be regarded as ambiguous and even potentially positive events, manifestations of a course of development in which a dynamic process necessarily generates opportunities for positive change without forcing unnecessary risks. This approach, then, offers a course toward future business success even in the face of significant loss. Three strategies which entrepreneurs in this study have adopted are examined in this chapter, namely, the combination of the old

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with the new, or path dependence; second, seeking facilitating relationships with other members of a business community, or guanxi support; and finally, reordering priorities and available resources including familial and personal resources, described here as self-reflexivity. The chapter has identified otherwise neglected elements of crisis. Relational crisis has been identified in the chapter as a form or characterization that deserves further research attention. In addition, it has been indicated that crisis seldom appears as a unitary and singular manifestation as one crisis is likely to be generative of another. In addition to the cases mentioned in the chapter, this latter point may be considered in relation to the ongoing COVID pandemic, which began as a health crisis and quickly became a crisis of unemployment in core sectors of the economy, and in response to medical and health policy interventions – such as mandatory vaccination or mask wearing – became a crisis of political confidence in many jurisdictions in Europe and the United States. The chapter has indicated the usefulness of acknowledging one crisis is seldom singular at any given time.

Conclusion Rethinking Entrepreneurship: Trust, Networks, Crisis, and Gender

A modern economy can be described as comprising a system of institutions, organizations, and entrepreneurial activities that facilitate the dispersion of resources, thereby providing for the needs of a society and its members (Baumol and Blinder 2008). Institutions serve as the ‘humanly devised constraints [and incentives] that structure human interactions’ (North 1990: 33). Subject to the institutional environment they inhabit, entrepreneurs do not merely provide products and services but especially develop new ways of doing so by innovating in various manner methods of production, introducing new products, and developing markets through which they are distributed, thereby contributing to economic advancement (Webb et al. 2020: 506). It is argued here that institutions may not only shape entrepreneurs’ action but also be reshaped by them. The growth of China’s economy is not only an outcome of institutional change but also a consequence of a demand from entrepreneurs for institutional redirection and indeed transformation of existing institutional approaches to private ownership and markets. In this way entrepreneurs in China satisfy the standard definition of entrepreneurship as ‘a context-dependent social process through which individuals and teams create wealth by bringing together unique packages of resources to exploit marketplace opportunities’ (Ireland et al. 2001), and, it should not be forgotten, they themselves contribute to the creation of such opportunities. China’s transition to a market economy, beginning in the late 1970s, resulted from both top-down and bottom-up processes. Farmers in certain areas initiated a move away from collective agriculture to household-based private production and marketing, which led to successes in a newly configured rural market economy (Lin 1988; Liu 1992; Puffer et al. 2010; Watson 1988). After initial resistance, the Central government came to see the benefits of such initiatives and went on to endorse and then promote them. In 1978 Deng Xiaoping, China’s paramount leader from 1978 to 1989, launched a reform 143

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program which not only led to the transformation of China’s economy but also reshaped the mindset of administrators and the people alike (Dickson 2008; Garnaut and Song 2004; Garnaut et al. 2001, 2005; Tsai 2002, 2007; Whyte and Parish 1984; Young 1995). As a result, many individuals and families tried their fortune in the newly formed market economy, significantly expanding the population of entrepreneurs (Gold 1991). The Communist Party’s new business-friendly policies and the institutional changes that supported them, including constitutional protection for private property ownership, has led to the rise of a new social strata of business entrepreneurs. At the same time, entrepreneurs have continuously employed strategies of various kinds to advance administrative and institutional change designed to support further business-friendly policies, and to promote the privileges that come from doing business and at the same time expand the opportunities to do so (Herberer and Schubert 2020). The efforts of entrepreneurs in this regard are not alone, of course. China’s government has since 1978 implemented policies and institutional development that has incentivized private business, as noted previously. In late 2001 China joined the World Trade Organization (WTO) through which international-standard trade institutionalization has occurred. Legal reform in China from this time has been consistent with the expectations of standardized global models (Michelson 2007). The development of formal institutions tends to reduce the significance of informal regulation in key sectors of any given society (Baumol 1990; Portes and Haller 2005). In developed economies, it is through compliance with formal institutions including formal capital and labour markets that entrepreneurs access various resources, and formal property rights and legal enforcement of dispute resolution (North 1990). In developing economies, on the other hand, formal institutions are typically weak or absent, a situation often referred to as an ‘institutional void’ (Mair et al. 2012; Sdyow et al. 2022: 331; Webb et al. 2020; but see also Helmke and Levitsky 2004; Tsai 2006). It has been shown in the chapters earlier that China’s transitional market economy follows neither of these courses, it has not taken the trajectory of developed economies characterized by a logic of over-arching formal institutions nor that of developing economies subject to insubstantial or weak institutions, institutional voids. The simple fact is that China is different, in many ways. The saying attributed to Deng Xiaoping summarizing China’s post-1978 development model, ‘crossing the river by feeling the stones’, indicates an exploratory, experimental, and pragmatic orientation, which captures key aspects of the transition to marketization, including initiatives of farmers and early entrepreneurs in producing and selling on their own behalf against the dominant requirements of collective enterprise. Such improvisation could only continue, though, if it were endorsed by the Communist Party. So, while there is exploratory pragmatism there is also a party-state which inevitably plays a commanding role. Indeed, in China, much regulation is initiated by the apparatus of the Party rather

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than the administrative bureaucracy or the courts, as in Western economies. In addition, Central government policy and regulation are invariably subject to the interpretation of local government which must implement such directives, often ‘creatively’ (Ang 2016; Bian and Zhang 2014; Luo et al. 2020). Under such situations, in which complexity and uncertainty are endemic, business transactions in China tend to be negotiated and settled through guanxi, a system of networked relations based on interpersonal reciprocal obligations. Such transactional arrangements, ‘weak’ in Western terms, have considerable latent strengths (Boisot and Child 1996: 612; see also Barbalet 2023). Guanxi networks provide benefit through access to privileged information and resources, and participants in guanxi obtain certainty when legal rules are weakly enforced or capriciously interpreted (Bian 2019: 191–200). For this and associated reasons, then, entrepreneurs build, maintain, and develop guanxi networks from and through which they obtain access to resources of various types as well as bureaucratic facilitation and protection in exchange for investment in the economic development of local jurisdictions and to the benefit of officials who manage them. In considering the situation of entrepreneurs in China, then, their conscientious engagement with guanxi networks has been discussed in many of the earlier chapters. In doing so a number of things have been achieved. One thing in particular has been a demonstration of the need to rethink the standard characterization of networks in terms of their structural attributes, through which they are regarded as entities that are in a sense prior to and even independent of the persons who inhabit them. It has been shown in Chapter 2, though, that the behaviour of network participants cannot be adequately understood simply as an effect of network embeddedness. It was shown in the chapter that entrepreneurs’ network-making is an intentional and purposive engagement undertaken by individuals through which they derive benefits. A second thing to notice, in addition to the agentic formation of business networks, also treated in the chapter, is that properly operating networks not only provide advantages to those who participate in them, but also that such network participation incurs certain costs for participants. This Janus-faced aspect of network membership is inadequately appreciated in standard treatments of networks, but clearly demonstrated in Chapter 2. While social networks are widely held to be pervasive and encompassing, they are often thought to be redundant in the conduct of e-commerce. There is a tendency in the literature to assume that online exchanges operate through automated processes in which the social actor has little direct involvement and no control (see Couldry et al. 2016: 132). Studies of online markets and e-commerce, which are historically recent phenomena, have predominantly focused on the interplay between technology and human agents. Research reported in Chapter 1, on the other hand, departs from the widely held assumption that transaction systems in internet markets do not encourage social ties between buyers and sellers in the manner of face-to-face

