The essential network : business relationships of the Chinese in the Philippines

Abstract

The ethnic Chinese are important players in the Philippine economy. Many believe that networking plays a role in their business success. This research aimed to develop a theory of business relations that explained why and how ethnic Chinese businesses enter into long-term business relationships. It sought to identify the antecedents to long-term business relationships and to discover how businesses chose their partners and structured their relationships. The research also investigated the tangible and intangible outcomes of these relationships. Eight in-depth case studies of ethnic Chinese firms were constructed using data from ethnographic-type interviews, observation, documents and literature. Using modified grounded theory, the core motivation for entering into long-term relations was identified as accessing scarce resources. Resources were defined widely and included finance, technology, raw materials and skills. A framework termed 'essential network' was developed. This network was composed of each firm's most valuable set of partners. In some cases, these partners could be its key customers or major suppliers or both and in others, its technology partners. The findings revealed that contextual variables (economic, social and political conditions) and the firms' strategies influenced the nature of their business relationships. Goodwill trust was not necessarily a precondition of cooperation. The preconditions lay partly in the objective circumstances, and partly in the accumulation of knowledge with reference to mutual interests and the potential satisfaction of those interests through cooperative behaviour. The four conditions that sustained cooperative interaction were related to (a) payoff structures, (b) endgame conditions, (c) embeddedness and (d) tit-for-tat mechanisms. Show more