How to Enter Business Networks? Drinking to Signal Cooperativeness in China

Interpersonal networks can sustain cooperation among businesspeople, but how do potential entrants demonstrate their credibility and reliability? Taking a mix of approaches, we examine drinking at China’s business banquets, which entrants commonly practice to signal trustworthiness and generosity to potential business partners. Drawing on ethnographic fieldwork, we first develop signaling game models to formulate several propositions regarding the effects of drinking. Then we develop a conjoint experiment to test the propositions. We show that entrants who drink heavily and entertain potential partners with high-end liquor are usually perceived by the latter as bearing high health and monetary costs and therefore as being trustworthy and generous. The effect is enhanced if the entrants have low alcohol tolerance because they must bear higher health costs in drinking heavily. Thus, drinking at banquets can help entrants establish networks, or guanxi, in China