National trust and the uncertainty of the institutional environment: implication for the choice of governance structures

(1)

MASTER THESIS

National trust and the uncertainty of the institutional

environment: implication for the choice of

governance structures

Authored

by

Irene Piziali

RUG: S4129296 - NCL: C0034975

DDM – Advanced International Business Management and Marketing

Supervisors:

RUG: Hammad Haq

NCL: Elizabeth Alexander

Institutions awarding the degree University of Groningen Newcastle University

(2)

ABSTRACT

Drawing from the social categorization theory I propose that trust towards an alliance partner country, namely national trust, influence the choice of governance structure. I use institutional environmental distance, a composite construct formed by

formal and informal institutional distances, as a proxy to directly measure the level of national trust. I argue that distance or differences between alliance partners increase uncertainty, hindering the development of national trust. Using a sample of

118 R&D equity and non-equity-based alliances formed by Chinese firms, in the electronic sectors, with foreign partners, I find support for the effect of cultural distance on national trust with an inverse influence on the choice of governance structure than the one predicted. While no significant results are found for formal

(3)

ACKNOWLEDGEMENTS

I would like to thank my supervisors, Hammad Haq from University of Groningen and Elizabeth Alexander from Newcastle University, for their valuable guidelines

(4)

1 Introduction

Progressively, knowledge is considered critical for firms to gain a competitive advantage. However, the environment is fast changing, the market is becoming more competitive and technological innovation has sped up (Gulati, 1995). Globalization increased competition globally and it became demanding to gain a competitive success and more knowledge is now needed (Glaister, Husan and Buckley, 2003). According to this, new trends and relationships may emerge between companies. Increasingly, there is a need for cooperation between firms giving popularity to strategic alliances. Strategic alliances involve voluntary agreements between two or more firms where they cooperate to develop a competitive advantage and pursue a specific objective (Lavie and Miller, 2008).

(6)

has given a total attention to the understanding of cultural distance on the relationship between trust and international strategic alliances.

Most recent literature has now identified a cognitive perspective of trust. In particular, Kwon, Haleblian and Hagedoorn (2016, p. 807) have investigated national trust, defined as “Trust towards an alliance partner’s country”. Kwon, Haleblian and Hagedoorn (2016) have analysed the effects that national trust has on the choice of governance structure drawing from a social categorization theory. The latter refers to the distinction between in-group and out-group membership based on the shared cognitions held by individuals (Bodenhausen, Kang and Peery, 2012). Specifically, their classification of social categories derived by the shared cognitions held collectively by members within the trustors’ country of origin, namely national membership (Kwon, Haleblian and Hagedoorn, 2016). They have measured national trust through a survey where they have asked to individuals from Western European countries to answer the following question: “I would like to ask you a question about

how much trust you have in people from various countries. Please tell me whether you have a lot of trust, some trust, not very much trust, or no trust at all.” (Kwon,

Haleblian and Hagedoorn, 2016, p. 814). Furthermore, they have identified that the influence of social categories is moderated by better information about the alliance’s partner. Hence, they have explored repeated alliances and position/centrality in an alliance network as mechanisms to gain better information.

There are a lot of open opportunities to investigate the notion of national trust. The reason is that trust is a multidimensional and complex construct and in the 2016 paper, Kwon, Haleblian and Hagedoorn have exclusively explored some of the potential effects of national trust on the choice of governance structure. However, no other author so far has contributed to the topic. This gap in the literature will be addressed in this study.

(7)

answer to the call of Kwon, Haleblian and Hagedoorn (2016) to provide a more “emic” approach that considers the differences in national and cultural context. This will be done through the identification of formal institutional quality and national cultures of the countries in the sample providing partners an opportunity to make more informed decisions (Morris, Leung, Ames, & Lickel, 1999). Second, I extend the research on trust relying on presumptive evidence that is one of the major bases of trust. Presumptive evidence refers to sources such as information about a party’s social category membership to distinguish the similarities and differences between social groups (Dietz, Gillespie, Chao, 2010), whereas many prior other studies have investigated the development of trust based on direct interaction and knowledge on the other party (Gulati 1995; Kwon, Haleblian and Hagedoorn, 2016). Third, I would like to enrich the international alliance literature investigating how China, defined as an emerging market, engages with strategic alliances. Indeed, the majority of prior study on strategic alliances have focused their attention on developed country missing the opportunity to expand knowledge on countries that are increasingly becoming important (Gomes, Barnes and Mahmood, 2016). This contribution may lead to interesting conclusions but some limitations may also arise, such as the erroneous generalization of the final findings.

To my knowledge, I am the first to conduct an analysis that extends the definition of national trust through the investigation of countries’ institutional environments. Furthermore, I will show the implications for the choice of governance structures. This leads to the following research question: How does national trust affect the choice of governance structure?

2 Theoretical framework

(8)

trust makes considerably challenging the development of trust between firms belonging to institutionally and culturally different societies (Kwon, Haleblian and Hagedoorn, 2016). The development of trust is mostly based on evidence obtained from the other party. The literature distinguishes two major bases of trust: direct evidence and presumptive evidence. Direct evidence refers to direct interaction and knowledge on the other party. This evidence has been tested by Kwon, Haleblian and Hagedoorn (2016) and therefore it is out of the scope of this study. On the contrary, presumptive evidence does not involve prior knowledge on the other party but refers to other sources such as information about a party’s social category membership (Dietz, Gillespie, Chao, 2010). Hence, trust based on social categorization does not take into account actual information about the alliance partner. Social categorization has been described by Ertug et al. (2013, p. 266) as a cognitive shortcut and the authors stated that: We recognize something according to the likeness of some focal features

to those of a prototype, which may be a stereotype, and on the basis of that attribute other features from the stereotype that are not in fact present”.

