Estimating the model

The structural model was estimated using the default PLS regression model analysis algorithms and the stable resampling method within WarpPLS 4.0. The model performed favorably on fit diagnostics. Specifically the average path coefficient (APC)=.195, average R-squared (ARS)=.621, average adjusted R-squared (AARS)=.586, all were significant at the .01 level. Both the average block variance inflation factor (AVIF)=1.775 and average full collinearity VIF (AFVIF)=1.860 indices were below the ideal level of 3.3 (Kock 2011a). The Tenenhaus GoF (GoF)=.527 index was considered large (>.36) signifying the explanatory power of a model was strong. Sympson's paradox ratio (SPR)=.833 which is above the .7 threshold and considered acceptable (Kock 2014).

Figure 4.1 presents the conceptualised model whilst Figure 4.2 displays the results of the structural model run. Table 4.3 summarises the hypothesis tests and model fit statistics. The R2 for relationship initiation capability was .62, indicating the latent IVs accounted for approximately 62% of explained variance in the DV.

Figure 4.1 Conceptualised model

Figure 4.2 The SEM model with significant β path coefficients

Guanxi resources Understanding of China’s business environment Relationship initiation capability Salesperson effectiveness Environmental Competition H4- H2+ H1+ H3- H5+ H6+ Guanxi resources Understanding of China’s business environment Relationship initiation capability Salesperson effectiveness ** Sig at .01; * Sig at .05 .68** .15* .16* R 2 = .62 Non-significant relationship shown for moderating link

** Significance at .01; * Significance at .05

n = 72; fit statistics: APC=.195**; ARS=.621**; AARS=.586**; AVIF=1.775; GoF=.527; SPR=.833

Table 4.3 β path coefficients, significance levels and hypothesis test results

Hypothesis β path

coefficients

Significance Hypothesis supported H1: High Guanxi resources have a positive association with relationship initiation

capability

.09 .15 No

H2: Greater understanding of the Chinese business environment has a positive association with relationship initiation capability

.68** <.01 Yes

H3: The higher the environmental competition, the weaker the association between guanxi resources and relationship initiation capability

-.06 .25 No

H4: The higher the environmental competition, the weaker the association between understanding the Chinese business environment and relationship initiation capability

-.03 .38 No

H5: The higher the effectiveness of the salesperson, the stronger the association between Guanxi resources and relationship initiation capability

.15* .05 Yes

H6: The higher the effectiveness of the salesperson, the stronger the association between understanding the Chinese business environment and relationship initiation capability

To conduct a basic further cross check of the SEM path results, standard regression was conducted in SPSS incorporating the two latent IVs of guanxi resources (GR) and understanding of China’s business environment (UC). Standard regression β scores were SPSS=.10 (p = .921), WarpPLS=.09 (p = .15) for GR. For UC the β scores were SPSS=.674 (p < .01), WarpPLS=.68 (p < .01) for GR. The high consistency between WarpPLS and SPSS coefficients contributes to the confidence of the model results presented.

4.6.1 Discussion

As stated, approximately 62% of explained variance in relationship initiation capability is explained by the model, showing empirical support for the influence of understanding China and H2. However guanxi resources had a non-significant link to RIC and H1 was not supported, even though the basic correlation between the two factors is significant as detailed in Table 4.2. This may be a consequence of the decline of guanxi’s importance in certain sectors (Fischer and Hartmann 2010) along with non-Chinese firms’ improved learning of guanxi mechanics, which is more aligned to understanding of Chinese business as opposed to possession of guanxi resources (Wilson and Brennan 2010).

The moderating effects of environmental competition on the main relationships are negative, consistent with the hypothesised roles. However as the relationships were not significant, H3 and H4 were rejected. On one hand Gu, Hung, and Tse (2008) propose that environmental competition often fosters alternative sources to obtain resources. As alternative sources become available, a buyer's dependence on relationships declines and forging relationships becomes more difficult with many other firms competing for the buyer's attention (Dong, Li, and Tse 2013). Therefore higher competitive intensity will act to loosen ties (Beverland 2009).

Conversely Chen, Ellinger, and Tian (2011) hypothesised strengthening rather than loosening of manufacturer-supplier relationships in China as a result of increased competition for critical raw materials, components, market share, customers and supplies exhibited.

Salesperson effectiveness is found to have a significant moderating effect on the links between understanding of China’s business environment and relationship initiation capability, supporting H6. This corresponds to the findings of Bellenger et al. (2008) which showed a significant link between salesperson effectiveness, understanding of the market and reputation in an industry network.

Salesperson effectiveness is found to have a significant moderating effect on the links between guanxi resources and relationship initiation capability (in spite of the main effect not being significant) supporting H5. Significant moderating effects on non-significant main effects often occur when the slopes differ substantially between moderating categories and a crossover between slopes occurs near middle values of the independent variable (Ender 2010). Due to the small sample size in the study, two simple groups were defined to examine interaction effects. The high salesperson effectiveness category accounted for all samples above the mean SE latent variable score across cases, low salesperson effectiveness accounted for samples below the mean. Figure 4.3 presents the interaction graph. The graph shows that at high salesperson effectiveness levels, the fitted line (p < .01) is steep projecting the relationship initiation capability of firms grows at a relatively high rate when guanxi resources increases. At low salesperson effectiveness levels, the regression is not significant, although what may be inconclusively seen is that a relatively uncertain and potentially sluggish growth in relationship initiation capability will occur. Furthermore below an intersect score of approximately three on the GR construct, RIC cannot be said with confidence to be stronger among those firms exhibiting high salesperson effectiveness.

Figure 4.3 SE moderating the relationship between GR and RIC