In the West, there is growing awareness that connections can be pivotal to a firm's success in gaining competitive advantage in the global arena. This paper compares Western networking with guanxi (connections) prevalent in Confucian societies. Guanxi are built between and among people. Hence the effective deployment of human resources is critical to the success of building such relationships. Data from forty West European multinationals with operations in China were collected. Where relevant, these were compared with the findings of Hong Kong firms in China. Specifically, the paper examined (1) how large European multinationals perceive the characteristics of guanxi ; (2) the importance of guanxi for market entry and long-term success in China; and (3) how guanxi is built and maintained by European companies in China. While the European companies have been able to establish a presence in China, their moderate level of satisfaction with performance there may be attributable to their inability to build very strong and appropriate guanxi with the relevant authorities. This may stem from their use of expatriates to staff senior management positions and insistence upon sole or majority-equity ownership to allow for maximum control. The implications for international human resource management are discussed.
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