COMMUNICATION ANTECEDENTS FOR

ESTABLISHING BUSINESS RELATIONSHIPS IN

CHINA

By

Geoffrey Gedge

This dissertation is submitted in part fulfillment for the

award of the degree of

Master of International Business

University of Auckland

November 2003

ABSTRACT

COMMUNICATION ANTECEDENTS FOR ESTABLISHING

BUSINESS RELATIONSHIPS IN CHINA

By Geoffrey Gedge

The purpose of this study is to explore whether the organizational management

of cross-cultural communication issues effects the establishment of business

relationships in China by Western, and more particularly, New Zealand

organizations. The study focuses on identifying the communication

antecedents that can be utilized by New Zealand organizations in the

establishment of business relationships in China. The data collected indicates

that many New Zealand organizations have trouble in establishing business

relationships in China. Identified are six communication related antecedents;

cultural difference, similarity and trust building, language barriers,

communication protocols, communication transmission and business network

development. The interviews and surveys conducted for this study identify that

New Zealand organizations are aware of these communication antecedents.

However, it was also identified that few of the organizations apply practical

consideration to, or application of these antecedents in establishing business

relationships in China.

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TABLE OF CONTENTS

PAGE

Abstract

Table of Contents i

List of Figures iv

List of Tables v

Acknowledgements vi

INTRODUCTION 1

1.0 Introduction 1

1.1 Background 1

1.2 Objectives 3

1.3 Research Focus 4

1.4 Scope of Research 5

1.5 Literature Review Outline 6

1.6 Methodology Outline 7

1.7 Study Rationale 8

1.8 Summary 9

LITERATURE REVIEW 10

2.0 Introduction 10

2.1 An Overview of the History of China 11

2.2 Chinese Business Relationships 12

2.2.1 Guanxi 13

2.3 The Impact of National Culture on Business Relationships 15

2.3.1 Power Distance 17

2.3.2 Uncertainty Avoidance 18

2.3.3 Individualism 18

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PAGE

2.3.4 Masculinity 19

2.3.5 Hofstede’s Fifth Dimension 20

2.4 Culture and Communication 21

2.5 The Communication Process 24

2.5.1 Understanding the Communication Process 27

2.5.2 Communication Style 30

2.5.3 Communication Interpretation 32

2.5.4 Communication Barriers 34

2.5.5 Language Barriers 34

2.5.6 Cultural Barriers 35

2.5.7 Perceptual Barriers 36

2.5.8 Non-Verbal Communication Barriers 36

2.5.9 Communication Process Summary 38

2.6 Communication Effectiveness 38

2.7 Requirements for Communication with the Chinese 39

2.7.1 Personal Address 39

2.7.2 Improved Listening Skills 40

2.7.3 Remembering and Comprehension 41

2.7.4 Adherence to the Rules of English Grammar 41

2.7.5 TheConcept of “Face” 41

2.7.6 Communication Exactness 42

2.8 Trust, Relationships, and Communication 43

2.9 Communication and Relationships 46

2.10 Summary 48

2.11 Conclusions 50

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PAGE

METHODOLOGY 54

3.0 Research Objective 54

3.1 Research Process Overview 56

3.2 Research Design 58

3.2.1 Initial Exploratory Interviews 60

3.2.2 Secondary Data Collection 61

3.2.3 The Observational Study 62

3.2.4 The Sample Survey 64

3.3 Summary 67

DATA ANALYSIS 68

4.0 Introduction 68

4.1 Cultural Difference 68

4.2 Similarity and Trust Building 69

4.3 Language Barriers 69

4.4 Communication Protocols 71

4.5 Communication Transmission 73

4.6 Business Network Development 74

4.7 Summary 77

CONCLUSIONS AND RECOMMENDATIONS 79

5.0 Conclusions 79

5.1 Limitations on Research 82

5.2 Recommendations 84

5.3 Implication for Further Research 85

APPENDICIES 87

Appendix 1Sample Survey Questionnaire

BIBLIOGRAPHY 88

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LIST OF FIGURES

PAGE

Figure 1 The Pervasiveness of Culture 22

Figure 2 The Communication Process 29

Figure 3 Chinese Business Model 45

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LIST OF TABLES

PAGE

Table 1 Western and Chinese Basic Cultural Values in Thought 21

Table 2 Hofstede’s Chinese and Western Cultures Dimensions 23

Table 3 Western and Chinese Approaches to Communication 26

Table 4 Chinese and Western Cultures Verbal Communication Styles 33

Table 5 Common Forms of Non-Verbal Communication 37

- vi -

ACKNOWLEDGMENTS

The author wishes to thanks the following people for their individual and

collective contribution to this thesis:

Maureen Benson-Rea, Director, Master of International Business Programme,

University of Auckland, for her time devoted to the co-supervision of this

thesis,

Steve Rawlinson, Lecturer, Department of International Business, University

of Auckland, for his time devoted to the co-supervision of this thesis,

Tim Munro-Keene, Group CEO, AFG Trust, for his comments and assistance

provided throughout the writing of this thesis and the conduct of the primary

data collection surveys,

S.P Chow, former Head of Finance and Economics, University of Hong Kong,

for his comments and assistance provided throughout the writing of this thesis,

Victor Percival, Chairman, New Zealand Chamber of Commerce, New

Zealand China Trade Association Inc, for his assistance with the exploratory

interviews and guidance of survey participants.

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C h a p t e r 1

INTRODUCTION

1.0 Introduction

Chapter 1 provides an overview of this study; communication antecedents for

establishing business relationships in China. An outline of the literature

reviewed is provided as background to the study objectives and research focus.

Finally, the scope of the study is outlined and the research methodology

adopted discussed.

1.1 Background

Research conducted by Geert Hofstede and others has made it clear that no

two cultures are the same, even if they appear to have similarities (Hofstede

1980, 1988, and 1990, Adler 1997, Chaney and Martin 1995, Gesteland 2002,

Rosch 1987, Warner 1997). In this regard, it would be an error to assume that

cultures across Asia are the same and that in terms of this study, that the

Chinese culture is synonymous with all other Asian cultures. The work of

Hofstede (1980) and others (Adler 1997, Chaney and Martin 1995, Gesteland

2002, Rosch 1987, Warner 1997) identifies that this incorrect assumption of

cultural homogeneity is a vital concept in terms of cultural understanding and

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communication. Data collected by the New Zealand Chamber of Commerce

evidence that many New Zealand organizations confuse the two. It is clear that

there is no “one size fits all” approach to doing business in Asia, let alone

China.

Recent work undertaken by Stringer and Haworth (2003) in conjunction with

Asia 2000 and Trade New Zealand supports the proposition that while the

New Zealand market offers limited opportunities for growth and development

to New Zealand organizations, few organizations question the potential growth

value of our Asian neighbors, particularly that of China. According to Stringer

and Haworth (2003) New Zealand organizations, view China as a country

whose attractiveness for business has increased following its accession to the

World Trade Organization.

The New Zealand Chamber of Commerce has collected data over many years,

with respect to companies including Fletchers, Lion Nathan, Carters and

Fisher and Paykel. This data suggests that many New Zealand organizations

fail in their attempts to establish business relationships in China. For those that

are able to immerse themselves and understand the Chinese culture, business

practices, relationships and values, research by Cochran (2000) suggests that

success (however defined) is achievable.

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This data and research prompts questions. What are the key drivers for an

organization seeking to establish itself within China? What does an

organization need to understand about the Chinese business environment?

How and why does this environment differ from that of our own here in New

Zealand? Why is doing business in China difficult for not only New Zealand

organizations but also Western organizations in general? These questions

formed the basis for this study.

This study provides data on how New Zealand organizations attempt to

establish business relationships in China. It focuses on the antecedents for

communication in China, and the establishment of business networks. This

study examines what communication is and how to communicate within the

Chinese business environment. It also examines the role and effect of cultural

difference between the Chinese and Western cultures with respect to

communication and the establishment of business relationships in China.

1.2 Objectives

The objective of this study is to identify whether or not Western and in

particular, New Zealand organizations succeed or fail in their attempts to

establish business relationships in China. The study focuses on identifying

whether New Zealand organizations have an understanding of the key

antecedents of communication that arise in the establishment of a business

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relationship in China. This study also considers whether there is a co-

relationship between communication and the establishment of business

relationships in China. Cochran’s(2000) work on Chinese networks suggests

that there is.

The study focuses on understanding what the communication antecedents are

from a Chinese perspective, and whether the cultural differences between

Chinese and Western organizations affect the perception and interaction of

those antecedents. This study examines how cultural differences inter-relate

with the communication antecedents in the development of business

relationships in China. In this respect, recent work by Chadee and Zhang

(2000), and Luo (1997 and 2000) with respect to the role of the guanxi is

reviewed. This study concludes that key communication antecedents can be

identified, which can be extracted for New Zealand organizations in the

establishment of their business relationships in China.

1.3 Research Focus

The focus of this study is on data collected from the New Zealand Chamber of

Commerce and from work undertaken within a New Zealand based company

in Auckland, which had established operations in Shanghai, The Peoples

Republic of China (PRC) in 2002. The data collected evidences that there are

issues faced by organizations in establishing business relationships in China.

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Recent work undertaken by Graham and Lam (2003) examined this area in an

attempt to understand why American businesses in particular failed to

appreciate the broader context of Chinese culture and values in business

relationships. From this, the research problem for this study evolved.

1.4 Scope of Research

This study reviewed New Zealand based organizations, by way of exploratory

interviews, observational study, and sample survey. The organizations selected

had established business relationships within China. The review was not

limited to organizations that had continued to operate within the Chinese

market. It also extended to organizations, which had exited the Chinese

market. The New Zealand Chamber of Commerce, China Trade Association,

provided assistance in identifying organizations for participation in a sample

survey. This association maintains a New Zealand wide database of

organizations with business interests in China. The scope of the study also

focused on identifying whether there was a co-relationship between identified

communication antecedents and the establishment of business relationships in

China. Work undertaken by Cochran (2000) on Chinese business relationships

suggests that there is such a co-relationship.

The scope of the study included the collection of primary data by way of a

direct observational study conducted within the Auckland based organization

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within which the writer worked. The organizations head office is in New

Zealand. Through this data and secondary research data, a primary factor in

the establishment of business relationships in China was the management of

cross cultural communication issues.

Following discussions with several businesses that had established themselves

in China, and on the advice of Hong Kong based academics, a direct review of

New Zealand organizations that had attempted to establish business

relationships in China was undertaken. This review provided additional

primary data to support the data collected from the observational study and the

literature review. It also supported the data from the exploratory interviews

with the New Zealand Chamber of Commerce.

1.5 Literature Review Outline

The primary elements of this study involve concepts of culture,

communication, and business networks. The literature reviewed in this study

considers each concept individually and in conjunction with the other two

concepts.

Research conducted in the 1960’s by Dutch Geert Hofstede is the base in this

study, for many of the perspectives regarding cultural difference. Nichols,

Stevens, Bartolome and Argys (1999), and Schein (1985), consider this

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perspective with respect to cultural barriers and the effect on the

communication process. Tam, Coote and Forrest (2000) identify the

importance of establishing trust and mutual respect in the communication

process, leading to the establishment of business relationships in China.