The alliance partner’s country of origin is expected to be a salient social category, increasing the likelihood that national factors influence the level of national trust (Ertug et al., 2013). Social categories based on nationality are associated with stereotypes and this might lead to errors of judgment (Terracciano and McCrae, 2007). Social categorization refers to the distinction between in-group and out-group membership. The former notion concerns those that share the same social group category or membership, while the latter refers to the presence of dividing lines between the perceiver and the target (Bodenhausen, Kang and Peery, 2012). Hence, perceivers are interested to understand whether an out-group would cooperate or compete. Primarily, social categorization enables inferences about particular issues, which in turn may be used to make decisions on whether and how to deal with certain people, firms or countries. Furthermore, social categorization may serve as an identity function (Kwon, Haleblian and Hagedoorn, 2016).

(9)

cultural aspects have a primary role in determining whether partners from different countries trust each other. In the context of international strategic alliances, membership to one social category may have substantial implications on the decision-making process of entering cross-border alliances (Zaheer & Zaheer, 2006). Authors such as Zaheer and Zaheer (2006) have also examined the role of trust in international collaboration and claimed that partners in the relationship may bring symmetric or asymmetric views of trust. In their study, Zaheer and Zaheer (2006) have analysed the social bases of trust asymmetry that concerns the imbalance of trust. They proposed that the differences in trust across societies are associated with cultural and institutional factors. Their findings have highlighted that trust asymmetry between partners (having different expectations on how the other party will behave) is an important subject in international relationships. These differences are associated with divergent institutional and cultural environments, affecting negatively the business relationship.

Furthermore, social categorization has a substantial impact on economic exchange relationships. In fact, it reduces trade and interactions with foreign partners and limits the chance to enter foreign countries’ markets. This evidence is particularly strong when the exchange involves technologies as they are considered trust intensive (Guiso, Sapienza and Zingales, 2006). Hence, I assume that when partners are coming from the same country, they share the same social category membership and therefore are also better informed on how to behave. These similarities decrease behavioral and environmental uncertainty and unknown situations, reducing the fear of opportunistic behavior and encouraging the development of trustworthy relationships.

2.2 Trust and the choice of alliance governance

structure

National trust may impact the choice of governance structure when engaging in cross-border exchange. In fact, national trust has an influence due to the cognition held by companies’ members toward a foreign firm’s country of origin (Kwon, Haleblian and Hagedoorn, 2016).

(10)

of different advantages such as obtaining and developing new technology and capabilities, entering new markets or reducing manufacturing or distribution costs. However, these strategic partnerships often fail (Patel, 2007). Alliances are productive when partners are able to combine their resources in an efficient and coordinated way. Partners are able to overcome risks and complexities, and achieve the target outcome. Conversely, unproductive alliances fail to combine resources in an effective and efficient way and lack the ability to deal with uncertainties in the relationship (Robson, Katsikeas and Bello, 2008).

Alliance activities may be organized according to several governance modes such as equity-based alliances, non-equity agreements (contractual agreements or export), licensing or franchising. Equity modes are further divided into equity joint ventures (EJVs) and wholly owned subsidiaries (WOS) (Pan and Tse, 2000). Furthermore, all these agreements may be formed by two or more firms (Arin ̃o, De la Torre and Ring, 2001). Choi and Contractor (2015) have extended the alliance modes categories beyond the traditional equity and non-equity classification collecting data from 237 international alliance deals. They have investigated national, industry and firms’ specific factors to choose an appropriate alliance governance structure drawing from a transaction cost perspective, a knowledge-based view and an institutional perspective. In this study the focus is on the two major classification of entry modes: equity-based and non-equity-based governance modes. The choice to form a certain governance structure may also depend on various factors such as firm-specific, industry-specific and country specific factors (Pan and Tse, 2000). Specifically, Pan and Tse (2000) have found that country risk factors have an influence in explaining the choice between equity-based and non-equity-based.

(11)

Trust is considered a success factor for managing business relationships (Glaister, Husan, and Buckley, 2003). Trust may also be used as an alternative control mechanism to mitigate opportunistic behaviour and lower transaction costs that emerge from an exchange. According to the latter statement, trust between partners allows companies to take the so called “calculative risks” based on the expectation that partners will not engage in opportunistic actions (Kwon, Haleblian and Hagedoorn, 2016). Trust between alliance partners also brings many benefits to the relationship such as lower need for monitoring, lower contracting costs and reduced transaction costs associated with an exchange (Gulati, 1995). In contrast, low trust between alliance partners requires higher commitment to avoid opportunistic behavior, which in turn generates higher transaction costs. Thus, equity-based alliances are a more appropriate form of governance when trust between partners is lacking, given that the mutual hostage tends to align partners incentives and contrast the risk of opportunistic behavior (Dyer and Singh, 1998).

Most previous researches have investigated trust arising from prior exchanges and ties between partners (Gulati 1995): previous and long-term interactions increase trust between partners and decrease the use of equity-based governance mode, enhancing the use of more informal contracts, such as non-equity-based modes. This statement has been also supported by Arin ̃o, De la Torre and Ring (2001) who claim that trust may be used to substitute or complement more formal governance structures. Their study is built on the reliance on trust and the role it plays in alliances. They investigate national factors such as value systems, culture and institutional differences and how they influence relational quality (initial trust). Their findings also highlight that there is a divergent degree of trust towards partners, depending on their nationality. However, trust is also considered risky. In fact, when a firm is willing to trust its partners shows to be vulnerable towards the action of that partners based on the expectation that they will not engage in opportunistic behaviour. Thus, trust requires a degree of vulnerability and exposure to uncertain behaviour (Ertug et al., 2013).

