Trust Building and Boundary Spanning in Cross-Border Management

Michael Zhang

• Publisher: Routledge
• Year: 2018
• ISBN:
  9781351858816
• Edition: 1
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

This edited book addresses two critical issues in international management: building trust and managing boundary spanning activities between international business partners. The duel-process of internationalization of multinational corporations (MNCs), through globalisation and regionalisation, has helped MNCs to increase their market expansion and improve the capabilities of innovation and learning. By creating various forms of international strategic alliances (ISAs), MNCs have become structurally more complex and geographically more dispersed. As a result, MNCs in general and ISAs in particular face the challenges of discerning blurred organisational boundaries, reconfiguring the control mechanisms, integrating diversified resources, and coordinating distributed activities in time and space.

Research in organisation behaviour indicates that boundary spanners play critical yet unspecified roles and functions in managing cross-boundary relationships. A core boundary spanning function is to build trust relationships. When organisations engage in business transactions, members of the organisations are concerned with not only the outcomes of economic transactions but also the processes of social exchanges. Boundary spanners may succeed in building interpersonal trust in a partnership, nonetheless their effort may not lead to inter-partner trust without an effective implementation of the institutionalisation process. Whereas trustworthiness is the antecedent to trust providing the basis for trust to develop, distrust manifests itself as a separate and linked concept to trust. These dynamic features of trust, trustworthiness, and distrust are critically elaborated.

Trust Building and Boundary Spanning in Cross-Border Management is dedicated to explicating these under-researched themes and contributing to the emerging streams of research in micro foundations and micro-structural approaches. It illustrates the latest research on the topic and will be of interest to both students at an advanced level, academics and reflective practitioners in the fields of organisational behaviour and theory, strategic management, international strategy and strategic alliances.

1
Introduction

Trust Building and Boundary Spanning in Cross-Border Management

Michael W. Zhang

1.1 Background and Context

While editing this book on trust building and boundary spanning in cross-border management I am delighted to have read two most recently published works on the subjects of managing knowledge and innovation across organisational boundaries and national borders. One is the book Managing Knowledge Integration across Boundaries, edited by Tell et al. (2017) and published by Oxford University Press. The other is a Special Issue from the Journal of Management Studies on “Boundary Spanning in Global Organizations”, guest-edited by Schotter et al. (2017).

Tell et al.’s book is the culmination of their four-year research from the programme of Knowledge Integration and Innovation in Transnational Enterprise. Their research focus is on the integration of advanced and specialised knowledge in various organisational contexts. By advanced and specialised knowledge they are primarily concerned with knowledge generation and integration by professionals from the following domains and disciplines: engineering, scientists, and corporate managers. Their analysis and discussion is pertinent to the contributions in my edited book.

Schotter et al.’s Special Issue on the other hand provides a summary of the past research on boundary spanning in a broader sense than that of Tell et al.’s. The trend of globalisation which had been rapidly growing until the sudden burst of the financial crisis in 2007 is still facing great uncertainty for the choice of future direction. This has been further complicated, Schotter et al. (2017) argue, by the United Kingdom’s historical memorandum to exit the European Union in 2016 and the potential policies to reverse the trend of globalisation by the Trump presidency in the United States. The changes in global business environment will have implications, likely to be more negative than positive, for managing economic and social transactions across national borders and organisational boundaries.

Nonetheless, in terms of global investment activities the recent UNCTAD data show that FDI flows saw a healthy recovery in the years of 2015 and 2016 from the previous six years.¹ It is as true of FDI inflows as it is of FDI outflows. The United States is still leading the global trend of investment with an FDI outflow of $299 billion in 2016, albeit less than the amount of $393 in 2007. Noticeable is the increasing FDI outflows from China. Being one of the leading recipients of FDI inflows in the past decades following the ‘open door’ economic reforms, China’s FDI out-flow more than doubled in 2008 in comparison to that of 2007 with $57 billion and $27 billion respectively. The growing trend continued through to 2016 with a registered figure of $183 billion, making China the second largest contributor to FDI outflows in the world.²

Until recently the duel-process of international expansion of multinational corporations (MNCs), through globalisation (Dunning 2003; Dunning, Fujita, and Yakova 2007) and regionalisation (Ghemawat 2005; Rugman and Verbeke 2004, 2007), has helped MNCs to increase their economies of scale and improve the capabilities of innovation and learning (Doz 1996; Tallman and Chacar 2011; Tell et al. 2017). By creating various forms of international strategic alliances (ISAs), multinational corporations have become structurally more complex and geographically more dispersed. As a result, ISAs face the challenges of discerning blurred organisational boundaries amongst the inter-organisational relationships (IORs), reconfiguring the existing control mechanisms, integrating diversified resources and specialised knowledge, as well as coordinating inter-organisational collaboration (IOC) in time and space (Brouthers and Hennart 2007; Choi and Beamish 2004; Kostova and Roth 2003; Krishnan, Martin and Noorderhaven 2006).