Additional support for this work is gathered from Luo (1997 and 2000), and

Ward and Smith (2003). Graham and Lam (2003) review the barriers to the

communication process, as do Coggin, Coggin and Li (2000).

Chen (2001) and Luo (2000) provide the base for the perspectives in this study

regarding Chinese business and Chinese business relationships, their

development, importance, and value. Monge and Contractor (1998) provide an

overview of the relationship between communication and the establishment of

business relationships in China.

1.6 Methodology Outline

Primary and secondary sources provide the research data for this study.

Exploratory research gathers primary data from the New Zealand Chamber of

Commerce, China Trade Association on the experiences of New Zealand

organizations establishing business relationships in China. As observational

study and informal interviews with the senior management of the organization

within which the writer works collects supporting primary data. Data

verification by way of a sample survey of New Zealand organizations known

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to have attempted to enter the Chinese business environment was undertaken.

The New Zealand Chamber of Commerce provided assistance in identifying

appropriate organizations to participate in the sample survey.

The data gathered from the exploratory interviews with the New Zealand

Chamber of Commerce, and from a review of literature provided the

foundation for the observational study and sample survey questions. The

literature published in relation to organizations that had entered the Chinese

business environment, and on the topics of communication, culture, and

Chinese business relationships provided the secondary research data for this

study. This included research studies of a number of organizations reviewed

by Chen (2001), Cochran (2000), and Whitely (2000).

Finally, the collation and analysis of these data evidences that there is a

relationship between the communication antecedents identified, and cultural

orientation, and the establishment of business relationships in China.

1.7 Study Rationale

The assertion that most New Zealand organizations are managed by, in

Hofstede (1980) terms, Western personnel, while Asian personnel manage

most Chinese businesses provides the rationale for this study. Research

conducted by Hofstede identifies that there are particular traits held by both

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Western and Asian managers that are different, and that would in the normal

course give rise to management conflict. The primary consideration for this

study is whether these cultural differences influence communication between

the cultures and the establishment of business relationships in China.

1.8 Summary

Chapter 1 has provided an overview of the research problem, the objectives

and focus of this study and a summary of the literature reviewed and the

methodology adopted in the gathering of the primary and secondary data

identified.

Chapter 2 will review the extensive literary works in the areas of cultural

orientation, communication, and business relationships, as those concepts

relate to the establishment of business relationships in China. Chapter 3

provides an explanation of the methodology adopted in the gathering of both

primary and secondary data for this study, while Chapter 4 provides analysis

of the data gathered from these sources. Finally, Chapter 5 reviews the

findings from the data analysis in Chapter 4 and provides considerations as to

research limitations and recommendations for further study.

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C h a p t e r 2

LITERATURE REVIEW

2.0 Introduction

This Chapter reviews cultural orientation, communication, and business

relationships, literary works with respect to the establishment of business

relationships in China. The aim of this study is to identify the communication

antecedents (if any) for establishing business relationships in China. Reference

to China throughout this study means Mainland China and the special

administrative regions of Hong Kong, Macau and Taiwan.

In identifying the communication antecedents (if any) for the establishment of

business relationships in China, an understanding of the history of China and

how that country’shistorical and cultural background influences business

relationships is necessary. Subsequent is an overview of what is a business

relationship in China. The differences that arise between Western business

relationships and Chinese business relationships are examined. This enables

comprehension of what and why the communication antecedents identified

throughout this literature review are considered necessary to the establishment

of business relationships in China.

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The research undertaken for this study does not investigate the concept of

success or failure in terms of establishing business relationships in China, as

this concept is beyond the scope of this study. The literature in this chapter

examines the theory behind cultural difference, the communication process

and associated communication networks, and the development of trust, for the

establishment of business relationships in China.

2.1 An Overview of the History of China

Graham and Lam (2003) in their recent work on Chinese negotiation and

cultural impact, provide an insightful overview of the roots of Chinese culture.

Throughout their review of the history of China, it is evident that there are

many modern sources on the history of China, as well as documented sources

in ancient writings; dating back more than 3,300 years. What makes the

Chinese civilization unique in global history is its continuity for over 4,000

years and its influence on not only business practices but also social and

business communication norms (Chen 2001).

The recurrent historical view of China has been the unceasing struggle of the

sedentary Chinese against the threat posed to their safety and way of life by

non-Chinese people (Cochran 2000). For centuries, virtually all the foreigners

that Chinese saw came from the less developed societies along their borders.

This conditioned the Chinese view of the outside world (Chen 2001), in which

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the Chinese saw their domain as the self-sufficient center of the universe or

Central Nation (Cochran 2000). Since that time, China has moved through a

series of political and social changes. It is the strength and length of this past

that dominates Chinese business and social practices (Cochran 2000). Without

understanding where a culture has evolved from, it is difficult to understand

how to communicate with it (Chen 2001). The Chinese national culture is not

only socially and politically strong, but dominates every facet of Chinese

business both within China and externally between Chinese businesses

overseas (Chen 2001). The role of national culture as will be examined in the

following sections builds considerably on the historical cultural embodiment

of a nation developed over time (Nichols, Stevens, Bartolome and Argys

1999). In the case of China, the role of national culture is synonymous with the

Chinese national ideology and identity (Chen 2001, Nichols, Stevens,

Bartolome and Argys 1999). The Chinese socially and culturally defines

themselves and their social and business practices and traits from their national

culture (Graham and Lam 2003).

2.2 Chinese Business Relationships

Since the focus of this study is to discover the communication antecedents for

the establishment of business relationships in China, it is essential to have an

understanding of the nature of the business relationships that prevail in China.

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These appear different from those in the West, and the question is how do

organizations develop and utilize Chinese business relationships to assist in the

establishment of their enterprises or undertakings? Equally, are Western

organizations able to develop and utilize such relationships for their own

success (Stringer and Haworth 2003)? Central to these questions is the

complex issue of guanxi (Luo 1997, 2000). The interpersonal relationships that

underpin the major dynamics of Chinese social and business structures define

guanxi (Luo 2000). Guanxi refers to the concept of drawing on connections in

order to secure favors in personal relations (Brunner, Chan and Zhou 1989). In

business, the Chinese first develop the relationship, which in turn leads to

guanxi (Li 1999). The guanxi relationship can put an organization into a

support position, or a position that offers power and an expectation that the

power held will be exerted to be helpful (Li 1999).

2.2.1 Guanxi

Guanxi has been pervasive throughout most of the Chinese business

environment for the past several centuries (Luo 2000), and literally binds

Chinese organizations within mainland China, and elsewhere globally into an

all encompassing social and business web. Guanxi has been widely recognized

as important in personal relations, and as a key determinant of business

performance in China (Liu, Dixon and Lee 2000).

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Trust is a key element of a guanxi (Liu, Dixon and Lee 2000). As will be

explored later the inability to develop trust limits the ability to develop a

business relationship in China (Ward and Smith 2003). A recurring concept in

the literature is that trust cannot be developed without communication (Tam,

Coote and Forrest 2000), and communication cannot be established without a

basis of similarity (Tam, Coote and Forrest 2000). The literature does not

define what amounts to a basis of similarity. It is unclear whether similarity in

the framework of communication and trust means cultural similarity or some

other basis of similarity such as common goals (Tam, Coote and Forrest 2000).

The relationship between these concepts is explored further in section 2.8. The

importance of guanxi in the literature develops from a widely accepted view

that guanxi is a key business element of organizational performance (Luo

2000). The relationship between the Chinese macro-economic environment

and the social micro-business environment gives rise to the guanxi network

(Luo 2000). Without access to the guanxi network, Chen (2001) states that, the

establishment of business relationships in China is limited. Other authors

(Chadee and Zhang 2000, Chen 2001, Luo 2000) support this view

As China continues to open to the global business environment the dynamics

of guanxi become gradually more entrenched, influencing both Chinese

business practice and social behavior (Chen 2001, Cochran 2000, Luo 2000)

throughout not only the greater Asian region but also the Western countries

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including New Zealand (Chadee and Zhang 2000). Guanxi within the Chinese

business environment in New Zealand is active (Chadee and Zhang 2000).

Despite the continued academic and business interest in guanxi, there is little

conclusive literature on the concept from an organizational business

perspective (Luo 1997 and 2000), and perhaps that is because guanxi is a

complex concept in practice. An understanding of guanxi is required within

the scope of this study because it is a cultural difference between Western and

Chinese cultures, which affects the communication process examined later.

If guanxi in its simplest form can be described as, trust (Luo 2000, Ward and

Smith 2003) then the literature demonstrates that trust cannot be built without

communication (Tam, Coote and Forrest 2000). Tam, Coote and Forrest

(2000) argue that while trust itself may be an antecedent to communication;

communication is an antecedent to the development of trust between parties of

cultural difference.

2.3 The Impact of National Culture on Business Relationships

A major challenge for any organization doing business internationally is its

ability to adapt to different cultural environments (Stringer and Haworth

2003). All adaptations require an understanding of cultural diversity,

perceptions, values and stereotypes (Graham and Lam 2003) and how these

interact within the context of communication and business relationships. To

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understand national culture, it is necessary to understand what “Culture” is.

Cultural characteristics between the Chinese and the West are so different that

they have an effect on the communication process (Graham and Lam 2003)

and on the establishment of business relationships in China (Alexander 2001,

Luo 2000).

Dutch researcher, Geert Hofstede (1980) found that there are four dimensions

to culture that help explain how and why individuals from different cultures

act in the way they do. His initial data was gathered from the results of two

surveys of over 116,000 IBM employee respondents from 70 different

countries, excluding China. From this data, Hofstede (1980) drew parallels and

distinctions between the work-based cultures of those 70 countries. It

continues to provide a concise overview of cultural similarity and distinction

based on the original four dimensions of power distance, masculinity,

uncertainty avoidance, and individualism. Through later work Hofstede and

Bond (1988), added a fifth dimension dealing with time orientation and

Confucian dynamism, and made assumptions regarding the Chinese, in terms

of the original four dimensions identified in the earlier work..

There are criticisms of Hofstede’s work including that it is now out of date

(Chen 2001). The main criticism is founded on the fact that it surveyed only

employees of IBM (Hodgetts and Luthans 2000). Chen (2001) considers that

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this taints Hofstede’swork with a US ethnocentric overture. In later work,

Hofstede and Bond (1988) addressed this criticism by clarifying that the IBM

study was not flawed as it dealt with the effect of the national environment and

culture on the IBM employee respondents before they joined IBM. Despite

criticism, Hofstede’s(1980) work continues to be one of the most definitive

pieces of research on culture to date (Chen 2001). For that reason, even though

Hofstede (1980) did not survey IBM employee respondents in China, it is

reviewed as foundation research dealing with cross-cultural issues in business.

Most recently,Hofstede’swork formed the basis for new research undertaken

by Graham and Lam (2003) in their review of American businesses in China

who indicate that Hofstede’swork is still valid. In order to gain an

understanding of each dimension and the effect on national culture and

communication, each dimension is summarized following.

2.3.1 Power Distance

Power Distance is defined as the extent to which less powerful members of

institutions and organizations accept that power is distributed unequally

(Hofstede and Bond 1988). Hofstede (1980) determined that in countries

where individuals blindly and without question obeyed orders given by

superiors are said to have a high power distance. The Asian cultures in

particular are typical of this (Hofstede 1980). By contrast, countries where

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subordinates legitimately question orders by superiors are said to have a low

power distance. Western cultures are typical of this trait (Hofstede 1980).

