Social capital, guanxi and political influence in Chinese government relations

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Social capital, guanxi and political influence in Chinese government relations Jenny Zhengye Houa,*, Yunxia Zhub a b

School of Communication/Digital Media Research Centre, Queensland University of Technology, Australia Business School, University of Queensland, Australia

A R T I C LE I N FO

A B S T R A C T

Keywords: Social capital Guanxi Corporate government relations Political influence Lobbying China

Social capital has emerged as a promising theoretical approach to understanding political influence in the public relations literature. However, the rationale of using social capital to influence corporate government relations in authoritarian societies is indistinct. To remedy this, we integrate Bourdieu’s (1986) and Lin’s (2001) social capital theories to explore how applying a variant form of social capital (e.g., guanxi) might shape corporate government relations in authoritarian China. A multi-method, qualitative approach was employed involving 44 interviews, participant observation and document review. The findings highlighted an underexamined “vertical” dimension of social capital (i.e., links with authority in a hierarchy), which enables corporations to exercise agency over the pre-existing and often vague regulatory environment. This study adds a new perspective to social capital with hierarchical guanxi that enriches our understanding of guanxi-based political influence in Chinese corporate government relations.

1. Introduction Over the past decade, public relations scholars have witnessed growing interest in social capital approaches to understanding political influence involving civic participation and democracy building (e.g., Saffer, Taylor, & Yang, 2013; Sommerfeldt, 2013; Yang & Taylor, 2013). Social capital is typically conceptualized as resources embedded in, and accessed through, networks of social relationships (Adler & Kwon, 2002). Social capital is viewed as an outcome of public relations that benefits Western civil society (Taylor & Doerfel, 2003; Taylor, 2010). Also known is that government relations, interchangeably called public affairs or lobbying (Davidson, 2015), can be affected by using social networks. This entails seeking to shape public policies to influence government and its institutions (Zetter, 2008). Social capital influences government relations or lobbying mainly through facilitating political advocacy (Saffer et al., 2013), coalition building (Wise, 2007) and community engagement (Toth, 2006). However, existing research focuses predominantly on society-level social capital that is horizontal in that it is characterized by bonding or bridging social capital (connections within or between groups), weakties (legal and contractual norms), and structural-hole positions (positions linking disconnected groups) (Burt, 1992; Putnam, 2000; Shen, 2016). Limited studies attend to the vertical (hierarchical) dimension of social capital, namely, building upward connections with political ⁎

decision-makers, who control access to resources and command topdown solutions (Li, 2015; Park & Luo, 2001). Even less is known about how social capital originating from individuals of organizations politically influences government relations in authoritarian societies in which vertical social capital matters (Lin, 2000). To gain the knowledge about such influence, it is beneficial to analyze how this vertical social capital shapes corporate-government relationships through creating and applying it in policy processes. To fully understand the political influence of social capital on government relations in authoritarian regimes, this study uses China to exemplify circumstances where vertical social capital is rich, when guanxi is prioritized with regulatory authorities while the state dominates. Social capital in China is chiefly referred to as guanxi, a networkbased, variant form of social capital (Batjargal & Liu, 2004) originating from personal connections (e.g., kinship, friendship). Through integrating Bourdieu’s (1986) with Lin’s (2001) social capital theories, this study examines both the process and influence of applying individual-level guanxi for an organizational purpose of managing government relations. This study contributes to the literature in two ways, by (1) adding a new perspective to social capital with vertical (hierarchical) guanxi in authoritarian societies; and (2) revealing social capital as a source and mechanism of political influence in Chinese corporate government relations. This paper starts by reviewing the relevance of social capital to

Corresponding author at: GPO Box 2434, Building Z6-529, Queensland University of Technology (Kelvin Grove campus), Brisbane, QLD, 4001, Australia. E-mail address: [email protected] (J.Z. Hou).

https://doi.org/10.1016/j.pubrev.2020.101885 Received 29 July 2018; Received in revised form 15 January 2020; Accepted 18 January 2020 0363-8111/ © 2020 Elsevier Inc. All rights reserved.

Please cite this article as: Jenny Zhengye Hou and Yunxia Zhu, Public Relations Review, https://doi.org/10.1016/j.pubrev.2020.101885

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Taylor and Doerfel (2003); Valentini and Kruckeberg (2012); Yang and Taylor (2013) Hazleton and Kennan (2000); Jin and Lee (2013)

PR contributes to society through creating social capital that enables civic participation and community engagement in democracies. Social capital improves organizations’ employee communication and corporate social responsibility (CSR). Social capital is a strategic asset for PR practitioners’ career success; “Personal Influence Model”

2. Literature review

2

Micro-level (practitioner)

How does social capital relate to the social value and impact of public relations in societies? How does social capital influence the outcomes of public relations in organizations? How does social capital influence PR practitioners’ careers? Macro-level (society/ community)

1. Social capital as a public good facilitating collective action in social structure based on values of trust and reciprocity (Coleman, 1990; Putnam, 2000) 2. Social capital as bonding (connections within groups) and bridging (connections between groups) social capital (Burt, 1992) 3. Social capital as fluid and convertible resource for instrumental purposes (Bourdieu, 1986)

Meso-level (organization)

Framing of relevant PR questions Levels of application in PR study

Table 1 Social capital approaches adopted in public relations research.