Against this historical background, I am editing this book with two main themes of trust building and boundary spanning in international strategic alliances to further develop this emerging and important area of academic enquiry. In this edited volume, researchers from Australia, Denmark, Germany, Norway, Switzerland, the United Kingdom, and the United States have made contributions from various perspectives. The ranges of the subjects and industry sectors covered are wide and interesting, from the micro-level investigation of the efficacy of learning and knowledge transfer between international strategic alliance partners through the lens of the theory of mind (ToM), to the macro-level examination of the link between institutional distance and trust gaps amongst buyers and suppliers in global value chains (GVC), and from the early entrepreneurial consulting firms to established large multinational financial institutions.

The book is divided into three parts. Following this Introduction (Chapter 1), two conceptual chapters by Zhang (Chapter 2) and Zhang and Gooderham (Chapter 3), are included in Part I to provide the contextual background of conceptual developments of trust building and boundary spanning respectively. In Part II the four chapters selected for inclusion focus on trust building through boundary spanning. They are Chapter 4 by Tøth and Søderberg, Chapter 5 by Engelhard and Pesch, Chapter 6 by Taylor, Daymond and Willard, and Chapter 7 by Perri and Buchan. It is worth noting that all chapters in this edited book cover the subjects of trust and boundary spanning, but the weighting between the two concepts varies. As a result, I categorically put three chapters in Part III: Chapter 8 by Qiu and Haugland, Chapter 9 by Swalef and Zhang, and Chapter 10 by Tang, Qiu and Zhang. In the final chapter (Chapter 11) Zhang summarises the key findings of the chapters in relation to the current state of the research on trust building and boundary spanning before proposing a number of directions for future research. I will briefly introduce the chapters with a hope to provide the reader with a sense of coherence emerging from this edited volume.

1.2 The Chapters

1.2.1 Part I Conceptual Development

Chapter 2: Trust and Distrust—The Microstructural Ties Connecting Cross-border Inter-partner Relationships Through the theoretical lens of inter-organisational relationship (IOR), Zhang critically reviews the literature on trust research in international strategic alliances. He recognises the contribution made by transaction cost theory to the research on strategic alliances, especially the ex ante transaction costs during the pre-formation phase of a partnership (Connelly et al. 2016). Meanwhile, he maintains that IOR theory offers more explanatory power in explicating the complex trust dynamics in international strategic alliances than that of transaction cost theory referring specifically to the post-formation period of inter-organisational collaboration. Zhang’s focus is on the relational and social aspects of inter-organisational collaboration where he elaborates two key concepts before proposing a dynamic micro-structural model of trust and distrust: (1) the under-researched concept of trustworthiness; and (2) the emerging area of interest in the concept of distrust.

He notes that for a better understanding of trustworthiness as a concept different from trust we need to grasp the role and function trustee plays in a dyadic relationship between the trustee and the trustor. It is the characteristics and actions of the trustee that determine the degree at which he/she will be trusted (Mayer, Davis and Schoorman 1995). More important to the discussion in this chapter is the concept of distrust. Drawing insights from Lewicki, McAllister and Bies’s (1998) research on trust and distrust and adding a temporal dimension, Zhang develops two separate yet linked continua of trust and distrust. The dynamics of trust and distrust manifest in the rates at which trust increases and distrust deceases in line with the development of inter-organisational collaboration. In addition, the effectiveness of the boundary spanners will influence inter-personal trust relationships at the IOR boundaries.

Combining the research by Geletkanycz and Hambrick (1997) and Puranam, Raveendran and Knudsen (2012) Zhang proposes a dynamic micro-structural framework comprising both trust and distrust as elastic ties spanning the inter-organisational relationships. In line with the researchers contributing to this edited book, he also emphasises that trust relationships are first and foremost an individual phenomenon. It is possible, albeit very challenging, to translate inter-personal trust into inter-organisational trust (Ring and Van de Ven 1992; Zaheer, McEvily and Perrone 1998). For organisations to create and sustain reputation in transaction relationships they need to demonstrate their behavioural trustworthiness, not the psychological state of trust (Ring and Van de Ven 1992), and their trustworthiness can be monitored and evaluated (Das and Teng 1998).

