Master Thesis MSc. SCM
The influence of national culture on supplier selection
and relationship performance evaluation decisions
University of Groningen
Faculty of Economics and Business (FEB)
Supervisor: Dr. ir. N.J. Pulles
Co-assessor: Dr. Thomas Bortolotti
Author: Shiyu Wu
Student number: S3630943
Email:
s.wu.11@student.rug.nl
1 ABSTRACT
Purpose: The purpose of this thesis is to investigate how Western firms can establish successful business relationships with Chinese firms by understanding the cultural influence on supply chain relationship management decisions in terms of supplier selection and relationship evaluation.
Design/Methodology/Approach: A qualitative case study is conducted in this study. Multiple semi-structured interviews are performed to collect data. Cases are selected based on predetermined criteria.
Findings: This research explores Chinese buying firms’ perceptions of different firm characteristics between domestic suppliers and foreign suppliers, how’re those differences are related to national culture and how would buying firms make supplier selection and performance evaluation decisions based on that.
Practical Implications: This research reveals national cultural influence on intercultural relationships. It also explains Chinese buyer firms’ decision-making logic from a cultural perspective. An understanding of this has practical meaning for those Western firms who want to supply their products into the Chinese market.
2
Table of Content
1. Introduction 3
2. Theoretical background 5
2.1 National culture and Chinese business culture characteristics 5
2.2 Supply chain relationship management 7
Supplier selection 8
Relationship performance measurement 8
2.3 The culture impact of relationship management decisions 10
Research framework 12 3. Methodology 12 3.1 Research Design 12 3.2 Research Setting 12 3.3 Data collection 14 3.4 Data analysis 15 4. Results 17 4.1 Supplier selection 17 4.2 Relationship evaluation 19 5. Discussion 24 5.1 The influence of national culture on supplier selection 25 5.2 The influence of national culture on relationship evaluation 26
6. Conclusion 30
References 32
Appendix 38
Appendix A: Interview Protocol 38
3
1. Introduction
Supply chain relationship management has been recognized as an essential means for manufactures to achieve sustainable competitive advantage and superior performance (Vanpoucke et al., 2014). A high-performance supplier is able to create value for purchasing organizations and help to enhance the organization’s competitiveness (Sureeyatanapas et al., 2018). With the greater dependence on suppliers, the need to effectively manage the supply chain relationship is increase. Multiple factors could contribute to the unsatisfactory performance of a supply relationship, such as price or quality. However, in an intercultural environment where Western suppliers attempt to build supply chain partnership with Chinese buyers, both players would likely encounter different perceptions toward some factors in the partnership which are arisen from cultural differences (Jia and Rutherford, 2010). In this condition, a greater understanding of intercultural factors is of great importance in ensuring that the multi-cultural business relationship could be successfully established.
Hofstede (1980, p. 25) defines national culture as “the collective programming of the mind which distinguishes the members of one human group from another.” In other words, national culture differs among different countries. The differences in national culture span to the organizational culture, directly affecting the management and operations of daily work activities that are implemented and controlled by local people (Hofstede, 1985). Hofstede and Bond (1988) indicate that culture consists of five dimensions: individualism versus collectivism, power distance, uncertainty avoidance, masculinity versus femininity, and long-term versus short-term orientation. Those different dimensions directly influence and indicate peoples’ patterns of thinking or way of behavior in that environment. For example, the United States is a typical individualistic society where characteristics such as personal freedom, self-profit pursuit, and personal goal priority are focused. On the contrary, China is a much more collective society. People in that cultural environment promote harmony and put group goals as a priority. Group members support each other and there is a high level of trust within the group (Hofstede, 1980).
4 differences pose risks and challenges to buyer-supplier relationship in an international context (Trent & Monczka, 2003; Pagell et al., 2005). For example, Kaunonen (2014) stated that Western-focused industrial buyer-supplier relational process models may not be suitable for the non-Western world. And strategic choices of firms are influenced by profiles of national culture (Franke/Hofstede/Bond,1991). As claimed by Monczka et al. (1998), cultural differences do not influence supply chain performance directly, but indirectly in a way of other factors such as trust, intensity of communication and commitment between supply chain partners. Hence, in a Western and Chinese supply chain relationship, the cultural differences could lead to potential misunderstandings between two firms. An understanding of Chinese buying firms’ perception of those cultural differences in a cross-cultural relationship might be helpful to promote relationship development, and further achieve better supply chain performance.