The relevance of social capital to public relations is well established in the literature (e.g., Ihlen, 2005, 2009; Edwards, 2006). Kennan and Hazleton (2006) argue that the essence of PR is to “cultivate, maintain and expand social capital on behalf of an organization” (p. 325). Social capital extends PR scholarship through articulating the social value of public relations beyond its primary economic function (Dodd, Brummette, & Hazleton, 2015). Table 1 outlines PR studies that draw on different social capital theories to explain how social capital is used so that it impacts at various levels in specialized PR practices. Because we intend this table to illustrate theories, the examples cited are meant to represent rather than be comprehensive. As shown in Table 1, by defining social capital as a public good that facilitates civic engagement (Coleman, 1990; Putnam, 2000), the macro-level research explores how public relations contributes to societies. Studies find that public relations can develop “societal social capital” through producing information and building relationships, thus improving democracy (e.g., Taylor & Doerfel, 2003; Valentini & Kruckeberg, 2012; Yang & Taylor, 2013). The meso-level study invokes Burt’s (1992) idea of bonding and bridging social capital. While the former is crucial to organizations’ internal communication (Hazleton & Kennan, 2000), the latter assists achieving organizational CSR (Jin & Lee, 2013). At the micro-level, Bourdieu’s (1986) notion of social capital as fluid resources exchangeable for other economic (e.g., money), cultural (e.g., qualifications) and symbolic (e.g., legitimacy) capital is widely cited. Social capital serves as a “Personal Influence Model” (Huang, 2000) because it uses personal connections to accomplish PR tasks or pursue individual success (Valentini, 2010). Nonetheless, social capital and its political influence is under-examined in the literature about government relations (GR), also called public affairs (PA) as a euphemism for lobbying (Davidson, 2015). While definitions of GR (PA) and lobbying remain uncertain, the practice seeks to influence policy and political decision-making to create a favorable environment where organizations operate (Wise, 2007). Two major contexts influence GR and lobbying in most developed countries: (1) Since Western democracies and pluralism encourage business participation in policy-making, a legislative body, which depends on votes from constituents, will have to listen; (2) The legal frameworks of lobbying are relatively established through governmentenforced, mandatory regulation and/or an association-run “lobbyist registry” (Myers, 2018). With transparent and predictable rules, GR and lobbying mainly apply to issues of contention and follow a structured approach (e.g., researching on issues, setting objectives, planning strategies, and evaluating effects) (Harsanyi & Schmidt, 2012). Within these contexts, GR (PA) and lobbying appear systematic and formal in the West. Lobbying can either target politicians for direct persuasion or mobilize citizens for public support of policy positions, mixing both personal and public communication strategies. The professional techniques of doing GR or lobbying vary from analyzing policies, submitting reports, running political advertising, influencing

Theoretical position of social capital

2.1. Social capital, government relations and lobbying in the public relations literature

Huang (2000); Valentini (2010)

Reference examples

government relations (public affairs) and lobbying in the public relations literature. We identify a gap caused by the low incidence of research into the “vertical” dimension of social capital and its political impact. Through an integrated theoretical framework (i.e., of Bourdieu, 1986, and Lin, 2001), we illustrate what a culturally specific form of social capital (i.e. guanxi) signifies in authoritarian China, and how it has been applied to Chinese corporate government relations. The Methods section details data collection and analysis, the results of which are thematized as major findings. Lastly, this paper discusses both theoretical and practical implications of social capital and political influence in China and points out future research directions.

Insights into public relations

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media, and “dialoging” directly with government (Popovic, 2017). While personal relations and networking strategies are commonly used in Western GR and lobbying, these relationships are often built around shared political interest about issues, thus being called “issue-based networks” (de Lange & Linders, 2006, p. 143). Also, the use of personal relations in lobbying is often regulated by law or bound by professional ethics, thus becoming open to public scrutiny (Vercic & Vercic, 2012). Further, most lobbying studies in Western democracies focus on the society-level, horizontal dimension of social capital, and how it assists building alliances and mobilizing publics. For example, Toth (2006), to extend GR research, pursues a civic interest by emphasizing social capital for community engagement. Wise (2007) argues that “building networks with the same groups (bonding social capital)” (p. 362) holds promise for lobbying research. Saffer et al. (2013) add that creating diverse ties (bridging social capital) enhances coalition building to influence legislation. However, in authoritarian contexts like China, clear social stratification and hierarchies make the vertical dimension of social capital (i.e., links with regulatory authorities) evident in government relations. For example, private entrepreneurs who possess vertical social capital can discuss exchange rate policy directly with the premier (Deng & Kennedy, 2010). Such social capital enables corporations to balance previous unequal relationships with government, thus creating space to negotiate policy. For this reason, what follows reviews a variant form of social capital, guanxi, in China’s political and legal environments.

with vague regulatory systems. In the absence of rational-legal orders, enforcing policies and rules is largely subject to government officials’ personal interpretation and discretion (Harsanyi & Schmidt, 2012). Through using guanxi with political power, corporations gain access to rich resources such as grants, loans and policy support. Cultivating guanxi with government authorities becomes a “central fact of corporate life” (Fan, 2007, p. 499). Based on this illustration, we integrate Bourdieu’s (1986) with Lin’s (2000; 2001) social capital theories to interpret guanxi because both scholars conceptualize social capital as network-based resources accessed by group members as “class goods” (Shen, 2016). “Class goods” means that different social classes possess different volumes of social capital as goods that produce exclusion and conserve resources (Julien, 2015). These authors’ theoretical position similarly starts with family and emphasizes the instrumental effect of social capital (e.g., advancing life chances). Their conception contrasts with the popular “American Communitarian” definitions of social capital as a “public good” (e.g., Coleman, 1990; Putnam, 2000) that promotes civic values (e.g., trust, reciprocity) yet overlooks the particular and exclusive ties that characterize guanxi. In particular, Lin (2001) inherited Bourdieu’s (1986) tradition to underscore that social capital enables individuals who occupy different positions to carry varied resources and exercise different levels of power control. For this reason, their theories can be integrated to guide our study: (1) Both theorists note the inequalities of social capital that is unevenly distributed across different levels, thus producing social stratification that maintains the dominant interest. For example, Bourdieu (1986) believes that the attainment of social capital causes conflict and power struggle. Lin (2000) attributes inequalities of social capital to hierarchical social structure. This resource (and power) differential effectively captures the vertical hierarchies inherent in guanxi. (2) While acknowledging its inequalities, both scholars also highlight the fluidity and convertibility of social capital. Bourdieu (1986) states that social capital traverses networks and can be exchanged for economic, cultural and symbolic capital. Lin (2001) also notes that social capital (e.g., guanxi) functions as a pooled resource transcending different levels of hierarchies and is exchangeable with other resources. For example, people from a lower level can call for a special favor from the upper powerful level by returning favor in a different form at a later stage.