2.3.2 Uncertainty Avoidance

Uncertainty avoidance is the extent to which individuals feel threatened by

ambiguous situations, and create situations and beliefs in an attempt to try to

avoid such situations (Hofstede 1980). In countries where individuals do not

like high levels of uncertainty and require high levels of security, faith tends to

be put in the belief of experts and their knowledge. The Asian cultures are

typical of this (Hofstede 1980). By contrast, individuals who are more willing

to take risks associated with the unknown illustrate cultures, which have low

levels of uncertainty avoidance. The Western cultures are particularly

noticeable in this area (Hofstede 1980). Hofstede and Bond (1988) identified

that the Chinese demonstrated a tendency towards high uncertainty avoidance.

2.3.3 Individualism

Individualism is the tendency of individuals to look after themselves and their

immediate families only (Hofstede 1980). By contrast, collectivism is the

tendency of individuals to seek to belong to groups that look after each other

in exchange for loyalty (Hofstede 1980). Hofstede (1980) found that

individuals in Western cultures demonstrated high levels of individualistic

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behavior, while individuals in Asian cultures demonstrated high levels of

collectivist behavior. Hofstede’slater work (Hofstede and Bond 1988)

identified that the Chinese demonstrated highly collectivist behavior. The

individualism dimension has implications in relation to communication, for

establishing business relationships in China. Cochran (2000) in his review of a

number of organizations that have entered the China market has identified this

dimension as a potential source of conflict between Western and Chinese

organizations. The high individualistic behavior of Western cultures can often

bring conflict into the communication process when dealing with a highly

collectivist culture such as China.

2.3.4 Masculinity

Hofstede (1980) defined masculinity as a situation in which the dominant

values of a society are success, money, and“things”. This dimension does not

measure the stereotypical traits of masculine and feminine behavior. Hofstede

(1980) defined femininity as the situation in which the dominant values in a

society are the caring for others and the quality of life. Hofstede (1980) found

that a number of the Asian cultures demonstrated strong masculinity traits

while the Western cultures demonstrated traits that are more feminine.

Hofstede and Bond (1988) concluded China to be a culture demonstrating

traits that are more masculine in business.

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2.3.5 Hofstede’s Fifth Dimension

Hofstede undertook further research (Hofstede and Bond 1988) which added a

fifth dimension to the earlier research. This fifth dimension looked at the

concept of time orientation and Confucian dynamism and particularly looked

at the position of China within the scope of the previous work undertaken. The

Confucianism dimension looks at the extent to which the values of the ancient

Chinese philosopher Confucius are accepted or rejected within the daily values

of a society. These values include concepts of respect, order, and seniority.

China rated highly on this dimension whereas Western cultures varied but

generally did not rate as highly as China.

Graham and Lam (2003) summarize Hofstede’s (1980) work in conjunction

with their own, as far as it relates to Chinese and Western organizations and

the effect on the communication process. Table 1 provides an insightful

summary of the main differences that exist culturally between Western and

Chinese organizations that affect the communication process between these

two groups. These differences were considered by Graham and Lam (2003) to

influence the establishment of business relationships. In section 2.4,

consideration is given to the impact of the cultural differences identified in this

section, from the works of Graham and Lam (2003) and Hofstede (1980 and

1988) on the communication process.

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Table 1 Western and Chinese Cultural Values in Thought

Western Organizations Chinese Organizations

Individualist Collectivist

Egalitarian Hierarchical

Information Orientated Relationship Orientated

Reductionist Holistic

Sequential Circular

Seeks the Truth Seeks the Way

Argument Culture Haggling Culture

Source: Adapted from Graham and Lam (2003)

2.4 Culture and Communication

Culture distinguishes one human group from another and in the context of

international business; it forms the basis that influences all behavior (Adler

1997). Figure 1 illustrates the influence that cultural differences have on an

organization (Schein 1985). This model illustrates the pervasive effects that

cultural orientation has across all aspects of human social and business

interaction. Schein’s (1985) model illustrates the interaction of cultural

orientation at different levels.

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Figure 1 The Pervasiveness of Culture

Source:Adapted from Schein’s Model of The Pervasive Culture

The model identifies the interrelationship between basic cultural assumptions,

national or societal cultural orientation, and organizational culture. Schein’s

(1985) model shows that culture consists of a series of complex and deep-

rooted phenomenon that are not easily changed. Organizations from different

cultural backgrounds will have basic assumptions and premises about dealings

with each other developed from deep-seated national ideology, values, and

cultural manifestations (Schein 1985). How to manage this is one of the issues

for Western organizations in the establishment of business relationships in

China (Stringer and Haworth 2003). Culture is one of the largest barriers to

communication (Rogers and Roethlisberger 1991). Coggin, Coggin and Li

(2000) indicate that use of the right communication antecedents assists in this

process and overcomes the barriers to communication.

BasicAssumptions -

Premises

IdeologyDeep Seated

Values

CulturalManifestations

on anOrganizational

Micro-Level

- 23 -

Hofstede’sand Bonds (1988) research illustrates the cultural orientation of

Western and Chinese cultures, which influence the communication process.

Table 2 illustrates the five dimensions of Hofstede’s (1980) and Hofstede’s

and Bonds (1988) research as it relates to Chinese and Western cultures. There

are traits that assist in understanding communication issues, which may arise

during this process between these cultural groups. Table 2, identifies areas of

potential conflict in the communication process that need overcoming in the

establishment of business relationships in China.

Table 2 Hofstede’s Chinese and Western Cultures Dimensions

Chinese Culture Western Culture

High Power Distance Low Power Distance

High Uncertainty Avoidance Low Uncertainty Avoidance

Collectivist Culture Individualistic Culture

Masculine Culture Feminine Culture

High Confucianism Values Mixed Confucianism Values

Source: Adapted from Hofstede (1980) and Hofstede and Bond (1988)

Tables 1 and 2 identify that the Chinese tend to adopt a higher regard for

power distance, masculinity, and Confucianism principles, which can be

viewed as the Chinese positioning on respect, seniority, position and power.

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The consequence in terms of communication-based relationships is something

that can be described as dictatorial and ambiguous. Dictatorial in terms of the

need for a high degree of respect to be shown by persons considered

subordinate and ambiguous in terms of the flow of information, which can

appear less than accurate, from a Western perspective. In contrast, the

relatively low power distance and feminine based cultures of the West tend to

result in a less formal and more conciliatory approach being adopted in all

relationships. Western cultures tend to place fewer accents on the formality of

position and seniority. The Western tendency is for low uncertainty avoidance

and high individualism resulting in an informal culture based on the “me”

principle. The result is that Western organizations look for precision and

accuracy in terms of the communication process.

This section has reviewed the impact of culture on communication and

concluded that cultural differences in orientation can affect the communication

process. The next section will review the extent of this impact.

2.5 The Communication Process

Having examined culture and concluded that it influences the communication

process, attention is now given to consideration of the elements of

communication and their relationship in the communication process. To

identify the communication antecedents that affect the establishment of

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business relationships in China, Stringer and Haworth (2003) find that it is

necessary to understand the communication process. The rationale for this is

that the basis of all relationships is communication (Tam, Coote and Forrest

2000). In the sphere of international business, communication takes on a role

of significance, because of the difficulties in conveying meanings and

messages between people of different cultures (Chen 2001, Nichols, Stevens,

Bartolome, and Argys (1999), Tam, Coote and Forrest (2000)).

The problems caused by misinterpretation, confusion and mistrust are

compounded for an organization operating in a cultural environment different

from its own (Nichols, Stevens, Bartolome and Argys 1999). Mistrust

resulting from miscommunication will halt the establishment of many

relationships, social, or business (Tam, Coote and Forrest 2000). The

significance of trust in the communication process and in the establishment of

business relationships in China will be reviewed in section 2.8. It is necessary

to ensure that communication, taking into account cultural differences, is

established because failure to do so will result in a failure to establish any form

of relationship (Tam, Coote and Forrest 2000).

Graham and Lam (2003) provide a basis for the comparison of the

communication process between Western and Chinese organizations. This is

summarized in Table 3 following.

- 26 -

Table 3 Western and Chinese Approaches to Communication

Western Organizations Chinese Organizations

Non-Task Sounding

Quick Meetings Long Courting Process

Informal Formal

Makes Cold Calls Draws on Intermediaries

Information Exchange

Full Authority Limited Authority

Direct Indirect

Means of Persuasion

Aggressive Questioning

Impatient Enduring

Terms of Agreement

Forging a “Good” Deal Forging a Long-Term Relationship

Source: Adapted from Graham and Lam (2003)

Table 3 indicates the Western tendency for quick meetings and informality as

opposed to the Chinese position in terms of a long courting process with

formality. This indicates that relationship building may not be a natural

- 27 -

inclination for Western organizations. This could give rise to conflict when

attempting to establish business relationships with Chinese organizations.

Graham and Lam’s (2003) summarized in Table 3, evidence that there may

also be misalignment in the information exchange process between Western

and Chinese organizations. Western organizations exchange information

directly with an expectation of full authority on the part of the parties involved

in the process. By comparison, Chinese organizations exchange information in

an indirect manner and the parties involved in the process may only have

limited authority. Information exchange also differs between the two cultures.

While Western organizations have a propensity towards persuasion in an

aggressive manner and become impatient, their Chinese counterparts have a

predisposition towards being more questioning in nature and as such more

enduring. These differences are consistent with the cultural differences

identified fromHofstede’s(1980) work, and identify areas of potential conflict

and misalignment in the communication process. Tam, Coote and Forrest

(2000) identified, that any such conflict or misalignment may ultimately

hamper the establishment of a business relationship in China.

2.5.1 Understanding the Communication Process

In terms of the communication process, attention is now focused on examining

what communication is. Many authors have defined communication as the

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process of transferring a message from a sender to a receiver (Chen (2001),

Gesteland (2002), Hodgetts and Luthans (2000)). The practical execution of

which can be fraught with difficulties (Chen (2001), Rowley (1998) and

Warner (1998)). Analysis shows that there are many problems caused by the

international context in which many organizations operate (Hodgetts and

Luthans 2000), which effect the transfer of messages between sender and

receiver. The reason for this is principally due to cultural differences (Hofstede

(1980), Hofstede and Bond (1988)). Research by Daft (1999) indicates that

problems arise because potential communication errors develop when sending

and receiving messages, due to factors such as knowledge, attitudes, and

cultural background. These factors act as filters and create “noise” in the

transmission, reception, and translation of the communication process (Daft

1999).

The most common of these problems is the inability of the sender and receiver

to establish a relationship with each other (Chaney and Martin 1995). In the

context of the Chinese business environment, this is seen as an inability to

establish a guanxi network. The question for an organization is how in the

international context to establish a relationship for communication purposes?

Secondly, why is the establishment of a relationship primary to the

communication process and relationship establishment process? (Tam, Coote

and Forrest (2000)). Research suggests that relationship building assists to

- 29 -

build a basis for similarity (Tam, Coote and Forrest (2000)), and similarity is

the foundation for building communication linkages necessary to establish

business relationships in China (Tam, Coote and Forrest 2000).

