MANAGEMENT CONTROL OF
STRATEGIC ALLIANCES
The ideal combination of trust and control
in International Joint Ventures to increase
stability
Management control of strategic alliances
The ideal combination of trust and control in
International Joint Ventures to increase stability
University of Groningen
Faculty of Economics and Business
Master of Science Business Administration
Specialization Organizational and Management Control
Author: Fabienne Boletis Student number: 1849697
Address: Jozef Israelsstraat 38B Postal code: 9718 GL
Place: Groningen
Phone Number: +31(0)6 42 82 70 93
Email address: fabienneboletis@hotmail.com Supervisor: prof. dr. J. van der Meer-‐ Kooistra Second Supervisor: R. A. Minnaar MSc
PREFACE
In front of you lies the final version of my master thesis. With this thesis, my study, a master in Business Administration with specialization Organizational and
Management Control at the University of Groningen, has come to an end.
My thesis focuses on trust and control issues in International Joint Ventures. This topic has interested me since the beginning of this master so I am happy that I can finish my studies with this thesis.
Firstly I would like to thank my supervisor, professor dr. Jeltje van der Meer- Kooistra for all her help and support. Her knowledge about this topic was very valuable and her feedback provided recommendations and perceptions that made me think about the topics in distinctive ways. I would also like to thank my second supervisor Reinald Minnaar MSc for co-reading this thesis.
I would also like to thank my contact person and all the participants from the
International Joint Ventures for their help. Talking to them gave me an impression of how International Joint Ventures really operate and this was very valuable.
Lastly, I want to thank my family and friends for their support!
ABSTRACT
Numerous international joint ventures (IJV) struggle with trust and control issues as the presence of two or more parents can make IJVs difficult to manage. A lack of trust can seriously undermine the basis for successful IJVs as too much time is spent on watching what each partner is doing and not devoting the time and energy to the outcome of the project. Control plays an important role in the capacity of a firm to achieve its goals. This thesis provides an empirical analysis of how trust and control can be combined to reach an ideal combination to increase the stability of IJVs. To have a stable relationship, there has to be an interaction between trust and control. Trust and control do not just substitute or complement but they interact.
This research explores four international joint ventures of Firm X. The main purpose is to discover how trust and control are related to increase stability in these IJVs. The results have shown that there are discrepancies between the IJVs and
respondents. The IJV Firm A- Company A needs more control whereas Firm A- Company B needs more trust and less control and Firm A- Company C needs more trust. Firm A- Company D also needs more trust but as this IJV is quite young, they are on good track to become even more stable.
TABLE OF CONTENTS
1. INTRODUCTION 7 2. LITERATURE REVIEW 10 2.1 Control 10 2.1.1 IJV Control 11 2.2 Trust 13 2.2.1 IJV Trust 142.3 Relation Trust and Control 16 2.4 IJV Stability 17 2.4.1 External Tensions 18 2.4.2 Internal Tensions 18 2.5 Conclusion 21 3. METHODOLOGY 23 3.1 Type of Research 23 3.2 Sample Selection 23 3.3 Data Collection 24 3.4 Data Analysis 24 3.5 Conditions 25 3.6 Case Description 25 3.6.1 Firm A 25 3.6.2 Company A 25 3.6.3 Company B 25 3.6.4 Company C 25 3.6.5 Company D 25
4. RESULTS AND ANALYSIS 26
4.1 Company A 26 4.2 Company B 32 4.3 Company C 37 4.4 Company D 42
5. CONCLUSION, LIMITATIONS AND FURTHER RESEARCH 48
5.1 Conclusion 48
5.1.1 Company A 48
5.1.3 Company C 49
5.1.4 Company D 50
5.2 Limitations 50 5.3 Further Research 51
1. Introduction
In recent years, the number of strategic alliances has increased rapidly. Strategic alliances refer to inter-firm cooperative arrangements aimed at pursuing mutual strategic objectives (Das and Teng, 2000). The key features setting strategic alliances apart from other single-firm strategies are the element of inter-firm cooperation (Arino, 1997). Inter-firm cooperation can assume many forms, it can be bilateral or multilateral, involve partners from similar or different product or service sectors, and impose higher or lower cooperative mandates (Alter and Hage, 1993). Such
arrangements can also vary in their strategic importance to the partners, ranging from rather casual and tactical arrangements (e.g. membership in industry associations, information sharing) to various forms of strategic alliances requiring high levels of commitment and control (e.g. joint research and development) (Fryxell et al., 2002). The strategic alliances that will be looked at in this paper are equity Joint Ventures (JV). A popular argument for JVs is that their structure enables parent companies to blend their competencies into a stronger organization than if either parent acted independently (Jarillo, 1988). International Joint Ventures (IJVs) means that at least one parent organization is headquartered outside the JVs country of operation or if the venture has a significant level of operations in more than one country (Geringer and Herbert, 1989). In the early 1990s, it was reported that over half of all IJVs fail within two years (Geringer and Hebert, 1991). Although the track record of IJVs may have improved over the past decade, a large gap remains between the potential for mutual benefit and their actual track record. IJVs tend to be highly unstable. Kogut (1989) attributes the instability of IJVs to the tensions between parent firms and between parent firms and the ventures. A possible reason is that the tensions between cooperation versus competition, rigidity versus flexibility and short-term oriented versus long-term oriented are not in balance. This balance is difficult to ensure but is crucial for a sustainable and successful IJV. Two determinants, which are critical in this balance, are trust and control.
but also to control the relationship between the parents. The purpose of control is to fashion activities in accordance with expectations so that the ultimate goals of the organization can be attained (Das and Teng, 1998). Trust is especially important in IJVs because firms have to rely on their partner’s performance and remain vulnerable to the parent’s actions (Kumar, 1996). An absence of trust can seriously undermine the basis for a successful IJV and a certain minimum level of trust is therefore essential for any IJV to be formed and to function.
This leads to the following problem statement: ‘The process of developing
combinations of trust and control has not been adequate and as a lot of IJVs concur with trust and control issues, it needs to be investigated more thoroughly’.
Two ways in which IJVs can increase stability are trust and control. Trust and control seem to be different kinds of approaches but an ideal combination of the two
increases the likelihood that the IJV can survive. Achieving an appropriate balance of trust and control is essential because it can potentially minimize dysfunctional
behavior and increase IJV performance. Therefore it is a crucial element for businesses.
The research question for this study will be:
How do trust and control contribute to the stability of IJVs?
