Abstract
This chapter focuses on the issue of managerial network in China. It addresses the importance of guanxi in influencing investment and operation of foreign companies in China, provides definition and principles of guanxi, and presents social roots and philosophies of guanxi. The chapter discusses the economic rationale of guanxi and its difference from Western networking. It explores the relationships among organizational dynamics, managerial network, and firm performance and offers practical guidance to guanxi construction and cultivation. Guanxi are delicate fibers woven into every Chinese individual's social life, and therefore, into many aspects of the Chinese society. Relationship development or networking building between organizations is critical to corporate success everywhere in the world. Guanxi utilization is influenced by organizational size because small businesses need to stress the importance of their personal connections to counteract those liabilities that result from their organizations' smallness. An organization's technological skills constitute a predominant element of its organizational capability.