Figure 2 illustrates the communication process. Simplified, the sender of a

message determines what he or she wants to say and then encodes the message

to convey his or her meaning to the receiver.

Figure 2 The Communication Process

Source: Adapted from Hodgetts and Luthans (2000)

Figure 2, identifies that a message conveyed is encoded. The cultural

orientation of the sender affects this. Conveyance of the message is by the use

of some form of medium such as telephone, correspondence, facsimile, email,

SenderMessaging

RecipientInterpretation

Medium ofExchange

Encoding

Decoding

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or face-to-face communication. Finally, the message is decoded and

interpreted by the receiver. The cultural orientation of the receiver affects the

decoding and interpretation process. Figure 2 illustrates the importance that the

medium of communication and the cultural orientation of both the message

sender and receiver play in the communication process. There is potential for

conflict in this process resulting from misinterpretation on the parts of the

sender and receiver.

2.5.2 Communication Style

Section 2.5.1 identified that the process of delivery and interpretation of

communication is affected by the cultural orientation of the sender and

receiver. Graham and Lam (2003) identified differences between Western and

Chinese organizations in terms of the manner of information exchange as

summarized in Table 3. Gesteland (2002) states that the manner of

communication delivery and the means by which individuals covey and

receive messages is largely affected by their personal communication style.

Gesteland (2002) determined cultural orientation dictated this, a view

supported by Hofstede (1980) and Tam, Coote and Forrest (2000). The actual

context of the communication plays a role in determining the effectiveness of

the encoding and decoding processes (Rowley (2000)). In simplifying the

communication process, Nichols, Stevens, Bartolome, and Argys (1999) argue

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from their review of various literature works that the defined context is the

actual information and the environment that surrounds a message being

communicated and that affects the manner in which that message is conveyed.

There are four contextual verbal styles examined in this area, which affect the

communication process. According to Hodgetts and Luthans (2000), and based

on prior research of Rosch (1987) these are Indirect vs. Direct verbal styles,

Succinct vs. Elaborate verbal styles, Contextual vs. Personal verbal styles, and

Affective vs. Instrumental verbal styles. In the context of Western and Chinese

communication antecedents, these four contextual verbal styles can help

explain the means by which some of the barriers to the communication

antecedent developed. These barriers create “noise” as identified by Daft

(1999) in the communication process.

Rosch (1987) states that an indirect verbal communication style is one in

which implicit messages are sent and received. This is characteristic of

collective high context cultures such as the Chinese culture. By comparison,

direct verbal communication styles are characterized by the sending and

receiving of more less ambiguous explicit messages, and are found within the

more individualistic low context cultures such as Western cultures. Rosch

(1987) considered that a succinct verbal communication style involved little

“talk”. It is characteristic of cultures with high uncertainty avoidance and is

- 32 -

predominantly found in high context cultures such as the Chinese culture. By

comparison, an elaborate verbal communication involves a large amount of

“talk” and can be found in high context cultures. Thirdly, Rosch (1987) found

that a contextual verbal style is one where the focus is on the speaker and on

the roles and relationships of the parties involved. This style is evident in high

context cultures predominated by high power distances and collective traits

such as the Chinese culture. By contrast, personal verbal styles are illustrated

by instances are the focus is also on the speaker the focus is on the personal

relationships of the parties involved. This is evident in low context cultures

with low power distances and more individualistic traits such as Western

cultures. Finally, Rosch (1987) considered affective and instrumental

communication styles. Rosch (1987) says that an affective verbal style appears

process orientated and receiver focused. This is evident in high context

cultures with a collective trait such as the Chinese culture. By contrast, an

instrumental verbal style tends to view language as goal orientated and sender

focused (Rosch 1987). A verbal communication style is indicative of the low

context more individualistic cultures such as the Western cultures.

2.5.3 Communication Interpretation

By understanding that Western and Chinese utilize different methods of

communication, it is understood why the process of communication and

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interpretation becomes misaligned between the two cultures. The effectiveness

of communication depends on how closely aligned the sender and receiver

meanings of the communication are (Putnam and Cheney 1995). If the

meanings assigned to the communication by the sender and the receiver are

different, then the communication process will not be effective. Table 4

illustrates the communication process as applied to Chinese and Western

cultures. Table 4, summarizes the work of Rosch (1987) and identifies that the

Chinese culture tends to verbally communicate on a more indirect, succinct,

contextual and affective platform than Western culture. By contrast, Western

culture has a tendency to focus on verbal communication directly in an

exacting, personal, and instrumental manner. The result may result in

miscommunication between the cultures due to cultural orientation.

Table 4 Chinese and Western Cultures Verbal Communication Styles

Chinese Culture Western Culture

Indirect Direct

Succinct Exacting

Contextual Personal

Affective Instrumental

Source: Adapted from Hodgetts and Luthans (2000) and Rosch (1987)

- 34 -

In terms of the communication process, these differences do not give rise to an

immediate trust sufficient to qualify as guanxi for the establishment of

business relationships in China (Luo 1997 and 2000). In order for Chinese and

Western organizations to establish trust, change is necessary in both the

delivery and interpretation of communication (Rogers and Roethlisberger

1991). In terms of the communication antecedents, these difficulties become

communication barriers. If these communication barriers cannot be overcome,

Tam, Coote and Forrest (2000) suggest that trust cannot be developed.

2.5.4 Communication Barriers

Ribbink (2002) considers there is benefit for organizations to understand the

barriers to communication. This assists to ensure that communication barriers

do not affect organizational performance. The more important communication

barriers according to Graham and Lam (2003) are those associated with

language, perceptions, culture, and non-verbal communication. These barriers

are considered in the following sections in terms of the potential effect on the

communication antecedents for establishing business relationships in China.

2.5.5 Language Barriers

A knowledge and understanding of a countries language is considered

important for organizations operating in foreign cultures (Gesteland 2002,

- 35 -

Graham and Lam 2003). While language education may be an advantage, the

ability to speak a foreign countries language does not guarantee success

(Graham and Lam 2003). Research indicates that written communication also

needs to be addressed (Gesteland 2002). Poor writing skills can prove a greater

barrier than poor language skills (Nichols, Stevens, Bartolome and Argys

1999). Similarly, translation problems need addressing as these also cause

language-understanding difficulties (Chaney and Martin 1995). An inability to

speak a foreign countries language is not necessarily a barrier (Luo 2000) as

with the assistance of interpreters this can be resolved.

2.5.6 Cultural Barriers

The concept of cultural barriers has been extensively considered in earlier

sections and is now considered given the effects of the different verbal

communication styles (Gesteland 2002, Hofstede 1980, 1991). Without an

understanding of the cultural orientation of both the sender and receiver of a

communication, misinterpretation of the communication and feedback will

occur (Gesteland 2002). Different emphasis and interpretation can be given to

different meanings and non-verbal components of a message communication

(Nichols, Stevens, Bartolome and Argys 1999). In terms of communication,

the cultural barriers that exist between a sender and receiver create “noise” that

- 36 -

distorts and distracts both the meaning of the communication and the

subsequent feedback (Daft 1999).

2.5.7 Perceptual Barriers

Gesteland (2002) defines perceptionas an individual’s view of reality. How an

individual sees reality can vary due to a number of factors and ultimately

influences interpretation and decision-making (Chaney and Martin 1995).

Cultural barriers and orientation often influence perceptual barriers (Daft

1999). Perceptual barriers are evident in communications that involve or

require individuals to “see” others (Nichols, Stevens, Bartolome and Argys

1999). An organizations cultural orientation and perceptions determine the

manner, in which it evaluates, judges and approves or disapproves ofanother’s

actions (Rogers and Roethlisberger 1991). One solution suggested to this

barrier is listening and understanding (Coggin, Coggin and Li 2000, Rogers

and Roethlisberger 1991).

2.5.8 Non-Verbal Communication Barriers

In any relationship, there are specific culturally determined non-

communication barriers that can affect the establishment of a business

relationship (Alexander 2001). Non-Verbal communication is defined as the

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transfer of meaning through means such as body language and physical space

(Gesteland 2002), and may include silence.

Table 5 Common Forms of Non-Verbal Communication

1 Hand gestures, intended and self directed (autistic)

2 Facial Expressions: smiles, frowns, yawns

3 Posture and stance

5 Interpersonal distance, special distance

6 Eye contact: direct gazing

7 Paralanguage: speech rate, pitch, volume,

8 Timing and pauses within verbal behavior

Source: Adapted from Hodgetts and Luthans (2000)

Table 5 lists some but not all, of the most important non-verbal barriers to

communication. The importance of each barrier differs from culture to culture

and situation to situation. An understanding of these non-verbal

communication facets can assist with the reduction of misinterpretation of

communications, and consequently assist in the development of trust that is

necessary for the establishment of business relationships in China (Alexander

2001, Chen 2001, Luo 1997 and 2000).

- 38 -

2.5.9 Communication Process Summary

Section 2.5 has reviewed the elements of the communication process that can

influence the transmission and receipt of communication. A number of barriers

to the communication process have been identified that cause “noise” (Daft

1999) and hinder the communication process. Section 2.6 will now examine

communication effectiveness and its role within the communication

antecedents for the establishment of business relationships in China.

2.6 Communication Effectiveness

In considering how the communication antecedents might be hindered

attention focuses on communicating within the Chinese business context.

Organizations can take a number of steps to improve communication

effectiveness in the Chinese business context (Alexander 2001, Chaney and

Martin 1995, Rosenbaum 2003). These include face-to-face, meetings,

telephone calls, and personalized email, all considered more effective in

communicating in the Chinese business context (Alexander 2001, Rosenbaum

2003). Daft (1999) suggests that individuals also need to listen actively, find

areas of interest with their counterparts, resist distractions, be responsive, and

judge the content not the delivery. To find an area of interest with ones

counterparty assists in the development of similarity, which is the foundation

for communication (Tam, Coote and Forrest 2000).

- 39 -

2.7 Requirements for Communication with the Chinese

The literature suggests that there are communication process differences

between Western and Chinese organizations. By understanding, these

organizations can communicate more effectively within the Chinese business

context for the establishment of business relationships (Alexander 2001).

Organizations that have ventured into China have discovered that living and

working in China is a unique experience (Coggin, Coggin and Li 2000). The

literature in this area is specific to business negotiations and generally over

looks the more complex business communication requirements for a business

relationship (Alexander 2001, Coggin, Coggin and Li 2000, Fang 1999, Luo

2000). The communication antecedents for establishing business relationships

in China require more than cultural sensitivity (Alexander 2001). It requires a

focused cultural sensitivity within the communication context with the goal of

increasing the communication senders and receivers abilities to respond. There

are a number of communication antecedents suggested by the literature,

considered in the following sections.

2.7.1 Personal Address

Western-based cultures adopt a more informal approach to business

relationships than do the Chinese (Luo 1997). A frequent error made by

- 40 -

Western organizations is the addressing of people by first names (Coggin,

Coggin and Li 2000). Western individuals see this as a sign of friendliness;

however, heavily influenced by Confucian beliefs, Chinese people prefer to

give consideration to the social status and age of the person they are

addressing (Coggin, Coggin and Li 2000). To show politeness and

demonstrate respect for someone who is senior in age or social status, the

administrative title plus family name is often preferred (Coggin, Coggin and Li

2000). It is impolite to use theperson’sfirst name in the address of a senior or

superior (Coggin, Coggin and Li 2000). It is safe to use first names when the

other party instructs you to use his or her first name (Coggin, Coggin and Li

2000).