In the academic literature it is frequently stated that IJVs are unstable. There is information available about trust and control in these unstable IJVs but the process of developing a suitable combination has not been measured in depth.
In order to answer the research question, various sub questions will be specified.
• How do trust and control in IJVs relate to each other?
• In what way has the combination of trust and control changed over time? • In what way do trust and control changes affect the IJV?
• What is the role of trust and control on stability?
The first aspect that is important to find out is how trust and control within the particular IJV relate to each other. The next fragment of information that is needed is if the combination of trust and control has changed over time. These two questions are important to develop an understanding of trust and control within the IJV. Next it is important to know in what way the trust and control changes affect the IJV. With these three questions, the interviewer receives a clear picture of trust and control within the IJV. After understanding how trust and control are related and
implemented within the IJV, it is essential to find out what the role of trust and control is on stability. By answering these four sub questions, the main research question can be answered.
The paper is structured in the following way. First there is a literature review to attain background knowledge about the topics with a literature conclusion and final
framework. Then the methodology will be described which will include case
2. Literature Review
With continued globalization of the world’s economies, joint ventures (JVs) have become an important element of many firms’ international strategies. These ventures involve two or more legally distinct organizations, each of which actively participates in the decision-making activities of the jointly owned entity (Geringer, 1988). If at least one parent organization is headquartered outside the JV’s country of operation, or if the venture has a significant level of operations in more than one country, then it is considered to be an international joint venture (IJV) (Geringer and Herbert, 1989). IJVs represent a way of coping with the increasing competitive and technological challenges of today’s environment. They also provide advantages to parent companies, for instance by gaining quick access to new resources. At one time or another, most MNC’s form IJVs in order to gain competitive advantage, diversify risk and gain access to new markets and technologies (Fryxell et al., 2002).
Despite their potential contributions, IJVs are not without their drawbacks. The presence of two or more parents can make IJVs difficult to manage and often characterized by poor performance. Two critical determinants of IJV performance appear to be the control exercised by parents over a venture's activities and the trust between the parents.
2.1 Control
Parents not only have to pay attention to control the joint venture itself, but also to control the relationship between the parents. In IJVs there are two types of
relationships. These are the hierarchical relationship between the parent and the joint venture, and the inter-firm relationship between the parents. The inter-firm
are confronted with the increasingly crucial need to monitor, coordinate and integrate the activities of the organization’s business, including IJVs (Child, 1977). According to West (1959), without effective control efforts, firms are likely to experience great difficulty in managing IJVs.
2.1.1 IJV Control
IJV control is a complex and multidimensional concept. However, Schaan (1983) made it possible to distinguish three dimensions of parameters, which comprise IJV control. These are 1) the focus of control, i.e. the scope of activities over which parents exercise control, 2) the extent or degree of control achieved by the parents. And 3) the mechanisms the parents use to exercise control. The three control parameters will be explained in more depth, but first it has to be acknowledged that the three parameters are not incompatible, they are complementary and
interdependent (Geringer and Herbert, 1989).
The focus dimension shows that parents may choose to exercise control over a relatively wider or narrower scope of the IJV’s activities (Geringer and Herbert, 1989). This suggests that the exercise of effective control should emphasize selective control over those dimensions a parent perceives as critical, rather than attempting to control the entire range of the IJV’s activities (Herbert and Geringer, 1989). This notion of selective control efforts raises the prospect of a split control IJV; one in which a parent firm may exercise dominant control over only a few dimensions of the venture (Geringer and Herbert, 1989). This means that a single parent firm dominates all or most of the IJV’s activities but no individual parent controls a clear majority of the venture’s activities. Looking at the second dimension, extent of control, Killing (1983) identified three types of joint ventures. A dominant partner IJV (where only one of the parents plays a dominant role in decision making, a shared management IJV (where each parent plays an active role in decisions) or an independent IJV (where the IJV general manager enjoys extensive decision making autonomy) (Killing, 1983). Determining the tightness of control is not always that
straightforward though. Tight control is not always visible on the surface, and it can be exercised in direct as well as subtle or indirect ways. In the mechanism dimension, Schaan (1983) distinguishes between positive and negative mechanisms (see
certain activities or decisions. Positive mechanisms involve informal influence
techniques, such as staffing and participation in the planning process. Exercising these mechanisms is a continuing process. Negative control mechanisms rely on
bureaucratic mechanisms, such as formal agreements, approvals and the use of a board of directors. Exercising these negative mechanisms is what Killing (1983) calls the exercise of raw power.
Geringer and Herbert (1989) refine Schaan’s division of control mechanisms by distinguishing three groups. The first control mechanism is context-oriented. These mechanisms encompass a wide variety of informal and culture based mechanisms and their essential purpose is to establish an organizational context appropriate for the achievement of the parents’ objectives (Geringer and Herbert, 1989). This means for example that the parents emphasize the development of a teamwork culture rather than an ‘us- them’ culture. This could for instance be promoted by designating all personnel as employees of the IJV, rather than of the individual parent firms. Such a culture may represent a very effective substitute to more formal or content-oriented
mechanisms (Geringer and Herbert, 1989). This shows that rather than relying on the
organizational setting, parents rely on more direct interventions, either by top managers or by the IJV’s board of directors (Geringer and Herbert, 1989). The last dimension is the process-oriented mechanisms in which parent firms exercise control through reporting relationships or influence on IJV’s planning and decision-making processes. For example, parent firms may require the participation of their corporate staff in the IJV’s strategic planning process. Therefore, the critical issue for a parent firm is to exercise control, in terms of mechanisms, extent and focus over an IJV in such a manner that will enable it to successfully implement its strategy without incurring a level of administrative or organizational inefficiencies, which outweigh the gains from its cooperative endeavor (Geringer and Herbert, 1989).
MODEL 1: A STRAGEY-CONTROL MODEL OF IJV PERFORMANCE (Geringer and Herbert, 1989, p.250)
The model relies on an integrative concept of IJV control that takes into account its different dimensions. It is organized around the concept of strategy, more specifically the parents’ international competitive strategies and the IJV’s strategy (Geringer and Herbert, 1989). This perspective could enhance the understanding of the decisions parent firms make about which IJV’s activities to control, the extent of control to exercise and the control mechanisms to employ (Geringer and Herbert, 1989).