Chapter 3 Boundary Spanning in ISAs: A Trust Perspective Zhang and Gooderham look into the subject of boundary spanning in international strategic alliances from a trust perspective. They argue that while trust can be relatively readily developed within an organisation, its development across organisational boundaries is significantly more arduous. Tensions and conflicts are elements of organisational life, which is even more apparent in the management if international strategic alliances due largely to the challenges in aligning ISA partners’ goals and objectives. However, the concept of conflict has been treated as a unitary construct in research resulting in a dichotomy between success and failure in outcomes and performance. Following Amason (1996), Zhang and Gooderham explicate two types of conflict: one is task conflict and functional and the other relational conflict and dysfunctional. This refinement of the concept of conflict enables them to identify the types of trust that can be associated with the types of conflict.

In reviewing the literatures of boundary spanning and trust building, they summarise the functions and activities of boundary spanners to include, inter alia, face-to-face communication, information processing, conflict mitigation, and social interaction. In the early stage of an ISA partnership, information asymmetry can be a potential source causing post-formation inter-partner conflicts. As boundary spanners are task-and role-orientated personnel working at the ISA boundaries, they are ideally positioned to deal with task-oriented conflict by developing social trust and affect-based trust. Therefore the presence or absence of effective boundary spanners at the ISA boundaries will determine the partnership performance. In a set of propositions Zhang and Gooderham contend that effective boundary spanners can be purposefully trained to accomplish specific activates and functions at the task environment.

They note two interesting features of research on boundary spanning and trust building. One is that researchers tend to start the analysis from the individual level, and the other is the majority of scholars have taken a process approach. And they concur with Katz and Kahn (1966) and Thompson (1967) that it is through the processes of changes in the structural and social systems that patterns of actions and relationships are represented and observed.

1.2.2 Part II Trust Building through Boundary Spanning

Chapter 4 Trust Building and Boundary Spanning in Global Collaborations Tøth and Søderberg examine the way in which inter-organisational boundary spanners influence the process of developing trustful client-vendor relationships involved in global software development projects. They argue that trust development is a core boundary-spanning activity and develop an analytical framework to help understand the various roles those boundary spanners play in building and maintaining effective collaboration for complex projects.

They adopt and further refine Palus, Chrobot-Mason and Cullen’s (2014) “Boundary Spanning Leadership Model” by introducing and adding the concept of trust-preparatory boundary-spanning activities. It is worth noting that building trust is one of the six main objectives of Palus, Chrobot-Mason and Cullen’s (2014) leadership model. Taking the processual view on trust building, Tøth and Søderberg ask two questions: (1) What is the role of boundary spanners in global collaboration? And (2) How do these boundary spanners influence perceived trustworthiness of vendor-side actors and the vendor organisation?

They take us through the process of boundary spanning and demonstrate how trust and trustworthiness can have an impact on vender-client relationships throughout the boundary-spanning process. They claim that perceived trustworthiness and ultimately trust are important facets of boundary spanning. Two boundary-spanning roles are critical to the success of building trust, one is so-called intermediary and the other connector. The change of trust-preparatory boundary-spanning activities from the individual level to the collective level is achieved by repeatedly connecting actors from both the client side and the vendor side. In so doing the client-side actors are exposed to an array of offshore vendor-side actors and gradually they are likely to start to assess the vendor-side collective as trustworthy.

Viewing from the practice-orientated perspective on the process of trust building at the inter-organisational boundaries, Tøth and Søderberg (p. 72) point out that we ‘must not retreat to a priori assumptions about boundaries as per se problematic’, but regard boundaries as socially constructed and emergent from differences in practice.

Chapter 5 Personal Attachment of Boundary Spanners in ISAs: A Two-sided Coin Engelhard and Pesch adopt a social capital perspective to investigate the development of personal attachment by the boundary spanners between international strategic alliance partners. They use Luo’s (2001, 178) definition of personal attachment as ‘the degree to which boundary spanners from each party are socially bonded through having developed interpersonal relationships and interpersonal learning’. They argue that personal attachment can help develop inter-personal relationships between international strategic alliance partners by increasing trust and suppressing opportunistic behaviour. The need of boundary spanners’ personal attachment comes from the changes in multinational corporations where the structure becomes more complex and relationship environment is more ambiguous. In particular the composition of people working in multinational corporations is more diversified with different ways of thinking, communicating, and behaving due to cultural distance. This kind of interactional ambiguities may lead to conflicts and mistrust between boundary spanners at the ISA partnership boundaries. It is argued that boundary spanners can have a crucial role to improve alliance performance through managing diversity and conflicts, and the relationship between boundary spanners within international strategic alliances is under-researched. They raise two, amongst others, research questions: (1) How can boundary spanners build, maintain, and deploy social capital to achieve their social...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Figures
• List of Tables
• List of Abbreviations
• List of Contributors
• Acknowledgements
• 1 Introduction: Trust Building and Boundary Spanning in Cross-Border Management
• PART I Conceptual Development
• PART II Trust Building through Boundary Spanning
• PART III Boundary Spanning from a Trust Perspective
• Index