2.7.2 Improved Listening Skills

The Western world has embraced the new technologies, particularly those

involving use of the internet, such as email, however most Chinese

organizations have not (Coggin, Coggin and Li 2000). The literature suggests

that the more senior in age and status the Chinese business associate, the less

likely he or she is to have access to or respond to email communications

(Coggin, Coggin and Li 2000). Many Chinese prefer to listen for hours on end.

The Chinese have developed attention spans, listen politely and comprehend

what is being said (Coggin, Coggin and Li 2000).

- 41 -

2.7.3 Remembering and Comprehension

As important as the ability to listen, is the ability to remember and the Chinese

are particularly good at remembering. Western organizations need to focus on

the ability to remember what is said, rather than what is thought said (Coggin,

Coggin and Li 2000). This ability to remember extends to the ability to

remember faces, names, places, dates and times, all considered part of respect

(Coggin, Coggin and Li 2000). Western organizations need to appreciate that

the Chinese not only remember what is said, but also understand what is said

in terms of their own cultural orientation (Coggin, Coggin and Li 2000).

2.7.4 Adherence to the Rules of English Grammar

The Chinese have learnt through listening, reading and remembering to follow

accepted authority (Coggin, Coggin and Li 2000). To the Chinese, the

accepted authorities of English usage are the authorities on grammar, books

and dictionaries (Coggin, Coggin and Li 2000). This may lead to challenges

for Western organizations, as there are variations of the English language from

country to country distorted through immigration and national usage.

2.7.5 TheConcept of “Face”

The Chinese are particular about when they will argue with people. This is not

done in public. In meetings the Chinese may be reluctant to express ideas or

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raise concerns directly (Coggin, Coggin and Li 2000). The general rule is

never to contradict another persons ideas, particularly that of an official, senior

or superior. Contradiction is considered a threat to position which amounts to a

personal attack (Coggin, Coggin and Li 2000). This concept becomes difficult

when consideration is given to the idea that even commenting, questioning or

seeking explanation for understanding, can be seen as causing a person lose

“face”(Coggin, Coggin and Li 2000). This Chinese rulecause’sdifficulty for

Western organizations where people in power and position are often

accustomed to being questioned, challenged and commented upon (Coggin,

Coggin and Li 2000).

2.7.6 Communication Exactness

In China, use of general words, even in relation to instructions has developed

over centuries even though the Chinese appreciate receiving specific

instructions (Coggin, Coggin and Li 2000). It is the result of wanting to avoid

trouble or responsibility (a high uncertainty avoidance, in Hofstead terms), and

continues to be found even in situations requiring a high level of exactness

(Coggin, Coggin and Li 2000). Requesting clarification of exactness is not

appropriate as this might cause embarrassment if the receiver does not know

the true level of exactness (Coggin, Coggin and Li 2000).

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2.8 Trust, Relationships and Communication

Having considered the principle communication antecedents, attention now

focuses on the concept of trust and the establishment of business relationships

in China. The literature indicates that in order to develop a business

relationship in China, it is necessary for the parties to develop a level of trust

sufficient to establish and maintain such relationship (Tam, Coote and Forrest

2000). The key antecedent in establishing trust is communication (Ward and

Smith 2003). Developing the correct communication style and protocol is of

importance to the overall establishment of a business relationship in China

(Cochran 2000). So is the development of mutual trust (Ward and Smith

2003). The lack of trust remains the utmost inhibitor to the establishment of

relationships in China (GUV 1997, Liu, Dixon and Lee 2000).

In the Chinese business context as a belief about an exchange partner’s

trustworthiness that results in that exchange partner’sexpertise, reliability or

internationality defines trust (Liu, Dixon and Lee 2000). Trust is the

foundation of good business behavior and is directly related to the cooperative

behavior that is seen as conductive to the success of a relationship (Wong

1998). The building trust in the Chinese business context involves frequent

face-to-face contact (Liu, Dixon and Lee 2000). Research by Jarvenpaa (1998)

concluded that individuals from collectivist-based cultures are more likely to

- 44 -

rely on face-to-face contacts when seeking to eliminate uncertainty. According

to the general principals of Confucianism, the evaluation of a partner’s past

and present behavior is a pre-requisite to building trust (Liu, Dixon and Lee

2000). This evaluation is based on frequent face-to-face contact (Liu, Dixon

and Lee 2000). According to Leung, Wong and Wong (1993), trust can only

be engendered when partners have the ability to observe each other’s

behaviors across a wide variety of situations and over a period.

Tam, Coote and Forrest (2000) identified potential communication antecedents

for the establishment of business relationships in China. Their study focused

on 152 Chinese business relationships and examined the effect of conflict,

communication, trust and similarity in the establishment and maintenance of

such relationships. It is clear that Chinese organizations focus on longer-term

goals and benefits, rather than on short run profitability (Seagrave 1995). It is

also clear that a longer-term orientation can only exist when the parties to the

relationship focus on the long run goals and mutually recognize the

interdependence of the long-term outcomes (Ganesan 1994). In contrast to

their Chinese counterparts, most Western organizations focus on the short-

term maximization of returns from an individual transaction (Tam, Coote and

Forrest 2000). With such polarized orientations, it is possible that Chinese and

Western organizations will never be able to develop interlinked relationships

that match true Chinese business relationships.

- 45 -

Figure 3 illustrates the nature and inter-relationship of the factors contributing

to the establishment of Chinese business relationships.

Figure 3 Chinese Business Model

Source: Adapted from Tam, Coote and Forrest (2000)

The key factor that emerging from the literature is the need to develop trust.

Figure 3 illustrates the importance in the establishment of longer-term

relationships of mutual trust and sound communication lines. These assist to

minimize conflict as a relationship destroyer. Tam, Coote and Forrest (2000)

suggest that in order to establish a longer-term business relationship in China,

Conflict

Communication

Similarity Trust

Long TermOrientation

- 46 -

you need trust, communication and an absence of conflict. Figure 3 illustrates

that conflict is avoided through the development of trust and communication.

Also illustrated is that the concept of trust itself is developed through

communication, and that communication is developed through similarity

between the parties. Trust, which is a basis of all Chinese business

relationships (Luo 2000), appears to be developed and influenced by both

communication and similarity, which supports the suggestion that

communication is assisted by similarity. If similarity in this context means

cultural similarity, then Hofstede (1980, 1991) and Hofstede and Bond (1988)

indicate that such similarity will never exist as between Chinese and Western

organizations. Tam, Coote and Forrest (2000) and other authors (Chen 2000,

Luo 2000, Rosch 1987) do not qualify whether the similarity for establishing

communication can be developed on a basis other than cultural similarity, such

as business goal similarity. In this respect, Rosenbaum (2003) suggests that

organizations need to understand their counterparty’s expectations, and

establish common ground, in order to develop business relationships.

2.9 Communication and Relationships

The relationship between communication and establishing business

relationships in China is considered. In all organizational communication

networks, the flow of information between groups for the establishment of

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business relationships is constant and necessary (Monge and Contractor 1998).

The mechanisms that help explain the creation, maintenance and dissolution of

these complex organizational networks largely difficult to understand (Monge

and Contractor 1998), but necessary if an overall understanding of business

relationships in China is to be achieved (Cochran 2000).

In terms of communication networks within Chinese business relationships,

each individual and each organization plays a role within the communication

relationship. The type of network and communication linkage(s) that exist

between organizations and the type of communication and network

relationship(s) that exists largely determine the success of the network

relationship (Monge and Contractor 1998). In Chinese business relationships,

there does not appear any evidence that such relationships ever dissolve. They

appear to enter a dormant phase and later revive when needed. This differs

considerably from the Western business perspective where business

relationships are generally short term, one off profitability exercises, dissolved

at conclusion and reborn for a “new” business relationship later required.

By understanding communication networks, a further understanding of the

Chinese business relationship is gained. Such relationships are viewed in terms

of indirect links, frequent communication, stability, multiplicity, strength,

direction, and symmetry (Cochran 2000, Monge and Contractor 1998). While

- 48 -

the actual networks can be viewed in terms of size, inclusiveness, components,

connectivity, density, centralization, symmetry and transitivity (Monge and

Contractor 1998), it is evident are that these factors that demonstrate

communication and business relationships are highly complex and continually

changing. (Cochran 2000, Luo 2000).

2.10 Summary

The literature suggests that the establishment of business relationships in

China is both complex and involved. Even more so is the development and

maintenance of communication networks. The establishment of business

relationships in China is based on communication. Without communication,

trust cannot be built and without trust, business relationships or guanxi cannot

develop.

Business relationships in China link entrepreneurs across the Asia Pacific

region in an interlinked business and social network (Luo 1997). It is clear that

business relationships in China possess a wealth of political, social, and

business influence within the Asia pacific region (Seagrave 1995). It is argued

that no business within the Asia Pacific region is able to maximize its potential

without involvement within a Chinese business relationship (Tam, Coote and

Forrest 2000). Guanxi and networks affect managers’ strategic choices, and

influence the overall performance of an organization (Luo 2000). The

- 49 -

literature on guanxi finds that these network relationships are a strategic

mechanism to assist an organization to overcome organizational competitive

and resource failings, by encouraging cooperation and exchange of favors with

other competitors and government authorities (Luo 2000).

Organizational communication is affected by the uniqueness of the

organizations communication channels and the organizational communication

climate (Putnam and Cheney 1995). The superior subordinate relationship

within a Chinese organization as distinct to the same relationship within a

Western organization can add to communication “noise” when the two

cultures meet.

Chinese organizations place less emphasis on short-term outcomes than

Western organizations (Buttery and Leung 1998, Xin and Pearce 1996). The

longer-term orientation and nature of a Chinese business relationship is able to

capture the extent to which Chinese organizations desire to maintain a

relationship despite short-term sacrifices (Tam, Coote and Forrest 2000). In

contrast Western organizations focus on short-term profitability. This does not

mean that Chinese organizations do not focus on profitability; however, the

focus of Chinese organizations is on the longer-term benefits as well as

profitability.

- 50 -

Western organizations can gain an advantage over competitors by developing

and maintaining their own guanxi network in China (Luo 2000). Knowing

how to develop, maintain and reinforce guanxi relations is vital for any

organization in China (Luo 2000). This process involves integration of

individual guanxi into an organizational guanxi web (Luo 2000). The literature

suggests that many Western organizations fail to understand that guanxi

involves constant monitoring both within the organization itself as well as the

external guanxi in a constant drive to improve an organizations social and

business credibility (Luo 2000).

2.11 Conclusions

The literature reviewed has identified a number of communication antecedents

that appear to contribute in a complex matrix to the establishment of business

relationships in China. A discussion of these follows.

Work undertaken by Geert Hofstede (1980) suggests that there are cultural

differences underpinning the both Chinese and Western cultures which in turn

impacts the nature of business relationships between these two groups. This

work viewed in association with that of Gesteland (2002), Hodgetts and

Luthans (2000), and Scheins (1985) establishes a base for understanding some

of the communication barriers that may exist between Chinese and Western

organizations. Nichols, Stevens, Bartolome, and Argys (1999) identified

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cultural orientation is a communication barrier. As such, the literature suggests

that the first communication antecedent critical to the establishment of

business relationships in China is a base understanding that cultural

differences exist.

