- Open Access
The social bases of a committed labor force: how guanxi works in the Chinese factories?
© The Author(s). 2018
- Received: 26 January 2018
- Accepted: 3 April 2018
- Published: 18 April 2018
Existing research points out that social relations are crucial in governing employment relations and eliciting commitment but fails to clarify how they work in different contexts. Using an employer-employee nested dataset and interview records in the Yangtze Delta, this study addresses the effect of employer-employee native-place ties on employees’ organizational commitment and how the effect is moderated by a firm’s internal labor market. This study finds that native-place ties can enhance employees’ organizational commitment, especially when the ties are stronger and constructed at a higher level. The firm’s internal labor market functions as an effective moderating variable: when the internal labor market becomes more open and provides more upward opportunity for its employees, native-place ties become less effective in promoting organizational commitment.
- Employer-employee native-place ties
- Internal labor market
- Organizational commitment
How can employers effectively elicit commitment from their employees? Why are some bosses able to secure effort while others fail to do so and, even worse, occasionally suffer from high voluntary turnover and sustained workplace shirking? Various research works have addressed this issue, among which the argument of “social embeddedness” is theoretically influential. Economic sociology and new institutionalism emphasize that pervasive social relations in the workplace often embed formally written contracts, rules, and regulations in a set of informal norms and perceptions that accordingly define each party’s role and obligations. They thus strongly shape employees’ commitment and obedience (Baron 1988; Granovetter 1974, 1992).
Chinese factories are filled with all types of social ties among the personnel, mainly primary ties based on lineage, kinship, and native-place origin. Urbanization facilitates vast migration from rural areas. Unlike what modernization theory predicts, rural-to-urban migration has not significantly weakened or replaced traditional social ties. On the contrary, the unfamiliar and often hostile urban environment maintains and even reinforces the role of primary ties for migrants (Ma and Xiang 1998). These ties have been brought into the workplace and profoundly shape the nature of employment relations for the new working class1 (Wen and Zhou 2007).
Although the subject of social embeddedness in employment relations has garnered wide scholarly attention, the literature suffers from at least two deficiencies. First, it is empirically controversial whether employer-employee social ties facilitate effective management in organizations with lower costs or hinder workers’ efforts by somehow invalidating formal regulations and behavior controls. Second, few researchers have seriously discussed why social ties ultimately work and in which contexts their effect varies.
This research studies the role of social relations in shaping workers’ organizational commitment, focusing on a typical type of social tie, the native-place tie between employer/manager and their employees. Using employer-employee nested data collected from over 280 manufactories in the Yangtze Delta Region and semi-structured interviews with factory owners, managers, and ordinary workers, we argue that (1) to some extent, the native-place ties between employer and employees can promote employees’ commitment, especially when the ties are strong and constructed at the higher level since employees usually expect higher returns when they share native-place origin with their superintendents; (2) the effect of such relations can be partially substituted if employees can secure equivalent returns from an alternative opportunity structure; and (3) the organization’s internal labor market provides important alternatives for employees. When the employees expect resources and opportunity from the firm’s internal labor market, they are naturally less dependent on and less constrained by the social ties with their employers. Therefore, the internal labor market moderates and constrains the role of social relations.
Since the inception of employment relations theory, two rather distinct bodies of literature have gradually evolved on workplace control and incentive structure. One views formal institutions as vital to establishing hierarchical order within organizations. Referred to as classical management theory and pioneered by Frederick Taylor and his disciples, it argues that through designing incentive systems, grievance and dispute resolution mechanisms, and appropriate rewards and punishments, “self-interested and intrinsically unmotivated employees will find it in their own interest to work toward the organization’s goals, … [and shape] subordinate behavior” (Miller 1992, 1). This point of view has been tremendously influenced by Max Weber’s theory of rationalization (Hill 1981), which emphasizes that running an organization and managing human resources are a mechanistic problem in nature. To achieve effectiveness, one needs to prioritize efficiency in management, define and schedule work tasks and processes as clearly as possible, and break tasks down into the smallest possible units. Therefore, this organization usually embraces a highly centralized authority structure, eliminates work autonomy in every segment, and simplifies and streamlines operations (Taylor 1997/1911; Guillen 1994). What drives workers to obey? It is usually believed that direct monetary incentive plays an essential role in shaping a domination and compliance system. As Weber points out, “In the capitalist system, the most immediate bases of willingness to work are opportunities for high piece-rate earnings and the danger of dismissal” (Weber 1978, 151).
