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Reprint: Trust and Performance in Cross-Border Marketing Partnerships—A Behavioral Approach

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Key Developments in International Marketing

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Abstract

Existing research on international partnerships focuses primarily on the ex ante structuring of interorganizational relationships. This study departs from this research by taking a behavioral approach to understand the ex post maintenance of cross-border marketing partnerships. A conceptual model is developed by identifying the antecedents of trust and performance in such partnerships. The model is empirically tested on a sample of U.S. firms having distributor and licensing relationships with firms from Asia, Europe, and Central/South America. Findings support the importance of bilateral relational norms and informal monitoring mechanisms in building interorganizational trust and improving market performance of international partnerships.

Aulakh, P., Kotabe, M. & Sahay, A. Trust and Performance in Cross-Border Marketing Partnerships: A Behavioral Approach. J Int Bus Stud 27, 1005–1032 (1996). https://doi.org/10.1057/palgrave.jibs.8490161

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Notes

  1. 1.

    Noordewier et al. (1990) consider monitoring mechanisms as one of the elements of relational norms. However, the important characteristic of relational norms is the bilateralism between the exchange partners. Monitoring mechanisms are generally initiated by one partner (usually the focal firm in agency relationships) to enforce compliance (Gencturk and Aulakh 1995; Jaworski 1988). Keeping this distinction in perspective, we consider the monitoring mechanisms as distinct from relational norms. As discussed later in the section, one of the monitoring mechanisms, social control, may eventually lead to a bilateral relational element, although it is still initiated by one firm as a monitoring tool.

  2. 2.

    There is some ambiguity about the causal linkage between commitment and performance (Cullen et al. 1995). For instance, in commitment theory, it is argued that commitment in exchange partnerships develops only if the partnerships are successful. On the other hand, Buckley and Casson (1988) suggest commitment to be precursor of performance. In fact, reciprocal causal linkages could be argued for the relationships between the three norms and trust and performance. Since we test the hypotheses on cross-sectional data related to a specific point in time, the exact causal directions cannot be empirically verified. Our premise is that since the objectives in interorganizational partnerships are to develop trust and enhance market performance, the presence of relational norms allows firms to achieve these objectives. However, we do not discount a feed-back loop from the consequences to the relational norms.

  3. 3.

    Since this study focuses on the cross-border partnerships from the perspective of U.S. manufacturing firms and the data are collected from one side of the dyad, the different controls are examined from the perspective of the focal firm. This does not imply that the focal firm is always the dominant firm that can impose its will on the foreign partners. Rather, in interorganizational partnerships, both firms attempt to influence each other’s decisions through different monitoring mechanisms.

  4. 4.

    The 652 potential informants represented 249 of the Fortune 500 firms and affiliates. This is because some firms provided names of more than one manager and also multiple affiliates of the same parent provided names of managers dealing with the specific international operations of the affiliate. The 257 respondents who actually filled the survey questionnaire represented 137 different Fortune 500 firms. Thus, we received more than one questionnaire for some firms. However, for these firms, respondents were from different affiliates and therefore are considered as separate data points.

  5. 5.

    Given that trust has been conceptualized at various levels (i.e., interpersonal, organizational, and societal [Hosmer 1995]) and incorporates both behavioral (i.e., confidence, behavioral intention [Anderson and Narus 1990; Moorman et al. 1993]) and structural (i.e., vulnerability, dependence [Madhok 1995]) aspects, a three item scale used in this study does not capture the different dimensions of trust. We thank the reviewers for bringing this to our attention, and we explicitly acknowledge this limitation in the conclusions section.

  6. 6.

    We attempted to test moderating hypotheses (H8 and H9) by entering the interaction terms (trust x asset specificity and trust x host market unpredictability) into the HMR analysis in step 3. However, despite the rescaling of the interaction terms through a mean centering approach suggested by Darlington (1990), parameter estimates were very unstable because of high multicollinearity (correlations between the original and interaction variables of 0.85). Thus the moderator effects of asset specificity and host market unpredictability on the trust-performance relationship were tested by using sub-group analysis.

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Acknowledgment

The authors thank the editors, three anonymous reviewers, and participants at the Global Cooperative Strategies Conference held at London, Ontario for their valuable suggestions on earlier versions of this paper. Partial support for this project was provided through the Associates Fund at Memorial University of Newfoundland and the Center for International Business Education and Research at the University of Texas at Austin.

Author information

Authors and Affiliations

  1. Michigan State University, East Lansing, MI, USA

    Preet S. Aulakh

  2. The University of Texas at Austin, Austin, TX, USA

    Masaaki Kotabe

  3. London Business School, London, UK

    Arvind Sahay

Authors
  1. Preet S. Aulakh
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  2. Masaaki Kotabe
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  3. Arvind Sahay
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Corresponding author

Correspondence to Preet S. Aulakh .