2.2 Trust
The second element that will be discussed is trust. Research on trust has been approached from a wide variety of perspectives. Most studies however have
conceptualized trust as the ‘willingness to make oneself vulnerable to the actions of another under conditions of risk, based on the characteristics or qualities of specific others, groups or systems to be trusted’ (Mayer et al., 1995, p. 347). Although
Affect based trust promotes the belief that an exchange partner actually cares about the relationship and more importantly, is attentive to the needs of the partner (Lewis and Weigert, 1985). Also, affect based trust enhances cooperation and goal
congruence such that a partner can be confident that his or her interests will be fully protected and that formal monitoring of behavior is not necessary. Such confidence also facilitates the honest and open exchange of information required to be informed of the needs of the other party and overcome perceptual biases that can lead to dysfunctional conflict (Fryxell et al., 2002).
2.2.1 IJV Trust
As IJVs represent incomplete contracts open to renegotiation, they naturally invite substantial restructuring later on (Inkpen and Beamish, 1997). This can lead to opportunistic behavior. Therefore, trust is especially important in IJVs because firms have to rely on their partner’s performance and remain themselves vulnerable to the partner’s actions (Kumar, 1996). A lack of trust can seriously undermine the basis for successful IJVs (Das and Teng, 2000) because too much time and energy is spent on watching what each partner is doing and not devoting it to the outcome of the project. A certain minimum level of inter-firm trust is therefore indispensible for any IJV to be formed and to function. The benefits of inter-firm trust in IJVs seem wide-ranging in character, including inducing desirable behavior, reducing the extent of formal contracts and facilitating dispute resolution (Ring and Van de Ven, 1994).
MODEL 2: SAKO’S HIERARCHY OF TRUST
(Sako, 1992, p.268)
Trust can be seen as a multidimensional construct. Not only are the three types of trust mentioned above important, it is also important to look at trust in more depth. For example, lateral- trust involves a ‘trusting’ relationship between the focal employees and co-workers and vertical trust refers to employee’s trust of his or her immediate supervisor and top management (Wong, 2012).
The model above shows the three types of trust. But there are also different sources of trust that will be looked at now. These sources are social relationships and
embedded ties or relationship-based trust (Dore, 1983), institutionalized processes or routines for fairly and reliably dealing with a partner organization, or process-based
trust (Zucker, 1986) or an alignment of economic incentives through hostages, or economic hostage-based trust (Klein, 1980). Let us have a look at the three sources of
trust in more depth.The relationship- based trust shows that trust arises through social collaborations between exchange partners.As the duration and intensity of
interactions between partner’s increases, bonds of attraction to develop and social sanctions are expected to be more valuable. Trust takes time to develop and can only be built slowly over time (Sako, 1991). As social knowledge between partners
increases, information asymmetries decrease, thereby reducing behavioral uncertainty (Dyer and Chu, 2000). Higher levels of trust could be the result of low information asymmetries and less behavioral uncertainty.Furthermore, acquiring social
a ‘high knowledge- carrying capacity because it presents immediate feedback opportunities and makes use of both visual and audio channels of communication’ (Dyer and Chu, 2000, p. 263). Therefore, it is considered useful for developing trust because it offers more signals for interpreting a partner’s behavior and motivations.
The process- based perspective differs from the relationship- based perspective in that the trust orientation that one partner has towards another partner is not based on personal relationships, but rather on a set of institutionalized processes and routines (Dyer and Chu, 2000). Therefore, the process- based perspective comprehends that inter- organizational trust may be built upon impersonal developments and routines that create a steady context for exchange.
The last source of trust is economic or hostage- based trust. Partners may also behave in a trustworthy manner due to ‘credible commitments’ that they have made with their partners (Klein, 1980).For example, partners may make financial or investment measures that are decisively aimed to align their economic prosperities. These measures are often referred to as credible commitments or an exchange of hostages.
2.3 Relation Trust and Control
To have a stable and durable relationship, there has to be an interaction between trust and control. The common goal of trust and control is the establishment and
most widely depicted view is that ‘control and trust do not just substitute or complement, but interact’ (Vosselman and Van der Meer- Kooistra, 2009, p. 269). This shows that control needs trust and trust needs control. Also, control produces trust and trust produces control.
During the years control can change. This change may have a direct as well as an indirect effect. This shows that an interaction perspective accounts for the interrelated dynamics of trust and control (Vosselman and Van der Meer- Kooistra, 2009). The interaction between control and trust may have negative consequences for the level of trust in situations where control exceeds a legitimate threshold of control (Vosselman and Van der Meer- Kooistra, 2009). Negative consequences arise in situations where control does not reach the legitimate threshold and therefore fails to generate zero-positive behavioral expectations (Vosselman and Van der Meer- Kooistra, 2009). Therefore, it is crucial that trust and control are interacting in a manner that is suitable for the IJV.
2.4 IJV Stability
Numerous researchers have mentioned the stability and/or instability of IJVs. The ways in which they are measured differ significantly. Blodgett (1992) for example argued that IJV instability was measured by ‘a change in the division of equity between joint venture partners’ after formation, and the unit of her analysis was ‘the joint venture contract rather than the joint venture itself’ (Blodgett, 1992, p. 477). She found a negative correlation between IJV stability and dominant equity control by one parent (Blodgett, 1987). She therefore argued that ‘shared management arrangements have a greater chance for long life than the dominant partner’ (Blodgett, 1992, p. 480). However, this is only a slight part of what can be seen as stability. Stability of IJVs can be seen as ‘the degree to which an alliance can run and develop successfully based on an effective collaborative relationship shared by all partners’ (Jiang et al., 2008, p. 3). This definition for IJV stability is used as stability is seen as a dynamic process variable that varies in different forms as the relationship evolves. There are also multiple factors underlying IJV stability.
2.4.1 External Tensions
External tensions or forces can be seen as pressures that arise from outside a system. This includes insecurities connected to the institutional setting and market insecurities (technological developments, competition, price developments for raw materials as well as for the end product). Developments in the institutional environment of an IJV may increase or decrease the level of uncertainty in which the IJV operates (Van der Meer- Kooistra and Kamminga, 2009). The creation of legal, governmental or industry regulations can generate a level of certainty as these regulations direct the behavior of organizations as well as their participants. However, constantly changing regulations can themselves create uncertainty (Kamminga and Van der Meer-
Kooistra, 2007). If an IJV operates in a market experiencing constantly changing regulations, the IJV management needs substantial autonomy to respond quickly to new situations. If developments in the institutional environment decrease the level of uncertainty and give the parent companies better insights into the IJV’s activities and its output, they can tighten the control of the IJV relationship (Van der Meer- Kooistra and Kamminga, 2009). Therefore it is important that the parents have a similar view of how to deal with these external forces. If these views are aligned, then the
instability rate is low.