This literature contrasts sharply with the second view of employment relations that centers primarily on economic sociology and new institutional organizational study. It argues that all formal arrangements are socially embedded in a web of informal relations, which seriously constrains the effect of formal institutions. As behavioral scientists argue, an organization is often “organic” in that the interaction among members is not presumed by formal regulations in a mechanical way. Employers and employees have their own understanding of the legitimacy of the rules, and in the workplace, they usually want to sustain their relations with co-workers despite employers’ efforts to break work tasks into small parts. Pervasive personal relations, small-group interaction, and nonmaterial needs all have a profound impact on employment relations and shape “group dynamism” to preserve order in the organizational hierarchy.
These works largely derive from the renowned “Hawthorne Experiment”2 dating back to the 1920s. In a Durkheimian tone, researchers argue that human beings like to be integrated into a certain group. The workers’ urge to have adequate social interrelations with other people even dominates their desire for material gains. The rapid development of the industry often tears small groups apart, atomizes individual workers, and eventually ignites industrial conflict. Mayo argues that if industrial society cannot come up with new methods of social integration and comradeship to replace traditional community-based support, social maladjustment and social disorganization will very likely occur (Mayo 2003/1933). In “China Enter the Machine Age”, Mayo’s Chinese disciple, Kuo-heng Shih, observed that rural migrants often encountered indifferent managers and rigid administrative procedures in urban factories. Their traditional social ties were easily dissolved, which gave rise to shirking and labor turnover (Shih 1944).
As a negation to classical management theory, this literature emphasizes the role of informal institutions in the workplace. They criticize the fact that the economic efficiency mentality long dominated the so-called scientific management practices without acknowledging workers’ need for adequate communication and socialization while at work. Managers try to maintain some level of collaboration by decomposing the labor process and creating interdependency among workers, but their efforts prove to be futile in the Hawthorne Experiments. As researchers eventually determined, the result is not discipline and collaboration but disorder and resistance since social participation is excluded from the organization and fatigue is widespread (Mayo 2003/1933).
If we regard labor management practices in the organization as a natural operation of a “contract,” the above two groups of literature diverge on whether the contract is coordinated through a price mechanism or through a somehow authoritarian hierarchy. Those who follow Taylor usually argue that labor management operates as if in a pure market, in which the price mechanism is largely effective. Traded parties engage in a repeated game and usually resort to damage compensation claims, refusal to collaborate further, or an immediate exit when facing potential betrayal. This view assumes that an employment contract is normally based on voluntary commitment from both sides that face pressure from market competition and seek to optimize their gains. They constantly adjust to market demand and supply and, through a series of bargaining processes and transactions, finally reach equilibrium and efficiency. Although aware of the fact that trading labor usually differs from trading other commodities, which to some extent requires much more sincere commitment, this literature largely relies on formal institutions, such as economic incentive structures, formal legislation, and grievance procedures, to define people’s entitlements, solve agency problems, and mitigate opportunistic behavior (Katzenstein 1985; Goldthorpe and McKnight 2006; Mühlau and Lindenberg 2003).