2.2. Guanxi as social capital in China’s political and legal environments Guanxi, as a variant form of social capital in China, originates from personal connections built on mutual trust, ganqing (affection) and reciprocity (Yang, 2002). China is a rich guanxi society with dense strongties of families and kinship, but sparse weak-ties in matters like legalcontractual norms (Lin & Si, 2010). While people engage in guanxi every day (e.g., gift-giving, banquets), they deliberately build connections with powerful regulatory authorities, who control access to and allocation of resources (Luo & Cheng, 2015). Being aware that resources are inconsistently granted, members of disadvantaged groups are motivated to build upward guanxi with members of advantaged groups. Related to guanxi is another concept called mianzi (face), which refers to one’s social status and influence that are maintained by mutual respect. Mianzi can also be raised through building guanxi with high-profile people and borrowing their influence (Yang, 2002). Guanxi is intrinsically hierarchical and evokes “a power relationship, as one’s control over a valued good or access to it gives power over others” (Gold, 1985, p. 660). Guanxi takes root in Chinese Confucianism, which historically defined five cardinal guanxi (Wulun): the relations between sovereign and subordinate, father and son, elder brother and younger brother, husband and wife, friend and friend (Park & Luo, 2001). Other than the case when friends interact, the other four guanxi follow strict orders with the sovereign holding supreme power above all. To maintain solidarity, guanxi establishes “structural patterns” in Chinese society, while mianzi (preserving one’s face through showing mutual respect) serves as the “operational mechanism” of guanxi-building (Chen & Starosta, 1997, p. 5). Thus, guanxi differs from most forms of horizontal social capital that emphasize weak-ties, bridging social capital, and public good (see Burt, 1992; Coleman, 1990; Putnam, 2000). Guanxi’s vertical feature enables us to fully understand the level-transcending quality of social capital and its political influence in government relations. Even in China’s developing regulatory environment, upward guanxi building with key officials still prevails in a transitional market economy. China’s emerging legal system implies the “evolution of policy or regulation,” or even the lack of rules in many fields to sanction corporate behaviors (Harsanyi & Schmidt, 2012, p. 94). Guanxi is thus deemed as “seamless fusion” with China’s new capitalist mode by reducing uncertainty, generating trust, and minimizing risks associated

Despite the compatibility, Bourdieu’s notion is often criticized for being insufficient to analyze cultural specifics and structural differences, whereas Lin offers a perspective of social capital (i.e., guanxi) that is arguably more Chinese (Qi, 2013). In this sense, Lin’s work complements Bourdieusian thought. Further, Lin’s (2001) “strength-ofposition” proposition highlights a lack of a “level playing field” (p. 76). He clarifies that individuals profit most if they link to the high-ranking and information-rich. This explains the propensity for building upward guanxi with regulatory authorities in China. Additionally, compared to Bourdieu’s overemphasis on the determinism of socioeconomic structures on actors’ dispositions (habitus) and capital (Edwards, 2006), Lin (2000) advocates upward social mobility through acquiring or exchanging social capital. In an authoritarian system, the advantaged (e.g., government) afford such mobility to reduce social conflicts and upheaval. In principle, both Bourdieu and Lin’s perspectives apply to guanxi, which shares the general features of social capital, such as networkbased resources, convertibility, and cross-level fluidity. However, we also draw attention to the Chinese context, where inequalities of guanxi do not necessarily cause conflict, as Bourdieu emphasizes with his notion of social capital. Instead, guanxi enables social harmony in China’s authoritarian and hierarchical system. The flexibility of applying guanxi to organizations or developing guanxi into “organizational social 3

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in the West, mobilizing social support is possible in China through media advocacy or public appeals. In addition, Deng, Tian, and Abrar (2010) identify a strategy of political embeddedness by aligning business interest with the government agenda such as boosting the local economy, increasing employment, and improving health care. However, these Western-like GR practices are not widespread among Chinese corporations. Because of its sociocultural uniqueness, corporate government relations in China still features “guanxi-based lobbying” (Tian & Fan, 2008, p. 136), although it lacks coverage in the literature. In summary, social capital is a promising lens for public relations research generally, and government relations, in particular (Dodd, 2016). The underdeveloped GR and lobbying literature focuses on the society-level, horizontal dimension of social capital (e.g., Saffer et al., 2013; Wise, 2007). This social capital facilitates coalition building and community engagement in civil societies. Scant attention has been paid to the vertical aspect of social capital, namely building relationships with regulatory authorities, which is common in authoritarian regimes like China. While prior studies have noted the prevalence of guanxi in Chinese corporate government relations, little research has detailed its political influence relating to social capital. Research has thus far poorly explained two aspects: first, how individual-level guanxi can be developed into organizational social capital for a corporate government relations purpose; and second, how social capital specifically influences government relations and under what conditions. These unanswered questions will be addressed in our study: RQ1: How is interpersonal guanxi developed into organizational social capital for the purpose of corporate government relations? RQ2: How is guanxi employed as organizational social capital to influence and enhance corporate government relations in China? RQ3: What are the enabling and/or constraining conditions to apply social capital in influencing Chinese corporate government relations?