2.4.2 Internal Tensions
An aspect that influences trust and control are the internal tensions within the IJV. Throughout the years numerous aspects change within the IJV. It is crucial that the parents react to these changes in a similar manner. If the parents have different views or ideas about these changes, the instability rate will increase. Therefore, it is essential that the parents confront the changes in a similar manner in order to avoid internal tensions. This is one aspect of the internal tensions.
Das and Teng (2000) argue that IJVs are the sites in which conflicting forces develop. Therefore, the tensions- based view attempts to explain the inherent vulnerability of IJVs in terms of a wide range of internal contradictions.Tensions result from the presence of the contradictions and the attempts to resolve such contradictions (Das and Teng, 2000). One way to resolve these contradictions is through the balancing strategy. This strategy recognizes inevitable tensions and attempts to balance
A balanced situation may lie anywhere from both forces being a low strength to both being a high strength’ (Das and Teng, 2000, p.85). Deephouse (1999) finds that through a strategic balance, an IJV can achieve the most effective performance. The internal tensions perspectives comprises of three pairs of competing forces. These are cooperation versus competition (behavioral), rigidity versus flexibility (structural) and short- term versus long- term orientation (psychological). This is the second aspect of the internal tensions. IJVs can be sustained if a careful balance between these
competing forces can be maintained. Miles and Snow (1991) suggest that one key reason that many IJVs fail is that one partner tends to unbalance the relationship, usually leaning toward too much control or modification.
Let us have a look at the pairs in more detail.
Rigidity and flexibility: Rigidity refers to the characteristics of mutual dependence and connectedness, whereas flexibility enhances the ability of partners to adapt, unencumbered by rigid arrangements (Das and Teng, 1998). Flexibility on the other hand, is the degree to which partner firms are able to modify the structural
arrangements in the IJV in order to adapt to changing conditions.
In IJVs, the level of rigidity within the system (i.e. inter- firm connections) tends to be intermediate- higher than the level of rigidity external to formal organizations, but lower than the level of rigidity internal to formal organizations (Das and Teng, 1998). IJVs can arise only when neither rigidity nor flexibility is dominant. In other words, the maintenance of a delicate balance is a prerequisite for an IJV to exist. IJVs
sacrifice flexibility because IJVs are separately incorporated entities and therefore the relationship among partners is more formally laid out. When flexibility is given too much emphasis, the IJV will tend to involve into a new system that will require very little control. Eventually the bond between the partners will weaken and the IJV will become vulnerable (Das and Teng, 2000). A system that is dominated by rigidity will be restraining the partners from adapting to environmental changes. Such an
overemphasis on rigidity reduces the chances for success and survival.
Opposing each other, flexibility and rigidity compete for dominance. Therefore, to make the IJV durable, both characteristics should be nurtured.
exploitation among the partners, a dominance of long- term orientation without on-going periodic results undercuts the partners’ motivation and commitment (Das and Teng, 2000). The issue is not about the expected duration of the IJV but it has to do with the intentions of the partners in terms of either exploiting the IJV or investing in the IJV.
The internal pairs of contradictory forces are interrelated. Cooperation versus competition and rigidity versus flexibility can be either positively or negatively related to each other, depending on the temporal orientation of the partners. The tension in short- term versus long- term orientation serves as the moderating variable between the other two tensions. The internal tensions perspective helps us understand that the inherent instabilities of IJVs spring from the difficult challenge of balancing many competing forces simultaneously (Das and Teng, 2000).
It should be noted however that IJVs are normally competitive, rigid and long term oriented (Das and Teng, 2000). And therefore this perspective helps to understand that the inherent instabilities of IJVs arise from the difficult challenge of balancing many competing forces simultaneously. Because in many IJVs these inherent instabilities are not balanced, many IJVs fail. But it should be mentioned that the termination of an IJV does not necessarily signal failure (Inkpen and Beamish, 1997). IJVs can end after achieving specified objectives, or after outliving their usefulness. In these cases, the termination of the IJV can be either natural or planned (Das and Teng, 2000). This should be taken into account when looking at IJV failure rates.
2.5 Conclusion
From the literature it can be derived that there are different views about the trust and control issues and their interactions. Looking at trust, there are three sources of trust that will be investigated. These are relationship- based, process- based and economic hostage- based trust. However, there are also three types of trust. They are
contractual, competence and goodwill trust. It is important for an IJV to know where in the trust hierarchy the IJV is and where this trust is coming from.
For control there are three parameters, namely: the focus, the extent and the
and process- oriented mechanisms. As control is an important element for IJVs, it is essential that the IJVs recognize that these three parameters play a crucial role. The relation and interaction of trust and control can be seen in the model below. As can be seen in the model, the relationship between trust and control is influenced by the internal and the external tensions. As these tensions are part of the stability factor they will be taken into consideration when trying to answer the research question:
How do trust and control contribute to the stability of IJVs?
MODEL 3: RELATIONSHIP BETWEEN TRUST AND CONTROL
Trust: Goodwill Competence Contractual Control: Focus Extent Mechanisms Stability Internal Tensions: Cooperation vs. competition Rigidity vs. Flexibility Short-‐ term vs. Long-‐term orientation
Internal Strategy vs. IJV strategy
Alignment of parent views towards changes
3. Methodology
In this section the methodology of this thesis will be described, which examines what type of research will be done and how the sample is selected. The second part will comprise of how the data is collected and analysed. Lastly, a more detailed case description is given of the chosen companies.
3.1 Type of Research
The purpose of this thesis is to describe how trust and control can influence the stability of IJVs and what the ideal combination of the two variables is. This research will make use of case studies because the concepts of trust and control need to be explored and also in relation to stability as this has not been previously studied. Case studies are most critical in giving insights to the problem at hand. Case study research can be explanatory, descriptive and exploratory (Berg, 2001). This research can be seen as descriptive and exploratory. Descriptive, because by using this approach ‘the formation and identification of a viable theoretical orientation will be applied’ (Berg 2001, p. 230). It is also exploratory because this research performs as a source for developing ideas that are then subjected to further research investigations.
3.2 Sample Selection
Within case study research it is possible to distinguish between single and multiple case studies (Blumberg et al., 2008). For this thesis, four IJVs of Firm A will be looked at. Firm A is chosen as this company has years of experience with IJVs and they concurred with actual trust and control issues within these IJVs. This makes Firm A an ideal company. The choice of four IJVs is made since one might not provide sufficient information while four gives a more adequate picture of how trust and control correlate. Therefore, with four IJVs, it is possible to clearly see differences or similarities.