In contrast, for those who view employment contracts as intrinsically authoritarian, effectively enforcing a contract largely relies on its perceived legitimacy rather than paid price. As Ronald Coase points out, “The operation of a market costs something and by forming an organization and allowing some authority (an ‘entrepreneur’ to direct the resources), certain marketing costs are saved” (Coase 1937, 392). Unlike markets, authoritarian hierarchies often allow entrepreneurs to direct and institutionalize long-term mutual commitment so that the trade parties can trade off social acceptance and esteem against wealth (Miller 1992). They correctly note that the noncontractual elements, such as social and psychological connections between employers and employees, are powerful independent determinants of employees’ organizational commitment and often profoundly influence their assessment of the legitimacy, equity, and humaneness associated with the employment contract (Baron 1988). When employees perceive the incentives and controls as inappropriate and thus lacking in legitimacy, these formal arrangements will not induce effort and commitment from the workers and, even worse, will likely reduce enthusiasm at work.3
Several empirical studies support the second view. A classic study of the Tennessee Valley Administration (TVA) finds that the personal networks and small cliques within the organization usually constrain the function of formal rules (Selznick 1949), sometimes even producing what Merton (1936) calls a “dysfunctional effect.” French sociologist Claudette Lafaye argues in his Sociologie des Organisations that in the rationalization process, the new adopted regulations are often incompatible with the existing prevalent norms. While formal and informal rules often have different sources of legitimacy, the coexistence of these two types easily produces tension. The informal norms by no means disappear naturally; instead, they usually continue in every possible way and distort the role of formal institutions (Lafaye 2000). Crozier (2010) also illustrates this point that the bureaucracy tends to design an ever-increasingly complex labor process and labor management practices including hiring, supervision, performance review, and promotion. However, personal relations within the organization do not fade away in this process; on the contrary, the complexity of formal rules usually reinforces private exchange and interpersonal dependency since the rigidity of formal regulations increases uncertainty in daily interactions.
Situations in emerging markets are quite similar. On one hand, the “formalization” of employment relations has not yet squeezed out traditional social ties, as modernization theory has long anticipated. On the other hand, the traditional ties play a new role in maintaining discipline and order in the workplace. Arrighi’s fieldwork in Rhodesia finds that many laborers still work part-time as farmers. They acquire their living necessities and accomplish labor reproduction through agriculture and are thus willing to accept relatively low wages and social insurance (Arrighi 1970). Burawoy reaches a similar conclusion when comparing miners in South Africa and California. If owners hire these migratory laborers, labor costs can be reduced tremendously since they can rely on primary social ties for labor reproduction and daily support (Burawoy 1976). A study of Shanghai workers in the early twentieth century reveals that the presumed solidarity among workers was never achieved since they varied greatly in skill level, birthplace, work situation, seniority, and gender. Perry even argues that the emerging capitalism in then-China was “more dependent on events in the countryside than on the direction of the Shanghai labor movement” (Perry 1993, 129).
An attempt to institutionalize employment relations is unfolding in contemporary China. Nevertheless, researchers still witness an emerging market with a huge number of “institutional holes.” The new laws and regulations cannot be effectively and efficiently enforced and thus suffer from a crisis of trust and pervasive opportunism (Bian 2002; Zhu and Warner 2000). Uncertainty and risks deriving from institutional holes pose particular challenges for the transition in employment relations, and noncontractual elements in enforcing labor contracts will presumably continue for a long time.
This study is largely in line with economic sociology, arguing that the labor contract is coordinated through an authoritarian hierarchy rather than a pure pricing mechanism and that the social ties between employer and employees play a vital role in establishing, maintaining, and enforcing an effective contract. However, as Portes (2010) points out, affirming that market transactors behave in particular ways because of their “social embeddedness” cannot advance our understanding in any way. We need more proximate explanatory mechanisms. Thus, we need to go further by probing into the constraints and conditions of the working of social ties and discuss whether the effect of guanxi varies in different contexts.