Secondly, Tam, Coote and Forrest (2000) indicate that the basis of Chinese

business relationships is mutual trust and respect. Tam, Coote and Forrest

(2000) also suggest that the basis for building trust and respect is good

communication. A precondition to building good communication appears from

their research to be a basis of similarity. A second communication antecedent

is one of trust and similarity.

Thirdly, language is identified as a potential communication barrier through

research of Graham and Lam (2003). In terms of language, it is important to

examine the spoken as well as the non-spoken aspects of language and how

the differences from Graham and Lam (2003) work are managed by Western

organizations. Language as a communication antecedent to the establishment

of business relationships in China is important to examine because it forms the

basis of the communication process.

Fourthly, an understanding of basic Chinese communication requirements, as

identified by Coggin, Coggin and Li (2000) and Chen (2001) is beneficial. It is

important to have an appreciation for the use of personal titles in address. The

- 52 -

fourth communication antecedent examined is the use of personal titles in

addressing Chinese business counterparts.

Fifthly,Coggin, Coggin and Li’s (2000) work, examined the role that listening

plays in the communication process and the use of words and the context in

which those words are used, particularly as far as that context relates to use of

the English language. Words, terms, phrases all can have different meanings in

different situational contexts. The fifth communication antecedent looks at the

peripheral aspects of communication in terms of listening and language use as

they relates to the delivery and receipt of communication.

The sixth antecedent examines the actual communication network. This

examines how communication is effected to establish business relationships in

China. This seeks to examine the importance of understanding the

communication network linkage and the effect on the communication process

in the establishment of business relationships in China. The sixth

communication antecedent looks at the “how”aspect of establishing business

relationships and how trust and mutual respect and similarity are built.

In the forthcoming chapters, these antecedents will be verified as they relate to

the experiences of New Zealand organizations in the Chinese business

environment. Chapter 3 outlines the methodology adopted for identifying and

verifying the communication antecedents, while Chapter 4 provide analysis of

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the data collected through the verification process. In concluding, Chapter 5

reviews the findings, provides recommendations for further research, and

outlines the limitations of the research undertaken.

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C h a p t e r 3

METHODOLOGY

3.0 Research Objective

In Chapter 2, key communication antecedents are identified for the

establishment of business relationships in China. This chapter will outline the

methodology adopted to verify the communication antecedents identified from

the literature, as those antecedents relate to the experiences of New Zealand

organizations in establishing business relationships in China.

By looking at how New Zealand organizations approach the establishment of

business relationships in China, it is considered that the key communication

antecedents identified will be verified. An implicit assumption is the

proposition that management of the key communication antecedents is

necessary for the establishment of business relationships in China. The

purpose of the further research is to verify the following:

1. Whether organizations have a general understanding and appreciation of

the cultural differences between the Chinese and their own cultural

orientation,

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2. How organizations look to create some form of similarity in order to assist

the communication process and the development of trust for establishing

business relationships in China,

3. How organizations overcome the language barriers and ensure that the

communication process is not hindered by other barriers,

4. Whether organizations have an appreciation for the particular aspects of

Chinese communication such as use of title in address,

5. How organizations ensure that the meaning of a communication

transmission is effected and that both parties to a communication

transmission attach the same meaning and interpretation to the

communication, and

6. Whether organizations understand the aspects of Chinese communication

networks in the establishment of business relationships in China.

The objective of this study is only to ascertain what the communication

antecedents are that influenced the establishment of business relationships in

China, and to verify whether those communication antecedents are recognized,

acknowledged and utilized by New Zealand organizations, in the

establishment of their own business relationships in China. Section 3.1

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provides and overview of the research process adopted, while Section 3.2

explains the research design.

3.1 Research Process Overview

The scope of this study focused on a review of New Zealand based

organizations, by way of exploratory interviews, literature review,

observational study, and sample survey. The review was not limited to

organizations that had continued to operate within the Chinese market. It

extended to organizations, which had exited the Chinese market. The research

process included the collection of primary data by way of exploratory

interviews, a direct observational study conducted within the Auckland based

organization within which the writer is employed, and a sample survey of New

Zealand organizations identified as having entered or intended to enter and

establish business relationships within China. Secondary research data was

collected from literature sources.

Exploratory research was conducted to gather primary data from the New

Zealand Chamber of Commerce, China Trade Association on the experiences

of New Zealand organizations establishing business relationships in China.

Additional primary research was undertaken by way of observational study

and informal interviews with the senior management of the organization

within which the writer is employed. Verifying primary research was

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undertaken by way of a sample survey of New Zealand organizations known

to have entered the Chinese business environment. These organizations were

identified with the assistance of the New Zealand Chamber of Commerce.

This review provided additional primary data to support the primary data

collected from the exploratory interviews and the secondary data from the

literature review.

The observational study and sample survey questions were developed based

on the data gathered from the exploratory interviews with the New Zealand

Chamber of Commerce, and from secondary source data from a review of

literature sources. The secondary research data was gathered from a variety of

literature works published in relation to organizations that had entered the

Chinese business environment, and on the topics of communication, culture,

and Chinese business relationships, including extensive studies of a number of

organizations reviewed by Chen (2001), Cochran (2000), and Whitely (2000).

Finally, data was collated and analyzed. This evidenced that there was a

relationship between the communication antecedents identified, and the

establishment of business relationships in China.

Through the literature review and exploratory research interviews that took

place, the research problem, the subject of this study, was identified and the

unit(s) of analysis and related variables identified. This was considered an

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appropriate procedure for identifying the problem, due to the limited literature

in this area, and the limited reported experiences of Western organizations in

entering the Chinese business environment (Zikmund 2000).

3.2 Research Design

A review of literature on research methodology and design (Tam, Coote and

Forrest (2000), Whitely (2000), Zikmund 2000) provided the approach

adopted for this study. Once the research problem was identified, attention

focused on the basic research design. Consideration was given to the types of

questions to be answered, what was required, in terms of descriptive or casual

finings, and the sources of data. A review was conducted to determine whether

the research objective should be answered by asking people, and to ascertain

the period for gathering the required information. Finally, research was

conducted to ascertain the wording of surveys and interviews, and application

was made for University of Auckland Ethics Committee approval. Approval

was granted under reference number 2003/332.

Identification of the research process assisted in the determination that primary

data would be best gathered by initially undertaking exploratory interviews

with professional organizations such as the New Zealand Chamber of

Commerce, in order to gain a broad overview of industry known problems

with communication and the establishment of business relationships in China

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by New Zealand organizations. Following this, the collection of secondary

data from literature sources identified the research problem and possible

solutions. In order to verify the primary and secondary data collected through

these processes, further primary data collection was undertaken by way of

direct observation of company employees and clients within a New Zealand

based company operating in Shanghai, China. Company consent was first

obtained, as was approval from the University of Auckland Ethics Committee.

Finally, consideration was given to identification of additional primary data by

an appropriate method such as a sample survey of other New Zealand

organizations that had entered China within the previous twelve (12) month

period, or who intended to operate within China during the next twelve (12)

month period. The purpose was to verify whether the data collected from the

observational study and the literature sources was reflective of New Zealand

organizations is general.

For the purposes of the sample survey of New Zealand organizations,

identification of an appropriate respondent database was undertaken. A

decision was made following an invitation from the President of the New

Zealand Chamber of Commerce–China Trade Association, to utilize the New

Zealand Chamber of Commerce’sdatabase, which is a free public access

database that categorizes its members into geographic business regions for

statistical and networking purposes. This data base was selected and utilized

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due to the ability to be able to rely on the accuracy of information maintained

by the database owner, in this case the New Zealand Chamber of Commerce.

The sample survey questions were designed, reviewed and pre tested, prior to

submission to the University of Auckland Ethics Committee for approval. An

initial pilot test was then conducted within the same New Zealand based

company that the observational research took place, in order to ascertain any

potential errors. The sample survey was distributed by email and post to 74

identified New Zealand Chamber of Commerce members that had indicated in

their member profiles an interest in business in China.

Following collection of the primary data, analysis and evaluation was

undertaken. Editing and coding of variables was based primarily on the

identified communication antecedents, size of organizations, and length of

time business had been conducted in China, use of networks, and use of

introduction parties. A brief overview of each of the principal methods of data

collection will now be outlined.

3.2.1 Initial Exploratory Interviews

Two initial exploratory interviews took place. The organizations interviewed

were the New Zealand Chamber of Commerce and the University of Hong

Kong, Department of Finance and Economics, both of which had collected

their own data over a number of years with respect to Western organizations

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attempting to establish business relationships within Mainland China. Data

collected from these interviews was recorded in handwritten notes for analysis

later and crosschecked with the interviewees.

3.2.2 Secondary Data Collection

Following the exploratory interviews, secondary data was collected throughout

the literature review process. Secondary data was collected from authorative

textbook authors on the topics of cross cultural issues, communication, and

Chinese business networks. Additional sources of secondary data included

research articles and journals on topics of communication, Chinese business

relationships, cultural orientation. Other Masters and PHD research projects

from Australian, New Zealand, American and Hong Kong Universities on the

topics of Chinese communication techniques, Chinese business relationships

were also reviewed.

The purpose of the secondary data collection was primarily fact-finding

(Zikmund 2000), for assisting with the identification of the research problem

and the research design of both the observational study, and the New Zealand

organizational sample survey. The secondary data collection process was

evolutionary in nature in that question and problem continually evolved

throughout the secondary data collection process until the point that the

research problem and possible solutions were identified.

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3.2.3 The Observational Study

An observational study was undertaken within the New Zealand Company in

which the writer is employed, following approval from the University of

Auckland Ethics Committee as to the objectives of the observation undertaken.

This part of the study was undertaken as formulated research with the purpose

to verify elements of the exploratory interviews and the literature review

(Morrel-Samuels 2002, Zikmund 2000). The literature reviewed on

observational studies (Zikmund 2000) indicated that for the purposes of this

study an observational study was an appropriate source of primary data

collection due to thewriter’spersonal knowledge of and relationship with the

participants and the environment in which the observational study was

undertaken. The observational study was conducted within a corporate office

setting and as such a controlled working environment. Additionally, the nature

of the observational study was one in which social behavior; frequency and

duration of activities were being observed and recorded.

University of Auckland Ethics Committee approval for the observational

study, and company employee participant consent was obtained. In the case of

the company employee participant consent, this was obtained at a corporate

level from the company Group CEO, and at a personal level from the

employee participants being observed. There were 6 company employees

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being observed for this part of the study. No electronic recording of

participants or activities took place, due to privacy issues raised to the study at

the corporate level. The observational study was systematically planned to

cover the six key communication antecedents outlined in section 3.0 and

observations were systematically recorded and entered into an Excel

spreadsheet for analysis. The results of the observations were crosschecked

and verified with the company personnel being observed for accuracy as

matter of prudence (Morrel-Samuels 2002).