An important criterion for the IJVs is that they should be partners for at least a few years. This is necessary to gather more insight into the combination of trust and control, especially for the trust fragment. This is the case for all four IJVs.
3.3 Data Collection
Qualitative data will be collected. Qualitative research refers to the what, how, when, and where of a thing, its essence and ambience (Berg, 2001).
Due to a few constraints such as the fact that most employees from the four IJVs are living abroad, questionnaires were sent out (see Appendix 2). With two of the
eighteen participants there was a telephonic interview conducted and the other sixteen participants filled out the questionnaires.
According to Blumberg et al. (2008), interviews are the most widely used source for collecting information for evidence. Blumberg et al. (2008) also argues that
interviews are often unstructured or can be in the form of informal discussions. However, for this thesis, the structured interview style is used, as it is crucial to have the same structure and questions for each participant. This provides the researcher with the ability to receive the most well defined answers as all the participants followed the same structure of questions. The interviews will be held individually as it is important to receive unbiased answers. The participants will be the IJV manager and at least one employee coming from each of the partners. Also, at least one participant is a member of the board of directors.
3.4 Data Analysis
According to Verhoeven (2007), the analysis of qualitative data as a result of
3.5 Conditions
It is important to take in mind some conditions that are necessary to guarantee the quality of the research. It is important to secure the validity of the information. Therefore it is vital to guarantee anonymity and privacy of the participants. It should be clear that the information will be kept confidential and will not be presented to the public. The information provided by the participants will only be used for this thesis and this component will most likely make the answers more reliable and honest. It is important to be truthful and clear towards the participants. This means that the purpose of the questions should be well defined in advance and the participants need to be approached respectfully.
3.6 Case Description
4. Results and Analysis
The results and analysis of each IJV will be presented in the following way: first there will be an introduction of the IJV to receive a richer picture of that specific IJV and participants. After this, the results of the control questions will be explained according to the three parameters (focus, extent and mechanisms). Then the results of the trust questions will be clarified followed by the results of the relationship of the trust and control question. Afterwards the stability questions will be explored. Lastly, there will be a short conclusion.
4.1 Company A
Six people are questioned for this IJV. This includes a member of the supervisory board, corporate director strategy, general manager, shareholder/board member, operations manager and the managing director.
The main topics in the contract are about the commercial conditions under which the IJV could purchase Firm A products, exclusivity for certain products and the exit arrangements. Some conditions changed throughout the years such as the exclusivity in certain products. The meaning of the contract was quite low as there was a lot of trust present so the contract was never a reference point. Only in the beginning to set up the intercompany trade and to form the supervisory board was the contract
meaningful. And also for the commitment of both parties was the contract useful.
4.1.1 Control
Focus: All six participants said that the parents emphasize selective control over the dimensions that they perceive as important. But a member of the supervisory board said that Firm A was quite reticent and should have been more direct. The general manager however argued that Firm A did not pay much attention to the IJV and that the other party had other much more relevant problems and that therefore the control was not actually present. According to the literature this shows that a single parent firm dominates all or most of the IJV’s activities but no individual parent controls a clear majority of the venture’s activities. The exercise of effective control should emphasize selective control over the dimensions that the parents recognize as
Extent: Of the six participants, a member of the supervisory board, general manager and the operations manager found that the local parent makes all the decisions
whereas the corporate director strategy, shareholder/board member and the managing director believe that both parents make the decisions jointly. This shows there is a clear division between the shared management and dominant partner control.
Determining the tightness is not always that straightforward. There is not a forthright response to this question and therefore this aspect is not in balance.
Mechanisms: When looking at Schaan’s mechanisms, the managing director and the shareholder/board member said that all or most of the mechanisms stated are used and the operations manager and corporate director manager said that most of the control mechanisms are used but especially the negative ones.
The general manager said that the control mechanisms established were the formal control mechanisms. This shows that negative control mechanisms are clearly used and that this relies on bureaucratic mechanisms. And this can be seen as the exercise of raw power (Killing, 1983).
Geringer and Herbert refined these mechanisms by distinguishing between three groups namely content- oriented, context- oriented and process- oriented mechanisms. All participants except for the operations manager said that there is a teamwork
culture but the shareholder/board member said it was based on Firm A’s culture while the general manager argued that it is more an Company A’s culture. The operations manager said that it was definitely an us- them culture because of the language barrier. A member of the supervisory board even said that there was too much teamwork and that Firm A should have been stricter.
When asked about the three types of control mechanisms there were variations in the answers. Three participants said it is an organizational setting and therefore context- oriented control mechanisms are in place but the corporate director strategy said this changed later on into direct interventions (content mechanisms) and the
shareholder/board member said that it is combined with reporting relationship (process- oriented mechanisms). The operations manager said that it is direct
the general manager said that it is important to have a clear leader in the IJV, once this is clear the influence of this parent is definite. These results show that there are variations in answers but the majority agrees that the control mechanism that is prominent is the context- oriented control mechanism. This shows that there is a wide variety of informal and culture based mechanisms. This is also shown by the fact that most participants agree that there is a teamwork culture. By using this control
mechanism an organizational context is established that is appropriate for the achievement of the parent company objectives.
As seen in the literature, it is a critical issue that parents exercise control in terms of focus, extent and mechanisms. As shown by the results there are some deviations between the answers. Looking at focus, it can be seen that this aspect is in balance however the extent or the degree of control is not. The mechanisms that the parents use to exercise control are also not forthright.
4.1.2 Trust
Four participants said that trust has not changed throughout the years but they did state different reasons. The general manager said that nobody felt responsible for the IJV while the managing director even said that ‘in the good times and in the difficult times, the trust was always perfect’. The operations manager and a member of the supervisory board said that trust did change and that it became less over the years. There were disappointing results and always excuses for these results. The member of the supervisory board even said that the managing director was incapable of doing his job. Also as the management was just in the hands of the local partner and as the results were disappointing the trust eroded.
The local partner was also the local managing director and therefore there is no difference of trust between the parents and between the parents and the IJV. Trust is build by frequent contact, which includes the personal and professional relationships from the parents, providing support confidence. The operations manager said that ‘going through the difficulties of the business, real trust is born’. The
that the belief was ‘everything will be fine’. The general manager said that in the beginning, no trust was built because nobody from Firm A was involved in the project. He mentioned that the main person responsible was retired and that no one in Firm A assumed the role of project sponsor. He said that in the beginning there was no trust but ‘interest’.