Data used in this paper were collected in the Yangtze Delta region from two waves of a nested survey. These two surveys were conducted in 2011–2012 and 2012–2013 by the Institute of Sociology, Shanghai Academy of Social Sciences, and both contained enterprise-level and individual-level information.6 Due to the lack of firm information, most studies of employees’ behavior and attitude only use individual-level data. Departing from those works, this study focuses on the firm-level opportunity structure and how it moderates the effect of employees’ social relations. Enterprise-level data is thus a prerequisite.
The dependent variable here is organizational commitment. To measure this concept, we integrated the classical scale of Meyer and his colleagues (Meyer et al. 1993), and an innovative version proposed by Chinese organizational psychologists (Sun and Jiang 2009). It contains three key elements. The first is a feeling of belonging and identity, which means that employees feel a psychological dependency on the organization. In the Chinese context, employees usually regard their organization as the “family.” Second, a consensus exists between the individual and organization, which implies employees’ recognition of the organization’s target, vision, and value system and whether s/he would ally with the organization’s interests in decision-making. The third element is the attraction of the organization, meaning to what extent the employee feels proud of being part of the organization when assessing his/her social status and reputation.
Organizational commitment: average score for each item
Feeling of belonging and identity
1. I feel like “part of the family” at my organization.
2. I feel that the boss and managers truly care about our well-being.
Consensus between individual and organization
3. I often feel my interests do not ally with the firm’s interests. (Adverse item)
4. All in all, I really feel as if this organization’s problems are my own.
5. I feel that my value system differs from what the firm tries to nurture. (Adverse item)
Attraction of organization
6. I am proud to be in this organization.
7. I would feel proud if the products we produce could be sold to other countries.
The independent variable is employer-employee native-place ties in the workplace, specifically between the respondent and his/her boss, mid-level manager, or lower-level supervisor. We used three measurements in the analysis: (1) whether the native-place tie occurs between the worker and the owner of the factory, and how close it is; (2) whether the native-place tie occurs between the worker and the mid-level manager, and how close the closest tie is if there are many; and (3) whether the native-place tie occurs between the worker and the lower-level supervisor, and the how close the closest tie is if there are many.
Among the respondents, 15.37% revealed that they shared place of origin with the owner of the factory, 23.47% with the mid-level manager, and 31.99% with the lower-level supervisor. To further analyze the strength of such social ties, we made cross-tabulations and constructed a new variable with three values: close native-place tie, not-so-close native-place tie, no native-place tie. The overall distribution shows that it is easier to have a lower-level close native tie than a higher-level one. For instance, only 3.64% claimed that they had close native-place ties with the factory owner, 7.65% claimed to be close with mid-level managers, and for lower-level supervisors the percentage increased to 13.65%.
The moderator variable is the openness of the firm’s internal labor market. We operationalized it as how many employees received a promotion annually in this organization. The survey did not collect this information at the firm level; thus, we aggregated individual-level information into group-level data. The aggregated variable is based on two items. The first item reflects the perceived probability of getting a promotion in upcoming years, with responses ranging from “definitely will be promoted” to “almost no chance.” We recoded these responses to a dichotomous variable, with “almost no chance” recoded to 0 and the others to 1. The second item reflects the promotion experiences of respondents in this organization by asking, “Have you been promoted in this organization, such as group leader, shop-floor supervisor, union committee member etc.?” We constructed another dichotomous variable, with “yes” recoded to 1 and “no” or “can’t remember” to 0. We then used these two dichotomous variables to construct a new variable, “the chance of getting a promotion.” If either dichotomous variable gets a value of 1 then the chance of getting a promotion equals 1 and otherwise equals 0. We proceeded to calculate the percentage of “1”s in each organization, implying the percentage of employees who already received a promotion or expected to be promoted. This measures the characteristics of the internal labor market: the higher the percentage, the more open opportunity structure the firm’s internal labor market shows to its employees. In the total 282 firms that we surveyed, the highest percentage of getting or expecting a promotion was 100%, implying that all the respondents in that firm had been or expected to be promoted in the near future. However, the lowest percentage was 4.3%, a sharp contrast.