5 How does national culture influence the buyer-supplier relationship management between Chinese buyers and Western suppliers?
To investigate the research question, a qualitative study is conducted. Four managers that are in charge of intercultural business are interviewed. Therefore, this paper’s contribution is twofold. First, from a scientific point of view, this paper contributes to the debate on national culture’s impact on supply chain relationships. From a managerial standpoint, as Chinese buying firms’ supplier selection and relationship performance evaluation indicators are explored in this paper, Western firms can take those implications as a reference when they conduct business in a multicultural environment.
The remaining of this paper is structured as follows. First, a literature review on national culture and Chinese business culture characteristics, supply chain relationship management, and the cultural impact of relationship management decisions is provided, and the research framework is presented. Second, the research method used to conduct this study is given. Third, collected data is analyzed and related findings results will be reported. Finally, this paper is finished with a discussion of the results and come up with some corresponding managerial suggestions.
2. Theoretical background
2.1 National culture and Chinese business culture characteristics
6 According to Fang (2006), the Chinese business culture is often seen as interpersonal oriented, reciprocal, tactical and network embedded. One of the most common case in the Chinese business culture environment is the practice of guanxi, which is a central trait of Chinese society that is based on that exchanges of favors between people over the long-term are facilitated through a set of interpersonal connections (Park & Luo, 2001; Giannakis et al., 2012). The practice of guanxi emerges from the philosophy of Confucianism, which gives strong implications for interpersonal and inter-organizational interactions in the Chinese business environment. It is doing business based on the premise of personal relationships which includes an exchange of favors (Avery et al., 2014). In general, guanxi can be seen as an antecedent of the startup of a business relationship. Giannakis et al. (2012) had surveyed 300 Chinese company as well as their international partner, the results found that the majority of Chinese companies (81%) participated in this research thought guanxi always have a huge impact on international business relationships, especially the buyer-supplier relationship. In addition, with regard to the procurement process, guanxi represents an important source of information and has the potential to reduce transaction costs.
7 Table1 Guanxi related aspects
2.2 Supply chain relationship management
8 2.2.1 Supplier selection
The topic of supplier selection has been comprehensively explored by scholars and procurement practitioners since the 1960s (Dickson, 1966). Supplier selection can be regarded as one of the most important loops across the whole supply chain. For many companies, purchasing costs usually account for more than 50% of the total cost (Kaufmann et al., 2012). Therefore, it is also a critical task for the buyer firm. Choosing the right partner is important because many of the performance failures can easily be traced back to the poor selection of partners at the planning stage (Pansiri, 2005).
Although the supplier selection criteria have been extensively explored in literature, with the globalization of demand and supply markets, significant changes have occurred. For example, in the previous studies, product price is one of the top three most frequently used criteria for purchasing decisions in the academic literature review. However, in recent years, the business practitioners gave the lower rank of its importance (Kannan and Tan, 2003). Rather, product quality and delivery have been among the most common and important criteria for supplier selection in the past few decades (Sureeyatanapas et al., 2018). According to Verma and Pullman (1998), supplier selection process differs between firms and purchased items. Simpson et al. (2002) also found that the supplier selection criteria are simple and subjective. It indicates that the supplier selection criteria are never fixed and are determined by how procurement managers make decisions, which could be influenced by national culture. In general, criteria such as cost, quality, delivery are most frequently mentioned in the supplier selection literature. And in recent years, sustainability is a new factor that some buyers would consider.
Supplier selection is also a relationship-building process. Models that describe relationship building in literature are similar in that they define the sequential stages of an evolutionary process from initial partner contact through to commitment/dissolution (Jia and Rutherford, 2010).