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markets (White 2008: 68) and therefore that a social network basis of internet commerce is redundant. The chapter shows that entrepreneurs’ networking engagement with customers is significant and cannot be adequately dealt with through system-focused notions of the singular efficacy of an ‘apparatus’ (Couldry et al. 2016; Scott and Orlikowski 2013: 78). Online business, it is shown, is not driven by abstract and standardized monetary exchange operations but by social actors who are shaped by and who reshape social and economic structures, including networks. Contrary to the residually accepted notions – democratic and utopian – of an even playing field created by the digital world (see Arora 2012), online e-commerce systems in fact depend on and reproduce old inequalities, albeit in new forms and possibly less overtly. The existing literature on e-commerce includes discussion focused on how reputational systems are used to mitigate the risks to consumers inherent in anonymous transactions, providing platforms for collecting data from buyers, and then aggregating and displaying numerical ratings and reviews of products and services (Adamopoulou and Symeonidis, 2014; Dikeman et al. 2014; Kuwabara, 2015). Little research has been reported, though, on how e-commerce entrepreneurs employ tailored strategies through which they themselves build their reputations online. The concept of ‘personalized anchoring reputation’, developed in Chapter 1, fills a gap in research on web-based markets by showing how companies anchor their reputations onto a prominent representative figure in framing their company’s image and its market presence. It is shown in the chapter how entrepreneurs construct their online presence in representing their companies and build a reputation based on a successfully personalized self-portrayal. Through such a personalized anchoring reputation entrepreneurs send signals to their customers, signals which are shaped in terms of a self-constructed online presence. In this way, e-commerce entrepreneurs frame their identities in order to create and expand their markets. To borrow Erving Goffman’s (1963: 18) words, a ‘full spatial environment’ is created in order to convey specific information about an enterprise or entrepreneur for the purpose of building and presenting online a commercial reputation. Another contribution of Chapter 1 is the identification and examination of the practices of an emergent category of small-scale business operatives known as m-commerce entrepreneurs. In particular, their deployment of aspects of face-to-face network interactions in the development of online markets is through what they call liebian, or fission. Their approach is in a ‘split and expand’ strategy in which chains of familial and friendship networks are generated, which draw on trust assumptions inherent in these networks and at the same time provide assurance against defection and malfeasance through facebased affirmation and sanction, in which obligation and reciprocity are maintained in this online environment. In this way, social embeddedness in online markets operate through networks of micro-level interactions. The liebian approach thus provides customers with a reliable platform, a situation which plays a constitutive role in disseminating information. The information which

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customers send is not abstract, rather it is ‘embodied’, to use Goffman’s (1963: 14) term, which is to say that it is information carrying the opinions and emotions of the senders. Products, therefore, become imbued with meanings and feelings associated with the sender’s status, tastes, and at the same time, the meanings and value of products are reproduced through senders’ identities and their affiliations with recipients. In providing information about products to each other, participants simultaneously are involved in interactional and affective dynamics. The promotional power of consumers here lies in its symbolic and emotional nature. In Chapter 1 neglected but important aspects of the agency of not only entrepreneurs but also their customers, and the extensive reach of both in the digital age, are identified and understood. The findings reported previously regarding liebian in particular have implications for approaches in economic sociology that see economic relations as reliant on face-to-face contacts and the relationships that come out of them (Baker 1984; Burt 1980, 1992, 2004, 2007; Granovetter 1985; Podolny 2001; Preda 2013; Rauch and Casella 2001; Smith-Doerr and Powell 2005; Uzzi 1996, 1997; Uzzi and Lancaster 2004; White 2002). It is difficult to get away from the fact that economic actors are oriented not only to commodities and profits but also to personal connections and social relationships. These distinct spheres, the economic and social, cannot be regarded as disconnected, though, because the economic actor who has established himself or herself in social relationships thereby has access to information and resources which they are able to deploy, with advantage, in face-to-face business exchanges (Uzzi 1996, 1997). The particular benefit of liebian for entrepreneurs is that it is their customers who perform the tasks of networking which benefit the entrepreneurs. This form of online interaction facilitates building and maintaining large numbers of both strong and weak ties. The mobilization of strong ties in liebian require little comment, but it is of interest that the liebian strategy intentionally also links persons, through the provision of information regarding everyday commodities, who would be otherwise disconnected. In this sense, then, liebian networks embed not only persons sharing strong ties but also persons connected by weak ties, thus bridging what have been called structural holes (Burt 1992). E-commerce is an expanding arena of activity and engagement not only in China, of course, but globally. Its success and growth as a business model relates to intrinsic qualities of e-commerce but also to its enormous advantages over shop-based sales during the COVID-19 pandemic, through which social distancing and lockdowns have interfered with face-to-face purchasing. Mention of COVID-19 reminds us that not all businesses are likely to prosper and grow; some do poorly and may even close. The general point is that entrepreneurship is arguably an uncertain process associated with risks and vulnerabilities (Townsend et al. 2018). Nevertheless, no matter how precarious business exchanges may be there are always persons attracted to it for a variety of reasons, including an absence of alternative prospects, as among the