Descriptive statistics of controls
Skilled worker/shop-floor supervisor
Labor rights protection institution
Years of schooling
Democratic participation in the workplace
Scale of organization
Human capital stock
Organizational commitment: results of the null model
Percentage of total variance
Level 2 effect (between cluster)
Level 1 effect (within cluster)
We then proceeded to examine the two sets of hypothesis. Here, there are several mechanisms. The first is the direct effect of employer-employee native-place ties on organizational commitment; second, the direct effect of the internal labor market on employees’ organizational commitment; and third, how the internal labor market moderates the effect of native-place ties. We estimated the following model of three equations for the effects of native-place ties and the internal labor market:
Native-place ties and organizational commitment: a direct effect
With mid-level manager
With lower-level supervisor
With owner (no such tie as ref.)
With mid-level manager (no such tie as ref.)
With lower-level supervisor (no such tie as ref.)
Controls (individual level)
Gender (male = 1)
Years of schooling
Hukou (local urban as ref.)
Cohort (before 1980 as ref.)
Occupational class (manager/technical as ref.)
Skilled worker/shop floor
Hourly wage (log)
Labor contract (yes = 1)
Social insurance (yes = 1)
Workplace abuse (yes = 1)
Union membership (yes = 1)
Ownership (state-owned as ref.)
Scale of organization (log)
Human capital stock
Rights protection institutions
Level 2 effect
Level 1 effect
Level 2 observation
Level 1 observation
First, we find that native-place ties do not guarantee a higher level of organizational commitment unless these ties are relatively strong. To be specific, those who have close ties with their superintendents usually show a higher level of loyalty compared to those who do not have such connections at all. However, those who have such connections but not as close reveal an even-lower level of commitment compared to those who lack such connections.
Models 2 to 4 demonstrate that for each type of native-place ties, close ties have a positive effect on organizational commitment while the effect of not-so-close ties is negative. Specifically, close native-place ties increase the commitment of those who share place of origin with their primary boss by 0.53 units, compared with those who have no such connections, while not-so-close ties decrease commitment by 0.51 units (p < .05), compared to the reference group. Model 3 reveals a similar pattern. Those who have close native-place ties with their mid-level manager show higher commitment (p < .1), while not-so-close ties decrease commitment by 0.21 units. Model 4 presents similar results on the coefficients, though not statistically significant. We can thus summarize two points. First, Hypothesis 1.1 is partially supported, which means the closeness or strength of native-place ties is vital to enhancing commitment and not-so-close ties make the commitment even more fragile. Second, Hypothesis 1.2 gets support since close ties indeed nurture a higher level of commitment.
These findings interestingly reflect the Janus face of social relations discussed before. As we see from Table 4, the strength of native-place ties has a different effect on employees’ commitment: close ties enhance the commitment, while not-so-close ties weaken the commitment. The Janus-face argument states that social relations between employers and employees may culturally command the employees’ compliance but at the same time practically elicits a higher expectation of special treatment from the employers. To go one step further, the cultural and instrumental faces of social relations may correspond to the strong tie and weak tie respectively. A strong tie usually elicits tight cultural constraints and in return brings more interest to those who obey. On the contrary, a weak tie is usually not strong enough to culturally obligate the employer and employees to cater to each other’s needs and sometimes only produces instrumental desires while being devoid of cultural constraints.
Second, other things being equal, as the level of guanxi gets higher, it has a greater effect in eliciting commitment. If the employee has the same place of origin as his/her boss, such a connection enhances the employee’s organizational commitment by 0.53 units. In comparison, a close native-place tie with a mid-level manager enhances 0.44 units of commitment, while a close tie with a lower-level supervisor only enhances it by 0.1 units. Scholars still hold different opinions about the effect of the last type of native-place ties. Some argue that lower-level supervisors are part of the hierarchical management system, the grassroots controls at the shop-floor level, and thus, it is fair to say that they exercise domination on ordinary laborers. Following this logic, the native-place ties between workers and lower-level supervisors will contribute to building the employee’s commitment. However, Table 4 does not seem to indicate adequate support to this standpoint: the effect of such ties is so weak, if not nonexistent, that it is more like a horizontal connection and solidarity among ordinary workers rather than a vertical tie between workers and their managers.