capital” (guanxi developed as an organizational asset) (Standifird, 2006), demonstrates the level-transcending quality of social capital (i.e. from an individual to an organizational level). Through developing guanxi into organizational social capital in a relatively open and accountable manner, it is likely to help reduce individuals’ opportunistic use or manipulation of guanxi for self-interest (Szeto, Wright, & Cheng, 2006). Nevertheless, such guanxi-based organizational social capital is poorly explained in research into Chinese government relations. 2.3. Guanxi, political influence and corporate government relations in China Similar to the GR and lobbying research in the public relations literature, corporate government relations in China is underexamined (Chen, 2013). Unlike most Western countries, where business participation in policy-making is supported and legislated, China has a restricted political environment and an ambiguous regulatory system. Youshui, the Chinese translation of “lobbying,” carries a negative connotation of persistent unwelcome persuasion. Despite increasing modernization and globalization, Chinese government holds an ambivalent attitude towards policy consultation. On one hand, it tries to engage with many people to seek response and input to draft laws; but on the other hand, the government is cautious about the consequence of permitting wide political participation or social activism (Liang, 2017). Liang calls this “consultative authoritarianism”: the state remains authoritarian (not pluralistic) by allowing limited policy participation and influence that does not challenge its governance. Without a “public affairs culture” in China (Harsanyi & Schmidt, 2012), corporations turn to informal personal tactics such as guanxi in practice. For example, Valentini (2010) claims that guanxi is as important for organizations in China to build government relations efficiently as social capital is in Western cultures. Szeto et al. (2006) find that guanxi investment in China averages three to five percent of organizational operating costs, equal to an annual figure of approximately US $4 billion. Given China’s state domination and hierarchical society, multinational CEOs are advised to meet with high-ranking officials regularly as local entrepreneurs do. Huang (2000) proposes a “Personal Influence Model” to describe practitioners overusing guanxi (gao guanxi) with prominent figures for self-interest. However, Szeto et al. (2006) argue that, when interpersonal guanxi is developed into organizational social capital with an objective of reciprocity between organizations, it can be ethical. Only a few studies have briefly explained how guanxi is used to gain political influence in Chinese corporate government relations. These studies treat guanxi as merely a technical tool, rather than explaining its rationale and mechanism of gaining influence from a social capital perspective. For example, Chen (2013) notes that corporations use guanxi to seek information for decision-making, which is essential to government relations. However, she does not explain why guanxi is legitimized and how it works to attain information. Kennedy (2009) exemplifies two different scenarios of applying guanxi. One involves the exceptional case where corporations get individual business approved because of the backing of a single or just a few officials, which can be seen as an opportunistic use of guanxi. The other involves employing guanxi to gain more face time with officials than seeking a guaranteed decision in their favor. However, Kennedy does not elaborate how guanxi assists corporations negotiating with policy-makers during the extra face time. Apart from the extensive use of guanxi, few other studies attempt to explore whether standard Western GR and lobbying is applied in China. Tian and Fan (2008) identify two non-guanxi based, corporate political actions: (a) as in the West, information provision is an option to influence policy-makers by analyzing the cost benefit of alternative plans. Popovic (2017, p. 7) calls this an “information-access exchange logic” in that lobbyists supply policy-makers with expert information in exchange for access to decision-making; and b) like constituency building

3. Methods This exploratory study applied a multi-method, qualitative approach to address the above questions. A qualitative approach helps us to “get at the inner experience of participants, to determine how meanings are formed through and in culture, and to discover rather than test variables” (Corbin & Strauss, 2008, p. 12). Fieldwork was conducted between late 2017 and early 2018 in Beijing, where most PR agencies and large corporations are located. Methods of data collection were semi-structured interviews, participant observation in a local PR agency, and document review. Each method serves a different purpose for this study as follows. As our primary source of data, semi-structured interviews provided participants’ understandings of social capital, thus guanxi, and their ways for using social capital in corporate government relations. Through purposive “snowball sampling” (Corbin & Strauss, 2008), we recruited 44 participants from three types of Chinese organizations: (1) Local PR agencies (n = 20). Since no professional lobbying firms exist in China (Harsanyi & Schmidt, 2012), we targeted PR agencies that have a dedicated team to help clients with government relations; (2) Corporate in-house PR units (n = 18). After recruiting 20 participants from agencies, we asked them to recommend their corporate clients for interviews. 18 in-house PR people with varied titles of “government relations officer,” “public affairs advisor,” “policy consultant,” or just PR were approached; and 3) PR professional associations (n = 6). We recruited six officers from Chinese PR associations which, on one hand, have close ties with the Chinese government and thus understand policies (Deng et al., 2010). On the other hand, they train PR agencies and in-house PR units on government relations. Owing to little access to the quasi-government Chinese PR associations, the number of participants from associations was smaller than that of agencies or corporations. Of all participants, 24 were men and 20 were women. Their work experience ranged from 1 to 10 years (16), 11–20 years (18), and over 20 years (10). All the PR agencies (20) were local and privately-owned. 4

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“preliminary communication,” or “showing goodwill.” The observed PR agency’s training manual confirms: “the purpose of building guanxi is to create trust and rapport with key people, rather than bribing them” [original emphasis] (Document data). An in-house PR manager further explained:

Corporations where in-house PR people work comprised Chinese stateowned (8) and private enterprises (10), covering IT (5), finance (5), auto manufacture (3), telecom (2), and retail (3) industries. The PR associations where the six officers were recruited were China International Public Relations Association (CIPRA) and China Public Relations Association (CPRA). The two associations allowed us to reveal organization identity. Guided by the research questions, the interview protocol had two foci: a) the process of developing guanxi into organizational social capital; and b) the approach and influence of applying social capital for corporate government relations in China. To complement the interview data, we also conducted participant observation (PO) and document review. The first author undertook a one-month PO as an academic advisor in a local PR agency, where she was able to watch everyday practices and organizational routines. For example, she attended and advised on their weekly meetings, consultations, workshops and trainings. “To adhere to scientific standards and tasks as distanced researchers” (Lüders, 2004, p. 223), she produced a daily reflective journal with 39 pages of fieldnotes. During the PO, she accessed some documents, such as proposals, minutes, training manuals, policies and guidelines. These documents mainly provide contextual information. The data set was analyzed through inductive thematic analysis, “searching across a data set…to find repeated patters of meaning” (Braun & Clarke, 2006, p. 86). We interpreted the data in relation to each participant’s background, the context of interviews, theoretical framework, and research questions. Nvivo 9.0 was used to store and manage the data. First, we read through all interview transcripts, field notes and documents, and grouped relevant information to specific questions or created a new category if it did not belong anywhere. Next, we discussed and developed initial codes from the data, for example, strategies and tactics of creating organizational social capital from guanxi and the ways and rationales of applying social capital in government relations. The third step involved constantly comparing and refining information to reach the most parsimonious themes. For example, “political influence” was identified as a significant theme supported by statements like social capital (i.e. guanxi) facilitating corporate government relations. Lastly, we examined anomalies and integrated them with major themes for nuanced understanding. To improve the research validity, this study used a memberchecking (Corbin & Strauss, 2008) technique by emailing each participant a copy of the interview transcript and initial findings. All participants were given a chance to verify or clarify the information collected from them. The cross-validation among views from different participants (i.e., from agencies, corporations, and associations) and the triangulation of multiple data sources (i.e., interviews, PO, documents) allowed a relatively accurate and comprehensive understanding of the data. Ultimately, three significant themes were identified: a) The art of developing interpersonal guanxi into organizational social capital; b) The political influence of social capital on corporate government relations; and c) The constraints on the influential role of social capital.

There is already [a] power imbalance between government and corporations. To narrow the distance, we should start from one-onone guanxi. As the Chinese proverb says, “Only when the position is right can communication become smooth (mingzheng yanshun).” Guanxi helps raise corporations to a better position to speak with government. Our interview data revealed the two-fold purpose of practitioners consciously developing interpersonal guanxi into organizational social capital. The first purpose was to formalize corporate government relations and build a positive organizational image. A PR consultant reflected, “PR’s reputation has already been stigmatized. Corporate government relations, as a specialized PR practice, should be distinguished from interpersonal guanxi which, unfortunately, is often misinterpreted.” The other purpose is to prevent risks associated with interpersonal guanxi. The PR industry appears to have a high level of employee turnover, which is likely to increase the fluidity of social capital, and thus guanxi. “If an individual dedicated to building guanxi with a government official leaves the company, the tie with government will also loosen if it is not pinned to the organizational level,” a PR manager explained. The participant observation fieldnotes, supported by interview and document data, revealed two rationales about how interpersonal guanxi is developed into organizational social capital. The first rationale involves stratified guanxi-building by paralleling different levels of corporate executives (e.g., CEOs, directors, managers) with differentranking government officials (e.g., top leaders, medium cadres, junior officers). An in-house PR manager explained, “To start with, we should find out the ‘right’ target of guanxi by spotting who could be the decision-maker.” Decision-makers are defined in a GR training manual as “authorities who determine resources allocation and enact top-down solutions” (Document data). In the PR agency under observation, a work platform called “guanxi database” was shared among employees, who kept updating the key contact list to detail not only officials’ general information but also personal interests (e.g., hobbies, leisure activities). Then guanxi was built with these targets either directly or through intermediaries (e.g., their family members, secretaries, former classmates). Apart from upward guanxi building with decision-makers, our data also indicated a structured approach to building guanxi into different layers of an organization. For example, practitioners did not overlook guanxi with both middle-rank cadres and front-line administrators. A CEO described this strategy as “labor division within a PR team”: senior executives build guanxi with key officials for strategic goals, while junior practitioners engage in guanxi with general officers for operational management. The relationship between guanxi initiators (who initiate guanxi-building) and donors (who are the target of guanxi) follows an equivalent principle—the two parties involved in guanxi should match in age, knowledge, and social status. One PR association officer reflected:

4. Findings 4.1. The art of developing interpersonal guanxi into organizational social capital

Building interpersonal guanxi into organizational social capital requires going beyond social gathering and networking to create a common ground for dialogue with the authorities. PR people need to demonstrate broad knowledge of policies and speak the same language as the officials. A capable government relations practitioner should be an expert-like friend to an authority.

RQ1 asks how interpersonal guanxi is developed into organizational social capital for a corporate government relations purpose. Our data indicated that Chinese PR practitioners tend to consciously develop guanxi into organizational social capital. They start from legitimizing guanxi as a lubricant for doing government relations. As an example, while some participants clarified that applying guanxi to government relations did not necessarily constitute manipulation or privilege seeking, they said rather that it reduced the hierarchical distance with government and created an opportunity for “dialogue” with power. Other participants justified using guanxi for “ice-breaking,”

The second rationale of developing interpersonal guanxi into organizational social capital entails aligning corporate initiatives with government frameworks at a macro level and with individual officials’ political interests at a micro level. In other words, only when the 5

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corporate proposals fit with policy directions and the decision-makers’ political orientation can interpersonal guanxi be employed for organizational benefit. A PR association officer commented, “One tip to win government approval is to highlight how a company proposal contributes to government priorities such as local economy and employment.” In addition, adapting interpersonal guanxi to organizational social capital requires considering how to add value to individual politicians’ profiles, or at least not to jeopardize their careers. Only by doing so can guanxi be used as organizational social capital to negotiate policy support from individual decision-makers. A PR consultant elaborated:

on board to direct corporate government relations. On one hand, retired officials are knowledgeable about the inner workings of institutional systems and skilled to analyze policies. On the other hand, they have their own guanxi with current policy officers, which can be borrowed for corporate use. The second mechanism of political influence is through social capita (i.e. guanxi) to increase corporate bargaining power with regulatory authorities to negotiate legitimacy for new initiatives. This functions on the aforementioned premise that China’s authoritarianism and developing legal systems provide space for top leaders’ discretion and evaluation of corporate compliance with policies. To shape authorities’ personal interpretations, Chinese PR practitioners attempt to build trust and proximity through social capital and thus guanxi, in exchange for symbolic capital such as legitimacy. An in-house PR manager explained, “If you have guanxi with regulatory authorities, they are more likely to interpret your corporate proposal as goodwill and approve it—simply giving you a mianzi (face).” As noted earlier, mianzi is achieved through showing appropriate mutual respect in social interaction or it can be borrowed from high-profile people in the guanxi network, as in this case. Another PR association officer echoed such negotiating power derived from social capital:

