Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/187554
Authors: 
Kong, Xiang
Year of Publication: 
2011
Citation: 
[Journal:] China Journal of Accounting Research [ISSN:] 1755-3091 [Volume:] 4 [Year:] 2011 [Issue:] 3 [Pages:] 121-133
Abstract: 
Based on a new institutional economy framework, this study examines the formation and economic consequences of social networks (guanxi) from the perspective of key suppliers and customers in China. Results show that commercial activities which depend on networks are determined by the institutional environment. For example, companies that have lower accumulated social capital (less trust among people) and are subject to more government invention depend more on social network transactions than on the market. In addition, this study shows that network transactions can provide benefits to firms, especially in weak institutional environments. Networks can reduce transaction costs by reducing information asymmetry, i.e., increased network dependence is associated with lower credit costs and lower advertising and sales costs. Networks can also reduce the effect of industry shocks, especially negative shocks, by creating a bonding mechanism. This study contributes to our understanding of social networks in emerging markets by providing evidence on network transactions with key suppliers and customers and their influence on firms' accounting behavior.
Subjects: 
Social network
Social capital
Transaction costs
Industry shocks
JEL: 
L22
M21
M41
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/3.0/
Document Type: 
Article

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.