Hiring for Networks: Social Capital and Staffing Practices in Transitional China

• DOI: http://doi.org/10.1002/hrm.21738
• Author: Nan Lin,Yanlong Zhang
• Published date: 01 July 2016
• Date: 01 July 2016

Human Resource Management, July–August 2016, Vol. 55, No. 4. Pp. 615–635

© 2015 Wiley Periodicals, Inc.

Published online in Wiley Online Library (wileyonlinelibrary.com).

DOI:10.1002/hrm.21738

Correspondence to: Yanlong Zhang, Assistant Professor of Management, Department of Organization and

Management, Guanghua School of Management, Peking University, Beijing, China 100871, Phone: 86-10-62767926,

Fax: 86-10-62753140, E-mail: yanlong.zhang@gsm.pku.edu.cn

social capital of their members to achieve organi-

zational goals as well (Knoke, 1999).

Past research suggests that firms can benefit

from employees’ social capital in two basic ways.

First, employees’ social connections and social

resources can facilitate firms’ business operations

and help firms to improve business performance.

Studies show that employees’ social ties are often

used by organizations to access a larger and more

qualified applicant pool in multiple contexts

(Fernandez, Castilla, & Moore, 2000; Fernandez &

Weinberg, 1997; Han & Han, 2009), to acquire the

technologies that firms need (Song, Almeida, &

Wu, 2003), or to raise financial resources (Zimmer

& Aldrich, 1987). Moreover, personal relationships

between representatives of different firms can

lead to institutionalized business relations among

Social capital, defined as resources embed-

ded in one’s social networks, has become

increasingly important in labor market

and management studies (Adler & Kwon,

2002; Lin, 2001). This concept has given

rise to a line of research that explores how people

utilize their network resources to pursue various

benefits (Lin, 1999; Marsden & Gorman, 2001).

Because the individual human being is the basic

building block of organizations, personal connec-

tions that cross individuals’ group or organiza-

tional boundaries will also bring various benefits

or resources to their organizations (Adler & Kwon,

2002; Brass, Galaskiewicz, Greve, & Tsai, 2004;

Burt, 1992; Coleman, 1990; Uzzi, 1996). Just as

individuals mobilize their social capital for pur-

posive action, formal organizations can utilize the

HIRING FOR NETWORKS: SOCIAL

CAPITAL AND STAFFING PRACTICES

IN TRANSITIONAL CHINA

YANLONG ZHANG AND NAN LIN

This article investigates how fi rms’ use of social capital criteria in staffi ng prac-

tices has been affected by China’s transitional institutional environment and

explores the impacts of person-job fi t in the social capital dimension on employ-

ees’ performance. Empirical results show that non-state-owned enterprises set

a higher social capital standard in the hiring process than state-owned enter-

prises. Foreign-invested enterprises outperform other fi rms in promoting a bet-

ter match between individuals rich in social capital and the positions that need

such resources. In places with intensive market competition, foreign and private

enterprises pay even more attention to employees’ social capital when making

HR decisions. Moreover, a better match between people and positions from a

social capital aspect has a positive impact on employees’ performance. Theoreti-

cal and managerial implications are discussed. ©2015Wiley Periodicals,Inc.

Keywords: social capital, human resource management, staffi ng, person-job fi t,

transitional economy

616 HUMAN RESOURCE MANAGEMENT, JULY–AUGUST 2016

Human Resource Management DOI: 10.1002/hrm

Given the importance

of personal social

connections in

an uncertain

environment, it

is imperative to

understand how

firms structure their

staffing system to

effectively utilize

social resources

maintained by their

members.

Previous studies have shown that firms can benefit

from employees’ social capital by recruiting people

with good social connections and mobilizing these

resources to achieve organizational goals (Aycan,

2005; Erickson, 2001; Fernandez et al., 2000;

Knoke, 1999; Porter & Powell, 2006). They can

also improve the marginal return of employees’

social capital by strategically allocating employees

with rich social capital to the positions that most

require such resources (Erickson, 2001; Lin, 2001).