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displaced farmers and politically marginal persons who during the first decade of China’s reform ‘turned to private commerce due to a lack of respectable employment options’ (Tsai 2007: 74). Others who engage in entrepreneurship may choose it from a range of alternative options because they harbour strong positive expectations regarding it (Tillmar and Lindkvist 2007: 346), in spite of the risks. The risks of doing business may not only be located in a crisis resulting from economic cycles, war, poor management of financial markets, or pandemics. Markets being inherently competitive, the risks entrepreneurs face may come from other entrepreneurs. Business requires that those who participate in it act in their own interests. At the same time, it is expected that while a pursuit of self-interest may involve the contravention of the interests of others, honest disclosure and conduct are nevertheless required. Be that as it may, in the business world it is ever likely that some behaviour will be opportunistic through which self-interest is pursued with ‘guile’ (Williamson 1985). One mechanism for controlling opportunistic behaviour is contractual governance which specifies each party’s roles, entitlements, and responsibilities. It is assumed, especially in the mainstream economics literature, that under unconstrained market conditions agents will costlessly negotiate comprehensive contracts regulating future contingencies relevant to the terms of their exchange (Lorenz 1999: 301). Should malfeasance occur in these circumstances formal institutions will provide third party enforcement of agreements and legal sanction against breaches. A supplement to contract is the less formal sanction against opportunistic behaviour which operates through trust relations in which it is held that the reputational costs of broken trust serve to impede the occurrence of maleficence (Granovetter 1985). While it is widely held that breaches of trust lead to exposure of the trustbreaker, resulting in the perpetrator’s loss of reputation and subsequent exclusion from future exchanges, complex social pressures are nested within embedded networks that make exit from a relationship in which trust has been broken or retaliation against a trust-breaker non-viable options. Various social obligations brought to a relationship or generated within it may constitute powerful counterincentives to disclose or punish deception. Perceived costs of relationship termination may exceed the perceived benefits of dissociating from or exposing a trust breacher. When an embedded partner has a perceived monopoly on providing particularly valuable benefits to the betrayed person, then departing the relationship may be simply impossible. Indeed, in circumstances of betrayed trust the best option may simply require the betrayed partner to adjust their own orientation in the relationship, thus permitting them to continue accessing benefits that would be lost if they were to retaliate by either exposing a breach of trust or departing the relationship in which the trustbreaker was established. The conventional view, that trust is secure because of the possible sanction that broken trust and the trust breaker will be exposed, assumes among other things that trust relations entail a commitment through which trust can be only honoured or broken. It is shown in Chapter 3 that this

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understanding of trust fails to appreciate that trust is in fact a commitment that may be negotiated and re-negotiated in the process of developing relationships. Research findings reported in Chapter 3 depart from the standard understandings of trust relations in the identification of a distinction between the alter-focused strategies located in both formal and trust-based responses to malfeasance as understood in the standard literature, and ego-focused responses utilized by guanxi participants, although by no means exclusive to them. Experience of opportunism or deception invariably provokes re-evaluations of not only the competence, reliability, and honesty of violators, but also of ego’s judgement regarding them. This corresponds with research on trust as ‘situational’, which suggests that trust is necessary only under conditions of interdependence and uncertainty that are premised on the choices made by others (Khodyakov 2007). Interdependence is essential in this context because an expectation regarding another’s trustworthiness only becomes relevant when the completion of one’s own consequential activities depend on the prior actions or ongoing cooperation of another person (Barbalet 2019). It is shown in Chapter 3 that rather than disclosing or punishing breaches of trust, betrayed persons may direct their attention to what they can do to preserve their advantage in the relationship, including modifying their own behaviour and expectations. In this way trust is effectively renegotiated, even redefined, in relations with exchange partners. Ego-focused adjustment may thus change the dynamic of interdependence and the degree of uncertainty in the relationship, and compel us to rethink the nature of trust. An intention here is to provoke development in research agendas which seek to better understand the complexities and fluidity of trust. Trust as a practice or a disposition can be located in any social relation irrespective of its organizational or institutional setting. But one institution in particular in which trust is held to be centrally relevant is the family (Misztal 1996: Chapter 5). As the American sociologist Bernard Barber (1983: 26) puts it: ‘It is an everyday and valued conception in our society that the family is the primordial source and location of trust’. Families operate through enduring lifetime relationships governed by commitments of various kinds and expectations of trust, so it is not surprising that it is widely assumed that trust is inherent in the pervasiveness of family businesses and a key factor in their success. The mainstream literature on family business typically takes as its point of reference the family firm in North America and Western Europe, so theoretical approaches to family businesses represent simultaneously presuppositions drawn from values and practices conventional in Western societies (Caspary and Herrmann-Pillath 2021; Khavul et al. 2009: 1220). A study of family business in present-day China encourages revision of dominant models of family business including the role of trust in their operations. Chapter 4 of the present book challenges taken-for-granted assumptions of the Western-centric literature in its demonstration that family business does not necessarily rely on trust but more importantly on role obligation, assurance implicit in kinship structures, and through interests that are socially interrelated if not conflated.

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The challenge of taken-for-granted assumptions of a Western-centric literature, mentioned in the preceding paragraph, is not a polemical exercise of juxtaposing accounts in terms of the location of their source and declaring one erroneous because of its pedigree. The issue must always be the explanatory capacity of a theoretical framework relevant to the data or subject to be explained (Qi 2014). In this light Chapter 4 challenges also the disposition of Chinese analysts which assume that trust derived from family relations is invoked or encouraged when kin terms of address are used by staff members in an enterprise and between staff and customers, as frequently reported. A significant literature treats such practices in China in terms of the formation of pseudo-kinship or a quasi-family through which trust between non-kin individuals is not only cultivated but formalized (Guo and Miller 2010; Jordan 1985; Santos 2008). Chapter 4 shows that neither pseudo-kinship nor quasi-familial relationships in fact generate familial-trust relations in any meaningful sense. It is shown, rather, that invocation of kin terms in a business context between non-kin persons is principally a strategic engagement in the development of emotional and instrumental guanxi relations which employers cultivate with their employees in order to meet needs generated in a new socioeconomic context, namely the market transitional economy current in present-day China. It was mentioned previously that China’s development as a market economy from the 1980s replicated neither the developed Western nor the developing non-Western models. It is often assumed, though, no doubt because of the size of China’s market economy and the numbers of private entrepreneurs operating within it, and the global significance of that economy and those entrepreneurs, that if China is not currently institutionally similar to developed Western economies it is trending in that direction (see Puffer et al. 2010). But the institutions, both formal and informal, characteristic of China’s present-day economy operate on principles rooted in China’s history and cultural development. The most important formal institution, of course, responsible for the move to marketization and the way in which it operates, is the Communist Party of China. No other global economy has a similar political pillar. The dominant informal institutions which underpin China’s economy are the family on the one hand and guanxi on the other. In market exchange relationships, as they operate in Western economies, persons provide service with the expectation of receiving comparable benefits in return (Clark and Waddell 1985; see Ingram and Zou 2008). In this way, equity is not only experienced but known to be experienced because market exchanges involve monetary transfers which are readily quantified. Guanxi relationships, by way of contrast, typically include emotional support and kindred benefits that are difficult to quantify and thereby supported through social exchanges carrying an additional bonding which may include kin forms of address. Chapter 4 thus contributes to the literature on family business by going beyond the conventional understandings of both Western and Chinese accounts by demonstrating that the apparent trust-inducing use of familial terms of address masks a

