Cultural beliefs, agency relationship, and network governance

Purpose – The purpose of this paper is to investigate the effects of cultural beliefs on governance in a business network without a legal institutional framework. Particular emphasis is placed on the cross-country remittance mail operating network in Chaoshan, China, during the period 1860-1949. This investigation builds on Greif’s business governance theory and develops an analytical framework that considers cultural beliefs, agency relationships and multilateral punishment mechanisms. Furthermore, it uses the institutional analysis method to identify the institutional factors that sustained the remittance mail operating networks and their underlying mechanisms. Design/methodology/approach – This paper adopts the qualitative research method. First, it investigates the history of the remittance mail operating network and agency relationships by searching through the contents of the relevant historical documents preserved in the official archives and information found in other records. Thereafter, it summarizes and demonstrates the cultural beliefs inferred from that research. The archival materials permit analysis of the interactions between cultural beliefs, agency relationships and multilateral punishment mechanisms by the institutional analysis method. Findings – Due to the lack of legal institutions in China during the period under review, cultural beliefs played a central institutional role in cross-country business relations. Network governance was coupled with clan cultural beliefs in the remittance mail operating network. This relationship was the key to sustain the efficient operation of the remittance mail network. Originality/value – In the West, corporate governance has been influenced by and has become an integral feature of Western culture and values. This is not necessarily so for the corporate governance in terms of Chinese culture and values. Thus, instead of mimicking the modes of developed countries, it is important for Chinese enterprises to seek a mode of corporate governance that is in accord with their local cultures. This may be an important focus for enterprise development.