2.3 National trust

(12)

confidence” (Moorman, Deshpande and Zaltman, 1993 p. 82; Morgan and Hunt, 1994

p. 23; Aulakh et al., 1996 p. 1008; Zaheer and Harris, 2006 p. 171-178). This definition has been also used by Arin ̃o, De la Torre and Ring (2001) who referred to it as relational quality.

Later on, a cognitive perspective of trust has been researched. Kwon, Haleblian and Hagedoorn (2016) have proposed a new view of trust: national trust. The latter is the most updated term used in the international alliance governance literature. National trust is defined by Kwon, Haleblian and Hagedoorn (2016, p. 807) as “Trust towards

an alliance partner’s country” which captures national differences. In the context of

international strategic alliances, national trust is understood as parent manager’s trust in the alliance partner’s manager and its firm, building on the firm’s country of origin. Therefore, the trustee may be identified as both an individual or an organization (Janowicz and Noorderhaven, 2006). National trust is considered a combination of interpersonal and interorganizational trust and operates at both managerial and organizational levels. Interpersonal trust operates at the individual managerial level where the parent manager trusts the partner’s manager. While interorganizational trust refers to trust at the organizational level where the focal firm’s individual manager trusts the partner’s organization (Zaheer and Harris, 2006).

In the context of international alliances, it is important to examine the dual role of national trust, both at the individual and organizational levels, to provide a better understanding. On one hand, individual managers are influenced by the beliefs and values held by people in the same country and originated by shared cognitions held collectively. On the other hand, also organizations have a culture and are embedded in specific cultural environments influenced by the country of origin. Members of one country share similar perceptions towards other countries’ members. So, organizations operating within the same country engage in increased interactions developing a higher level of trust derived by shared social cognitions (Guiso, Sapienza and Zingales, 2006).

(13)

to be trustworthy relying on stereotypes and collecting data on aggregated survey responses by thousands of people in each Wester European country. Embracing a slightly different approach, Ertug et al. (2013) have found that trust is influenced by the home country of both partners. In particular, they have explored the perceived trustworthiness of IJV partners determined by the propensity to trust the other party’s home country, collecting data on 165 IJVs. To measure trustworthiness, they used an eight-item scale with the purpose to capture three dimensions: benevolence, integrity and domain-specific ability (Ertug et al., 2013). One of their main findings is that when firms from the parent’s country of origin has a higher propensity to trust their partners, the perceived trustworthiness of the foreign partner increases. Moreover, this result is mitigated by prior experiences.

(14)

On the other hand, there is a stream of literature that contradicts the previous findings. For instance, Jha, Kim and Gutierrez-Wirsching (2019) have investigated the effects that trust, cultural, geographical and institutional distances have on the formation of international strategic alliances. Their findings highlight that it is more likely to form a cross-border alliance between firms from countries that have a higher level of trust and a low cultural and geographic distance. However, there are no effects for institutional distance.

Overall, according to the opposing arguments in the literature it is apparent that institutional and cultural distances are widely used to determine the level of trust in a cross-border partnership.

A focal step of this research is to identify which dimensions are the most meaningful to explain the level of national trust between international partners and the consequences for governance choice. Pan and Tse (2000) have shown that the choice of governance structure is influenced by firm-specific, industry-specific and country-specific factors. Furthermore, Zaheer & Zaheer (2006) assumed that the development of trust in interfirm partnerships is often based on shared expectations, which are partly shaped by the institutional environment in which the parties are embedded. Based on the discussion of the extant literature, I decided to focus my research on institutional environmental distance, a composite construct formed by formal and informal institutional distances. Specifically, the cultural and institutional environment of each country involved in the exchange relationship are considered the features that group individuals within one social category. In this study, these will be used as proxies of national trust.

3 Hypothesis development

3.1 Institutional environmental distance

(15)

perceptions and behaviours (Steenkamp, 2001). Given this characterization, it is certainly harder to obtain reliable information on this more informal feature of the institutional environment.

Authors such as Couper, Reuber and Prashantham (2020, p. 326) have recently claimed that “Before a partnership is formed, high distance can lead partners to

erroneously attribute cues to a potential partner’s high quality, leading to over-expectations of partner performance”. In fact, before a partnership is initiated there is

little information about the target partner. Therefore, the focal firm is more likely to trust based on similarities among partners’ institutional environments. These perceptions are mostly based on social similarities and stereotypes that are not always accurate (Couper, Reuber and Prashantham, 2020).

Institutional distance represents the differences in the institutional environment of the alliance partners and comprises formal and informal institutional distance (Yang, Su and Fam, 2012). It has been convincingly argued that high institutional distance increases environmental and behavioural uncertainty, which is a crucial factor in international strategic alliances (Luo, 2001). Ertug et al. (2013, p.265) have claimed that “Uncertainty about the other party’s conduct and the risk based on dependence

on the other party make the level of trust in the other party crucial”. Therefore, in the

framework of cross-border partnerships it is considerably important to investigate the characteristics of the cultural and legal environment of the alliance partner’s country of origin as to reduce the degree of uncertainty and take more informed decisions on governance structures. Beside the attribution of cues to a partner based on him belonging to a particular social category, the next sections will identify various situations that highlight how environmental institutional distance may influence the levels of national trust, affecting the choice whether to form an equity-based alliance or a non-equity-based alliance

3.2 Formal institutional distance

(16)

regarding formal institutions: liability of foreignness and the quality of protection of property rights.