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complex set of interactions and exchanges providing surety through specialized guanxi practices. Familial forms of address are of course endemic in family businesses. Family businesses have been an important component of the Chinese economy in the last four decades, and female entrepreneurs play a significant role in them. Sociological research on female entrepreneurs in China remains largely underdeveloped, however. Accounts of research regarding female entrepreneurship has predominantly drawn on North American and West European cases, implicitly informed by cultural dispositions of individualism and neo-liberal presuppositions (Jimenez 2009; see also Connell 2000: 5). Entrepreneurship is conventionally viewed as a profession requiring masculine qualities, with men alone typically regarded as ‘agentic’ (Bowman 2007). It is not surprising, therefore, that ‘notions of masculinity are coterminous with the normative entrepreneur’ (Marlow and Martinez Dy 2018: 8). When hegemonic gender beliefs are effective in defining entrepreneurship, hierarchical presumptions about men’s greater competence become salient, along with assumptions regarding men’s and women’s different traits, dispositions, and skills (Gilding 1994; Ridgeway 2014). The supposed characteristics of successful entrepreneurship – agency, pragmatism, and risk-taking – are stereotypically masculine features (Calás et al. 2009). Women, on the other hand, are held to conform to nurturing values and communal rather than self-directed behaviours (Heilman and Okimoto 2007). Gender roles, related to caring and motherhood, have been assumed to limit the possibilities for entrepreneurial agency (Calás et al. 2009). Hegemonic gender beliefs lead to a dichotomic gendered understanding of entrepreneurship. Against familiar gender assumptions regarding women in business, discussion in Chapter 5 is premised on the idea that gender is a perceptual and relational quality, the consequences of which can best be understood by distinguishing how gender may be utilized, performed, and created. Through an examination of female entrepreneurs’ active responses to the challenges they face in business, Chapter 5 provides a basis for better understanding of what is entailed in ‘doing’ gender, ‘performing’ gender, and ‘displaying’ gender. Family businesses are known in general to have relatively brief life cycles. Female business owners in particular tend to be regarded as more likely than male owners to fail in the face of crisis (Li et al. 2019; see Marshall et al. 2015). Indeed, it is reported that women and men react differently to external shocks, reflecting differences in how they manage their respective businesses (Bradshaw 2014; Young et al. 2017). It is held that women are more likely to adopt a risk aversion and defensive crisis response, while men engage a risk-taking and offensive approaches (Cesaroni et al. 2015; Cowling et al. 2020). Contrary to assumptions that female entrepreneurs adjust their business models to reduce risk, the Diana International Research Institute Surveys and case studies indicate that women entrepreneurs promptly captured new business opportunities that resulted from the COVID-19 crisis and related changes in their circumstances (Manolova et al. 2020). And yet, women are

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perceived to be less likely to adopt information technology (Orser and Riding 2018), for instance, and it has been held that social media may be a barrier to the success of women entrepreneurs (Mack et al. 2017). The constraints faced by businesses during COVID-19 have encouraged innovation of various kinds, including a significant growth in e-commerce and a dramatic fall in the use of cash in commercial and business transactions, developments that are likely to persist after the passing of the COVID crisis (Brammer et al. 2020: 501). While the research reported in the chapters earlier pre-date this particular crisis, the concern with crisis and how business operatives in China, both women and men, conceptualized crisis and managed their enterprises through crisis is reported in Chapter 6. The connection between business and crisis is well established in the literature, including Schumpeter’s (1954: 81–86) idea of ‘creative destruction’ as a process in which both established enterprise is forced out of business and new enterprises arise through the opportunities creative destruction provides. Indeed, entrepreneurship can be conceptualized as a process through which entrepreneurs pursue commercial goals in the face of uncertainty (McMullen and Shepherd 2006; Townsend et al. 2018). The conceptual relationship between uncertainty, risk, and crisis is broadly acknowledged (Beck 1992, 2009; Fligstein and Goldstein 2010; Giddens 1990; Stiglitz 2010; Walby 2015). In its wide-ranging treatment of crisis Chapter 6 challenges taken-forgranted approaches which understand crisis as a singularly present outcome or a consequence of discord or disruption with a focus on the largely detrimental consequences that typify crisis and how it is presented. A quite different understanding of crisis, in terms of a paradoxical integration of adversity and opportunity that are inextricably linked in a dynamic relationship, perceives crisis more comprehensively as an aspect or phase of an unfolding process. Through an examination of experiences of business crisis in China reported by entrepreneur respondents in the study undertaken for this book, Chapter 6 contributes not only to our understanding of business crisis, but to how crisis, in general, can be characterized and conceptualized. Chapter 6 operates through a framework which considers both how risks may be managed and, at the same time, how opportunities which emerge in crisis are identified and acted upon. By introducing the idea that crisis entails not only exposing and dealing with weakness and susceptibility but also emergent opportunities Chapter 6 contributes to an apprehension of crisis that highlights its creative and therefore positive properties encouraging business development. In reflecting on China’s economy and especially its so-called market transition, many questions arise. This book has focused on an obvious one, namely the role of private business in this development which has not only brought irretrievable change to China but to the global economy and the geo-political balance that for past centuries has been dominated by Western powers, first European powers and from the middle of the twentieth century the United States. While the role of private business is an obvious one in consideration

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of China’s economy at the present time, the approach taken by this book is in a number of ways not so obvious. Given the gravity of the topic, it is not surprising that much research and scholarship has been devoted to it and many important publications have addressed the initiation of a private business economy out of a collectivist and socialist economy that was the hallmark of China’s revolution during the so-called Mao era, from the 1950s to the 1970s, and the shape it has taken since that time (Guthrie 1999; Herberer and Schubert 2020; Huang 2008; Kraus 1991; Naughton and Tsai 2015; Nee and Opper 2012; Tsai 2007). The present book is distinguished from these and similar works in a number of ways. First, it is based on 65 in-depth semi-structured interviews with and observations of entrepreneurs who own small and medium businesses in a number of cities in China. In many ways, these businesspersons are representative of the population of employers and innovators in China’s economy in the early twenty-first century. Second, the book begins with a new and dynamic sector of China’s economy with which the vast majority of ordinary Chinese have daily contact, which supplies many of the necessities of their lives, namely e-commerce. This is an under-explored domain of entrepreneurship and marketing in China that has global implications given that e-commerce is the fastest growing marketing form world wide. Third, a topic that is unavoidable in any discussion of business in China and about which a great deal has been written, namely guanxi, is treated in the present book in an entirely novel manner. Several chapters touch on guanxi and various aspects of its nature and operations. What is new in the present book is the account of agentic primacy in guanxi networks, the way in which businesses manage their workforces through the development of intra-firm guanxi, and the finessing of trust relations through guanxi. This last point is a fourth contribution to the literature on enterprise uniquely provided in the present book, namely a new account of trust relations between businesses which turns on its head the conventional approach to trust which assumes that broken trust necessarily leads to disruptions in the relationship between the trust giver and the trust breacher. Here trust is shown to be a process involving redefinition and reaffirmation subject to different personal strategies of engagement, either alter-focused or ego-focused. In addition to the themes just mentioned which mark the novelty of the present book two other important issues are treated in chapters earlier which are largely ignored in accounts of business and entrepreneurship not only in China but generally. The first is the broad question of gender and family. Certainly, the literature on family business is well established and voluminous. One of its features, challenged in the present book, is the typical characterization of the subordinate position of female partners in family businesses. A fascinating element of the persons interviewed for the study drawn on in the present book is the high proportion of women in business, both in family firms and on their own account, and how the gender forms and dynamics they participate in have

