This study at tempt s to empirically investigate the effect of guanxi networks on buyer - seller relationships and on firm performance in vegetable industry in P.R. China. We interviewed 167 vegetable producers and 84 companies to test our conceptual relationship mo del. Results demons t rate that guanxi networks significantly improve buyer - seller relationships regarding interpersonal trust and transaction specific investment s. Buyer - seller relationships show significant impacts on chain performance. Results imply that the effects of guanxi networks differ for producers and companies in the chains. Study also revealed that transaction related at tributes (risk, channel requirements and transaction conditions) also influence buyer - seller relationships and chain performance jointly with guanxi networks. Paper ends with several managerial implications regarding the use of guanxi networks in business practices.