Looking at the three types of trust, the managing director, shareholder/board member and the corporate director strategy positioned the IJV as goodwill trust. The
operations manager said a mix between goodwill and competence trust and the general manager said competence trust. The member of the supervisory board said that it is important to have goodwill trust but this was not reached and this is where it went wrong. The examples include the facts that the director was not strict enough and had incapable people in his team. However goodwill trust was reached, as Firm A was ready to finance the project despite of not achieving good results. Also the local manager was obliged and got paid to work for 50% but he worked full time without asking for more money. Firm A supplied products at a special preferred intercompany rate, which was also not agreed to in the beginning. Based on goodwill trust it
worked.
The results show that the parties do more than what it has to abide by the written or oral contractual obligations. But there are still deviations about competence and goodwill trust. This shows that numerous participants feel that the maximum level of trust has not been reached and that the partners have not developed mutual
The results show that the participants clearly agree about the source of trust but they do not agree on the type of trust reached in this IJV. As this aspect in not in balance, it is subject to problems.
4.1.3 Relation Trust and Control
Four participants agreed that the trust and control levels are in balance. They
mentioned that the control mechanisms were in place and this also helped to rely on trust. They believed that trust and control are interacting in a manner that is suitable for this IJV. This is in line with the literature, which argues that trust and control do not just substitute or complement but interact. The member of supervisory board and the general manager said trust and control levels were not in balance as there is too much trust and not enough control. As these two participants argued that trust and control are not in balance, they believed that a cognitive state of mind regarding future behavior has not been achieved. They believed that control did not change (it stayed too low) but that trust declined. This shows that for them, negative
consequences arose and control did not reach the legitimate threshold and failed to generate zero-positive behavioral expectations.
4.1.4 Stability
The managing director, the shareholder/board member and the general manager said that all three pairs of internal tensions are in balance. A member of the supervisory board stated that short- term/long- term orientation was in balance but that there was too much cooperation and too much flexibility.
The corporate director strategy said that there is always a certain balance between cooperation/competition and between rigidity/flexibility but that IJVs are transitional in nature and that IJV partners almost always realize that a JV has a limited lifetime and the motives will change over time. The operations manager said that
cooperation/competition is not in balance as the IJV was born to be a temporary solution. There was a clause in the contract that Firm A would eventually take over. The general manager said that none of the pairs were in balance.
instabilities, which spring from the difficult challenge of balancing these competing forces.
There have been various problems in this IJV. Most problems were normal business problems and were resolved. For example, permanently updating the local market circumstances. The operational manager said that Firm A was lenient and took no ownership of the problems and that the local partner was over optimistic and that this was a deadly combination. The views on how to solve problems were not always the same. The corporate director said that Firm A was pressing for more commercial agility but that the problems were always resolved in mutual consent. There were financial problems and the views in how to solve it were not the same but the problem was resolved.
It is crucial that the parents react to changes in a similar manner. The majority of the participants mentioned that the views of the parents were not the same and this added to the internal tensions and the instability of this IJV.
According to the managing director and the shareholder/board member the internal strategy of the parents is the same as the IJV’s strategy. But the managing director also said that it is the same but the way to develop it is not. The shareholder/board member said that they are the same but that it is adapted to the local market. The operation manager and the general manager said that this is not equal and the corporate director strategy said that it is hardly ever the case that this is the same as the IJV itself will create its own reason of existence and will try to survive in its own way. This shows that there is a partition in the answers. Model 1 shows that the international strategy of the parents has a large amount of influence on the IJV strategy and that the IJV strategy has a small amount of influence on the international strategy of the parents. Half of the participants mentioned that this influence is not the case, as they believe that the strategies are the same. The other half of the participants said that the two strategies are not the same but either complement or interact and this is in line with the model.
promised. Therefore, everyone had his or her own role. The parents had a similar view of how to deal with these external forces.
4.1.5 Conclusion
The results and analysis show that all participants from this IJV argue that the focus of the IJV was right. Therefore, only those dimensions that were seen as important were controlled. The extent however was not balanced, as there were clear deviations. Already from the beginning it was remarked by some participants that control was not optimal. As the participants were not concurrent in their answers about who made the most decisions already gives an indication that control was not exercised optimal. Most of the participants agreed that the mechanisms that were most deployed were the negative mechanisms. Also a remarkable aspect is that particular participants
mentioned that control was not present or not to a great extent. Four participants argued that trust did not change over the years. Another remarkable aspect is the fact that all participants agreed that trust was prominently present but not all agree that goodwill trust has been reached. However, two participants said that there was too much trust present and that in the last operating years of the IJV, the trust declined. It has also been argued that the trust and control levels are in balance and that there have not been changes in the levels over time. However, this IJV wound up in 2011 and therefore difficulties did occur.
4.2 Company B
For this IJV five participants are questioned. This includes two general managers, corporate director strategy, managing director and the European director/board member.
4.2.1 Control
Focus: One of the general managers argued that there was selective control from both parents. The other general manager and the managing director said that there was no selective control. The general manager mentioned that the board of directors
controlled all of the activities and that the board of directors were also the parents of firm A and Company B. The European director/board member said that Firm A had selective control and that Company B had overall control. The corporate director strategy said that the IJV was very much controlled (and consolidated) by Company B. Firm A’s influence was strong in the strategy and in the technology/
process/product functions. From the results it can be seen that Company B tried to control everything and not the dimensions, which they perceive as important. This shows that there is one parent (in this case Company B), which controls the clear majority of the IJV’s activities.
Extent: Four participants agreed in the statement that both parents make an equal amount of decisions. The European director/board member said that the local partner alone makes most of the decisions. This shows that most of the participants agree that there is a shared management IJV and that each parent plays an active role in the decision-making.
All five participants agreed that there is a teamwork culture. The corporate director strategy added that this IJV started a bit as an us- them culture as the partners did not know each other but quickly the personal click created a strong element of trust and this combined challenge resulted in a teamwork.
Looking at the three types of control mechanisms, there are some deviations in the answers. Four participants agreed that the IJV relies on organizational setting (context) mechanisms. The managing director said it is combined with reporting relationships (process). One of the general managers said there is a ‘don’t shoot the messenger’ philosophy. As there was a very open culture the organizational setting is definitely in place. The corporate director strategy said the organizational culture but in day-to-day decisions the local partner was more in control with direct interventions (content) as they were closer to the business and were consolidating the financial results. The European director/board member said the IJV relies more on the reporting relationships. This shows that the control mechanism that is noticeable is the context mechanism. This mechanism states that there are a wide variety of informal and culture based mechanisms present.