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outcomes quite unlike those that might be expected on the basis of standard accounts. The Chinese case provides patterns and structures of experience for women and especially women in business that are significantly dissimilar to the experiences of Western women. Whereas it is frequently shown that family relations are an impediment on the independence of female entrepreneurs in Western economies, female entrepreneurs experience their intergenerational family more as a resource that facilitates their business endeavours rather than an incumbency detracting from their efforts in business. A final theme treated in the present book is the nature of crisis in business and the role of crisis in entrepreneurial development. The last chapter, after a broad discussion of the conceptualization of crisis in the standard literatures as well as in the distinctively Chinese approach to crisis, goes on to show how the experience of business crisis, on the basis of interviews with entrepreneurs in China, provides opportunities for renewal and not necessarily forces business closure. This is a pertinent theme on which to end this book because the present COVID pandemic, which began after the field work for the book was completed, shows us how crisis is not only multi-faceted but also generative of new possibilities and opportunities. This is the elemental understanding of crisis in Chinese cultural areas, as weiji, danger combined with opportunity. It was noted previously that China’s marketization path departs significantly from the Western model of economy and entrepreneurship. Many of the differences between China and the West are reflected in how each has managed the COVID pandemic. But in these differences is the fact that the pandemic has been unavoidable for all economies, and entrepreneurs everywhere have experienced similar crises through it with which they have to deal. What is attempted in the chapters earlier is to both acknowledge the commonalities of enterprise and doing business where they exist and at the same time to point to the differences between the characteristics of entrepreneurs and entrepreneurship in China against the measure of conventions about these things in the standard literature, largely Western in origin, that informs scholarship and guides research. In doing so it is hoped that the Chinese characteristics of business discovered in my field work interviews and observations will fill out and enhance the value of the accounts of business in general that research draws upon and contributes to.

Appendix

Table 1  Summary profile of private entrepreneur interviewees

Age range 26–35 36–45 46–55 56–65 Education level Up to primary schooling High school schooling College to university Total

Female

Male

6 17 8 4

5 14 7 4

3 12 20 35

9 21 30

Table 2  Summary profile of private entrepreneur interviewees by sector

Manufacturing Clothing/Accessories Construction Furniture Health/Medical products Household/Personal products Industrial/Electrical products Mining

Female

Male

4

2 3 1 1 1 4 1

2 4 1

(continued) 155

Appendix

156 Table 2  (continued) Female Sales Agricultural products Clothing/Accessories Export/Import Food/Beverages Health/Medical products Household/Personal products Industrial/Electrical products Real Estate Service Abattoir Beauty care Design/Cultural/Educational services Food/Beverages Health/Medical care Hotel Vehicle repair/Transport Entrepreneurs in more than one category Total

4 1 1 2 3 1

2 4 4 2 1 2 −3 35

Male 1 1 2 1 2 2 1 1 1 1 2 2 1 1 −2 30

Table 3  Entrepreneur interviewees’ companies: Year of foundation and employee numbers Female

Male

Founded Employee year numbers

Founded year Employee numbers

1990 1991 1996 2005

1990 1990

114 156

Construction

1996 1999 2006

118 Approximately 100 134

Furniture

2008

128

Health/Medical products

2011

Approximately 80

2010

81

Manufacturing Clothing/Accessories

Household/Personal products

1994 2010

82 110 168 125

136 81

Appendix

157

Table 3  (continued) Female

Male

Founded Employee year numbers

Founded year Employee numbers

1995

1995

Approximately 500

2004 2005 2006

Approximately 500 19 30 720

2006 2012 2014

720 80 52

2006

Around 900

2006

Around 900

2014

45

Clothing/Accessories

2007 2010 2013 2013

63 16 0 0

2007

63

Export/Import

2007

56

Food/Beverages

1999

55

2011 2013

48 32

Health/Medical products

2007 2008

72 86

2013

90

Household/Personal products

2010 2008 2008

52 24 55

2010 2008

52 24

Industrial/Electrical products

1995

37

1992 1995

30 37

1999

110

2012

67

Manufacturing Industrial/Electrical products

Mining Sales Agricultural products

Real Estate Service Abattoir Beauty care

2012 2013

30 42

2013

42

Design/Cultural/ Educational services

2010 2012 2013 2013

74 130 2 48

2009

58

Food/Beverages

1994 2011 2011 2007

66 72 49 46

1994 2013

73 50

Health/Medical care

2011 2013

47 31

1990 2014

59 26 (continued)

Appendix

158 Table 3  (continued) Female

Male

Manufacturing

Founded Employee year numbers

Founded year Employee numbers

Hotel

2004

85

2012

55

Vehicle repair/Transport

1997 2009

33 12

1997

33

Entrepreneurs in more than one category (in Italics)

−3

−2

Total

35

30

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Index

abductive analysis, 18 Abidin, Crystal, 36 accumulation crisis, 122–123, 126–128 Africa, 74 agency e-commerce, 25, 36 gender roles, 101, 114 guanxi networks, 45–50, 153 paradoxical integration, 127 social network analysis, 42, 43, 45–50, 56, 153 trust, 61 agreements breaches of, 64–68, 70, 72 trust-based or contract-based, 58, 72 Ahl, Helene, 111 Ahrne, G., 52 alcohol consumption, 2, 3, 47–49, 93 Alibaba.com, 25 All-China Federation of Industry and Commerce, 102 anti-corruption campaign, 12, 51, 52 anti-trust campaign, 12 Arriagada, Arturo, 35 Arrow, Kenneth, 60 Asia, 25 assurance e-commerce, 29, 35–37, 39 family businesses, 83–85, 92 gender and education, 110 legal regulation, 71 trust, comparison, 85 bankruptcy, 58, 119, 122, 133, 137 banks, 8, 64, 78, 109, 123–124, 139

Barbalet, Jack, 10, 24, 30, 33, 43–45, 55, 59, 65, 68, 69, 72, 81, 85, 88, 89, 134, 135, 137, 145, 149 Baym, Nancy, 30 Beck, Ulrich, 125 Berglund, Henrik, 140 Bian, Yanjie, 9, 10, 11, 24, 33, 41–43, 45, 48, 53, 56, 59, 63, 68, 69, 89, 91, 95, 135–137, 145 Bika, Zografia, 80 Bishop, Sophie, 35 Blau, Peter, 62 blood ties, 79, 80 Bourdieu, Pierre, 44, 45, 86 Burt, Ronald, 5, 38, 135, 136 business, definition, 57 capitalist system accumulation crisis, 122–123, 126–128 ‘political capitalism’, 11 card games, 48, 49 Caspary, Sigrun C., 92 Castells, Manuel, 48 Changshu, 2, 15 Charmaz, Kathy, 18 Chen, Jie, 14 childcare, 3, 101, 113–116 China Confucian norms, 78, 89, 103 Gross Domestic Product (GDP), 1, 15, 26 historical cultures, 128, 129, 132 kinship, 78, 84 traditional gender norms, 102–104 transition economy, 1, 5–15, 143 class, 1, 8, 10, 12–15, 42