The key to successful use of guanxi with government officials lies in how the company’s policy preference helps the authority’s political promotion. Since government leaders are keen to build political track record, we need to emphasize how our business projects will boost the local economies—a key indicator of political performance. In this process, a rule of thumb is not to threaten politicians’ career security, for example, not to put them in ethical risks (e.g., corruption), which is unwise and unsustainable for corporate government relations.

Since Chinese guanxi emphasizes reciprocity, as long as your [organizational] proposal doesn’t go beyond the overarching framework, not to challenge the Party-state leadership or damage the interests of decision-makers―why don’t they give you a mianzi? Using guanxi for persuasion or negation is more like a “win-win” than [a] “zero-sum” game.

4.2. The political influence of social capital on corporate government relations To answer RQ2: How is guanxi employed as organizational social capital to influence and enhance corporate government relations in China, we find that social capital, and thus guanxi, is used by practitioners strategically and carefully in practice. Guanxi enables corporations to exercise agency over the pre-existing, vague regulatory environment. This agency drives the power relations between government and corporations in flux: Corporations are not completely passive to government domination, but rather apply guanxi as organizational social capital to either overcome a policy’s “information blind spot,” or to negotiate support from regulators for new initiatives. Typically, two mechanisms of guanxi-based political influence emerged from the data. One mechanism is to use guanxi to solicit information, clarification, or a reliable account of policies from an official perspective so that corporations can better position themselves and make informed decisions in China’s vague regulatory environment. One PR consultant explained, “Such information is not necessarily about ‘hidden tricks,’ but we seek up-to-date specifics, advice and clarification from authorities about how better to understand the policy guidelines and limits.” Thus, guanxi allows organizations to navigate bureaucratic mazes and enables information to flow from the top. In a PR manager’s words, “Guanxi helps us to find out the negotiable room within the vaguely restrictive environment.” Another participant agreed that using guanxi with government officials can identify where the “red line” (forbidden zone) is, so that corporations can bypass it and gain flexibility amid rigidity. A PR association officer elaborated:

Further, our data justified using guanxi for policy negotiation from both pragmatic and cultural perspectives. A PR consultant argued, “China’s bureaucracy is cumbersome, and policies often lag behind. We have to use guanxi as a shortcut to introduce new policy alternatives from an industry angle to decision-makers. We help their work.” Another PR association officer justified guanxi-based policy influence from a Confucian cultural perspective: Chinese harmony culture encourages co-existence of similarities and differences, consensus and conflicts. If a corporate proposal sounds deviant from existing policies, the key is to find a way to communicate and negotiate that policy preference. Guanxi can facilitate such opinion expression and make it more acceptable. In support of the interview data, also as noted in our participant observation journal, Chinese PR practitioners cautiously used guanxi to negotiate with and influece the government policy-makers. In other words, practitioners strove to increase autonomy and flexibility of PR practices within a confined regulatory space while still following the government leadership as a principle. 4.3. The constraints on the influential role of social capital RQ3 asks what enabling and/or constraining conditions underlie the application of social capital in Chinese corporate government relations. Our results show that social capital, and thus guanxi, can only assist corporations to negotiate the “fuzzy edges” of policy frameworks, wherein there is no clear-cut boundary between what is legitimate and what is not. Such institutional uncertainty, along with persistent state domination, makes advice from policy authorities valuable to corporations. A PR consultant shared one example. Since China’s Water Pollution Prevention and Control Law provides general guidelines without specific measurements, some corporations seek to use guanxi with authorities to influence their evaluation of corporate compliance with the law in a lenient way. Stated another way, Chinese authoritarianism, coupled with incomplete legal systems, serves as a major condition to allow guanxi-based political influence. Another enabling condition of guanxi-based political influence is when corporations can present alternative plans and viable solutions for

With guanxi, corporations can ask officials to clarify where [the] “no-go zone” is because existing policies may not specify what is permitted. Such critical information helps corporations to develop a sense of how far they can go [within a broad policy framework]. This quote mirrored a Chinese way of policy risk-taking called “playing the edge ball” (da cabianqiu) (Stern & O’Brien, 2012), that is, using interpretive information to explore the opaque-yet-shifting boundaries of policies and strive for autonomy without breaking laws. In “grey zones,” corporations take advantage of guanxi with top leaders to attain immediate decisions or approval of individual business projects. But this guanxi-based policy support is often ad hoc and restricted to the purview of local governments. To obtain such information, one strategy adopted by Chinese PR practitioners was to co-opt the source of pressure from a regulatory body. For example, one practice observed from the local PR agency was to use guanxi to invite retired politicians 6

