Trust Me!!!...But How? Relationship Bonding as an Antecedent of Trust in International Strategic Alliances: USA-Mexico, A Latent Variable Structural Modeling Approach

This paper develops a model to understand the influence of relationship bondings on the structure of trust between partners in American-Mexican strategic alliances. Results showed that American partners perceived structural and social dependency from their Mexican counterparts as building the cognitive component of trust negatively. Mexicans perceived that higher level of social bondings reflect positively in the cognitive and emotional components of trust. The implications of these results in the management of the relationship from a cultural perspective are discussed. 3 INTRODUCTION Strategic aihances between hs of different nationai origins continues to grow marrigan, 1988; Geringer and Hebert, 1991; Beamish, 19841. A huge number of these ventures are unstable and perform poorly despite the structuraj and contractual arrangements made by the partners to create stability. Performance in international strategic alliances may be influence by the degree of cultural distance that exit among the partners in the venture [Gray and Yan, 1991; Baumgarten and Rivard, 1991; Geringer and Hebert, 1991; Levis, 1990; Kadia and Bhagat, 1988; Perimutter and Heenan, 19861. Park [ 19911 reported that 67% of the managers pointed out differences in cuhural backgrounds as one of the most important source of difficulties in the identification of problems and managerial strategies to solve them. Perhnutter and Heenan [ 19861 suggested that cultural differences, poor communication and political infighting lead to the demise of a global strategic partnership. Managers representing the partner firms in strategic alliances may have communication probIems, different attitudes toward time, job performance, desire to change to material wealth [Xiliing, 19821. Differences in the primary goals of the partners, and distrust are other reasons why joint ventures fail Peterson and Schwind, 1977; Suhivan and Peterson, 19821. Dissimilarities of cultures between the two parents may lead to differences in objectives, management styles, operating methods and strategy implementation Boot, 19821. Unresolved ~mflkts are caused by enormous epistemologicai differences between managers’ cultural frames of reference [ Szalay and Ficher, 1979; Simiar, 1982; Ganitsky et al., 199 11. In fact, some researchers suggest that compatibility between partners is the most import factor in building a cross-cultural cohesive 4 venture perlmutter and Heenan, 1986; Teagarden and Von Gfinow, 19921, while others suggest that we should focus on “intercultural fit” as determinant of performance CRodriguez, 19951. Through continuous interactive process, partners in an alliance may build relationship bondings of economic and social nature. These bandings may allow social mechanisms as trust to be cultivated in the relationship. Trust may itise the relationship with value wadhok, 19921. So far, the relevance of trust in building strong relationships, willingness to cooperate and eventual success of the alliance is clear. However, it is needed to learn how to make these relationships better. No study has been carried out to understand the effect of relationship bonding on trust in international strategic alliances. The purpose of this study is to understand the infIuence of relationship bondings on the components of trust between partners in American-Mexican strategic alliances. For this, a model is proposed where trust is the outcome of the relationship within the social exchange theory as a hework. The implications of these results for understanding the antecedents of trust and the behavior of its components from a cu1tura.I perspective are discussed. The results of this study will help managers understand the role of relationship bonding in international strategic alliances and the effect of the different dimensions of trust on reducing complexity between partners. TRUST AS CONDITION FOR COOPERATION Trust is a critical eiement in developing trade relationships. It has been identified as a prerequisite for a successful strategic alliance pnkpen and Birkenshaw, 1994; Sullivan and Peterson, 1982; Peterson and Schwind, 19771. As pointed out by many researchers, trust is part of the ” chemistry ” which may allow strategic alliances to be fruitful padaracco, 1991; Harrigan, 1988; Houghton, c 1990; Lynch, 19891. The incorporation of trust in the framework of analysis may heip understand the emergence, stability, performance and success of international ventures (Wharton et al., 19911. Trust is an informal mode of control defined as a set of mutual anticipations and obligations that provides an effective the strategic alliance Initiatives outside the informal mode of coordination. The existence of trust in a relationship gives a fIexibility not available in formal transactions Koenig and Wijk, 19921. structured planning and within the decision making process may be possible, giving the venture more flexibiiity and adaptability. A trust relationship is established when expectations