Doctor of Philosophy
School of Economics - Faculty of Commerce
Sahakijpicharn, Krittakorn, Guanxi network and business performance of Sino-Thai SMEs, PhD thesis, School of Economics, University of Wollongong, 2007. http://ro.uoe.edu.au/theses/63
During the last few decades overseas Chinese business networks have been important for the local economies of many countries in Southeast Asia, including Thailand. Although only 14 percent of the Thai population is Sino-Thai, they still make a significant contribution to the Thai economy. Sino-Thais are estimated to control over 80 percent of listed companies by market capitalisation (Mackie, 1994). One of the key factors behind the success of overseas Chinese in Thailand, and in other countries, is strong social relationships and strong business networks between them. A number of studies have attempted to explain how these social relationships and business networks contribute to Chinese business success. A clear picture of such a connection has, however, still not been achieved. Thus, the main object of this thesis is to examine how social relationships can be used to improve business performance, in particular for the case of Sino-Thai SMEs.
To attain this objective, this thesis first reviews the literature relating to both guanxi and organisation networks. Evidence from the literature shows the importance and benefits that both guanxi and organisational networks can provide to its members. In addition, this thesis also reviews the literature relating to strength of ties, network embeddedness, business uncertainty and business performance. By reviewing the literature a theoretical framework, that links these factors together, can be established. From the framework a number of assumptions and hypotheses relating to relationships between the guanxi network, strength of ties, network embeddedness, business uncertainty, and business performance are identified. The Kruskal-Wallis Test, a multiple regression analysis, a multiple discriminant analysis, and factor analysis are all used to test these assumptions and hypotheses. Data from 298 Bangkok based Sino-Thai SMEs provide a number of interesting results. First, strength of ties in the network for the family relationship is stronger than the friend and stranger relationship, while the strength of ties in the network for the friend relationship is stronger than the stranger relationship. Second, strength of ties in the network has a positive impact on the level of network embeddedness. Third, the level of network embeddedness for the family relationship is stronger than that for the friend and stranger relationship, while the level of network embeddedness for the friend relationship is stronger than the stranger relationship. Fourth, network embeddedness has a positive impact on Sino-Thai SMEs’ business performance. Fifth, business uncertainties have a negative effect on Sino-Thai SMEs’ business performance and sixth strength of ties in the network has a negative effect on business uncertainties.
This thesis also uses structural equation modeling (SEM) as a means to analyse all variables in the framework simultaneously, and to confirm results of hypotheses testing presented earlier. The result of SEM provides strong support for the empirical findings in this thesis and, also, suggests that network embeddedness is the most important factor that helps to improve business performance as a result of an increase in the strength of ties in the network. Finally, this thesis recommends that policy-makers should encourage SMEs to consider both formal and informal networks as presenting real opportunities to increase their business performance. In particular, policy-makers can encourage and help Sino-Thais SMEs to use the common characteristics of the guanxi network to establish strong business networks with other Chinese entrepreneurs in other countries such as Singapore, Malaysia, Hong Kong, and China. Furthermore, this thesis suggests financial risk management and changes in firm strategy as two major approaches that SEMs can use to reduce some business uncertainties.
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