Joint venture survival in China: the importance of tangible and intangible trust
| DOI | https://doi.org/10.1108/JABS-05-2016-0070 |
| Date | 08 May 2018 |
| Pages | 173-192 |
| Published date | 08 May 2018 |
| Author | Bradley James Koch,Pamela L.T. Koch |
| Subject Matter | Strategy,International business |
Joint venture survival in China: the
importance of tangible and intangible trust
Bradley James Koch and Pamela L.T. Koch
Abstract
Purpose –The purpose of this paper is to examine the relationship among joint venture survival in
Sichuan and two types of trust: intangible trust and tangible trust. Intangible trust encapsulates the
internal affective aspects of trust, whereas tangible trust captures the external and more easily visible
willingnessto commit resources to the partnership.
Design/methodology/approach –The primary data used in this research are based on surveys
conducted in 2002-2003 of 274 foreign invested firms in Sichuan province and are from a follow-up
investigationof firm survival in 2009.
Findings –The results show that both intangible trust and tangible trust are significant in predicting
survival in joint ventures seven years into the future. In addition, the authors explore determinates of
intangible and tangible trust. Management control had no impact on intangible trust, but it had a
significant positive impact on tangible trust via the presence of a foreign general manager. Cultural
distance had the expectednegative effect on intangible trust, but an unanticipated positive influenceon
tangibletrust.
Originality/value –The main contribution of this research is establishing a link between measures of
trust taken in 2002 with a performance measure from 2009. Trust today, whether it is tangible or
intangible, predictsperformance in the future. The majority of prior research linked a current measureof
trust with a current measureof performance, which blurs the trust and performance relationship, as it is
likely that the relationshipis reciprocal and higher levels of trust may be the result of good performance
just as much as good performanceis a result of higher levels of trust.
Keywords Trust, Cross-cultural management, Cultural distance, Foreign joint ventures, Hazards model
Paper type Research paper
International joint ventures (IJVs) are often considered unstable (Yan and Zeng, 1999) and
have high failure rates (Bergquist et al., 1995;Inkpen and Li, 1999). Among the reasons
offered to explain this high failure rate is the lack of trust between the IJV and parent
company (Bener and Glaister, 2010;Ng et al., 2007;Lu 2006). Trust is considered an
important variable as it has been linkedto cooperation, resource commitment (Beamish and
Banks, 1987), reliability (Das and Teng, 2001), improved organizational efficiencies (Sako,
1991), increased knowledge transfer (Szulanski et al., 2004) and decreased negotiation
costs (Zaheer et al., 1998) to name just a few. One drawback in this area, however, is that
the majority of studies look at how current measures of trust relate to current firm
performance (Zaheer et al., 1998) and nothow initial levels of trust might contribute to long-
term survival. The lack of such longitudinal studies makes it difficult to determine the
direction of the trust–performance relationship, as it is as reasonable to argue that good
performance builds trust as it is to say that trust leads to better performance. The purpose
of this study is to look at the influence of simple measures of trust taken at an initial time
period and their relationshipto IJV survival over the subsequent seven-year period.
Complicating research in this areais that trust is multifaceted and has been theorized about
from many different perspectives, resulting in a multitude of measures and dimensions
Bradley James Koch is
Associate Professor at the
Department of
Management, Grand Valley
State University, Grand
Rapids, MI, USA.
Pamela L.T. Koch is based
at the Department of
Management, Grand Valley
State University, Allendale,
MI, USA.
Received 10 May 2016
Revised 13 July 2016
Accepted 27 July 2016
DOI 10.1108/JABS-05-2016-0070 VOL. 12 NO. 2 2018, pp. 173-192, ©Emerald Publishing Limited, ISSN 1558-7894 jJOURNAL OF ASIA BUSINESS STUDIES jPAGE 173
(Hagen and Choe, 1998;Lewicki, McAllisterand Bies, 1998;Madhok, 1995;McKnight et al.,
1998). In our case, however, we have only a parsimonious measure of trust to use. We
acknowledge from the outset that we will not address complex issues related to
measurement and dimensionality. As a result, the study has related limitations.
Nonetheless, we believe that these simple measures of intangible and tangible trust
coupled with the longitudinal nature of the study provide a worthwhile contribution to the
literature.
Theoretical overview
Trust
Many measures and dimensions of trust have been proposed (Hagen and Choe, 1998;
Lewicki et al., 1998;Madhok, 1995;McKnight et al., 1998). Most recently, it has been
common to decompose trust into some combination of affect, relational, calculative and
cognitive components. In a study of IJVs in Malaysia, Jain et al. (2015) defined affect trust
as being based on personal emotional bonds. Wai On et al. (2013) deemphasized general
emotions and moved toward perceptions of the other party’s internal motives and integrity,
which are evaluated on an emotional basis. Shou et al. (2011) used many of the same
questions as of Wai On et al., but defined their trust component as goodwill, which focuses
on the belief or feeling that other party is looking out for your best interests. Schilke and
Cook’s (2015) definition of relational trust moves away from an individual’s feelings toward
the implicit acceptance of social norms and cognitive institutional rules. Thus, it is the
exchange partners’ embeddedness in a common social orientation andidentity that shapes
behaviors and provides the basis for trust. The definition of calculative trust by Shou et al.
(2011) is not based on the blind adoption social norms, but rather a rational calculation of
negative consequences from violating explicit social norms and formal regulations. Thus,
trustworthy behavior is one way in which rational actors maximize their gains and minimize
their loss. Finally, Jain et al. (2015) defined cognitive trust as the confidence of future
behaviors based on past behaviors, competence, reputation and/or credentials. Although
some research uses general measures of trust that encompass multiple of these
components (Hsieh and Rodrigues, 2014;Isidor et al., 2015), we believe that most of these
components can be broadly classified into intangible and tangible categories, where
intangible trust includes affect and relational components and tangible trust includes
the calculative and cognitive components.
For the purpose of this study, we define intangible trust as a feeling or belief about the
goodwill of the other. This is an assessment of another’s internal state or attitude toward the
assessing party. For example, “The other person is trustworthy.” “I trust her because she is
a good person.” “The other party will care about the success of this IJV.” “They have
goodwill toward me.” In contrast, we define tangible trust as the concrete measurements of
the other’s competence, including effective deployment of resources, weighing of benefits
versus risks and evaluation of reliability based on past performance. For example, “I can
trust them because they have done X, Y and Z and are clearly committed to our
relationship.” “I can rely on them because I have seen they are reliable with others.” “They
are trustworthy because they have committedresources to our relationship.”
These two general areas are clearly related to each other. Beamish and Banks (1987) long
argued that trust increases cooperation, allowing parties to continuously commit the
resources necessary for IJV success. In other words, intangible feelings of trust lead to
tangible outcomes as measured by resource commitment. Madhok (1995) included both
tangible and intangible components when he distinguished between “structural” and social
trust, with structural trust encapsulating the complementarity of partners’ capabilities and
resources (tangible measures) and social trust (an intangible evaluation) allowing the
cooperation to be realized.In the same vein, Ring and Van de Ven (1994) thought of trust as
having both belief and behavioral intention components. Other proposed dimensions can
PAGE 174 jJOURNAL OF ASIA BUSINESS STUDIES jVOL. 12 NO. 2 2018
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