201

Index

202 Coleman, James, 51 Collins, Randall, 42, 91 combinations, old and new (path dependence), 132, 133 communism, Eastern/Central-European transition, 8, 11, 12, 16, 132 Communist Party (CCP) economic transition, 5–8, 144 entrepreneurial class, new, 8–10, 12–15 gender equality, 103 networks, 17, 48–49 conflict, 55, 71, 88, 121, 125 Confucian norms, 78, 89, 103 Connell, Raewyn, 98 constitutional amendments, 6–8, 58, 103, 144 constructivist grounded theory, 18 contracts of employment, 91, 92 kinship networks, 54 and trust, 58, 61–62, 70–73 corruption, 9, 11, 12, 51, 52 costs cost effectiveness, 10, 37, 77 entertainments, 3, 46–50 family businesses, 87 health costs, 3, 4, 47–50 information flow, 137 personal relationship breakdown, 46 transaction costs, 58, 60 costs and benefits social networks, 40–50, 54–55, 63 trust, 63, 70–73 COVID-19 pandemic, 25, 119, 124, 154 crisis accumulation crisis, 122–123, 126–128 economic transition, 11 global financial crisis (2008), 123–124, 130–131 guanxi networks, 133–137 paradoxical integration, 126–129, 131–132, 134, 136, 139–141 path dependence (combinations, old and new), 132, 133 self-reflexivity, 138–140, 142 weiji (danger and opportunity), 120, 126, 128, 140 Western conceptualizations of, 120, 121, 124–126 cross-cultural comparative studies, 114 cultural capital, 1, 34, 35, 42 culture, see also entertainments; norms Confucian norms, 78, 89, 103 cross-cultural issues, 66, 114

‘drinking table’ culture, 47–48 historical cultures, 128, 129, 132 kinship, 78, 84 traditional gender norms, 102–104 customer service, 29–31, 65 danger. see weiji (crisis as danger and opportunity) Daodejing, 127 data-analysis, 18 daughters, 105–107, 139–140 Davis, Deborah, 5 democracy, 12–15, 33, 41, 60 Deng Xiaoping, 5, 7, 9, 143, 144 dependency, 55, 65–66, 83, 113, see also interdependency of opposites, paradoxical integration of; path dependence (combinations, old and new) deregulation, 123–124 Dickson, Bruce J., 6, 10, 14, 144 digital capital, 34 DiMaggio, Paul J., 27, 41, 42, 51, 61, 110 displaying/doing gender, 110–114 displaying/doing intimacy, 90–92 domestic staff, 115, 116 ‘drinking table’ culture, 47–48 Duffy, Brooke, 34 e-commerce definition, 23, 25 embeddedness, 25, 28–29, 31–32, 34–36, 39 expansion, 24–26, 109, 130–131 face, 30–31, 37, 39 guanxi networks, 24, 29–33 liebian (fission), 36–39 personalized anchoring reputation, 33–36, 39 reputation systems, 25, 27–28, 37, 39 research gaps, 25, 26, 29, 38, 39, 153 economic capital, 6, 10, 16, 34, 91 economic crisis. see crisis economic exchange, 41, 58, 59, 62, 97 economic reforms, 8–9, 11–15 economy. see free-market economy; market economy; socialist market economy; transition economy electronic reputation systems, 25, 27–28, 37, 39 embeddedness e-commerce, 25, 28–29, 31–32, 34–36, 39 economic action, 24 social capital, 122 social networks, 44, 47, 52, 56, 62 trust, 59, 62, 65–67, 73 emotional capital, 91

Index emotionalized guanxi relationships, 89, 90–92 emotions e-commerce, 31, 34 face, 31 family businesses, 78, 80, 83, 85, 89 networks, 42, 55 obligation, 83, 85, 135–136 trust, breaches of, 63, 69 employee retention, 92–95 employer–employee relations crisis, 138–139 emotionalized guanxi relationships, 89–92 family businesses, 54–55, 76, 79, 82–88 gender performance, 112 intimacy performance, 90–92 kinship forms of address, 77, 88–89, 95 pseudo-families, 53, 77, 79–81, 89 trustworthiness, 67–68, 72 entertainments costs, 3, 46–50 gender roles, 47, 49, 104, 105 media representations/previous research, 2, 3 entrepreneurs, see also female entrepreneurs class status, 1, 8, 10, 12–15 definition, 4–5, 119 demographics, 11, 13–14 media representations, 2, 8 migrant returnees, 6, 53 work ethic, 3, 4 entrepreneurship definition, 4–5, 143 family businesses, 76, 77 former employees, 94–96 gender norms, 99–102, 104–105 individualism, 98, 100, 101, 106, 118 social networks, 5, 24, 26, 48 environmental crisis, 127, 130, 138 Erikson, Emily, 42, 45 Europe communism, transition from, 8, 11, 12, 16, 132 e-commerce, 24, 26 female entrepreneurship, 98 ‘old boy/girl’ networks, 56 exchange, see also economic exchange; favour exchange; information exchange; online exchange trust definition, 61 face definition, 30 e-commerce, 30–31, 37, 39

203 family businesses, 77, 84, 85 migrant entrepreneurs, 6 research methods, 17 social networks/guanxi networks, 47, 50, 52, 139 staff retention, 93–94 trustworthiness, 59, 62, 65, 67–70, 72 family businesses, see also kinship forms of address; kinship networks; pseudo-families daughters, 105–107, 139–140 definition, 75 development phases, 87–88 employer–employee relations, 54–55, 76, 79, 82–88 female entrepreneurs, 102–109, 111, 139–140 introduction, 75–77 tie strength, 77–79, 83, 84, 86, 87, 89 transition economy, 6 family harmony, 106–108 family life childcare, 3, 101, 113–116 dangers to, 3, 140 entrepreneurial motivation, 4 gendered responsibilities, 101, 105, 108, 113 intergenerational dynamics, 115–116 non-market relations, 57 One Child Policy (1979–2015), 103–104 positive changes, 137 favour exchange crisis management, 135–137 face, 68, 69 guanxi definition, 10, 24, 43, 44, 63, 95 information flow, 137 network ties, comparison, 45, 89 trust, 62, 69 Fei, Xiaotong, 79, 81 female entrepreneurs advantage/disadvantage, 109–110 family businesses, 102–109, 111, 139–140 intergenerational dynamics, 115–116 statistics/demographics, 102, 104 support from husbands, 108, 113–114, 116 female entrepreneurship research, 98–99, 105, 154 femininity, 99, 101, 102, 112, 117 fictive kinship, 80–81, 88 fieldwork observations, 43, 88, 90, 94, 153 finance, external crisis, 119 gender, 109, 113