Viewing the control answers, it can be derived that most aspects are in balance. The focus and extent aspects were answered almost identical whereas there were some deviations in the mechanisms answers.
4.2.2 Trust
Two participants, a general manager and the managing director said that trust did not change throughout the years. The other three participants said that the trust did change. This was the case as a new CEO (from Company B) came on board and that the close working/personal relationships with Firm A had changed. With the new crew on the company B’s side the relationship did not restore to the old level that Firm A would have liked.
Two participants believed that there is no difference of the trust between the parents and between the parents and the IJV. The corporate director strategy said that there was a nearly unbreakable trust between the IJV partners whereas the relationship with the management of the IJV was often more tense. One of the general managers said that there is a difference between of the trust between the parents and between the parents and the IJV. The other general manager argued that there is not a difference of trust between the parents but that in 2006 there was a change as Company B had the chance to buy out (put/call option) and they exercised. The trust changed between the parents and the IJV but not between the parents.
Four participants said that the type of trust present is goodwill trust. The European director/board member said that it is goodwill trust underpinned by both competence and contractual trust. One of the general managers said goodwill trust but also competence trust. The corporate director strategy mentioned that all three types of trust were present in more or less equal ways but that the relation with the
management was more based on competence trust. This shows that goodwill trust is mostly present and that the parties have developed mutual expectations that the other partner will do more than it is formally committed to doing.
When mentioning the sources of trust, all participants agreed that the source of trust is relationship- based trust. The corporate director strategy said that there is certainly a substantial relationship- based trust but that there is also an element of hostage- based trust, as there was a mutual dependency. One of the general managers said that Firm A was more process based in the beginning but that Firm A had so much international experience and Company B had a good reputation with forecasting/budgeting results. Therefore they had a consistency of performance, which led to more trust.
The results show that there is a consistency in answers about the source of trust and the types of trust.
4.2.3 Relation Trust and Control
helped to rely on trust. Therefore, trust and control interact and there is an establishment and maintenance of positive behavioral expectations.
4.2.4 Stability
Starting with the internal tensions, all participants agreed that the three pairs of internal tensions are in balance. The corporate director strategy said that there is always a certain balance between cooperation/competition and between
rigidity/flexibility but that it can swing over time. The IJV had a limited lifetime and the motives of the parents would change.
Also in this IJV there were multiple problems. According to the European
director/board member the problems involved ‘internal Firm A jealousies’. They were resolved by ‘balancing heads’ together. A general manager said that no big problems occurred. Of course there were the normal business issues but as there was a team-based culture they were resolved quickly. The corporate director strategy mentioned that the views were most of the time aligned. If problems occurred than they were always resolved in mutual consent. This changed slightly after a new CEO in Company B took over as he had a different agenda.
Looking at the internal strategies from the parent and the IJV’s strategy, the managing director argued that they must be aligned. A general manager said that they are not the same while the other general manager said that the internal strategies are not relevant as both parents had different products. The European director/board member said that initially they were the same. The corporate director strategy said they are hardly ever the same, as the IJV will create its own reason of existence and will try to survive in its own way. The partners expect mostly different things like dividend or trade volume as a decent margin. In this case Firm A expected a licence fee, dividend and learn the competitive landscape in that part of the world.
But from most competitors you know their strategies so you know what to do to protect your position.
4.2.5 Conclusion
The results and analysis show that most aspects are aligned between both parents. The focus is not over the dimensions seen as important but the parents are trying to control all activities. The participants also mentioned that one parent makes all of the
decisions and this is clear to most of the participants. However, when looking at the answers about who makes most of the decisions (extent), most participants said that both parents make an equal amount of decisions. These answers are in contrast with each other. The mechanisms, which are deployed, are not identical for all the participants.
Trust has changed throughout the years but goodwill trust is still prominent. The trust and control levels are in balance and also the internal tensions pairs are in balance.
4.3 Company C
For this IJV, five participants have been questioned. They are the chairman of the supervisory board, supervisory board member, CEO of Company C, managing director and the managing director of Company C. The main topics in the contract include the creation of a production unit producing for both parents specify high quality products in an effective and cheap way. The agreement can be seen as ‘crispy’ and ‘condensed’ containing basic rules of cooperation, giving the majority
shareholder more involvement in some areas. The main condition is that both partners must purchase directly from the IJV and not via third parties. Other important
4.3.1 Control
Focus: Four participants agreed that the parents emphasize selective control over the dimensions that they perceive as important. The managing director also mentioned that it is selective control as Firm A is stock listed and therefore needs faster and more detailed information. The CEO of Company C said that he believes that the parents are closer to control all activities rather than only the strategic ones. This shows that overall the parents emphasize control over the dimensions that they perceive as important.
Extent: Four participants argued that both parents make an equal amount of decisions. The managing director added to that that the IJV manager makes the operational decisions alone (but based on the annual budget) while both parents make an equal amount of decisions when concerned with strategic decisions. The managing director of Company C said that both parents are foreign and that they are undertaking the decisions together to reach the agreement. The CEO of Company C mentioned that the foreign parent alone makes all of the decisions. The results show that overall the shared management is seen in this IJV.
Mechanisms: Considering the positive and negative mechanisms, it can be seen that relations with JVGM, reporting structure and the approval required for specific decisions, plans/budgets etc. are stated by all the participants. Other mechanisms which have been mentioned a lot are ability to make specific decisions, ability to set objectives for JVGM and the contracts. There are clear and specific answers for this question and the participants agree to a huge extent.
Looking at the control mechanisms, all participants mentioned that there is a
working out the decisions of strategy and engaging management team of Company C in the business discussions.
When asked about the three types of control mechanisms, the participants answered differently. The chairman of the supervisory board believes it is an organizational setting (context) while the supervisory board member believes it is a reporting relationship (process). The CEO of Company C mentioned that the parents rely on more direct interventions (content). The managing director of Company C also agreed with direct interventions and the managing director said that it is a mixture of the three. This shows that there are clear differences between the answers.
Observing the control answers, it can be concluded that focus and extent answers are in balance. The positive and negative mechanisms were also in balance, but when looking at the mechanisms in more detail, there were clear deviations between the three types of control mechanisms.