2.2.2 Relationship performance measurement
9 relationship performance evaluation as “the process of quantifying the efficiency and effectiveness of supplier action” (Neely et al., 1995). In evaluating a relationship, a set of parameters needs to be considered. Walter et al. (2003) proposed that commitment and trust are indicators of relationship performance. Commitment represents the belief by both parties that the relationship will continue into the future (Heide and Miner 1992). And in the field of the supply chain, long-term relationship, loyalty, and the intention of the corporation in the future is the measure of a partner’s commitment (Avery et al., 2014). In addition, supplier dependence is also revealed in the literature as one performance indicator. Supplier dependence represents the extent to which the supplier relies on the buying firm’s business (Krause et al. 2007), it also indicates the ability of the supplier to find another buying firm for its product and the effect on price and operations if the supplier loses the buying firm’s business (Avery et al., 2014). From the buying firm’ s perspective, a strong supplier dependence is usually desired.
Apart from that, Heide (1994) describes flexible adaptation, the extent to which partners adapt their behaviors to environmental changes for the benefits of both parties is also a measure of partnership performance. Information sharing is also seen as essential in a relationship because it can be regarded as an exchange of information and can represent a form of favor (Avery et al., 2014). Lastly, as Ribbink and Grimm (2014) proposed that differences in the physical communication styles of buyers and suppliers could reduce the profits of both parties, the communication style might also be a factor that influencing buyer-supplier interactions. Those essential aspects of buyer-supplier interactions are summarized in table2.
10 2.3 The culture impact of relationship management decisions
The role of national culture in the international buyer-supplier relationship has attracted attention from researchers in the International Business (IB) and Supply Chain Management (SCM) and practicing managers these days (Cannon et al., 2010; liu, 2012). Hofstede (1994) stated that culture has a fundamental impact on the thinking and behavior of individuals in business relationships, it is important to have a basic understanding of business partners’ culture background. Because of those cultural differences, business logic also differs in China and Western countries (Park and Luo, 2001).
With globalization, it has become important to “understand the impact of cultural differences on business interactions” between cross-cultural buyers and suppliers (Ribbink and Grimm 2014, p. 114). Cultural differences between Asian (including China) and Western (including the US) countries were found to impact purchasing practices (Kristal et al., 2011). Cultural characteristics provide explanations of actions within a supply chain relationship. For example, some literature has investigated how culture affects the source location decision making (e.g., Carter et al., 2010) and buyers’ expectations of supplier performance (e.g., Steward et al., 2010).
As mentioned in the previous paragraphs, Guanxi is an essential part of Chinese business culture. It could influence the supply relationships greatly because there are several obvious differences in its approach as compared with Western forms of supplier relationship management (Jia and Zsidisin, 2014). Based on the national cultural traits, one fundamental characteristic of the Chinese business environment is the emphasis on the structure of business relationships and the interaction in a community. And in most Western countries, business culture is characterized by personal freedom, personal rights, independence, privacy, and individualism (Giannakis et al., 2012). As cultural differences could pose risks and challenges to a buyer-supplier relationship in a cross-cultural context, six typical risk roots are revealed in the chart below:
11 Table 3 Aspects of cultural influence on business management
Source: Adapted from Jia and Zsidisin (2014)
12 Research framework
3. Methodology
3.1 Research DesignThe main purposes of this study are to explore Chinese buying firms’ perception of the impact of cultural differences on the Chinese-Western buyer-supplier interactions, and how the particular characteristics of Chinese culture influence foreign supplier selection decision and partnership performance evaluation. To understand these issues, a qualitative case study research will be conducted. “The main objective of qualitative research is to create a methodology for approaching, understanding, analyzing and explaining management phenomena at a social or company level” (Delattre et al., 2009, p. 33). As the research context in this thesis is Chinese culture, case study research is helpful to explore and explain Chinese procurement managers’ behavior within that social environment.
3.2 Research Setting
The unit of analysis for this research is the relationship between a Chinese buyer and Western supplier, in the context of the supply chain. And the focus is on Chinese buying firms’ perception of supplier selection and how they measure that relationship in relation to cultural differences between China and the West (Jia and Lamming, 2013). Eisenhardt (1989) suggests that 4–10 cases are suitable for multi-case study. This sampling suggestion could prevent the dilemma between insufficient evidence for theory development and too much qualitative data to handle (Han et al., 2018).