Firstly, when entering an alliance with a foreign partner, a problem arises as to the unfamiliarity associated with the institutional environment, something that is also called liability of foreignness (Chang et al., 2012). This issue leads to conflicts and frictions with foreign countries’ stakeholders for obtaining legitimacy (Gooris and Peeters, 2014). Liability of foreignness implies higher social costs that originate from unfamiliarity hazard and discriminatory hazard. Unfamiliarity hazard refers to lack of knowledge about the foreign environment and institutional distance certainly contributes to widen this knowledge gap. Liability of foreignness is also due to information symmetry that increases the risk of opportunistic behavior from the foreign partners who own better knowledge of the local environment. The second aspect of the liability of foreignness is the discriminatory hazard originated by the discriminatory treatment from the host country’s stakeholders (Eden and Miller, 2004). This leads to conflicts and frictions with foreign countries’ stakeholders for obtaining legitimacy. Furthermore, firms willing to enter countries that display high formal institutional distance need greater adaptability and greater learning to comply with foreign regulative practices (Gooris and Peeters, 2014). Overall, the unknown institutional environment leads to higher uncertainty on how to behave and obtain legitimacy, and it also requires higher adaptation. This leads to attributing lower levels of trust to the foreign partner. On the contrary, entering a country characterized by low formal institutional differences reduces this uncertainty and the difficulties to comply with stakeholders, thus requiring also a lower level of adaptability. Indeed, a better institutional fit will ease the right and effective application of foreign rules and regulations (Gooris and Peeters, 2014). Under these circumstances, a parent firm has a higher level of national trust. To contrast the high costs associated with liability of foreignness and with a low level of national trust resulting from high formal institutional distance, the firm targeting a foreign market might decide to enter an equity joint venture and partner with locals, thus exploiting them to reduce the friction with host State’s institutions and to gain higher legitimacy (Choi and Contractor, 2015).

(17)

which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence”. Oxley (1997) has suggested that large formal

institutional distance creates challenges based on the quality of the protection of intellectual property rights and the efficient enforcement of agreements. High formal institutional distance, as represented by larger differences in intellectual property rights protection regimes, increases parent firm uncertainty due to lack of familiarity. In past studies, other authors such as Keefer and Knack (1997) have claimed that weak institutional environments inhibit and degrade the security of property rights making more difficult for foreign partners to enter that country safely. In particular, intellectual property protection is essential in the successful establishment of international strategic alliances involving technology transfer (Oxley, 1999). Alliances in high and medium technology industries such as the electronic sector are focal for the study. R&D alliances have know-how to protect and patents are key strategic assets. Therefore, firms forming part of these alliances need to take major attention on the characteristics of the partner’s country of origin and its surrounding formal institutional environment (Choi and Contractor, 2015). R&D alliances are characterized by high uncertainty (Richards and Yang, 2007). High formal institutional distance enhances difficulties in evaluating whether the partner’s country of origin has a strong or weak protection regime. The complexity of R&D alliances requires higher cooperation and this requirement is less easily satisfied when institutional distance is large, unless a specific firm is ready to incur in potentially high costs. To make cooperation more effective and efficient, a sufficient degree of involvement of partners is required with the purpose to protect and transfer the technology in a less costly manner (Van Kranenburg, Hagedoorn and Lorenz‐Orlean, 2014). When formal institutional distance is high, cooperation may be more effectively achieved by adopting hierarchical governance modes such as JVs. These agreements reduce environmental and behavioural uncertainty through higher degrees of involvement in the partnership that reduce appropriability hazard. Furthermore, an EJV will enhance monitoring and control without the need to refer to formal institutions (Van Kranenburg, Hagedoorn and Lorenz‐Orlean, 2014).

(18)

as belonging to different social categories and inhibits the willingness to trust others (Meier et al., 2015). Thus, when the foreign partners are considered to be part of an out-group, it is more likely that a specific firm will compete rather than collaborate (Bodenhausen, Kang and Peery, 2012). Hence, I predict that before a partnership is initiated the focal firm substitutes the low level of national trust with more hierarchical governance structure to reduce its vulnerability and the risk of opportunistic behavior. Hypothesis 1: High formal institutional distance (or differences) between alliance partners generates low levels of national trust, increasing the likelihood to choose an equity-based alliance mode

3.3 Informal institutional distance

Informal institutional distance refers to differences in national cultures in term of social belief, values and attitudes (Wang, Zhang and Zhou, 2020). These principles of national culture have a long-lasting influence as they are gained early in life (Abdi and Aulakh, 2012). In this paper, I refer to national culture as the main informal institutional dimension. Authors such as Ertug et al. (2013) have found in their study that cultural distance is likely to be negatively associated with the establishment of trust. Hofstede (2001) proposed that national cultures may be distinguished according to various value dimensions such as: Individualism versus Collectivism, Masculinity versus Femininity, Power Distance, Uncertainty Avoidance and Long-Term Orientation. Previous studies have already identified that cultural dimensions as classified by Hofstede have divergent effects on the choice of governance mode. In particular, Choi and Contractor (2015) analysed Power Distance and Long-Term Orientation. Their findings show a positive relationship between Power Distance and Long-Term Orientation on the entry mode choice. Moreover, Choi and Contractor (2015) have demonstrated that high distance between partners in these cultural dimensions leads to prefer equity-based alliances as to better align partners incentives through a mutual hostage and reduce the risk of opportunistic behavior.

(19)

similarities are a precondition for strategic alliances success. On the other hand, Luo (2001) is of the opinion that cultural differences between alliance partners increase the level of uncertainty, influencing negatively the establishment of trust.