Editor information

Editors and Affiliations

  1. Collins College of Business, University of Tulsa, Tulsa, OK, USA

    Saeed Samiee

  2. Leeds University Business School, University of Leeds, Leeds, UK

    Constantine S. Katsikeas

  3. Department of Economics and Social Sciences Institute of Marketing and Innovation, University of Natural Resources and Life Sciences, Vienna, Austria

    Petra Riefler

Appendix

Appendix

Measurement

Relational Norms

Continuity Expectations (α = 0.83) (Strongly Disagree 1–5 Strongly Agree)

 – Our firm and our partner firm are very committed to each other [CONEXP1]

 – If our firm could find another partner in this country, we are likely to switch to a new partner (R) [CONEXP2]

 – There is a high level of uncertainty in this partnership (R) [CONEXP3]

 – We and our partner firm are not sure how long our relationship will last (R) [CONEXP4]

Flexibility (α = 0.68) (Strongly Disagree 1–5 Strongly Agree)

 – In this partnership, our firm and our foreign partner expect to be able to make adjustments in the on-going relationship to cope with changing circumstances [FLXBIL1]

 – Flexibility in response to requests for changes is a strong characteristic in this partnership [FLXBIL2]

 – Whenever some unexpected situation arises, we would rather work out a new deal with our foreign partner rather than hold each other to original terms [FLXBIL3]

Information Exchange (α = 0.86) (Strongly Disagree 1–5 Strongly Agree)

 – We hesitate to give our partner information that is not part of the contract (R) [INFOEX1]

 – Our partner firm hesitates to give us information that is not part of the contract (R) [INFOEX2]

Monitoring Mechanisms

Output Control (α = 0.75) (Strongly Disagree 1–5 Strongly Agree)

 – Established sales targets for this foreign partner are specified in the contract [OUTCON1]

 – The terms of our agreement require this foreign partner to attain a certain market share for our products [OUTCON2]

 – The extent of territorial coverage that this foreign partner needs to attain for our products is clearly specified in the contract [OUTCON3]

 – Our future relationship with this foreign partner is contingent on how it achieves the specified goals [OUTCON4]

Process Control (α = 0.79) (Strongly Disagree 1–5 Strongly Agree)

 – Our firm regularly monitors the quality control maintained by this foreign partner [PROCON1]

 – Our firm frequently monitors the marketing activities performed by this foreign partner [PROCON2]

 – Our firm closely monitors the extent to which the partner firm follows established procedures [PROCON3]

 – We have developed specific procedures for this foreign partner firm to follow [PROCON4]

Social Control (α = 0.76) (Strongly Disagree 1–5 Strongly Agree)

 – This foreign partner fully understands the philosophy of our firm [SOCCON1]

 – This foreign partner has tried to incorporate our management philosophy into its own organization [SOCCON2]

 – We have made concerted efforts to instill our business philosophy in this foreign partner’s managers [SOCCON3]

Relationship Consequences

Trust (α = 0.77) (Strongly Disagree 1–5 Strongly Agree)

 – Our business relationship with this foreign partner is characterized by high levels of trust [TRUST1]

 – Our firm and the partner firm generally trust that each will stay within the terms of the contract [TRUST2]

 – We and our partner firm are generally skeptical of the information provided to each other (R) [TRUST3]

Partnership Performance (α = 0.80)

Relative to competitors in the foreign market, the performance of the partnership on the following dimensions:

 – Sales Growth (Very Low 1–5 Very High)

 – Market Share (Very Low 1–5 Very High)

Moderator Variables

Asset Specificity (α = 0.70) (Strongly Disagree 1–5 Strongly Agree)

 – Our firm has made significant investments that are specific to our relationship with this foreign partner

 – Our firm products/technologies are tailored to meet the requirements of this foreign partner

 – It will be very costly for us to replace this foreign partner

Host Market Unpredictability (Cronbach α = 0.88) (Very Predictable 15 Very Unpredictable)

 – Import Regulations

 – Export Regulations

 – Economic Conditions

 – Remittances and Repatriation Regulations

 – Inflation Rates

 – Exchange Rate Fluctuations

Control Variables

Equity        0 = no ownership; 1 = shared ownership

Industry       0 = raw materials and intermediate goods; 1 = finished goods

Region 1 and Region 2 Two dummy variables for the three regions: Central/South America; Europe; Asia

Partnership Type    0 = Distribution; 1 = Licensing

  1. (R)—scale is reverse-coded

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Aulakh, P.S., Kotabe, M., Sahay, A. (2024). Reprint: Trust and Performance in Cross-Border Marketing Partnerships—A Behavioral Approach. In: Samiee, S., Katsikeas, C.S., Riefler, P. (eds) Key Developments in International Marketing. JIBS Special Collections. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-17366-0_6

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