13 selected based on the following criteria. First, all the selected sample firms should have more than one foreign supply chain relationships. It means that those firms have sufficient experience in dealing with supply chain relationships in different cultural environments. Second, all the selected interviewees have been working for the company for three years, and familiar with Chinese business culture. Meanwhile, to ensure the reliability of data, those interviewees should have experience in the supplier selection field for more than three years. Ideally, procurement managers in each firm should be interviewed, or the interviewee could also be a general manager if it is the general manager’s task in dealing with suppliers. The main advantage of interviewing Chinese procurement managers is that they communicate and interact with suppliers most frequently. And it is their subjective behaviors to make supplier selection decisions that represent the whole firm, and their perception towards certain factors that are resulted by cultural differences in the supply chain performance is the issue this thesis trying to explore.
In this thesis, in order to find suitable interviewees to participate in this study, multiple emails were sent to procurement managers in different firms. For those procurement managers whose contact information is not for public, messages were left on their companies’ official websites. Because of the low reply rate, personal network of mine was also used to identify whether anyone or his friends who meet the above criteria and then I got in touch with them to introduce this study and see whether they were willing to participate in this study. Finally, four interviewees were found to participate in this research, which resulted in a total of eight cases. An overview of interviewees and cases are presented below.
14 Table 5 Overview of the cases
3.3 Data collection
Semi-structured interviews were used as the source of primary data, as semi-structured interview involves open-ended questions which allow in-depth responses and help to facilitate detailed explanations of the interviewee’s experience (Baumbusch, 2010). Those interviews were conducted with key employees in each of the sample companies and each interview takes approximately one hour. The interviews were conducted on WeChat videos and audio calls. The interviewees’ names and their companies’ names were replaced by capital letters in this thesis to keep confidential.
15 management and Western forms relationship management. During the interview, real-life examples were always encouraged to given. Interviews were recorded with interviewees’ permission for further analysis.
Table 6 Interview Protocol
3.4 Data analysis
16 happen if the equipment does not meet the standard, then tens of millions of investment will be in vain.” was coded as ‘high quality standard restrictions’ at first, and then coded as ‘Emphasis on quality when choosing Western suppliers’ combined with other codes that have the same meaning. However, as not every concept was related to national culture, only relevant information would be analyzed in the next section. This table below present an example of the coding process on the supplier selection aspects.
Table 7 Example of coding categories
17
4. Results
In the following section, the results of this study will be presented. As the aim of this thesis is to investigate the national culture’s influence on Chinese buying firms’ supplier selection decision and relationship evaluation, an overview of results will be presented in this section. Some supplier selection and relationship evaluation indicators are already covered in the literature review part, other indicators are summarized from the interviews.
4.1 Supplier selection
18 recommended by an acquaintance, I’ll have more confidence on him”.
The criteria that Chinese purchasers use to select domestic and Western suppliers are very similar. For example, criteria such as price, quality of the product, delivery time, and payment method are mentioned in the interviews frequently. The only obvious difference is that all the interviewees admitted that price is the top criteria they use to select domestic suppliers, however, when selecting suppliers from Western countries, quality matters most. As indicated by the interviewee A, “China is a manufacturing powerhouse, there are so many factories with similar quality we can choose. It is for sure we’ll choose the one with the best price”. On the other hand, all the interviewees admitted that they perceive Western-made products have better quality than domestic products, especially concerning high-tech equipment or component. As Chinese managers are in a high uncertainty-avoidance context, they will try their best to avoid and mitigate potential production risks in the future. “In our industry, the standard of machinery equipment is strict. Serious accidents might happen if the equipment does not meet the standard, then tens of millions of investment will be in vain.”(B). They always check the standards term again and again, in order to make sure the quality is guaranteed. Therefore, when selecting among western suppliers, the quality of products is most important rather than price.
Apart from price and quality, the other two important aspects for both Western and domestic supplier selection are also mentioned in the interviews. One is the payment method requirement, which differs in different companies. For example, “some suppliers only require full payment, there are also others accept 30 percent upfront payment and 70 percent after shipment payment.”(A). From this purchaser’s perspective, she is less willing to accept the full payment method requirement because cash flow was essential for her company. On the other hand, because of the high uncertainty-avoidance culture in China, she had concerns about the reliability of new suppliers, especially during their first corporation.
