Chao C. Chen - Rutgers University
Ya-Ru Chen - New York University
Katherine Xin-
China Europe International Business School &
Hong Kong University of Science and Technology

Taking a procedural justice perspective, we examined the effect of managerial guanxi practice (granting favors to employees with whom the manager has guanxi ties) on trust in the authority in Chinese organizations. Three studies were conducted. In the first survey study, we found a negative effect of guanxi practice on trust in the authority, which was mitigated by the favorability of outcomes that the respondents received, but enhanced by perceived prevalence of guanxi ties among members in organizations. In support of our theoretical reasoning, the second survey study found that the negative impact of guanxi practice on trust in the authority was indeed accounted for by perceived procedural justice in the organization. Furthermore, consistent with the notion of ingroup/outgroup distinction in the Chinese society, the negative relationship between guanxi practice and trust in the authority was weaker for those with ingroup status. The third scenario study found that the negative impact of guanxi practice varied as a function of guanxi bases: favoring a nephew or a hometown fellow lowered trust in the authority but favoring a college schoolmate or a close friend did not. Theoretical and practical implications are discussed.