Taking these ideas as the point of departure,

we further advance this line of research by explor-

ing the institutional conditions that influence the

incorporation of social capital considerations into

firms’ staffing practices. Specifically, we investi-

gate how firms’ types of ownership affect their use

of social capital criteria in their staffing processes

and their practices in matching individuals rich

in social capital with related positions, how the

level of regional market competition moderates

the influence of ownership types, and the impact

of person-job match in the social capital dimen-

sion on employees’ performance.

We situated our research in China’s transi-

tional context because, unlike mature market

economies, transitional economies are often char-

acterized by a diversity of organizational forms,

a plurality of property rights, and volatility and

low codification in the institutional environment

(Boisot & Child, 1996; Nee, 1992; Peng, 2003).

The greater variability in organizational forms

and institutional environments enables us to

better explore the boundary conditions of social

capital theory and understand the relationship

between institutional variations and the process

and effects of social capital management. In addi-

tion, business practitioners who operate in similar

transitional contexts must understand the impor-

tance of employees’ social capital and the proper

management of these resources to facilitate the

adaptation of their management practices to insti-

tutional contexts; this will enable them to achieve

legitimacy and success in the transitional environ-

ment (Ahlstrom, Bruton, & Yeh, 2008).

In the following sections, we review previous

studies and propose several testable hypotheses,

then proceed to a statistical analysis that uses a

Chinese nationwide firm survey to estimate the

effects of both organizational-level and regional-

level factors on firms’ use of social capital criteria

during the staffing process. The article concludes

with a short summary of major findings and a dis-

cussion of limitations and future directions.

Theory and Hypotheses

The importance of employees’ personal social

resources to firms has been well documented in

firms (Gulati, 1999; Knoke, 1999). Such connec-

tions not only help firms make investment deci-

sions and initiate contracts (Batjargal & Liu, 2004;

Zhou, Li, Zhao, & Cai, 2003) but can also enhance

a firm’s reputation or social status and help firms

overcome outsiders’ skepticism (Podolny, 2001).

Second, studies on institutional theories fur-

ther point out that the extent to which actors

rely on social resources to achieve instrumental

goals is conditioned on the pertinent institutional

context. Some argue that social connections with

regulatory agencies or local states can provide

institutional protection for firms that operate in

an uncertain environment (Boisot & Child, 1996;

Xin & Pearce, 1996). In this context, personal con-

nections are often used as a substitute for reliable

political and economic institutions

(Walder, 1986; Xin & Pearce, 1996).

When firms operate in an uncertain

and competitive environment, man-

agers are encouraged to have close

personal relationships with their

counterparts in related companies

and officials from regulatory agen-

cies because it is believed that man-

agers with better connections “may

be able to navigate the uncertain

waters better and lead their firms to

higher performance” (Peng & Luo,

2000, p. 488; see also Xin & Pearce,

1996). This strategy is especially

important for newly established

privately owned enterprises (POEs)

and foreign entrants because they

are more susceptible to various insti-

tutional hazards (Luo & Min, 1997;

Nee, 1992; Porter & Powell, 2006).

Although both Chinese and for-

eign managers tend to agree that

employees’ social capital is an impor-

tant asset to firms operating in China,

there is still significant variation in the extent to

which they can effectively utilize such resources

(Tung & Worm, 2001; Yeung & Tung, 1996). For

instance, studies indicate that as compared to other

multinationals, some European multinationals are

relatively incapable of effectively utilizing employ-

ees’ social capital. This inability can be partly attrib-

uted to their staffing policy, which makes it very

difficult to appoint competent or well-connected

ethnic Chinese to the senior management posi-

tions (Tung & Worm, 2001).

Given the importance of personal social con-

nections in an uncertain environment, it is imper-

ative to understand how firms structure their

staffing system to effectively utilize social resources

maintained by their members (Knoke, 1999).