204 finance, external (cont.) guanxi networks, 64, 136, 145 state sector, 13 financial crisis (2008), 123–124, 130–131 financial institutions, 8, 64, 78, 109, 123–124, 139 financial management, 54, 84 financialization, 123 Finch, Janet, 78, 83, 84 fission (liebian), 36–39 Fligstein, Neil, 5, 34, 123, 152 Ford Motor Company, 75 Frazer, Michael L., 80 free-market economy, 8, 123 friendship crisis management, 134–137 face, 47 fictive kinship/pseudo families, 80, 88 liebian (fission), 36–39 tie multiplexity, 45 trust, 57, 68 ganqing (feelings of personal closeness), 89–91 Garnaut, Ross, 6, 144 gender advantage/disadvantage, 109–110 definition, 99, 102 entertainments, 47, 49, 104, 105 entrepreneurship research, 98–99, 105, 154 and leadership, 100, 104, 106–109, 115 performance of, 110–114 personalized anchoring reputation, 33–34 gender identification, definition, 101 gender norms daughters, 105–107 of entrepreneurship, 99–102, 104–105 family roles, 101, 105, 108, 113–114 traditional Chinese society, 102–104 gender reforms, 103–104 generation, paradoxical integration of, 126–127, 131–132, 136, 141 Giddens, Anthony, 41, 83 gig economy, 25, 28 global economy, 75, 76 Global Entrepreneurship Monitor, 104 global financial crisis (2008), 123–124, 130–131 Goffman, Erving, 31, 50, 89, 91, 112, 139, 146 Gold, Thomas B., 4, 7, 12, 13, 24, 46, 58, 59, 64, 144 Goodman, David, 12 Gouldner, Alvin, 41 Graham, Angus, 128 Granovetter, Mark, 45, 55, 62, 71, 137

Index Gross Domestic Product (GDP), 1, 15, 26, 76 grounded theory, 18 guanxi networks agency, 45–50, 153 crisis management, 133–137 defined as favour exchange, 10, 24, 43, 44, 63, 95 e-commerce, 24, 29–33 emotionalized guanxi relationships, 89–92 employee’s role, 138 information exchange, 46, 63, 137, 145 obligation, 45, 46, 49, 67–70, 135–137 social network factors, visibility of, 42, 45, 56 tie strength, 45, 53, 89, 135–137 transition economy, 2, 4, 10–12, 15, 17 trust/trustworthiness, 59, 63–64, 68–70 Hamilton, Eleanor, 98, 100, 107, 109 health costs, 3, 4, 47–50 Heberer, Thomas, 14 Hefei, 2, 15, 138 Herrmann-Pillath, Carsten, 92 hongbao (money placed in a red envelope), 50–51 Hu Jintao, 11 Huawei, 75 ideal norms, 83, 84 identity, 69 collective, 8, 12, 13, 92 e-commerce, 27, 34 gender identification, 101 performance, 112 individualism, 98, 100, 101, 106, 118 informal interviews, 16–18, 30, 85 informal regulation, 51, 58–59, 61–62, 150 information exchange crisis management, 135, 137 e-commerce, 25, 27, 29, 33, 34, 36–38 family businesses, 87 guanxi networks, 46, 63, 137, 145 leadership styles, 90, 100 social networks, 41, 44, 45, 50 tie strength, 37, 45, 87, 137 Inner-Mongolia, 66 innovation entrepreneurship definition, 5, 143 family businesses, 76 female entrepreneurs, 104, 109 informal regulation, 61 social networks, 42, 53 staff retention, 95 transition economy, 9, 15

Index ‘inside-outside’ distinctions, gender roles, 103, 105 Institutions, see also contracts; legal regulation; social networks definition, 143 entrepreneurship context, 23–24, 40 financial, 8, 64, 78, 109, 123–124, 139 and guanxi networks, 10, 11, 63–64 institutional uncertainty, 8–9, 11 private property rights, 8–10, 13, 15, 57–58 interaction ritual chains, 92 interdependency of opposites, paradoxical integration of, 126, 141 interest switch problem, 88 interests, interrelated, 86–89 intergenerational dynamics, 115–116 interviews, 15–18 informal, 16–18, 30, 85 semi-structured, 15, 16, 18, 26, 43, 153 intimacy, performance and display, 90–92 Jacka, Tamara, 104 Jamieson, Lynn, 90 Japan, 92 Jiang Zemin, 7 Jingdong online shopping website, 31–32 Keister, Lisa A., 10, 11 King, Ambrose Yeo-Chi, 56 kinship culture of, 78, 84 definition, 53 kinship forms of address, 77, 88–89, 95 kinship networks, see also pseudo-families case studies, 53–55 fictive kinship, 80–81 tie strength, 53, 78, 84, 89 trust, 55, 77 Kirzner, Israel, 5 Kohn, Melvin, 1 Kollock, Peter, 59 Koselleck, Reinhart, 121 Krippner, Greta, 45, 117, 123 Laozi, 128, 140 leadership and gender, 100, 102, 104, 106–109, 115 intimacy, 90 paternalistic style, 89 transactional vs. transformational, 100 legal regulation, see also contracts; deregulation; private property rights COVID-19 regulations, 124

205 crisis management, 140 e-commerce, 27 transition economy, 6–9, 11–12, 63 trust, 57–58, 63–64, 71–73 Western countries, 9–10 liebian (fission), 36–39 Lin, Cyril Z., 6, 9 Lin, Nan, 44, 45, 81 Liu, Xiaogan, 128 loans, 10, 13, 109 local government corruption, 9, 52 guanxi networks, 10, 15, 48–49, 63 transition economy, 6, 9, 145 loyalty, 68, 69, 81, 88 Luhmann, Niklas, 59 Lukes, Steven, 65 Lusthaus, Dan, 129 Ma, Jack, 25 mafia, 134–135 malfeasance. see opportunism (malfeasance) market, conceptualizations of, 10, 23, 57 market economy conclusions, 143–144, 150 democratization, 12 entrepreneurship, 1, 2 institutions, 10 networks, 48 privatization, 7, 11 rural areas, 6, 104, 143 transition, governance of, 7–9 trust, 58–60, 63, 70 marketization Communist Party (CPC), 12, 150 Deng Xiaoping, 6, 144 private property, 58 social inequalities, 104 Western countries, comparison, 154 Marlow, Susan, 98, 100, 105, 107, 113, 115, 151 Marriage Law, 103 Marx, Karl, 122–123, 126–128 masculinity, 99–102, 104, 107, 139 m-commerce, 3, 33–39 medium private enterprises. see small and medium private enterprises (SMEs) Michels, Robert, 41 migrant entrepreneurs, 6, 53 modernity, 125 monopoly, 13, 41, 65, 73, 96 Murphy, Rachel, 6

