Elective affinity between guanxi favouritism and market rationality: guanxi circles as governance structure in China’s private firms

This study presents three case studies intended to examine Chinese private firms’ reliance on guanxi-oriented governance structure under different degrees of market rationality. Our findings show that regardless of their profitability goal, employment size, and organizational complexity, the three companies under study rely rather equally on their central players’ guanxi circle as the governance structure. Furthermore, when someone is permitted to enter this guanxi circle and exercise a certain degree of managerial authority, both job competence and personal trust of this person are simultaneously evaluated. We interpret these findings not as evidence of conflict between market rationality and guanxi favouritism, but as evidence for Weberian elective affinity between the two seemingly conflicting principles.