There are various situations that will aggravate a firm’s uncertainty caused by high cultural distance. In particular, cultural distance complicates the coordination of foreign activities (Gooris and Peeters, 2014). This requires an additional monitoring to reduce the risk of opportunistic behaviour. Furthermore, high cultural distance between alliance partners make it very challenging to interpret information and to predict the behaviour of a foreign partners. This limits the predictability of the alliance partner’s behaviour creating further uncertainty (Chang et al., 2012). In addition, a lack of complete information on foreign agent’s performance increases the risk of opportunism along with agency costs (Gooris and Peeters, 2014). High differences in social beliefs, norms and values also give rise to operational challenges such as difficulties on agreeing on common goals and on solving conflicts between alliance partners (Jha, Kim and Gutierrez-Wirsching, 2019). Differences also add complexity to interactions between culturally distant partners. Divergent views on mutuality are very likely, increasing the perceived risk and uncertainty in the possible actions of the foreign partner (Wang, Zhang and Zhou, 2020). EJVs help to reduce monitoring and agency costs and increase the effective coordination of foreign activities. Cultural distance makes complex the transfer of knowledge and of core competencies, thus leading to higher managerial costs (Jha, Kim and Gutierrez-Wirsching, 2019). EJVs, in fact, bring partners closer, increasing the degree of inter-partner involvement. Moreover, joint control is possible through an EJV, something that enhances activities monitoring and reduces the risk to act opportunistically (Van Kranenburg, Hagedoorn, Lorenz‐Orlean, 2014). Cultural distance has a greater effect when involving technology intensive partnership. R&D activities need high coordination and communication between partners. However, these are demanding requirements when partners have large cultural differences (Gooris and Peeters, 2014). R&D components are considered a firm core competency and are characterized by high degrees of uncertainty. Hence, it is more likely that highly culturally distant actors will form an equity-based alliance, to avoid the risk of opportunistic behaviour and the risk to lose competitive advantage (Pangarkar and Klein, 2001).

(20)

as equity-based alliances (Richards and Yang, 2007; Choi and Contractor, 2015). Generally, alliances are used to limit and better deal with environmental uncertainty. However, the latter purpose is amplified when partners are from different countries and when cultural distance is high (Pangarkar and Klein, 2001).

On the other hand, cultural similarities reduce transaction costs due to lower misunderstandings and better communication (Pangarkar and Klein, 2001). Alliance partners characterized by low cultural distance are expected to share a higher level of trust for two reasons. First of all, partners sharing similar attitudes, norms and values can access more accurate and complete information on the foreign partner reducing behavioral uncertainty. Secondly, the reputational consequences to act opportunistically are greater when they occur between culturally similar partners (Gulati, 1995). Overall, it can be concluded that low cultural distance between the parent firm and the target partners result in higher levels of national trust. In this case a non-equity-based alliance is more appropriate as the uncertainty and transaction costs are low (Gulati, 1995).

Hypothesis 2: High cultural distance (or differences) between alliance partners generates low levels of national trust, increasing the likelihood to choose an equity-based alliance mode

Figure 1: Relationship model

4 Methodology

(21)

(2016) has calculated that half of the studies in this field of enquiry use a quantitative method for analysing data. I decided to embrace this approach because all the data needed were available through existing databases and because the collection of secondary data is appropriate for this study.

4.1 Sampling and Data collection

For my current analysis, I focus on international strategic alliances and data were collected from research and development (R&D) equity and non-equity alliance agreements within the computer and electronic product manufacturing industry. The decision to focus on this industry is due to the increased competition among electronic product manufacturers worldwide (Lu and Weng, 2018). Chinese industry of high and medium technology intensity account for about 731 billion (US$) in 2018, almost the 30% of the world high and medium technology exports (The World Bank, 2020). One limitation and source of bias may arise according to the sampling design. This refers to limitations in analysing only one sector which might lead to misleading generalization for other industries. In fact, the collection of data of only one industry brings concern of idiosyncrasy and specificity to the analysed sector. Nonetheless, the choice to focus the research on R&D strategic alliances is also based on the consideration that R&D firms have know-how to protect, and patents are key strategic assets to them. Therefore, these firms need to take major attention to the overall characteristics of the partner’s country of origin and its surrounding institutional environment and environmental uncertainty (Choi and Contractor, 2015). Particularly, R&D alliances are characterized by high uncertainty (Richards and Yang, 2007). Furthermore, R&D partnerships require partners to closely collaborate, communicate and coordinate. Trust plays a primary role in determining the best functioning of the relationship (Choi and Contractor, 2015). All these aspects make technology intensive alliances suitable for the study.

(22)

exporter (Wang et al., 2008). China is also considered the world’s largest emerging economy and engages massively in international business. Furthermore, the country has to deal with many challenges in the context of international partnerships associated with the intricacy of all transition economies and the undergone major market reforms (Li and Zhong, 2003). China, as an emerging market, is characterized by rapidly evolving institutions and a weak legal framework and institutional environment where informality prevails. The less developed governmental and regulatory infrastructures lead to inefficiency or lax enforcement of contracts/law (Marquis and Raynard, 2015). This unique institutional environment places an emphasis on understanding to what extent Chinese firms trust other countries when dealing with cross-border relationships. These are the reasons why China is a suitable home country for my study.

(23)

agreements established by 92 Chinese firms for an overall sample size of 138 R&D alliance agreements. From this sample emerges that Chinese firms established agreements with 26 countries worldwide. On the basis of the current sample, I had to collect data about formal and informal institutions for each country involved. However, data on Bermuda informal institutions were missing as well as data on Virgin Islands formal institutions (voice and accountability indicator). Therefore, all alliance agreements established between China and these two countries (Bermuda and Virgin Islands) were excluded from my sample. These are probably offshore

investment holding vehicles for Chinese firms. Hence, 3 equity-based R&D

agreements were excluded. The current sample also includes strategic R&D alliances by Chinese firms in China. However, there will be no formal and informal institutional distance as companies coming from the same country have equal institutions and share the same culture. Hence, 17 more non-equity-based R&D alliances were excluded from the sample. I then obtained my final sample size of 118 R&D alliance agreements.