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from contributing to the agenda and identifying policy options to implementing regulations (Davidson, 2015). The “societal social capital” (Yang & Taylor, 2013) characterized by weak-ties in social networks, facilitates collective lobbying and coalition building based on trust, reciprocity and shared values. However, within China’s authoritarian and vague regulatory system, joint lobbying through allies is not common, whereas guanxi-based interaction constitutes a Chinese style of lobbying to build trust and influence policy. In particular, Chinese PR practitioners tactfully develop “vertical social capital” (guanxi with regulatory authorities) so that they begin their practice from agentic positions (Lin, 2001) irrespective of the “given” ambiguous regulatory context dominated by government. Our findings detailed the development of interpersonal guanxi into organizational social capital, which differs from the West that uses personal relations to influence politics. While personal strategy is common in Western lobbying, it is often combined with other tactics (e.g., presenting policy proposals, submitting reports), to influence a common issue in keeping with law or professional ethics (de Lange & Linders, 2006). Yet, upward guanxi building with those in control is crucial to Chinese government relations as “whom you know” (Lin, 2000) makes a difference in policy influence. In China, guanxi with regulatory authorities helps corporations to lift their structurally disadvantaged positions and gain access to negotiating opportunities with government. The development of interpersonal guanxi into organizational social capital shows strong Chinese characteristics in two ways: a) It embodies Lin’s (2001) idea of stratified social capital building through assigning different-level executives to build guanxi with varyingly ranked government officials; and b) Guanxi-building is to be integrated with corporate objectives (rather than personally exchanging favors) so that they align with the government’s agenda. We find that guanxi-based political influence works mainly through two mechanisms: first, guanxi is used to seek clarification from policymakers so that information flows from the government to corporations using the fluidity and convertibility of social capital (e.g., guanxi exchangeable for information) (Bourdieu, 1986). Such information assists Chinese corporations to overcome policy ambiguity, ascertain environment limits and accordingly, pursue autonomy, or push the indistinct yet shifting boundaries. Clarifying information helps Chinese corporations identify and seize opportunities to negotiate with decisionmakers. This guanxi means of accessing information differs from that in the West, which Popovic (2017, p. 7) describes as an “information-access exchange logic” whereby lobbyists exchange expert information with policy-makers for access to decision-making. The second mechanism is to use guanxi to increase corporate bargaining power with regulatory authorities to attain legitimacy for new initiatives. This functions on the rationale that social similarity, solidarity and affection inherent in social capital (e.g. guanxi) (Lin, 2001) induce individual decision-makers to evaluate corporate performance generously and thus engender reciprocity by giving respect or mianzi. Such guanxi-based policy negotiation occurs mainly in areas where corporations and government can work together. It normally involves bypassing the “no-go zone” associated with sensitive issues (e.g., human rights and CCP leadership) to focus on the negotiable “gray zone,” where guanxi is used to either take risks within policy constraints or negotiate alternative plans. Such a way of negotiating accords with what Deng et al. (2010) call “political embeddedness” by working within government frameworks to explore the policy influence. In addition, the negotiable zone seems to be more open as the government also promotes the Chinese economy as part of its agenda. Consequently, the Chinese government maintains its “authoritarian resilience” (Liang, 2017) through allowing conditional bottom-up negotiation while upholding political authority. In other words, having guanxi with regulatory authorities may empower Chinese corporations with more opportunities to (1) clarify information about what is negotiable and (2) identify and seize opportunities to influence decision-makers. Nevertheless, our study does not

policy reform that benefit both the government and society. In addition to using guanxi, Chinese PR practitioners would need to demonstrate scientific knowledge and industry insights to help policy-makers resolve complex issues. As one PR consultant pointed out, “now that everyone has guanxi with officials, how you make a difference depends on whether your proposal leads to a positive issue outcome.” One PR association officer explained the viability of using guanxi for political influence from a government perspective, “the government nowadays is willing to listen because they know absorbing views from those to be regulated will make new policies easier to be enforced, rather than dead on arrival.” An in-house PR manager added, “government listening can reduce ‘where there is a policy from above, there is a counter-measure from below’ (shangyouzhengce xiayouduice).” However, it seems clear to all the study’s participants that applying social capital, and thus guanxi, for political influence can be constrained by several factors. One limitation rests with the fluidity and volatility of social capital facing challenges from fierce market competition. For example, market logic impinges on traditional values underlying guanxi, such as mutual commitment and obligation. One PR consultant cautioned, “Guanxi becomes vulnerable in the market economy where profit-making comes first. It’s not surprising to hear from time to time, stories about someone betraying another for self-interest.” Interpreted from another perspective, China’s booming market economy has stimulated an increasingly open and competitive environment which, in turn, undermines exclusive corporate reliance on guanxi to win government projects or grants. Another constraint on using social capital, and thus guanxi, to influence government authorities relates to multi-level institutional pressures. Although Chinese PR practitioners employed guanxi to increase bargaining power, regulatory authorities still need to observe and account for various institutional rules ranging from organizational, industrial and national levels. Even if a top leader intends to do a favor for the guanxi initiator (e.g., a company), s/he has to watch the institutional rules which s/he is bound to. A PR association officer illustrated how multi-level institutional pressures constrain officials’ personal decision-making: First, government officials will calculate whether their favor-giving threatens their political trajectories. Then, they’ll look at industry standards, national law, and the discipline of the Chinese Communist Party (CCP). They need to account for various levels of inquiries to avoid trouble for themselves and organizations before giving any policy support (e.g., offering an ad-hoc policy). Only when the corporate appeal doesn’t surpass any of those hard lines (yingxian) can guanxi-based political influence take effect. The third constraint seems to come from the contemporary social media environment, which pressures both corporations and government to publicize information and make policy processes transparent. Most participants admitted that nothing can be covert in social media. The proliferation and relative openness of social media were deemed to: a) “free the information flow” according to a PR consultant, and thus “people will no longer rely merely on guanxi to seek information”; and b) “expose those ‘under-table deals’ (anxiang jiaoyi) to ethical scrutiny, not to mention pulling or manipulating guanxi with officials for selfinterest,” warned another PR association officer. Further, even the government per se has increasingly adopted social media (e.g., Weibo) as a main channel for information disclosure and distribution. 5. Discussion This study illustrated the explanatory power of a variant form of social capital, namely, guanxi, for politically influencing Chinese corporate government relations. The cultural differences between Western democracies and Chinese authoritarianism determine that social capital influences policy in different ways. In a Western electorate system, where business participates in policy-making, it does so at every stage 7

