KEY CONCEPT

Inter-organizational conflicts can be extremely harmful. A study has revealed how Chinese firms manage and reduce their inter-organizational conflict. Ethical leadership plays a vital role in Chinese business culture, and as this study illustrates, it helps them foster more cooperative relationships – and those are the key to less inter-organizational conflict.

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IDEA SUMMARY

In traditional Chinese Confucian culture, an emphasis is placed on the development, maintenance, and exploitation of social networks, which depend on reciprocity, integrity, and the highest individual ethical standards. In China, inter-firm relationships (such as supplier/buyer relationships) cannot be well understood without recognition of this.

The research here suggests that ethical leadership not only affects employee satisfaction and performance within organizations, but also that it influences other external stakeholders’ perceptions and subsequent behaviour.

The research collected data from 81 suppliers and 45 corresponding managers of a large group company in China. The study and results support the contention that ethical leaders play an essential role in managing inter-organizational conflict and facilitating joint initiatives in which the cooperative firms are highly interdependent.

The study found that task interdependence is a key factor of inter-firm relationships, requiring mutual understanding and joint actions from both partners in order to improve the quality of cooperation.

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BUSINESS APPLICATION

How to Deal with Inter-Organizational Conflict the Chinese Way:

• Firms could gain a competitive advantage in inter-organizational collaboration with an ethical perspective. Since an ethical leader is often a critical interface actor at the boundary or contact point between firms, these leaders can effectively facilitate collaboration with external buyers or suppliers.
• Conflict in the supplier–buyer relationship can be significantly reduced by two-way interaction based on ethical behavioural principles. This could lead to a competitive advantage for the firm demonstrating ethical leadership compared to a firm which ignores this dimension.
• In addition to some traditional concerns such as product or service quality, to facilitate the resolution of business disputes in China, maintaining and promoting an ethical image by building interpersonal moral ties is vital for firms.
• Firms should pay more attention to ethical leadership in interacting with interdependent partners. Sound cooperating relationships can only be created and maintained with mutual understanding and support well perceived by both sides, because high interdependence usually leads to various ethical dilemmas in inter-organizational cooperation.

Overall ethical leadership provides a tacit commitment to achieve win–win solutions.

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REFERENCES

How Do Chinese Firms Deal with Inter-Organizational Conflict? Shenjiang Mo, Simon A. Booth & Zhongming Wang. Journal of Business Ethics (October 2011).

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