4.2 Dependent variable

The dependent variable is the choice of alliance governance mode depending on the degree of integration. In this study the distinction is represented by equity-based R&D alliances (more integrated modes), such as joint venture and minority stake, and non-equity-based R&D alliances (less integrated modes), such as joint development, cooperative agreement, technology development and know-how licensing. The dependent variable has been coded as 1 if the agreement is an equity-based alliance and 0 if the agreement is a non-equity-based alliance.

4.3 Independent variables

(24)

and to assess their quality I adopted the 6 institutional indicators identified by Kaufmann, Kraay and Mastruzzi (2011): voice and accountability, political stability, control of corruption, government effectiveness, regulatory quality, and rule of law. These variables will help to assess the degree of similarities or differences between China and the 26 countries involved in the study and the respective quality of the formal institutional environment of each country.

Data on the six institutional indicators were collected from the World Bank Governance Indicators database (updated in 2020). The database provides aggregate governance indicators for the period 1996-2019. However, to the scope of this study only measures of the most recent year available (2019) were collected for each indicator. To measure formal institutional distance (FD) I adopted the same composite variable created by Wang, Zhang and Zhou (2020) with deviation along each of the six indicators. Hence:

(Formula 1)

(25)

is the one studied by Kogut and Singh’s (1988) building on Hofstede’s (1988) cultural dimensions: individualism vs. collectivism, masculinity vs. femininity, power distance, uncertainty avoidance, and long-term orientation. The reason to base my research on these specific five cultural dimensions derived from Hofstede’s second edition of his book published in 2001. I decided to apply the same cultural distance measure thereby identified in order to assess the informal institutional distance between China and each of the 26 countries involved in the study. However, in this specific case I have corrected for variance differences (Beugelsdijk, Ambos and Nell, 2018). Country data on Hofstede five cultural dimensions were collected from Hofstede’s database (Hofstede Insights, 2018). I then computed informal institutional distance (ID) through the following formula:

(Formula 2)

Where ID j refers to the informal institutional distance of country j from China; Dij represents the index for country j for the ith informal dimension; DiChina is the index for China for the ith informal dimension; and V i is the variance of the index of the ith informal dimension (Wang, Zhang, and Zhou, 2020).

4.4 Control variables

(26)

Hagedoorn, 2016). Both firm size and age were collected on Orbis and, where not possible, annual reports were checked. I also control for country level data. I use host country GDP per capita (current US$) to control for all possible effects that host country economic development might have on entry mode choice. GDP per capita was retrieved from the World Bank Database for the most recent year available – 2019.

4.5 Data analysis

A Logistic regression will be used to examine the effect of my independent variables on the choice of the most appropriate governance structure. This seems to be the most appropriate model for this study due to the binary nature of the dependent variable that expresses the likelihood to choose an equity-based alliance (1) or non-equity-based alliance (0) (Gulati, 1995; Santoro and McGill, 2005; Choi and Contractor, 2015). Table 2 will show the results of the various logistic regression models that I estimate. Firstly, Model 1 will display the baseline model with all the control variables included to verify whether they were statistically significant or not. Secondly, to prove the reliability, Model 2 excludes the control variable that did not show any effect on entry mode choice. Thirdly, Model 3 tests the results of my two hypotheses. Finally, Table 3 will display the results of the logistic regression model run to test the robustness of my findings. This will be discussed in more details in the robustness check section.

5 Analysis and results

(27)

all the variables appearing in my model. It can be observed that among the variables the largest VIF is equal to 1.52. This value is way below the accepted rule-of-thumb value of 10, suggesting that multicollinearity is not an issue (Neter, Wasserman, & Kutner, 1985). In addition, the correlation table displays a negative coefficient between formal distance and entry mode, and between informal distance and entry mode. These results show that large formal and informal distances create an obstacle for the choice of governance structure. This is consistent with my assumption that cultural and institutional distances affect firms’ choice on which might be the most appropriate entry mode. However, a logistic regression needs to be run to verify whether my two hypotheses are statistically significant.

Table 1: Descriptive statistics, correlation matrix and VIF

p<0.10; *p<0.05; **p<0.01; ***p<0.001

(28)

variable was significant with a p-value < 0.01. This means that economic development of the partner’s country of origin has an influence on the choice of entry mode. However, this influence becomes statistically insignificant when we test for formal and institutional distance. Therefore, I decided to exclude also Host country GDP as a control variable from my final model. Model 3 shows that by excluding host country GDP as control variable the significance of one of the main independent variables, informal distance, slightly changes. In fact, Model 2 reveals that informal distance is significant at the 5% level (p-value < 0.05), while, excluding Host country GDP in Model 3, informal distance is statistically significant at the 0.1% level (p-value < 0.001). These results reveal that the economic development of the partner’s country of origin has an impact on cultural distance. According to this result, I decided to keep Host country GDP as a control variable in my final model.

On the other hand, it is not surprising that focal firm size influences the choice of governance structure and it remains significant (p-value = 0.001) when testing the impact of formal and informal distances. In fact, as I stated earlier in the paper, large firms are less dependent on trust and also less susceptible to environmental uncertainty and opportunism due to greater capabilities (Choi and Contractor, 2015). In addition, it is more likely that larger firms have specific assets and core competencies to protect from foreign partners’ opportunistic behaviours. Therefore, large firms have a further incentive to make informed decisions about the most appropriate governance structure to adopt.