The observational study sought to gather primary data in relation to use by

company employees of telephone, facsimile, email, written correspondence,

and teleconference facilities in their dealing with counterparties in China, and

the primary language used by company employees (i.e. English or Chinese) in

their dealings with counterparties in China. The study also sought to identify

whether company employees used titles in address to counterparties in China

and what methods (if any) of reinforcement of communications took place to

ensure that counterparties in China understood what was required. The

observational study focused on identifying the cultural mix of employees and

their roles in terms of the creation of similarity with Chinese counterparts, and

the overall approach of the company to the building of relationships with

Chinese counterparties.

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3.2.4 The Sample Survey

The sample survey was conducted to verify the data collected from the initial

exploratory interviews, the secondary literature based data and the

observational survey data. The sample survey was conducted by way of

questionnaire designed to reflect that a cross sectional study was being

undertaken nationwide, at a set point in time (Zikmund 2000). The purpose of

this was to obtain a broad overview of the general approach of New Zealand

organizations to establishing business relationships in China.

Some elements of the sample survey questionnaire could be classified as

longitudinal, in that respondents were asked questions with time ranges from

the present to the past and future twelve-month periods. The sample survey

questions were designed on a simple attitude-scaling basis, or a yes or no

answer basis, as well as a category-scaling basis consisting of several response

categories providing the respondents with alternative rankings. Assistance in

the design of the sample survey questionnaire was gained from a review of

prior work and surveys undertaken by a number of authors (Morrel-Samuels

2002, Tang, Lai, Zhu and Quan 1996, Whitely 2000). A number of behavioral

intention or expectation questions were included to summarize respondent

overall positions.

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The sample survey questionnaires were distributed by email and direct mail to

74 identified New Zealand organizations who were all members of the New

Zealand Chamber of Commerce, and who in their profiles had indicated that

they had, or were intending to undertake business in China. 11 invited

participants responded to the sample survey, representing a 14.86% response

rate. Non-response rates are always a problem and this will be examined

further in Chapter 5 under “Research Limitations”.

In developing the sample survey questionnaire (Appendix 1), it was

determined that in order to receive the greatest number of direct and accurate

responses (Morrel-Samuels 2002) that a structured question format would be

adopted, limiting the number of variable answers respondents could give. The

majority of the sample survey questions were designed to be undisguised and

straightforward. A number of disguised questions were included for cross

checkingrespondent’sprior answers and to ensure that respondents could not

try to “guess” the answer required.Questions were designed for relevance and

pre-tested for accuracy (Morrel-Samuels 2002). No open-ended questions

were included. The language of the sample survey questions was kept simple

and did not carry any double-barreled question items (Zikmund 2000). All

questions related to only a single issue. Filter questions were initially asked to

identify the type of category a respondent company came from, followed by

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specific questions on communication preferences, business networks, practices

and satisfaction.

The sample survey questionnaire is divided into 4 specific data collection

sections. Section 1 gathers generic data about respondent companies such as

size, industry, turnover, employee numbers, and ownership. The ownership

question is aimed at identifying whether cultural similarity exists.

Section 2 reviews organizational intention for the establishment of business

relationships in China. The questions in this section are aimed at identifying

survey respondent’sentry into the China market. These questions assist in

identifying the level of organizational knowledge that an organization has

about the establishment of business relationships in China.

Section 3 is the main data collection section of the questionnaire. This section

aimed to collect specific data concerting organizational interaction in the

China market. Survey respondents were questioned regarding amount and type

of contact within the China market, the frequency of these interactions and the

type of interactions be it social or business. The organizational level at which

these interactions took place and the ethnic origin of the primary contact

person within the organization were questioned. This section focuses on the

use of titles by organizations and the methods of ensuring communication

effectiveness are achieved.

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Section 4 attempted to collect data concerning an organizations purely

subjective view of its activities in China, and the organizations intention for

the forthcoming 12 months. The purpose was to identify the organizations

commitment to establishing business relationships in China and whether the

organization acknowledged that the establishment of such relationships is

longer term and not solely profit focused. The nature of this section required

subjective analysis on the part of the survey respondent.

3.3 Summary

This chapter has outlined the process and rational for the methodology adopted

in the collection of data for this study. This process involved exploration,

verification, further exploration and final verification of data identified as

relevant to the research problem.

Through this process of exploration and verification, the research problem was

defined and solutions identified. Data collected from the research process was

systematically recorded for further use and analyzed though the use of Excel

spreadsheets. The results of the exploratory interviews, the observational study

and the sample survey are discussed in the following Chapter.

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C h a p t e r 4

DATA ANALYSIS

4.0 Introduction

Chapter 2 identified 6 key communication antecedents for the establishment of

business relationships in China. These deal with areas of cultural difference,

similarity and trust, language barriers, communication requirements,

communication transmission and business network development. The data

collected from the exploratory interviews, the observational study and the

sample survey will be analyzed with respect to each of these antecedents. The

data collected from these primary sources generally supports the literature

perspectives as related to the 6 identified communication antecedents for the

establishment of business relationships in China.

4.1 Cultural Difference

The data gathered from the New Zealand Chamber of Commerce and the

University of Hong Kong, Department of Finance and Economics from the

exploratory interviews is essentially similar in terms of content. Both

organizations viewed that the key problems with Western organizations

establishing business relationships in China is a general lack of cultural

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awareness of the cultural and communication differences that existed between

Western and Chinese cultures.

4.2 Similarity and Trust Building

It was evident from the observational study and the sample survey that New

Zealand organizations did not generally consider the issue of similarity. The

respondent organizations of the sample survey considered that the contractual

relationship was of primary importance. It was because of the contractual

relationship that they felt trust could be based.

This evidences data provided by the New Zealand Chamber of Commerce in

the exploratory interviews. The Chamber expressed concern that New Zealand

organizations did not generally appreciate the nature or need for trust in

establishing business relationships in China.

4.3 Language Barriers

While difficulties associated with language is an issue, it is generally

considered that this is not a paramount communication problem, albeit, one

that could greatly aid in reducing communication barriers. The New Zealand

Chamber of Commerce considered that from a New Zealand perspective, New

Zealand organizations had a “business arrogance” that dictated that business

must be conducted their way and in their language.

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By contrast, from the observational study, the language most commonly

spoken within the Auckland office of the company observed, when dealing

with its Shanghai office and company clients was Mandarin. Mandarin was

spoken on average 85% of the time during the observational periods and

English spoken the rest of the time. The language always spoken within the

companies Shanghai office was Mandarin. Other than the Group CEO, who

was Western by cultural decent, the other employees observed of a Chinese

cultural decent spoke Chinese in their business and social related

conversations in some 85% of the time during the day. English was generally

only spoken when dealing with a native English speaker. Native English

speaking employees who did not also speak Mandarin, never dealt with either

the Shanghai office employees or clients. The perception was that non-

Mandarin speaking employees in the Auckland office were disadvantaged and

limited at times in the extent to which they could participate in company work

projects due to language barriers. This was most evident within the company’s

Corporate Banking division, which was dominated by work from Shanghai.

In the sample survey, conversations directly in English were not considered

essential with only 18.18% of respondents stating that discussions in English

or written communications in English are important to them. Of a higher

importance is speaking to their Chinese business partners directly (36.36%)

irrespective of whether an interpreter was used, which was in 90.91% of cases.

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4.4 Communication Protocols

In the exploratory interviews, the New Zealand Chamber of Commerce and

the University of Hong Kong, Department of Finance and Economics

expressed views that they considered Western organizations had a general lack

of understanding of Chinese business protocols. Both organizations also

considered that the general lack of appreciation for Chinese business

relationships and Chinese communication networks were interlinked.

The company the subject of the observational study had strict policies in terms

of addressing clients and associates. In addressing clients and senior

employees within the Shanghai office, titles such as Mr., Mrs., and Dr. were

always used. Interestingly, titles were rarely if at all used within the Auckland

office between employees. Of note was that the Group CEO was always

referred to by his first name, by all employees in both Auckland and Shanghai,

however, senior Shanghai employees were always referred to by title, even by

the Group CEO. The use of titles with clients was dispensed with upon the

client requesting the use of their first name.

In terms of China business experiences the sample survey indicated that

36.36% of respondents felt that an understanding of the Chinese business

practices is the single largest barrier to business relationships, while 27.27%

felt that it is always difficult to conclude a “deal” in China. Surprisingly only

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9.09% found language a business barrier. 18.18% found that they were

generally unable to reach a contractual agreement with their Chinese business

partner, and 9.09% considered that the Chinese always changed their minds

too much during the negotiation process. New Zealand businesses

predominately conducted business in China through some form of strategic

alliance or joint venture (63.64% and 9.09% respectively), with establishing a

wholly owned subsidiary as the least favored method (36.36%).

Further, of the responding participants, 63.64% recognized the importance of

Chairman or Owner to Chairman or Owner interaction. The same percentage

also recognized the importance of Director interaction. Nearly 1/3 of those

responding did not recognize the importance of these interactions, rating the

interactions at a senior level as average to low in terms of importance. This

may be because the ethnic origins of those personnel within the New Zealand

respondent organizations interacting with Chinese business partners were

predominantly New Zealand European (81.82%). Only 36.36% of respondents

had Chinese personnel who interacted with their Chinese business partners.

The high percentage of New Zealand European personal interacting with

Chinese business partners may account for the equally high response rate that

senior level interaction was not particularly important. This may be due to the

cultural orientation of New Zealand European personal as discussed in Chapter

2. When dealing with their Chinese business partners, 100% of respondents

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always used some form of title when addressing their Chinese business

partner.

4.5 Communication Transmission

From the exploratory interviews, the New Zealand Chamber of Commerce and

the University of Hong Kong, Department of Finance and Economics

indicated that they considered that there is a general lack of understanding or

appreciation by Western organizations of how to communicate effectively in

China and establish business relationships.

In the observational study, the company’s clients were generally Chinese. All

discussions with clients were initially by way of face-to-face meetings, without

exception, 100% of the time. These meetings took place in either the clients

home city or in the Auckland office and progressed through a series of social

lunch or dinner based meetings to more business orientate meetings from

which work would eventually be obtained. Follow up discussions with clients

were by way of personal direct telephone calls, letters, facsimiles or emails.

The sample survey respondents provided remarkable data in this area. 81.82%

of respondents stated that they tried to meet face to face with their Chinese

business partners as often as they could, albeit the number of times these types

of meeting took placed was not disclosed. 72.73% of respondents recognized

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that face-to-face contact was important to their business relationships while

100% kept in contact on a regular basis by way of email contact. Only 36.36%

preferred to use the telephone as a means of communication, perhaps

recognizing the difficulties with language, while 18.18% favored written

communications such as letters or facsimile and 18.18% favored some form of

audiovisual teleconference facility. However, despite recognizing, the

importance of these methods of communications, on a weekly basis contact by

facsimile was the most popular (54.45%) followed by email communication

(45.45%) and then face to face contact and telephone contact being utilized

36.36% of the time. However, 72.73% of respondents had face-to-face contact

with their Chinese business partners at least once a quarter, while 45.45%

spoke to their Chinese business partners at least once a month directly by

telephone.

4.6 Business Network Development

The New Zealand Chamber of Commerce indicated that one of the main

barriers to establishing business relationships in China was the general process

focus by New Zealand organizations as compared to the transaction focus of

their Chinese counterparts. New Zealand organizations were considered to

focus more on process and profit than on the actual relationship itself. As such,

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New Zealand organizations had a shorter-term focus on business network

development than did their Chinese counterparts.

