An integrative perspective of social exchange theory and transaction cost theory on the antecedents of trust and trust-performance relationship in international joint ventures : Evidence from Nordic Multinational Firms

Abstract:

A great deal of attention has been paid to the performance of international joint ventures (IJVs) and trust has been suggested as a key determinant of it. However, limited empirical evidence exists to substantiate a positive relationship between trust and performance of IJVs. Also, there is a limited understanding of the antecedents of trust. Thus, the purpose of this study is to investigate the antecedents of trust and to examine the trust–performance relationship in IJVs.

The conceptual framework of the study is drawn from social exchange theory (SET) and transaction cost theory (TCT). The framework consists of five social factors from SET (i.e. prior alliance experience with partner, partner’s cultural sensitivity and reputation, quality of inter-partner communication, and expected longevity of IJVs) and two structural factors from TCT (i.e. interdependence, and ownership share) that are considered as potential antecedents of trust. Further, the framework proposes a positive linkage between inter-partner trust and IJV performance and it is suggested that inter-partner resource complementary moderates the trust-performance relationship. The developed framework is tested by using a sample of 89 IJVs established by Nordic firms during 2000–2011 in Asia, Europe, and America. A web-based questionnaire is used to collect data from the Nordic managers of the IJVs. The collected data is analyzed by using the structural modeling approach with PLS estimation technique.

The results of the study suggest that trust has a positive effect on the performance of the IJVs. The findings also indicate that partner’s cultural sensitivity and reputation, quality of inter-partner communication, and expected longevity of IJVs enhances, while partner’s opportunistic behavior reduces trust. Surprisingly, equivalent ownership share and symmetric interdependence are found to be unrelated to trust, and further equivalent ownership share increases the partner’s opportunistic behavior in IJVs. Findings also indicate that partner’s cultural sensitivity and reputation, quality of inter-partner communication, and symmetric interdependence are the factors which attenuate opportunism. Contrary to expectations, the moderation effect of inter-partner resource complementary on trust-performance relationship is not significant. These findings have important implications for managers planning to form and manage IJVs in foreign markets.