Table 2: Results of Logistic Regression

All tests are two-tailed: p<0.10; *p<0.05; **p<0.01; ***p<0.001

(29)

Hypothesis 1 predicts that large differences in the formal institutions of alliance partners’ countries generate low levels of national trust, thus affecting the entry mode choice. It is expected that high differences increase the likelihood to choose an equity-based alliance mode. However, the results do not show a statistical significance (p-value > 0.10), meaning that differences in legal and regulatory systems between partners’ countries do not influence the level of national trust and they are not relevant for the choice of governance structure. Hence, Hypothesis 1 is not supported.

On the other hand, Hypothesis 2 predicts that high cultural distance between alliance partners’ countries generates low levels of national trust, increasing the likelihood to choose an equity-based alliance mode.

In this particular case, my empirical test shows to be statistically significant at the 5% level (p-value = 0.05d). However, the coefficient is negative. The results suggest that cultural distance is negatively related to the likelihood of following into the formation of an equity-based alliance. Therefore, also Hypothesis 2 is not supported. Because cultural distance affects the level of national trust is the opposite manner than the one that I predicted.

5.1 Robustness check

(30)

The loaded factor still includes all the governance indicators in its concept, so little change from testing formal institutional distance as an aggregate. Overall, this proves that the differences in institutional quality between partners’ countries do not affect the level of national trust and the choice of governance structure significantly. Thirdly, as it is supposed that cultural dimensions are robust and not correlated (Hofstede and Bond, 1984) and load into 5 different factors we run the model with each of them to see which of these unique dimensions have a direct influence on the entry mode choice.

Table 3: results of the effects of Hofstede Cultural dimensions on the

choice of governance structure

All tests are two-tailed: p<0.10; *p<0.05; **p<0.01; ***p<0.001

(31)

individualism, task prevails over relationship and individuals are expected to take care of themselves and their immediate family (Hofstede, 2011), while in a collectivistic society, establishing and maintaining a relationship is considered extremely important. Therefore, high distance on individualism leads to divergent priorities in terms of collaborations. This explains the reluctance to form equity-based alliances. Furthermore, it can also be interpreted as a search for entrepreneurial ideas and innovation that are all characteristics associated with individualism. A study by Block and Walter (2017) shows that individuals coming from individualistic countries are associated with entrepreneurial traits with a preference to establishing new ventures. Moreover, these people are more concerned on pursuing their personal goals, focusing on externalities and on achieving high levels of self-actualization. These characteristics also reduce the willingness to closely collaborate with partners through the share of equity.

6 Discussion and Conclusions

This research examines how formal and informal distance may measure the level of national trust and the implications for governance structure. The aim of the study is to identify the effects of national trust on organizational outcomes in the form of entry mode choice. The study does not consider prior interactions between companies but it is based on presumptive evidences that refers to other sources such as information about a party’s social category membership (Dietz, Gillespie, Chao, 2010). With 138 R&D alliance agreements between Chinese companies and foreign partners, my results lead to unexpected conclusions. On one hand, it has been proven that cultural distance influences the choice of governance structure but it appears that an inverse relationship than the one predicted take place. This result shows that national trust has an influence on entry mode decisions when it is analysed in terms of cultural similarities and differences between the alliance partners’ countries. Hence, the identification of cultural similarities enables decision makers to infer trustworthiness (Kwon, Haleblian and Hagedoorn, 2016).

(32)

significant and positively related to the likelihood to form equity-based alliances, whereas Individualism is statistically significant but negatively related to the likelihood to form an equity-based alliance. No significant effects have been found for Power Distance, Masculinity and Uncertainty Avoidance. The not significant result of Uncertainty Avoidance is the most surprising. This dimension has been defined by Hofstede (1991: p.113) as the “extent to which the members of a culture feel

threatened by uncertain or unknown situations”. Therefore, countries with high

(33)

differences generate a lower level of national trust and lead to form non-equity-based alliances. Quite the opposite, in the case of China low levels of trust lead to choosing a non-equity-based alliance. There are two possible explanations for the result that China prefers to form non-equity-based alliances. The first one derives from the combination of the social categorization theory, which states that high differences in individualism generate low levels of national trust (Zaheer and Zaheer, 2006), and the transaction costs theory that states that when the uncertainty of the other party behavior is high non-equity-based alliance are a more reversible form of governance structure (Choi and Contractor, 2015). A second explanation may be retrieved from a study conducted by Wang and Nicholas (2007)and showing that the preferred mode to internationalize for Chinese firms is through non-equity-based alliance. In particular, Chinese firms started adopting contractual joint ventures (CJV) during China’s reform era. CJVs are considered the major form of non-equity alliances in China and are also called cooperative joint ventures. This form of alliance does not involve the share of equity but is regulated by formal contracts (Wang and Nicholas, 2007). This last consideration provides a further possible explanation for why my findings show that, when cultural distance is high, it is more likely that the parent Chinese company chooses a non-equity-based alliance.

In addition, the application of social categorization theory to this study may lead to the problem of psychic distance paradox. This concept has been defined by Lavie and Miller (2008, p. 9) who state that “Perceived similarities between the firm’s home

country and proximate countries reduce managers’ uncertainty about the nature of the foreign environment and thus lead them to believe that conducting business in these countries would be relatively easy”. This is one of the reasons why firms

associate similarities to high levels of trust. However, Lavie and Miller (2008), through the psychic distance paradox, highlight that similarities may not always increase the level of national trust but at times lead to erroneous judgments about the potential behavior of the alliance partner. The above argument may provide another reason as to why Chinese firms are more likely to choose equity-joint ventures when cultural distance is low.