In the observational study, relationships with clients were observed to be

developed over extended periods. Periods of 9 months to 2 years, were

considered normal to facilitate the development of an understanding between

the company and the client as to the clients needs and requirements. During

that period, the client would be assigned a personal client representative

manager within the Auckland and Shanghai offices. This person would be the

primary contact point for the client on all of the client’s dealings with the

company. Meetings would be arranged with the client in the client’s home

city. These meetings would be attended by either the client’s personal

representative manager and or the Group CEO. Initial meetings were of a

social nature, usually lunch, dinner, drinks, or coffee during which time the

company services and capabilities were outlined to the client in a relaxed

atmosphere. As the relationship developed, the client would then be brought to

the Auckland office of the company, the expenses paid for by the company,

and more formal business orientated meetings entered into. Senior Auckland

employees made trips to the Shanghai office on a regular basis. Trips were

generally made for 2 - 3 week periods once a month by at least one Auckland

based employee.

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The sample survey provided additional data. All participants that responded to

the sample survey had conducted some form of business in China over the

previous 12-month period. However, only 63.64% were presently conducting

some form of business in China, with 9.09% of those responding stating that

they did not intend to conduct business in China again. Of those responding,

54.55% had conducted business in China for between 2–5 years with 45.45%

having conducted business in China for 5 years or more. Interestingly, 63.64%

of survey respondents felt that conducting business in China was essentially

identical to conducting business in New Zealand. Given the periods of time the

survey respondents had been conducting business in China, this response is

somewhat surprising. Only 27.27% of respondents recognized that conducting

business in China is not at all similar to conducting business in New Zealand.

Reflecting the continuing change of the Chinese business environment, 100%

of respondents viewed their Chinese business relationship as purely

contractual, while recognizing that there was a social component to that. Only

27.27% of respondents viewed their Chinese business relationship as purely

business orientated. Over 1/3 of respondents recognized the importance of

social interaction by way of meals, golf, other entertainment activities or

general social visits to each partners offices.

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90.91% of respondents reported that their business relationships in China have

been financially profitable for them over the last 12 months. However,

“financially profitable” is not defined and does not necessarily equate to cash

flow in the current reporting period. All respondents reported that their

Chinese operations had performed better than budget. Finally, over the next 12

months, 63.64% of respondents reported that they would be continuing to do

business in China, with 9.09% stating that they would be actively seeking new

business sources and 27.27% looking to improve their existing business

relationships. Of those organizations that responded, one organization

provided an additional comment that it felt that its operation was particularly

reliant on Chinese speaking employees in both China and New Zealand in

order to manage its business relationships.

4.7 Summary

It is evident from the primary data that no one single communication

antecedent can be viewed as sole key antecedent in the establishment of

business relationships in China. Whether business relationships in China are

developed appears to be the results of a combination of the communication

antecedents that result in the creation of mutual trust and respect between

parties, and an overall general understanding of each parties expectations and

capabilities.

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The results of exploratory interviews, the observational survey and the sample

survey generally confirmed the information gathered from the literature review

in terms of the communication antecedents for the establishment of business

relationships in China. It is evident that the establishment of business

relationships in China takes time. While some understanding of the Chinese

language is an advantage, it is not as great a barrier as what might be expected,

or reported through the literature review. That being said, there is a high

reliance on interpreters by organizations that do not have native Chinese

speaking employees. An appreciation for the formality of the Chinese business

relationship is evident from not only the literature review, but also from the

information gathered from both the observational and sample surveys. The two

surveys demonstrated the importance of the use of titles, respect, and an

appreciation for the importance of position. New Zealand organizations

recognize the importance of face-to-face meetings or at least direct speaking

contact in some form with Chinese business partners, however appear to pay

little regard to this in practice.

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C h a p t e r 5

CONCLUSIONS AND RECOMMENDATIONS

5.0 Conclusions

The exploratory interviews conducted with the New Zealand Chamber of

Commerce and academics from Hong Kong University indicated that the

difficulties experienced by most Western organizations in attempting to

establish business relationships in China, involved poor communication and a

general lack of understanding of Chinese communication protocols. The

literature reviewed concluded and supported the comments of these

organizations. The literature identified that the foundation for these difficulties

appeared to be the basic cultural differences that exist between Western and

Chinese culture.

From the literature the individualistic, egalitarian, argumentative and

information orientated Western cultures such as New Zealand tend to favor the

more direct and exacting communication styles. By contrast the collectivist,

hierarchical, circular, and relationship orientated Chinese culture, requires a

more indirect and succinct communication style. These differences have a long

embedded historical development in both cultures. In turn, this has given rise

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to developments over time in the perceptions developed by each culture of the

other. These perceptions have a long seeded embodiment in the social and

business related norms of each culture, and in turn influence each cultures

interpretation of and communication with the other.

The literature established that in order to understand the communication

antecedents for the establishment of business relationships in China, is

essential to understand what communication is and how it takes place with

respect to the impact of cultural difference. Cultural difference affects the

encoding and decoding processes involved with communication and also the

manner and medium of exchange. Together with the cultural barriers and the

unique non-verbal barriers that exist within each culture the potential for

failure of the communication process is multiplied.

This study considered what constituted a business relationship in China. The

exploratory interviews indicated this is an area where New Zealand and other

Western organizations failed to appreciate the uniqueness of the Chinese

business environment, and the importance of concepts such as trust and the

development of close relationships. The concept of guanxi was reviewed and

from the supporting literature, it is evident that any form of business

relationship in China can only be established if there is development of mutual

trust and respect between the parties. The development of trust and mutual

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respect is the foundation for establishing business relationships in China. The

literature indicated that the communication process is affected by the degree of

similarity between the parties. It is evident from the literature that the concepts

of culture, trust and communication are so entrenched in the process of

establishing business relationships in China, that a lack of appreciation of

these issues influences an organizations ability to establish a business

relationship in China.

Finally, the literature identified that there are 6 key communication based

antecedents, which affect the establishment of business relationships in China.

These deal with areas of cultural difference, similarity and trust, language

barriers, communication requirements, communication transmission and

business network development. These were verified by way of an

observational study and sample survey of New Zealand businesses

establishing business relationships in China. Subject to the limitations

discussed in the next section, the results of the observational study and the

sample survey supported that propositions that New Zealand organizations did

have a base appreciation of the cultural differences between their own culture

and that of the Chinese. Further the data supported that most New Zealand

business recognized the need for the use of titles and the concepts of seniority

and position, albeit, not all applied those in practice. Similarly, most New

Zealand organizations dealt with the language barrier by either having

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Chinese-speaking employees involved in the business relationship, or via use

of an interpreter. What was evident from the data was that while there is a

notional appreciation by New Zealand organizations of the need to foster and

develop relationships in China, these are not perhaps viewed in the same light

and given the same degree of importance as perhaps needed.

5.1 Limitations on Research

One of the principle limitations to the research undertaken was sole the use of

the New Zealand Chamber of Commerce membership database, from which

the sample survey respondents were selected. While this database is extensive,

it does only provide access to organization details that are members of the

New Zealand Chamber of Commerce and that have indicated some form of

business interest with China. 74 New Zealand organizations were identified

for the sample survey. In survey terms, this is a small survey cross section;

however, from the literature reviewed the number of survey respondents

appears mid range of the numbers surveyed in previous surveys undertaken by

other authors. The sample survey as conducted may not be as conclusive as if

a wider sample survey had been conducted. In this regard, the results of the

sample survey can only be considered representational of New Zealand

organizations, and not conclusive.

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In terms of the survey response rate of 14.86%, according to Zikmund (2000)

this is poor and may be the result of a poorly designed or boring survey. In the

writer’s opinion, it may also reflect the sensitive nature of the material

surveyed. This gains support from the exploratory interviews with the New

Zealand Chamber of Commerce. The Chamber confirmed that most New

Zealand business are relatively secretive with respects to their dealings in

China, treating this as confidential business information that provides them

with some form of competitive edge, and as such many decline to normally

disclose any information regarding their dealings in China.

While there is, no factual evidence it is also possible that respondents surveyed

may not have fully disclosed the true nature of their business relationships in

China. This may be due to perceptions of not wanting to divulge

“confidential” market information that leads to success or failure and that may

be released to competitors through the publication of this study.

A further limitation has been identified with respect to the observational study.

The writer was generally only in the offices of the company the subject of the

observational study between 8am and 2pm daily. Bearing in mind that during

the period of the study China was four hours behind New Zealand, time wise,

the writer is not always in the office during the period in which the majority of

work was conducted with the company’s Shanghai office and China based

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clients. As such, the results of the observational study may be understated,

rather than overstated.

Finally, the greatest limitation of the primary data collection methods is that so

many of the concepts that were tested were highly subjective. Given that they

were considered, reviewed and answered from a Western cultural perspective,

bias in the answers is likely. A number of concepts, which should have been

verified such as the development of mutual trust and respect, were simply too

subjective to be quantified for the sample survey and as such any answers that

were received from respondents may be of little factual value.

5.2 Recommendations

It is evident for the literature and the surveys conducted for this study that the

establishment of business relationships in China is not a straightforward

exercise for any organization, let alone a Western organization. Cultural and

communication difficulties identified in this study hinder understanding the

communication antecedents necessary for establishing business relationships

in China. It is evident that Western organizations need to have a better

appreciation of the importance of establishing trust and mutual respect with

their Chinese counterparts. An appreciation of the time necessary to establish

these elements is important, and from the data analyzed, it appears that many

New Zealand companies do not appreciate this point in practice.

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Western organizations are culturally dissimilar to Chinese organizations. As

such, it is necessary for Western organizations to explore and identify some

foundation of similarity, in order to establish trust and respect. It is unclear

from the literature whether this similarity can only mean cultural similarity or

whether some other variety of similarity such as common business goals can

fulfill this important element in establishing business relationships in China. In

terms of displaying respect, it is clear that Western organizations need to

adhere to the more formal communication protocols common in China, such

as acknowledgement of position and seniority and use of titles in addressing

Chinese business counterparts.

In concluding, it is crucial that Western organizations appreciate and

understand the uniqueness of the Chinese communication process and the

relationship with the Chinese business network, in the establishment of

business relationships. The relationship with that of the elements of trust,

mutual respect, and communication are equally important considerations for

Western organizations entering the Chinese business environment.

5.3 Implications for Further Research

This study has identified that the existing research in the area of

communication antecedents for the establishment of business relationships in

China, is limited. Existing research is focused on specific areas of the Chinese

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business relationship and does not fully explore the inter relationship between

establishing business relationships in China, and the communication

antecedents that precede those relationships.

Further research would be well placed examining the experiences of

organizations across the four different cultural groups identified through

Hofstede’s work, to ascertain whether the data collected from New Zealand

organizations is reflective of the much wider international experience. This

additional research would then allow benchmarking as against the experiences

of Chinese domiciled organizations and identify the actual impact of cultural

difference on the communication antecedents for the establishment of business

relationships in China.

Further research needs to be undertaken in order to better understand the vast

market of China and the factors that guide the development of business

relationships.

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APPENDIX 1

SAMPLE SURVEY QUESTIONNAIRE

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