Considering that each respondent may have more than one type of native-place ties, we present model 5 as a full model that contains all three types of native-place ties so that we can assess the net effect of each type and compare the results with previous models. Model 5 reveals that a higher level of native-place ties has a larger net effect on organizational commitment. The effect of the lowest level of native-place ties is overshadowed by the effect of other types of ties, which means that if the employee has more than one type of native-place ties, the effect of lower-level ties would be more “invisible.” This finding lends support to our argument that the level of social ties does matter. Therefore, Hypothesis 1.3 also gets partial support, but the relationship between the levels of social ties and commitment is not linear. Native-place ties with lower-level supervisors do not guarantee the employees’ attachment to the organization; at the same time, the connection with the factory owner is no more useful than a connection with a mid-level manager in that regard. Referring to what was discussed in previous sections, this nonlinear relation perfectly reflects the complexity of guanxi in general. Sometimes the cultural constraints of guanxi may dominate while sometimes it only shows sheer instrumental concerns; what is worse, we hardly know the reason why this occurs. As the level of guanxi gets higher, subordinates may identify more with their superintendents and accept whatever they demand; at the same time, the subordinates may also have greater expectations and ask for more reciprocity from their superintendents. These tendencies tremendously influence the effect of social ties.
Native-place ties, internal labor market, and organizational commitment
Ties with owner*
Internal labor market
Ties with mid-level managers*
Internal labor market
Ties with lower-level supervisors*
Internal labor market
Model 2: with the owner
Model 2.1: direct effect of ILM
Model 2.2: moderating effect of ILM
Model 3 with mid-level manager
Model 3.1: direct effect of ILM
Model 3.2: moderating effect of ILM
Model 4 with lower-level supervisor
Model 4.1: direct effect of ILM
Model 4.2: moderating effect of ILM
With owner (no such tie as ref.)
With mid-level manager (no such tie as ref.)
With lower-level supervisor (no such tie as ref.)
Openness of internal labor market (ILM)
ILM * bc
ILM * bc_2
ILM * bc_3
ILM * mc
ILM * mc_2
ILM * mc_3
ILM * tlc
ILM * tlc_2
ILM * tlc_3
Now let us move to the moderating effect of ILM, as presented in models 2.2 to 4.2. We further add coefficient models (as indicated in Eq. 2.2) to the previous models 2.1 to 4.1. The coefficient models contain ILM as the independent variable and the direct effect of native-place ties (β1) as the dependent variable in order to analyze how ILM moderates the effect of social ties.
Table 5 reveals the interesting finding that as the ILM becomes more open, the effect of social ties is considerably reduced. Such reduction of effect is significant in all three types. Taking model 2.2 as an illustration, since the openness of ILM is a positive number ranging from 0 to 1, the sign of γ11 × ILM is up to the sign of γ11. In model 2.2, γ11 has values of − 3.952 and − 2.485; thus, γ11 × ILM has a negative value. This indicates that as the openness of ILM increases, the β1 decreases and ILM reduces the effect of the independent variable.
If native-place ties between employees and their bosses are strong and close, as the ILM increases its openness by 1 unit, the effect of strong ties on commitment is reduced by 3.952 units (p < .01); if such ties are not so close, then as the ILM becomes more open by 1 unit, the effect of weak ties is reduced by 2.485 units (p < .01). Similar results are presented in models 3.2 and 4.2. For close guanxi between employees and mid-level managers, a 1-unit increase in ILM openness reduces the effect of guanxi by 1.931 units (p < .05); for not-so-close ties, the reduction is 0.883 units. For close guanxi with lower-level supervisors, a 1-unit increase in ILM mitigates the effect by 1.547 units (p < .05) and for not-so-close guanxi, the reduction is 0.260 units. Hypotheses 2.1 and 2.2 both get strong support.