4.3.2 Trust
Only the managing director said that trust has changed over the years. He said that the level of trust is changing and the situation has become more difficult since Firm A became a member of the X- group and is no longer independent. The supervisory board member said that the level of trust has not changed but that it is under some pressure. The other participants said that the level of trust has not changed. Trust is build on the basis of open discussions and seeking for compromises and
member said that is something between goodwill and competence trust. The competence trust results from the long- term presence of both partners on the same market and knowledge of the market. The goodwill trust is visible in the way of problem solving: the solution is being worked out with avoiding making reference to the JV contract or practising opposite voting. The managing director said that all three forms of trust are important.
The managing director of Company C said that competence trust is present while the CEO of Company C said that contractual trust is present but with some elements of competence trust. The reasons for competence trust are the production in technology (the IJV partners trust in the competence, staff in scope of technology) and the quality of goods (IJV partners trust in the competence of staff in scope of quality assurance) and the certification of procedures (IJV partners trust in the competences and
knowledge of the staff in scope of procedures).
Looking at the sources of trust, the chairman of the supervisory board said trust comes from the relationship- based trust. The CEO of Company C said that it comes from economic or hostage- based trust while the managing director said a mix between relationship- based and economic based trust. The supervisory board member said that trust comes from process- based trust. This shows that there are deviations between if the trust comes from social collaborations, or on a set of institutionalised processes and routines or because of credible commitments that the parents may have made.
The results show that there are numerous deviations in the trust answers.
4.3.3 Relation Trust and Control
Four participants agreed to the fact that the trust and control levels are in balance. Only the CEO of Company C said that they are not in balance due to deteriorating business results of one of the IJVs partners. This shows that trust and control interact and that overall there is an establishment and maintenance of positive behavioral expectations.
4.3.4 Stability
The managing director of Company C, the supervisory board member and the
managing director believe that the internal tensions are in balance. But the managing director supplemented to this that it needs a lot of communication and experience. The CEO of Company C said that there is a balance between cooperation/competition and between rigidity/flexibility but that there is no balance between the short- term and long- term orientation. The chairman of the supervisory board said that there is no balance between the internal tensions as they are in conflict by nature.
There were problems in this IJV. The chairman of the supervisory board said that they were resolved in agreement. The supervisory board member said that the problems were related to the speed of the investment and dividends. But in both cases the problems had been discussed and resolved. The managing director mentioned that the change on the management level creates problems because the new people are not well informed about the historical background, the reasons for decisions made in the past and that they are not familiar with the official or informal rules and relationships. This creates problems. The managing director of Company C said that problems occurred but that they were automatically resolved in the way of common
consultations of both IJV partners. The CEO of Company C said that there was one main and unsolved problem. One of the partners kept the contractual promises to take the pipes produced, the other could not meet the promises, which led to a difficult financial position of Company C. There were differences on how to solve this problem and finally one of the partners sold its shares to Firm A.
Viewing the internal strategies from the parents and the IJV’s strategy, the
competing with each other. The managing director of Company C said that they deal with ‘demand for the products’ as both partners are responsible for securing the demand for the products of Company C (in proportion to their shareholding structure). But the answers indicate that there are not a lot of external tensions to overcome.
4.3.5 Conclusion
The results and analysis show that the control aspects are mostly in balance. Most participants believe that the focus of control is selective, both parents make most of the decisions and there is a teamwork culture. The answers for these questions were very specific and were in line with each other. Only the question which covers all three control mechanisms (context/content/process) was answered differently by the participants. The type of trust present in this IJV and the source of trust have been answered contrarily. The answers about the internal tensions are also in conflict with each other. But the level of trust and control is in balance according to most of the participants.
4.4 Company D
Three participants have been questioned for this IJV and they are the CEO of Firm A, the managing director and the general manager.
The main topics in the contract are deals about the relation, who brings in what products, responsibilities and supervision. There were no changes in the contract and the meaning of the contract is for legal reasons. It is the reference on which you act. Definitely in the beginning phases is the contract important. As the IJV matures, the contract becomes less relevant and the performance has to prove that the construction actually works. Therefore, a contract is necessary for legal reasons but it has no impact for daily operations.
4.4.1 Control
Focus: All three participants agreed that the parents emphasize selective control. This shows that no individual parent controls a clear majority of the venture’s activities. The exercise of effective control should emphasize selective control over the
Extent: Looking at the question about who makes the most decisions, there are some deviations between the answers. The managing director argues that the local manager alone makes most of the decisions while the general manager said that both parents make an equal amount of decisions. He added to this, that it is ‘more the main shareholder’ that makes the decisions. The CEO said that the IJV manager makes the operational decisions while the strategic decisions are made equally by both parents. This shows that there is a division between shared management and independent IJV. As there is not a direct answer to this question, this aspect is not in balance.
Mechanisms: Looking at the positive and negative mechanisms, the managing
director said that the reporting structure, the bonus for JVGM tired to parents’ results, strategy/budget/planning and the approval required for specific decisions,
plans/budget etc. are in place. This shows that he believes that there are more positive control mechanisms than negative control mechanisms deployed. It also indicates that he believes that more informal influence techniques are used and this is a continuing process. The CEO did not specify the mechanisms but said that both parents make the strategic decisions while the IJV manager makes the operational decisions. The general manager said that all the negative control mechanisms are in place and less than half of the positive control mechanisms. He argues that more bureaucratic mechanisms are used.
Looking at the three mechanisms in depth, the general manager said that Firm A has a reporting relationship (process) while Company D has a direct intervention (content) and reporting relationship. The CEO said that the IJV relies on direct interventions while the managing director argues that the IJV relies more on reporting and planning processes and can therefore be seen as a reporting relationship. This shows that instead of relying on the organizational setting, parents rely on more direct
interventions and that parent firms exercise control through reporting relationships or influence on IJV planning and decisions making processes. This shows that the mechanisms implemented are seen as more formal.
It is crucial that there is a balance between the focus, extent and mechanisms. The answers about focus were in balance but the extent question was not. Even though the answers from the mechanisms were not identical, there is still a clear thread
throughout the answers.
4.4.2 Trust
The managing director said that trust changed over the years and that through
communication, checking processes and the ability to make compromises the trust is build. The general manager said that the level of trust did not change because the two parents knew each other before and that they trusted each other. Confidence has increased over the years and this increased the level of trust and also because of the personal relationships. The CEO said that the level of trust at group level was good but that locally it was low in the beginning but after a few interventions from top management it improved. Through communication, transparency and corrections if needed, trust was built. He mentioned that the level of trust between the parents and the IJV was good, but between the parents itself it was low in the beginning but improved after interventions from top management. The general manager argued that there is no difference in the level of trust between the parents and between the parents and the IJV. The managing director said that there is more trust between the parents and the IJV.