are formed on one party and these are fUfXed by the other. . Trust rests primarily on the interaction process between conceptualization of trust exists because there are at LaGrace, 19861. Although, trust may be indispensable partners in an alliance. This “ relational ” least two parties involved [pwyer and in social relationship between parties, it involves an eiement of risk and doubt Lewis and Weigert, 19851. Trust allows that social interactions may proceed in a simple, confident and smooth way because it reduces complexity and uncertainty. Cooperative relationships do not happen in vacuum. Mumighan [ 19941 discriminated between structural and psychological determinants of cooperation. Structural determinants of cooperation are simifar to what Turner [ 19701’ called “task bonding ” and psychological determinants may refer to “personal bonding “, In buyer-seller literature, relationship bonding is also considered an antecedent of commitment to the reIationship and explains long term cooperation Wilson, 1978; Wilson and Mumrnalaneni, 1986, 1988, Han, 19911. In sum, trust is an integral component in the 6 development of cooperation between partners. It fosters the creation of value and has relationship bondings of structural and social nature as antecedents. Undetianding Culture in Sttategic Alliances Values that influence managers’ behavior in organizations are national culturally bounded. Laurent [ 19831 found that different countries retain their culturally specific ways of work in spite of common management policies. Some management functions such as planning and control are affected by how the culture defme the constructs of time and morality [Redding and MartynJohns, 19791. Cultural norms may affect problem definitions and managers decision making style. It influences objectives motivating choice, reactions to the environment, decisiveness, individual strategies in facilitating choice and, risk adjustment behavior[Tse et al., 19881. Davis and Rasool [I9881 found dSerences in the value profile and orientation of Japanese, Australian, South Korean, Indian and Australian managers. Their results suggested that Indian and Australian managers were most moralistic-oriented follow by the American managers. Japanese managers showed the most practical orientation followed by American and Korean managers. Indian and Australian were less pragmatic. The study suggested that managers manifest different norms and expectations of success and reward due to the different value structure ingrained in their individuaI personalities. Values immersed in any culture affect an individual’s motivation and hence the criteria which an individual uses to evaluate specific situations [Adler et al., 1986; CamilIeri, 19851. Managerial values are expected to have an effect on performance and the success of the organization peters 7 and Waterman, 19831. Cultural values influence perception, searching of information and alternatives in a problem-solving process pamberger, EM]. Values with respect to change, risk, innovation, growth, social responsibility, ownership, participation, competition, power, tradition, religion, family ties, human relations determine directly or indirectly the choice of objectives, strategies and policies pamberger, 19861. Managers’ thinking, theory building and leaming styles are culture bounded mayes and Allinson, 19881. Cultural and intra-cultural differences influence the tendency to adopt a probabilistic set, discrimination of uncertainty or ability to express a numerical probability Iphillips, 198 11. Culture is persistent and determinant of differences in managerial attitudes Eelley et al., 19871. Baird et al. [I9901 found that American and Chinese managers reported dEerences in planning, control systems, job design and reward systems in the management ofjoint ventures. Assumptions about organizations, people, work, employment, performance and rewards which characterize the two societies may explain these differences [Von Glinow and Teagraden, 19881. Culture shapes individual behaviors in marketing effectiveness, closeness to customers, market orientation and corporate values through variations in managerial attitudes, beliefs, and values morbum et al., 1990 1. Understanding interactions between different national cultures and the mechanisms that build trust and respect in international relationships are difficult given the lack of adequate frameworks. However, culturalism being very consistent with the literature in cooperative behavior, [Casmir, 1993; Wintrobe, 198 1] and strategic alliances [Tornroos and Moller, 19901 may assist in understanding these intercultural dynamics. Culturalism assumes [l] Preservation, of cultural identity as a condition of cross-cultural relationships, [2] Transmission of cultural identity, [3] 8 Enlightened self-interest in order to seek common cultural ground and [4] Interdependence, related to task and instrumental dimensions rather than emotional ones. This proposal emphasizes the preservation of the cuitural identity of the parties while developing interdependence and interaction. Inequities in relationships being culturally bounded, can