Trust-performance relationship in international joint ventures: the moderating roles of structural mechanisms

Abstract

Purpose This study aims to investigate the relationship between trust and performance in international joint ventures (IJVs) with the moderating effects of the structural mechanisms from transaction cost approach. Design/methodology/approach Using web-survey, data are collected from 89 IJVs of Northern European firms in Asia, Europe and America. Empirical data are analyzed with structural equation modeling and estimates moderating effects of symmetric dependence, symmetric equity share and resource complementarity. Findings The findings offer some interesting insights for transaction cost and the social exchange theory. This study demonstrates that a symmetric equity share between IJV partners does not moderate the trust–performance relationship, while a symmetric dependence and resource complementarity between partners effect positively. Therefore, trust takes on greater importance in enhancing IJV performance under symmetric dependence and resource complementarity and symmetric equity share between IJV partners deprecates the importance of equity distribution. Practical implications A symmetric dependence prevents the deceit from either partner in trusting relationships. Further, a trustful relationship enhances IJV performance regardless of the equity share in IJVs. IJVs with asymmetric equity share can also be successful, provided that IJV partners develop inter-partner trust. Originality/value The extant research has not examined how the trust–performance relationship is contingent on structural mechanisms of IJVs that transaction cost economics deem necessary to prevent opportunistic behavior. Three structural mechanisms of symmetric dependence, symmetric equity share and resource complementarity moderate the trust–performance relationship in IJVs.

Determinantes de desempenho em joint ventures internacionais brasileiras

“…As years go by, the organization creates procedures and mechanisms to deal assertively with conflicts that result from cultural differences and with market dynamics, reducing the likelihood of its dissolution. This is why several studies defend that the existence of relational mechanisms have positive impact on an IJV's performance (Ali & Khalid, 2017;Larimo & Nguyen, 2015;Lavie et al, 2012). These mechanisms involve creating a mutual trust environment, commitment, flexibility towards differences and creating a promising face-to-face relationship that has mutual learning, allowing that both parties develop more specialized knowledge and align with business (Lavie et al, 2012), what Nielsen (2007) names as collaboration network or collaborative know how.…”

“…Other studies focus the influence each partner has on the IJV's decisions and how this impacts on performance (Ali & Khalid, 2017;Ding, 1997;Mantecon et al, 2016). Ding (1997) shows that when a foreign partner controls the business's strategic decisions, the IJV has better performance.…”

Does organizational culture matter in the relationship between trust and SMEs performance

“…Also, trust has been found to be an essential catalyst for team productivity (Buvik and Tvedt, 2016;Curseu and Schruijer, 2010). Research on how trust affects team performance is still limited and inconclusive (Ali and Khalid, 2017;Buvik and Tvedt, 2016;Dirks and Ferrin, 2001) because some researchers argue that performance is context specific and may differ in line with nature of industry and teams involved. Similarly, most results concerning the association between trust and group performance may be due to the small focus on how trust affects organizational performance (Ali and Khalid, 2017;Buvik and Tvedt, 2016).…”

“…Research on how trust affects team performance is still limited and inconclusive (Ali and Khalid, 2017;Buvik and Tvedt, 2016;Dirks and Ferrin, 2001) because some researchers argue that performance is context specific and may differ in line with nature of industry and teams involved. Similarly, most results concerning the association between trust and group performance may be due to the small focus on how trust affects organizational performance (Ali and Khalid, 2017;Buvik and Tvedt, 2016). At the same time, some researchers were inclined toward the traditional thought on how trust studies focused on the individual rather than the organization level.…”

Investigating the Effects of Social Trust and Perceived Organizational Support on Irrigation Management Performance in Rural China

“…It has been commonly argued that households are more likely to participate in collective activities if they believe that others will do the same [29]. Accordingly, social trust considerably reduces opportunism and cooperative costs in collective activities [30,31]. Furthermore, it facilitates a strong cooperative relationship between members in irrigation management [32], because it encourages households to share information, knowledge, and resources [33].…”