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understanding of the complexity and richness of the Chinese social capital, guanxi. Instead of viewing guanxi as an innate timeless principle of Chinese culture, as numerous PR studies have done (e.g., Chen, 2004; Luo & Cheng, 2015), we treat guanxi as a cultural practice but one whose meaning we have updated by applying it to a transitional market economy. Our study also provides a fresh understanding of Huang’s (2000) “Personal Influence Model” that emphasizes individual-to-individual guanxi and criticizes using guanxi for unethical purposes. Rather, our study highlights the strategic development of interpersonal guanxi into organizational social capital, by acknowledging the potential of guanxi to empower corporations to exercise agency over a restrictive environment and generate reciprocity between business and government.

claim that guanxi plays a decisive role in Chinese government relations and its effect is constrained by several factors. Chinese PR practitioners acknowledge that guanxi becomes fragile when it faces increasing market challenges. Corporations can no longer rely merely on guanxi to win government projects. Another constraint lies in the multi-level institutional pressures. Regulatory authorities have to consider personal political interests, industry standards, national laws, and the discipline of CCP before offering policy support based on guanxi. These findings complement both Bourdieu and Lin’s theories by identifying specific conditions for converting social capital (i.e. guanxi) to other resources (e.g., political support). Moreover, our participants reported that social media (e.g., weibo) compelled both Chinese corporations and the government to be transparent in policy processes. This means that using guanxi alone for self-interest or favor exchange cannot be sustained in a social media environment. Therefore, the impact of opportunistic use of guanxi is constrained. Overall, our study has revealed how vertical social capital (i.e. guanxi with regulatory authorities) functions as an important source and mechanism of political influence for Chinese PR practitioners to navigate bureaucratic mazes, exploit the fuzzy edges of policies to identify what is negotiable, and align and negotiate with a powerful yet resilient authoritarian system to obtain support rather than challenge the system. However, it is difficult to predict how this Chinese form of social capital will continue to shape future corporate government relations. But one certainty is that its pervasive impact could be weakened when institutions formalize further and access to information in social media and beyond becomes even more widespread. Learning from their Western counterparts, Chinese PR practitioners can convert companies into “trusted advisors” (Macnamara, 2012) for policy-makers in the long term. Until then, guanxi as a form of social capital may still have impact, but will probably serve as a foundation to build formalized, organization-based GR.

6.2. Practical implications This study offers practical implications for both local and foreign corporations to master the art of building guanxi to win the game of government relations in China. The key is to develop guanxi into organizational social capital that is immune to employee turnover or to avoid potential conflict between personal interest and organizational objectives. In this regard, we recommend the following principles: building stratified guanxi (e.g., assigning different levels of executives to build guanxi with different-ranking government officials) and aligning the organization’s goals with the government’s agenda. When applying social capital to policy negotiation, a bottom-line is not to challenge the Party-state leadership or incur any political risks to individual officials. It is advisable to avoid sensitive zones while seeking autonomy or negotiating flexibilities in preferred ways. 6.3. Limitations and future research This study is not devoid of limitations. One is the missing voice from government officials. Because of the high power distance in Chinese society, it is difficult to recruit government participants. However, their opinions would be helpful to cross-validate or complement the views from PR practitioners. Also, the PO method has unavoidably led to some “sensitive” data being blocked which, in turn, influenced the data collection. Nonetheless, by keeping daily reflective notes and being reflexive, our study aimed to produce objectivity that should be understood as a “worthy, but impossible philosophical ideal of observing and describing reality ‘as it is’” (Eadie, 2009, p. 479). Future research can attempt to develop specific measurements of the vertical dimension of social capital because it is salient to authoritarian regimes. In this regard, Lin’s (2001) social capital theory in hierarchical societies provides a starting point to empirically analyze the number of levels, the size of occupants, and the resource differences at each level. It would also be interesting to consider how social media shape the creation, use and political influence of social capital, which traditionally results from social interaction in physical settings. In addition, it is worthwhile to adopt a cross-cultural approach to examining different representations of social capital in different societies to fully grasp their essence, foundations and impacts on corporate government relations. Overall, social capital holds great potential for government relations and lobbying studies, thus meriting further attention from scholars, practitioners and policy-makers.

6. Contributions and future research 6.1. Theoretical contributions This study makes three contributions to the scholarship of social capital and public relations, in general, and corporate government relations, in particular. Firstly, we have detoured from the mainstream research of the society-level social capital as an outcome of public relations in civil societies (Saffer et al., 2013; Sommerfeldt, 2013; Taylor, 2010). Rather, our study reveals how applying individual-level social capital (e.g. guanxi) to Chinese corporate government relations is influential. We highlight an underexamined vertical dimension of social capital (e.g., guanxi with regulatory authorities), which is crucial to Chinese political influence. Thus, our study not only adds a new perspective to social capital, but also offers a useful case for comparison with other authoritarian regimes where vertically derived social capital is prevalent. Examples are quan hế in Vietnam (Doan & Bilowol, 2014), blat in Russia (Petersone & Erzikova, 2016), and nepotism in the Arabic world (Al-Kandari & Gaither, 2011). Secondly, our study offers new insight that extends the lack of literature about government relations (public affairs) and lobbying by painting a Chinese picture of guanxi-based policy negotiation. In contrast to Western issue-focused approaches to lobbying (Vercic & Vercic, 2012), we identify a relationship-centered style of influencing individual politician decision-making in an authoritarian context. This is where vertical social capital—and thus guanxi—enables corporations to find space to negotiate within vaguely confined systems. The Chinese way of influencing policy differs sharply from that of the West, which relies mainly on constituency building, lobbying allies, and media advocacy. In this sense, our study enriches the public affairs literature that is dominated by North American and other Western research developed in democratic regimes (Davidson, 2015). Thirdly, being comprehensive, our research provides a thorough

Funding This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors. Declaration of Competing Interest None. 8

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