19 and there is one suitable supplier from Australia. We have to consider whether he has a service point in Africa and our other project destinations.” It can be seen that although Chinese purchasers trust the quality of Western-made products, they still had some concerns about product maintenance and the convenience of help from foreign suppliers. On condition that after-sales service could be provided inside China or in the project destination, Chinese purchasing managers feel that such suppliers were reliable and were more likely to choose them.
4.2 Relationship evaluation
4.2.1 The evaluation of trust at the interpersonal level
When asked about the relationship evaluation decisions during an established relationship, all four interviewees emphasized the role of trust in the two types of supply chain relationships. “Mutual trust is important in any relationship…trust means to give priority to that supplier in the future.”(A). However, one interviewee also admitted that she has the feeling that “I personally feel that our domestic supplier trusts us more than Western supplier.” (A). She thought the reason could be the scale of her company, and the amount of products she purchased from her Western supplier is not sufficient enough. Interviewee B also mentioned that the lack of personal contact with the Western supplier in daily life makes trust between them less noticeable and sometimes the degree of trust with Western supplier can only be evaluated based on business performance. For instance, “In China, if one person can always do what he had promised to me, no matter it is on the business aspects or our personal life aspects, I’ll feel he is trustworthy. You know, it also can be seen as the quality of our guanxi in private.” Therefore, Chinese purchasers also evaluate the degree of trust from personal issues among each other.
4.2.2 The evaluation of counterpart’s sincerity based on price
20 relationship.”(C). This manager thought price could be used to measure both domestic and foreign supply chain relationships.
4.2.3 The emphasis on long-term commitment
Two interviewees mentioned the role of supplier commitment. Because of the long-term orientation characteristic in Chinese culture, interviewees felt that no matter for domestic suppliers or Western suppliers, it is vital for them to show their sincerity and intention to maintain a long relationship because the long-term corporate intention makes Chinese purchasers feel secured in case of any supply chain disturbance occurs. “Any suppliers who have the intention to build a long-term relationship with us is more trustworthy… we’re trying to keep our supply chain stable” (A). The role of long-term corporate intention is especially important in a Chinese-Western supply chain relationship because of the existence of geographical distance. Things that can be easily controlled in China could lose control abroad. As perceived by interviewee C, “They are too far away from us, everything is much more difficult to control, especially if we do not know each other very well.” This interviewee regarded long-term commitment as a way to mitigate potential risks in the future.
Although the role of commitment in a buyer-supplier relationship is important, interviewee D admitted that sometimes the commitment from Western suppliers is quite unclear to him because the way of socialization is different. In China, relationship maintenance is based on gifts giving or giving personal favor. However, it is quite strange in the Western world. “It is quite difficult to tell their (Western supplier) intention. For example, if one of our domestic suppliers wish to maintain a longer relationship with us, he'll send us gifts or contact us frequently to enhance our guanxi and ganqing. It is so common in China”. In this condition, the commitment from that supplier can only be seen from the length of contract.
4.2.4 The enhanced mutual trust by information sharing
21 a process to enhance xinren(trust) between each other, and which in turn could benefit each other. “I would feel like the one who is willing to give me more information is more trustworthy. I also feel we have a better relationship.”(B). The information here was not limited to any single transaction. It could also be something in other companies or that industry. As affirmed by interviewee A, if any supplier gave the information she wants, she felt this supplier trusts her and regards her as friends or alliance. It is less likely that such supplier would do anything harmful during their corporation. On the other hand, because cultural differences could lead to inefficient collaboration with Western suppliers, appropriate information sharing is seen as essential.
However, interviewee A also admitted that there is one condition that information sharing is less critical. She did not expect information sharing from well-known suppliers, as the number of products her company ordered from them is far less than other purchasers. There is no reason that such kind of suppliers would share information with her proactively. “If our customers directly specify which brands they want to use and they are all well-known brands which have a good reputation in our industry, then in this situation, information sharing is not a measure for our relationship.”
4.2.5 The indication of guanxi based on the speed of response
Another common relationship evaluation criteria is supplier responsiveness. Interviewee A affirmed that suppliers’ reaction to them also indicates the quality of their relationship. For instance, she felt the faster a supplier reacts to her plans, the better relationship they have. “We have initiated a plan, which needs immediate corporation from them. In this condition, the speed he reacts, the accuracy and completeness of the information he provided to us is essential. He should send them to us as soon as possible. However, many suppliers can not do that”. Therefore, when any supplier who is able to make a response to buyers’ requirements quickly, and provide with accurate and complete information, Chinese purchasing managers would feel this supplier value their guanxi and respect him. In other words, they are in a good buyer-supplier relationship.
4.2.6 The awareness of tackle cultural differences issue on communication
22 evaluation decisions. One issue is the way of communication, which means how suppliers answer purchasers’ questions. Some interviewees felt that it is essential that their suppliers directly answer their questions rather than talking about other affairs for a long time. “I asked him about the delivery date of the product, but he never responded directly to my question, that’s really annoying.”(C). If any supplier always speaks beat around the bush, those managers would have a feeling that the supplier must be hiding something from him. Therefore, managers would feel unsecured and worried. It can be seen that Chinese purchasing managers prefer straightforward responses.
Unlike evaluating BSR from the same cultural background, the quality of communication is also seen as extremely important when evaluating the relationship with Western suppliers. According to the interviewees, three reasons can be summarized. First, misunderstandings could easily occur in a Chinese-Western buyer-supplier relationship because of language and cultural differences. In international business, both buyers and suppliers could be from non-English-speaking countries. They must rely on English to communicate, which is a second language. In this condition, some misunderstandings could arise. For example, there are some words Chinese purchasers use which are appropriate in Chinese culture, but people from other cultures might feel inapposite. “people from Muslims has their own religious belief, we may violate their taboos unintentionally. Although this is not the case that is definitely going to happen.” (A). Another condition is that when receiving e-mail from Western suppliers, Chinese purchasers sometimes felt uncertain about whether they accurately understand the meaning. “There is a lot of grammatical ambiguity, and a lot of expressions can be understood as two meanings. Sometimes I can not accurately understand what the other side is trying to express.”(D). Therefore, Chinese purchasing managers also measure to what extent does language and cultural differences become a barrier in communication and whether both sides are trying to take efforts to tackle such problem.
23 have to go online to check the information to figure out what it is in my country.” When a situation like this happens frequently, Chinese purchasers felt that it is a typical type of inefficient communication signal because a straightforward problem has to be confirmed repeatedly. Although it could just be a minor problem in the supply chain, they sometimes regard suppliers like this are not thoughtful and professionalism enough because they did not translate that terminology into general terms or terms used in China.
24 Table 8 Overview of results
5. Discussion
25 5.1 The influence of national cultural on supplier selection
This study identified that the main difference in selecting suppliers from domestic and Western countries is the different focus on cost and quality. When selecting suppliers inside China, Chinese purchasing managers regard price is the most important criterion because they know how the price game works in China and there are so many alternatives they can choose from. Sometimes even they purchase one equipment with an expensive price, the quality of that equipment is hardly assured. Therefore, Chinese purchasing managers are especially focusing on the quality of products purchased from Western suppliers as they have the perception that Western-made products have higher quality standards. With better quality, production risk is less likely to happen in the future. Such feeling could be derived from the different tolerance of deception across cultures. Some researches have indicated that in collectivistic countries, making false promises or lying during business negotiations is a common practice (Li et al. 2006, Triandis et al. 2001). Therefore, sometimes the quality of products that described by Chinese supplier could be unreal or even exaggerated. On the other hand, as deception is seen as highly inappropriate in individualist cultures, such as the United States and Australia (Gupta and Gupta, 2019), it is more likely that the quality that Western suppliers assured is real.
26 as less risky by the buying firm because it can provide the buyer access to more trustworthy and sufficient information about the new supplier on its past performance, competence, etc. through a trusted partner, and also with collateral endorsed by the trusted partner which may impose strong binding norms against defaulting behavior of the new supplier (Gulati & Gargiulo, 1999; Li et al., 2008; Yang et al., 2017). Therefore, the uncertainties about the new supplier could be relatively eased.
Unlike making supplier selection inside China, the geographical locations where after-sales service could be provided is a special factor that Chinese purchasers will consider. This study indicated that they prefer to make supply chain relationships with those suppliers who are able to provide after-sales service in Chinese buying firms’ project destinations. Western firms with such characteristics increase their degree of trustworthiness and decrease Chinese purchasers’ uncertainty on future maintenance difficulty. This study also reveals that the payment method is a common factor when selecting supplier from the intercultural and intracultural environment. Chinese purchasers have concerns about transaction safety during the first corporation, especially on condition that they are not familiar with that new supplier. This could be driven by the high uncertainty avoidance culture in China that the Chinese purchasers consider full payment requirement is too risky for them.
5.2 The influence of national culture on Relationship evaluation
27 The influence of xinren
From the results of this study, it is evident that trust is seen as an important indicator of a buyer-supplier relationship in any culture. However, because the way of socialization is different in different cultures, the evaluation of trust with Western suppliers can only be evaluated by the business performance. But in a domestic supply chain relationship trust is evaluated at both interpersonal and business levels. Such difference could be caused by the different degrees of interpersonal association across cultures. With the influence of highly inflexible, informal, and personal relationship building process in Chinese culture, Chinese purchasers believe close personal contact in daily life is essential to enhance trust. Therefore, the perception of trust in a relationship is closely related to the intimate association with each other. This is in line with Barnes et al., (2011), in the Chinese context, trust occurs at the individual level among people (xinren), whereas in the west, trust appears to be more at a business level. As Chinese society is deeply influenced by the Confucian value for more than thousands of years, the Chinese prefer to get to know their business partners initially. Therefore, although the intimate association is not a crucial factor in a Chinese-Western supply chain relationship as investigated in this study, it can be a plus to enhance trust among each other.
The influence of uncertainty avoidance
From this study, it became evident that communication issues could be a barrier in both buyer-supplier relationships. Therefore, it is seen as an important indicator of a relationship but it has different focuses in an intercultural relationship and intracultural relationship. In an evaluation of domestic supply chain relationship, the way of communication is focused because passive communication usually leads to poor business performance. On the other hand, as Chinese culture pursues harmony, the passive way of communication is seen as not giving counterpart mianzi. Therefore, it can be seen that the active communication style is valued in a Chinese-Chinese supply chain relationship.
28 professionalism of contact person are strong indications of Chinese-Western buyer supplier relationship. The reason is that although the language and cultural difference are fixed, both parties could use more formal words and descriptions during communication, and try to avoid using any words which might arise religious misunderstandings. However, suppliers with no further corporate intention might ignore this factor when dealing with Chinese purchasers. Furthermore, as diverse terminology exists in different countries, confusion would simply arise. In this condition, Western suppliers’ small behavior such as translate terminologies into general terms or terms used in China beforehand is a representation of being sincere and trustworthy. It also indicates that they value this relationship. Lastly, as a qualified contact person from the Western supplying firm is more likely to achieve efficient communication and help to make better business performance further, it is also seen as an important factor in a Chinese-Western supply chain relationship. By doing so, the potential risks which could be caused by the communication factor will be mitigated.
The influence of long-term orientation and Renqing
29 the way of socialization is different in the Eastern and Western countries, renqing related behavior might not be so common in the Western business environment. That’ why Chinese purchasers sometimes feel it is difficult to evaluate the commitment in a relationship with Western suppliers apart from the official length of the contract.
This study identified that the Chinese purchasers thought that the quoted price is a representation of suppliers’ sincerity towards this relationship. From their perspective, offering a favorable price is equal to maintaining a relationship sincerely. If a supplier offers the most favorable price directly, there is no need for Chinese purchasers to make another inquiry somewhere else. But the precondition is that they trust each other and the trust-building process usually takes a long time.
From this study, it became evident that information sharing is equally important no matter in an intercultural relationship or intracultural relationship. The Chinese purchasers regard information sharing is a way to make alliance and share mutual interests. In fact, this relates to the culture of reciprocity-the exchange of favors (Jiang and Prater 2002). Information sharing can be regarded as an exchange of information and can represent a form of favor (Avery et al., 2014). And there is sufficient amount of empirical research proved that strategic alliances in which partners exchange timely, accurate, and relevant information, and share critical and ‘‘sensitive’’ information are more successful than alliances that do not possess such behaviors (Chen and Paulraj, 2004; Paulraj et al., 2008). It can be seen that the frequent exchange of information between a relationship gives an indication that the two partners are on the same side, which also means they trust each other. That’s why Chinese purchasers admitted that information sharing is especially important in their supply chain relationship with Western suppliers as certain cultural difference is inevitable. Therefore, information sharing plays an important role in the Chinese purchaser’s relationship evaluation criteria as it could improve business performance.
The influence of high power distance
30 new project usually takes a relatively long time in a company because a simple document needs to be signed step by step. Therefore, if any supplier reacts to Chinese purchasing firms’ initiatives quickly, the Chinese purchasing manager would feel that the sales manager that he dealing with has relatively high power and is able to accomplish a task quickly. The fast reaction from the supplier also indicates that the counterpart values this relationship.
6. Conclusion
In line with the existing literature, this research explores the influence of Chinese business culture characteristics in the Chinese-Western supply chain relationship, especially in the supplier selection and relationship evaluation aspects. It also demonstrates that Western companies need to be more familiar with Chinese business culture characteristics, which may enable international firms to gain a competitive advantage in breaking into the Chinese market. Meanwhile, an understanding of Chinese business culture could also help to maintain a good buyer-supplier relationship.
Managerial implications
The essential for business to better manage effectively across cultures is growing persistently. Because of China’s increasing importance in the global economy, there are more and more firms in the Western countries are looking to China for business opportunities and China is one of the most challenging countries for foreigners to engage in business (Paine 2010; Avery et al., 2014). Consequently, it is important for foreign managers to develop a basic understanding of Chinese business culture characteristics.
31 Second, although guanxi is idiosyncratic to China, investment in interpersonal relationships deserves attention in diverse cultures (Wang et al., 2014). Drawing upon qualitative observations, the role of guanxi is emphasized in the Chinese business context. In China guanxi often comes first before business. Interpersonal relation-specific investment (guanxi investment) is able to deliver or signal long-term orientation, commitment, and cooperation (Chen et al., 2011; Lee & Dawes, 2005; Wang et al., 2014). As a result, in order to maintain better guanxi with Chinese buyers, Western suppliers are recommended to focus on guanxi investment. The easiest way to enhance guanxi is through increased social interaction, such as visiting, wining, dining, and participating in social events together (Barnes et al., 2011). This is in line with the existing Western literature that relationship investment includes “not only the economic and technological resources of participating firms but also social commitments and entanglements of individual agents” (Ring & Van de Ven, 1994).
In addition, although the cultural difference is unavoidable, both firms could try to build consensus on the basis of understanding cultural differences and the potential cross-cultural conflicts. By combining two cultures, the maximum balance point of both sides' interests will appear. This can be achieved through frequent communication. Rather than guessing alone the intention of the counterparty, communication sincerely with each other is always an efficient way to ease concerns and solve conflicts.
Limitations and Direction for Future Research
The study has several limitations that need to be addressed. First, the number of interviewees is limited. Future research may involve a large number of interviewees. Second, the interviewees are all in the manufacturing industry, which could not represent the whole business environment in China.
32
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Appendix
Appendix A: Interview Protocol Section A: general questions
1. What is your nationality and how long have you been living in China? 2. How long have you been working in the purchasing field?
Section B: culture and supplier selection decision
3. How do you select suppliers in China? Can you describe one supply chain relationship as an example?
4. How do you select suppliers in the West? Can you describe one supply chain relationship as an example?
5. Do you feel that the selection of Western supplier differs from the selection of Chinese supplier?
6. Can you tell me the role of Guanxi in those two types of supplier selection decision making? How does it influence your domestic and foreign supplier selection respectively?
Section C: culture and performance evaluation decision
7. How do you evaluate the relationship performance with the Western supplier? How' s that different from dealing with a domestic Chinese company?
8. What factors do you think are important in those two types of relationships? 9. Have you ever encountered any barrier or misunderstanding in any interaction
aspect with Western suppliers? Can you give me some examples of those problems? 10. From your point of view, do you feel that those misunderstandings are caused by
