Interpersonal relationships as informal governance mechanism: do family firms and non-family firms practice differently?

Abstract

Due to the inefficient formal governance mechanisms in Asian emerging markets, informal mechanisms are often more important than formal ones. Among the informal mechanisms, interpersonal relationships, known as guanxi, play an important role in providing firms access to diverse resources, reducing uncertainty and transaction costs. However, the literature has paid insufficient attention to whether or not the practice of guanxi is different between family firms and non-family firms. This article reviews relevant research in this stream and argues that the practice of guanxi in family firms seems to be healthier, more stable and with long-term commitments. In contrast, practice of guanxi in non-family firms seems to be more opportunistic, detrimental, and time variant.