Finally, after adding coefficient models, we still witness a significant direct effect of ILM on organizational commitment. Models 2.2 to 4.2 show that a 1-unit increase in the openness of ILM would respectively enhance an employee’s organizational commitment by 2.287, 2.278, and 2.263 units.
Commitment and shirking in employment relations have long received scholarly attention. At an earlier stage, economics emphasized the role of “efficiency wage” (Shapiro and Stiglitz 1984), but later, economists made substantial theoretical revisions to add social and relational elements to their models (Akerlof and Yellen 1986), emphasizing that these elements, often extracontractual, make the contract-based labor exchange more or less reciprocal. Political scientists also point out the importance of nonmarket institutions for controlling the incentive to shirk or cheat in the labor market (Krieg et al. 2013). From another perspective, legal experts argue that relying solely on laws and decrees will not elicit adequate commitment. All these standpoints urge researchers to broaden their horizons and study the roles of ubiquitous informal institutions and pervasive guanxi.
Seminal works in economic sociology argue that extracontractual social relations between employers and employees have a profound impact on employees’ behavior and attitude toward the organization, which is referred to as the social embeddedness of employment relations. However, most follow-up studies merely focus on the effect of social relations and discuss whether social embeddedness has an impact. Such replicative studies obviously lack the capacity of advancing our understanding and disappointingly impair the preciseness of this concept (Fu 2009; Liu 2015). Some scholars have noted the context of social embeddedness, arguing that social behavior and attitude are constrained by informal institutions, but such constraints are themselves subject to certain larger structures (Wang 2008). Researchers have attempted to create some formal analytical framework but have not yet applied the framework to test it empirically.
This study takes a slightly different approach. It does not use empirical data to test the size of the effect of social embeddedness but to address a theoretical question raised by the sociology of knowledge, “How does ideology work?” (DiMaggio and Powell 1991). We propose several statements to construct our theoretical framework:
The first statement argues that people comply with informal institutions partly due to the moral restrictions but more likely due to their instrumental concerns. This argument is not at all original. Social network researchers have already noted the multifaceted nature of guanxi as both emotional bonds and an instrumental toolkit. Lin (2001) argues for the relational basis for social exchange, the so-called “relational rationality” built on pervasive asymmetrical social exchanges. Both of the trading parties tend to sustain their mutual commitment, trust, and affection through instrumental ways. However, scholars also admit the lack of systematic inquiry into the empirical consequences and contexts of multifaceted social relations (Bian 2010).
This work does not stop with pointing out that social relations have two faces. Instead, we proceed to the second statement, that the instrumental concerns of complying with social relations can be (partially) substituted. When people can secure equivalent or more profits through alternatives, they are less constrained by social relations. Thus, the effect of guanxi will be reduced. In this way, we may be able to analyze the contexts and conditions of social relations in an indirect way.
In several articles, Bian and his coauthors analyze whether the effect of social networks on job seekers’ entry-level wage varies across different sectors. They find that network effects are stronger in less-institutionalized sectors, which to some extent addresses the contexts of guanxi (Bian and Huang 2015; Bian and Zhang 2014). These results merit further investigation. For instance, what does the institutionalization of sectors really mean? What is the mechanism behind this moderation effect? After all, the sector is such a broad issue with so much internal variation, and it is probably not suitable as an ideal measurement of context.
Using qualitative data and existing literature, we constructed a theoretical framework and tested its empirical validity using a novel employer-employee nested dataset. We argue first that native-place ties can elicit organizational commitment so long as such ties are strong and constructed at the higher level. This also accounts for the instrumental characteristic of social relations in general. Second, if such instrumental concerns can somehow be taken care of through alternative ways, employees feel it is less necessary to secure their particularistic ties with the employers. Third, the internal labor market in an organization is an important alternative for employees. In a more open internal labor market, employees can get better life chances and opportunities for upward mobility; the effect of native-place ties on commitment is then reduced. In contrast, in a more closed internal labor market, employees have no alternative but to rely on their personal ties with employers, which enhances the effect of guanxi.