be dissolved given the understanding that each partner has of the others social and structural bondings requirements and expectations. Williams et al. [ 19931 in a five country cross-national study suggested that the success of cross national business relationships is partially determined by the nature of the bonds affecting the interaction and commitment to the relationship. In sum., a deep understanding of the cultural dimensions that drive behavior and relationships may preclude a good interpretation of exchange contents when two national cultures interact. Relationship Bonding m Antecedent of Trust Time interactions between firms build commitments and bonds through a social exchange process makansson and Johanson, 19881. These bonds are technical and economic in nature, involving explicit business benefits through technology, and markets, and social through interpersonal exchange as familiarity, fiiendship, and personal confidence. These bonds may support the existence of shared values, non opportunistic behavior Morgan and Hunt, 19941 and timely communication Moorman, Deshpande, and Zaltman, 19931 as antecedents of trust and commitment. The mechanisms to enhance trust building in relationships may be culturally determined [Bianchi and Bellini, 19911. In fact, trust to Japanese managers is evidenced by hard work and honest 10 bondings measure the strength of a personal relationship between partners and may range from a business relationship to a close personal reIationship.” ln personal relationships there is a great degree of seff-disclosure, concern for the partner and presence of liking for the other person pUiIson and MoIIer, 1989, p. 1011. As pointed out by Han et al. [1993], If the partners do not trust each other, there will be no resources put into the reiationship. So structural and social bonds will not mature in the dyad. Therefore the following hypotheses are stated: Hla: Stmctural bondings will be qysternatically linked to trust between partners in U.S.Mexican alliances. Hlb: Social boruiings will be systematically linked to trust between partners in U.S.-Mexican alliances. See figure 1. ******************** Put figure 1 here ******************** TEIE DIMENSIONS OF TRUST Trust being sociaily constructed implies an interpretative assumption that is shared by the parties and constitutes a coIIective attribute applied to the reiationship among people rather than a psychological state taken individually [Lewis and Weigert, 19851. Trust may be defined as a multidimensional construct. It has cognitive, emotional and behavioral dimensions that are merged as a unitary sociai property. The cognitive dimension refers to the good reasons evidence of trustworthiness. Familiarity is a precondition for trust and distrust puhmann, 19791. Experience with and knowledge about the object of trust is required for estabiishing the cognitive component of trust. We say there exists trust between two parties when the social actors no longer need any 11 evidence or rational for their confidence in the object of trust Lewis and Weigert, 198Sj. The cognitive dimension of trust is a collective reaiity. This means that one trusts on the consideration that the other trusts. The affective component of trust is the emotional bond present in the relationship among the parties. It is intersubjective and reciprocal in essence. The third dimensions of trust is the behavior of the parties. BehavioralIy, trust is related to the uncertainty of the future actions of one of the parties. The behavior component of trust suggests that the parties will act in a competent way and according to their mutual expectations Farber, 19831. Lewis and Weigert [1985] suggested a fiamework for the analysis of the different types of trust . based on rational and emotional bases. The preponderance of the cognitive dimension in trust among the parties defines determines an “emotional rational thinking. If any prediction. a “cognitive trust” and a preponderance of the emotional dimension trust”. The authors indicated that trust is a mixture of feeling and of these dimensions is eliminated trust degenerates into faith or TOO much emphasis on ‘getting the job done ‘z characteristic of the American culture and ignoring the relationships as a social system within the venture can lead to failure Foran, 19801. Mexicans use feelings, are impulsive in their decision making and maintenance of the reIationship is emphasized over direct communication WcCann, 19701. Americans consider work as an end in itself, profess ethic values as honesty, integrity, hard work and diligence, emotions are hidden and any emotionai display is sign of weakness pass, 19891. Americans prefer direct communication McCann, 19701. They approach activity with a concern of “ doing ‘: change the external environment while being optimistic and striving, task centered, a high need for achievement, and self determination marris and Moran, 19911. Therefore it is expected that structural and social 12 bondings build in the refationship will affect the nature of trust as perceived by Americans and Mexicans differently. The following hypotheses are stated: