The impact of Guanxi on the selection of Logistics Service Providers in China

Background. By employing dedicated Logistics Service Providers (LSPs), companies can focus on their core competencies, reduce logistics costs, and have specialized logistics expertise available. However, many such outsourcing arrangements fall short of expectations as little attention is given to interpersonal connections between those who manage organizational interfaces (boundary spanners). Personal relationships are especially important in the Chinese culture, where business practices revolve around special relationships called Guanxi. Although the Guanxi phenomenon has been investigated from various angles and logistics outsourcing is considered a key topic in Supply Chain Management (SCM) research, so far, the literature overlooked the impact of Guanxi on the LSP selection process. Aims. This study aims to answers the overriding research question “How does Guanxi impact the selection of Logistics Service Providers in China now and in the future?”. Methods. A multi-tiered research process with qualitative expert interviews, a quantitative survey, and a Delphi study was employed. To identify possible impacts of Guanxi on the selection of LSPs in China, 22 qualitative interviews with experts working for LSPs and automotive Tier 1 suppliers were conducted. The resulting interview transcripts were qualitatively analyzed using the approach proposed by Meuser and Nagel. To verify the findings, a survey instrument was developed and administered online among supply chain management experts working for LSPs and companies in the automotive industry. This quantitative study was completed 194 times by participants from 17 countries, mainly China and Germany. The collected data was analyzed using various descriptive and multivariate statistical methods. Then, to forecast how the Guanxi influence will develop in the future and which factors will impact it, a Delphi study following Schmidt’s ranking type approach was conducted. It was administered and analyzed across four panels among 57 experts from LSPs and companies in the automotive industry in China. Results. Eight support possibilities, ways how the buying center of a firm can support an LSP along the stages of the selection process, and ten contingency factors, factors that may alter the support possibilities, were identified in the explorative study. In the confirmatory study, contingency factors ranked as highest impacting the selection process were selection process structuredness, project volume, and number of decision makers. It could be confirmed that the sex of the boundary spanners does not influence the impact of personal relationships on the LSP selection process, that the influence of personal relationships on the LSP selection process is lower in Western cultures compared to China, that at multinational companies, the influence of personal relationships on the LSP selection process is lower than in domestic companies, that at large companies, the influence of personal relationships on the LSP selection process is lower than in small and medium-sized companies, and that LSPs perceive the influence of personal relationships on the LSP selection process higher than buying firms. Support possibilities most frequently occurring in practice are that a buying center shares information about an upcoming project before the official start [of a tender], that a buying center evaluates the bidder’s quality more positively and that the buying center considers a bidder as a possible bidder. The Delphi study led to the identification of 31 factors influencing the future impact of Guanxi on the LSP selection process. Common themes were a strengthening of compliance, the development and digital transformation of the supply chain function as well as wide-ranging market shifts. This indicates that the Guanxi influence will rather decrease in the future and develop into a different form. Conclusions. As one of the first comprehensive investigations into the workings of Guanxi in SCM on a micro level, the studies demonstrated how Guanxi impacts the selection of LSPs in China. The findings extend the literature about buyer-supplier relationships during the procurement of third-party logistics services, where it could be shown that personal relationships can positively impact a buyer’s quality evaluation and lead to an information advantage for service providers. Also, a noteworthy contribution to the existing knowledge about contingency factors was made. Recommendations for practitioners include, above all, that firms should acknowledge that Guanxi relationships have certain effects on the selection of LSPs. On the buying firm side, this allows for deliberate decision making regarding the mitigation of such effects or the purposeful usage. LSPs could use Guanxi strategically to benefit from its business enhancing effects and seize the chance of the changing market environment where Guanxi develops into a form more compliant with international regulations.