206 National People’s Congress (NPC), 8, 58 Naughton, Barry, 9, 153 Nee, Victor, 1, 6, 8, 9, 12, 153 neimu xiaoer (insider), 31–33 network embeddedness. see embeddedness network norms, 43, 47, 49–53, 55, 66 networks, see also embeddedness; guanxi networks; social networks entrepreneurship context, 24, 26, 48 non-market relationships, 57 norms, see also Confucian norms; face; family harmony; gender norms; guanxi networks; ideal norms; network norms; obligation; reciprocity; trustworthiness (xinyong) definition, 50 obligation, see also favour exchange e-commerce, 30, 33, 39 family businesses, 78, 81 guanxi networks, 45, 46, 49, 67–70, 135–137 kinship networks, 54 role obligation, 77, 81, 83–85, 89 ‘old boy/girl’ networks, 56 One Child Policy (1979–2015), 103–104 online exchange, see also e-commerce anonymity, 24, 26, 27, 39 embeddedness, 25, 28–29, 32, 34, 36 online reputation systems, 25, 27–28, 37, 39 online shopping websites, 31–32 opportunism (malfeasance) guanxi networks, 70 legal regulation, 58, 61, 71 reputation, 59, 62, 72 research methods, 18 social networks, 55, 71 trust, 59, 62, 71, 72, 73 opportunity, 6, 24, 70, 86, see also weiji (crisis as danger and opportunity) Orlikowski, Wanda, 32 Osburg, John, 2, 10, 13, 48, 49 paradoxical integration, 126–129, 131–132, 134, 136, 139–141, see also weiji (crisis as danger and opportunity) participant observation locations, 16, 17, 153 research findings, 108, 110–113 paternalistic leadership, 89 path dependence (combinations, old and new), 132, 133 Pearson, Margaret, 12, 13

Index People’s Congress representatives, 14, 17 personalized anchoring reputation, 33–36, 39 Polanyi, Karl, 125 police, 134–135 political capital, 10, 11, 16, 17, 48 ‘political capitalism’, 11 positionality, researcher, 17 power dependency, 65–66 e-commerce, 35 face, 70 female entrepreneurs, 113 paradoxical integration of reversal, 128–129 social networks, 41, 48, 49, 51, 55 transition economy, 6, 14, 15 Preda, Alex, 28 private enterprise, definition, 7 private property rights, 8–10, 13, 15, 57–58 private sector, 1, 10, 11, 48–49 private wealth, 1, 11, 119 privatization, 1, 7, 11, 17, 132 protection money, 134–135 pseudo-families, 53, 77, 79–81, 89 Qi, Xiaoying, 3, 9, 10, 24, 31, 33, 43–45, 48, 50, 59, 64, 68, 69, 78, 79, 85, 93, 94, 106, 115, 126, 127, 131, 134, 136, 139, 140 qualitative methods, 16 quasi-family relationships. see fictive kinship; pseudo-families reciprocity crisis management, 95 e-commerce, 30, 39 family businesses, 81, 83 social networks, 44 trust, 62, 63, 69 reflexivity, 138–140, 142 relational crisis, 138–140 relationship, see also guanxi networks defined as guanxi, 10 reputation. see face; fission (liebian); personalized anchoring reputation reputation systems, 25, 27–28, 37, 39 research methods, 2, 4, 15–18, 153, see also fieldwork observation; interviews; participant observation research participants, 15–17 researcher positionality, 17 reversal, paradoxical integration of, 127–129, 134, 141 Richter, Michaela W., 121

Index Ridgeway, Cecilia L., 99–101, 111, 112, 117, 151 role obligation, 77, 81, 83–85, 89 Roscoe, Philip, 28 rural areas, 6, 86, 87, 104, 143 Russia, 11, 74, 79, see also Soviet Union Schubert, Gunter, 14 Schumpeter, Joseph, 5, 24, 38, 119, 126–128, 132, 133 Scotland, 80 Scott, James, 15 Scott, Susan, 32 self-employment, legalization of, 6–7 self-reflexivity, 138–140, 142 semi-structured interviews, 15, 16, 18, 26, 43, 153 Shanghai, 138 Shenzhen, 2, 15 Simmel, Georg, 60, 74 small and medium private enterprises (SMEs), 15, 75 social capital, 42, 46, 47, 60, 64, 122, 135 social class, 1, 8, 10, 12–15, 42 social embeddedness. see embeddedness social networks, see also guanxi networks; kinship networks; network norms agency, 42, 43, 45–50, 56, 153 costs and benefits, 40–50, 54–55, 63 e-commerce, 25, 27–29, 36–39 entrepreneurship, 5, 24, 26, 48 network norms, 43, 47, 49–53, 55, 66 trust, 42, 48, 54–55, 62, 71 social norms. see norms socialist market economy, 1, 7, 12, 76 South Korea, 12 Soviet Union, 8, 12, see also Russia spousal dynamics e-commerce, 33 family life, 107, 108, 116 gender performance, 110–114 kinship networks, 53 leadership and gender, 100, 104, 105 staff retention, 92–95 Stark, David, 132 State Administration for Industry and Commerce, 6 state-owned enterprises (SOE), 7, 11, 17 structural holes, 38, 45, 135 symbolic capital, 6, 35, 110 Taiwan, 12 Taobao online shopping website, 31

207 taxation, 12, 15, 63 technology-led crisis, 130–131 tie strength e-commerce, 37 family businesses, 77–79, 83, 84, 86, 87, 89 fictive kinship/pseudo families, 80–81 guanxi networks, 45, 53, 89, 135–137 information exchange, 37, 45, 87, 137 kinship networks, 53, 78, 84, 89 social network analysis, 42, 44–45, 53 trust, 69 transaction costs, 58, 60 transition economy China, 1, 5–15, 143 Communist Party (CCP), 5–8, 144 guanxi networks, 2, 4, 10–12, 15, 17 legal regulation, 6–9, 11–12, 63 trust breaches of, 59–60, 62–63, 68, 69, 71, 73 conceptualizations of, 60–61, 65, 69, 85 contingent reworking, 60, 66–67, 71, 72, 74 costs and benefits, 63, 70–73 e-commerce, 27–28, 37, 39 family businesses, 76–79, 81–83 informal regulation, 58–59, 61–62 legal regulation, 57–58, 63–64, 71–73 market economy, 58–60, 63, 70 research gaps, 59, 64 social networks, 42, 48, 54–55, 62, 71 trustworthiness (xinyong) breaches of, 64–73 definition, 65 e-commerce, 30, 33, 35, 37 employer–employee relations, 67–68, 72 face, 59, 62, 65, 67–70, 72 gender and education, 110 United Kingdom (UK), 79 United States of America (USA) e-commerce, 24–26 family businesses, 76, 79 female entrepreneurship, 98 global financial crisis (2008), 123–124 ‘old boy/girl’ networks, 56 tie strength, 137 Uzzi, Brian, 42, 87, 147 Walby, Sylvia, 123, 125, 152 Wank, David L., 83 weiji (crisis as danger and opportunity), 120, 126, 128, 140, see also paradoxical integration

Index

208 Western countries class, 1, 12 crisis, conceptualizations of, 120, 121, 124–126 economic models, 154 family businesses, 114, 115 female entrepreneurship research, 98, 154 legal regulation, 9–10 Whyte, Martin, 79 women. see female entrepreneurs; female entrepreneurship research; femininity

Wong, Siu-lun, 76 World Bank, 25 World Trade Organization (WTO), 9, 63, 144 Xi Jinping, 12, 52 Yamagishi, Toshio and Midori, 85 Zhang, Lei, 11 Zhejiang University, 102 zhongjianren (middle person), 134, 137