The interaction between business Guanxi connections and environmental dynamism in determining Chinese firms’ competitive advantage abroad

The purpose of this research is to investigate whether business connections, referred to as Guanxi, established by Chinese firms with foreign business partners, affect the competitive advantage that these firms develop in the host country. Additionally, this study explores whether the effect of Guanxi on competitive advantage is moderated by the degree of environmental dynamism in the host country’s market. From a theoretical perspective, this research integrates the resource-based view (RBV) theory and the Structure-Conduct-Performance (SCP) paradigm to provide a comprehensive explanation of this phenomenon. The study collected survey data from 312 firms operating in 39 countries across six continents. Partial Least Squares Structural Equation Modeling (PLS-SEM) was used for data analysis. The findings suggest that Chinese firms leveraging their Guanxi networks with foreign business partners are better positioned to gain a competitive edge in those markets. However, while Guanxi has a positive influence on competitive advantage, this effect diminishes in environments characterized by high dynamism. Overall, this research advances the understanding of how external environmental factors, such as environmental dynamism, can moderate the effectiveness of internal resources like Guanxi.