In regard to the problems and deficits of this paper, the limitations of the data prevented us from adopting a better conceptualization and operationalization of the internal labor market. In theory, the internal labor market is much more than just promotions; it includes pricing, allocation, and training of labor. In model specification, the aggregation of individual-level data also creates measurement errors. We therefore need more group-level information about career ladders and job allocation to make up for this issue.
Another problem is the lack of treatment for endogeneity between native-place ties and organizational commitment. Not all the employees share native-place connections with their employers. It is reasonable that some latent factors could create a situation in which some employees have better chances to be socially connected with their bosses, and the same factors elicit higher commitment from those employees. To solve this endogeneity problem, we need to find an effective instrumental variable that correlates with native-place ties but is uncorrelated with commitment in order to come to a more credible conclusion.
The new working class in China has led to a huge number of migrant workers flowing from rural to urban areas, often employed in non-state sectors. This contrasts to the old working class that was made up of state-employed laborers who enjoyed permanent employment and social insurance, as was typically the case in the planned economy. See Chan and Pun 2009.
The Hawthorne Experiments were conducted between 1924 and 1932 at the Western Electric Company, Hawthorne Works, in Chicago. During these experiments, a research team from Harvard Business School led by Elton Mayo discovered illuminating results about human relations in the workplace and their impact on productivity. These findings formed the basis for the school of human relations in the social sciences.
We need to briefly state here that the institutionalization of labor contracts is far more complicated than with other types of contracts. According to what labor contracts prescribe, wage laborers trade “labor power” for money. Labor power differs from other traded things in that it is inseparable from those who sell labor and largely depends on the aspirations and willingness of those who own it. Although the labor contract may stipulate the quantity and quality of traded labor power, it is still practically difficult for employers or a third party to enforce the contract. In other words, it often lacks “exogenous claim enforcement” (Bowles and Gintis 1993, 166–67).
Prof. Shu Keng has suggested careful reading of the seminal works by Edward Lazear and his colleagues. His suggestion is truly appreciated.
The author thanks an anonymous reviewer for pointing out the links between “implicit contracts” and the internal labor market.
Data collected by these two waves of surveys are cross-sectional rather than panel and include different enterprises. Seven cities were deliberately chosen as representing the industrial development level in this region: Shanghai, Nanjing, Nantong, Changzhou, Hangzhou, Ningbo, and Wenzhou. Five labor-intensive industries were targeted: electronics, garment, mechanics, automobile assembly, and chemical engineering. Enterprises were sampled according to the distribution of industry, ownership, and scale in each city. In total, 282 enterprises and 5049 employees were interviewed. Among the employees, production workers comprised more than 80%. Due to space limitations, we do not present the distribution of samples here, but the results are available upon request.
Before doing that, the author first calculated the Cronbach value of this measurement scale. According to a general rule, if the value is between 0.7 and 0.8, it denotes an acceptable level of measurement consistency. If the value is above 0.8 then the level of consistency is fairly high and thus reliable. The result of the calculation is 0.84, meaning that these seven items are internally consistent in the measurement.
Information on measurement of controls is available upon request.
Here, we adopted a random-coefficient model. After making lrtest, we rejected the hypothesis that random slope equals zero. We thus decided to add the random effect of the independent variable in model specifications.
The author thanks the helpful comments from Prof. Xin Liu in Fudan University.
This study was sponsored by the Shanghai Academy of Social Science, 2017-034, “Enterprise Trade Union, Skill Differentiation, and Employment Relation in China.”
Availability of data and materials
Data and materials are available upon request.
The author read and approved the final manuscript.
The author declares that she has no competing interests.
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