Investing in guanxi: An analysis of interpersonal relation-specific investment (RSI) in China

• We introduce interpersonal relationship-specific investment (RSI) into the framework for interfirm RSI.
• We examine guanxi investment as interpersonal RSI in China.
• We identify the dimensions of, and develop a measurement scale for guanxi investment.
• Interorganizational and interpersonal RSIs directly and interactively influence interfirm relationship performance.

This study contributes to a more comprehensive understanding of relation-specific investment (RSI) in interfirm exchanges by introducing a construct for interpersonal RSI. Drawing on economic sociology and qualitative findings, we examine interorganizational RSI and interpersonal RSI as distinct constructs and uncover their roles in relationship performance. In particular, our study focuses on the Chinese interfirm context, in which interpersonal RSI, based on the indigenous practice of guanxi (cultivating social connections), is known as guanxi investment. We adopt a qualitative approach to explore the elements of guanxi investment, and then develop a behavioral measurement scale as a tool for further research. We employ an empirical survey to test and affirm the validity of the scale. The results confirm that in addition to their respective effects, interorganizational and interpersonal RSIs exert an interactive effect on interfirm relationship performance. We offer managerial implications for firms that operate in China.