Abstract Manuscript Type Perspective Research Question/Issue This paper argues thatChina shall not completely transit from a relation‐based into a rule‐based governance regime because theChinese system of governance is the product of its rich heritage and entrenched value system. Research Findings/Insights Relation‐based governance has two dimensions. This first is apparent from the emphasis on reciprocity and mutual obligations fostered between individuals and groups. The second is evident from inside an organization, where governance is hierarchical and paternalistic. This system of governance was influenced by Confucian doctrines that are moral centered precepts used to regulate human behavior and relationships. Given that this governance regime is interlinked to theChinese culture, it is doubtful thatChina would completely abandon it in favor of a rule‐based system from theWest. Theoretical/Academic Implications There are two key implications drawn from this article. First, in the absence of the moral underpinnings of relation‐based governance, this system is susceptible to exploitation. Individuals could take advantage of relationships and relational networks to commit mischief or achieve personal gains through tunneling or expropriation of company assets. Therefore, it is imperative to reinforce the ethical ideals of relation‐based governance inChina. Second, since relationalism fromChina's past and the laws transplanted from theWest are key features ofChina's governance regime, it is important to explore hybrid solutions to lessen the possibility of bottlenecks and incongruities emerging. Practitioner/Policy Implications Any proposed hybrid governance solution ought to be able to deal with potential differences between theChinese and theWestern value systems as well as combine both regimes into an integrated framework.
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