(34)

(35)

A third and last reasonable explanation concerns the ease with which information can be obtained when the quality of formal institutions of a specific country is higher due to the objectivity and explicitly of practices and rules (Wang, Zhang, and Zhou, 2020). Therefore, it is likely that firms do not need to base their judgement on social categories or stereotypes because information on the formal dimension of the institutional environment concerns state institutions with written norms that are accessible and readily available to everyone (Wang, Zhang, and Zhou, 2020).

6.1 Research implications

(36)

The paper also contributes to the international alliance literature in terms of firm size effects on entry modes. Kwon, Haleblian and Hagedoorn (2016) did not include variables such as size and sales in their model because they were not available for their specific sample. They also justified that these measures are not significant for entry mode choice. However, I predicted that parent firm size may influence the level of national trust due to how they deal with environmental uncertainty and fear opportunistic behavior. I decided to include investor size and data availability allowed me to do it. In line with my expectation, it resulted that firm size has a marginal influence on governance structure decisions.

Findings contribute to add insights on how emerging market firms deal with strategic alliances. In particular, the paper investigates the unique characteristics of Chinese firms in dealing with trust and their idiosyncratic habits when entering foreign countries (Wang and Nicholas, 2007). It is important to note the tendency of Chinese firms to form non-equity-based alliances in the form of contractual joint ventures, a trend that they initiated to deal with the impacts of China’s reform era. In fact, these non-equity-based alliances were easier to enter, exit and adapt through the negotiation of terms and conditions between the partners. CJVs help firms to efficiently adapt to the fast-changing institutional dynamics of an emerging market such as China (Wang and Nicholas, 2007).

In addition, the international business literature estimates that cultural distance is used as a proxy indicator for national trust. This is supported by my empirical study, which shows that the level of national trust may be derived by national cultures (Kwon, Haleblian and Hagedoorn, 2016). I add a contribution to the IB literature by showing that formal distance has no significant effects on the choice of governance structure so it cannot be used as a general proxy indicator to determine the level of national trust. To conclude, formal institutional variables should be distinguished from national trust.

6.2 Limitations and future research directions

(37)

limitations when making this conclusion. It is important to identify the appropriate proxies to measure national trust in a way that is useful to take more informed decisions. I tried to use a more emic approach to assess national trust through formal and informal distances. However, the findings highlight that not all these measures are significant in determining the level of national trust and their subsequent implications for entry mode choice. It is important to know that the level of national trust is a multidimensional construct and it is not attributable to a unique factor. It is suggested that future research should extend further the definition of national trust by assessing various nuances associated with this complex construct. Future research may take an approach that examines the differences in national context using measures divergent from the ones applied in this study. For instance, the influence of social and psychological norms may be investigated to determine the level of national trust (Zaheer and Harris, 2006).

The first important limitation of the study is the extremely small sample of R&D alliances. Due to low data availability, I was only able to find 118 transactions made by Chinese firms. According to the 22-year review of strategic alliance literature conducted by Gomes, Barnes and Mahmood (2016) only 21.7% of the studies employed a sample size between 100 and 249, while the majority of the studies had a sample size that ranged between 250 and 500, and an increasing number of researches used a sample that exceeded 10000 observations. A small sample raises issues of generalization and poses the problem of how to adequately judge the match between the experimental sample and the population (Tipton et al., 2016). To solve this issue, a different home country may be taken into consideration where future research might benefit from a larger dataset that helps analyse national trust in more depth and might bring unexpected findings.

A second notable limitation involves the focus on only one home country in my sample. Trust is understood differently by the diverging national cultures and national contexts so that the constancy of the home country may have provided a substantial influence on the results of my study (Zaheer & Zaheer, 2006). Studies that examine various home countries with their unique cultures would be beneficial to justify my assumptions and final findings.

(38)

firms in China that have partnered with companies around the world. Hence, the institutional distance between China-US, China-Germany and China-Sweden is large because US, Germany and Sweden are all developed country with stable institutions and thus high-quality institutions (Jha, Kim, and Gutierrez-Wirsching, 2019), whereas China is an emerging market and it is characterized by low-quality institutions. Analogously, the institutional distance between China-Egypt and China-India is small because they are all emerging countries with undeveloped institutional environments (Marquis and Raynard, 2015). Therefore, my sample excludes all the partnerships between companies coming from developed countries having high institutional quality. The design of this sample might lead to erroneous results excluding the positive association with institutional distance and the establishment of national trust. Future research might address this limitation to adjust for biases in my study.

Further limitations in my study leave space for future investigations. For instance, to provide a more complete and reliable research, future studies may investigate simultaneously direct and presumptive evidence. This involves a comprehensive analysis that determines the implications of national trust based on both prior interactions and social category membership. However, I also expect that there are many other factors that mitigate the effect of category-based trust. Hence, I suggest to examine foreign partner’s reputation or status that would provide more information to the parent firm and further increase their ability to judge the trustworthiness of the foreign partner (Ertug et al., 2013).

6.3 Conclusion

(39)

7 References

Abdi, M., & Aulakh, P. (2012). Do country-level institutional frameworks and interfirm governance arrangements substitute or complement in international business relationships? Journal of International Business Studies, 43 (5): 477–497.

Arin ̃o, A., de la Torre, J. & Ring, P.S. (2001) ‘Relational quality: managing trust in corporate alliances’, California Management Review 44(1): 109–131. Aulakh, P. A., Kotabe, M., & Sahay, A. (1996). Trust and performance in

cross-border marketing partnerships: A behavioral approach. Journal of

International Business Studies, 27(5), 1005–1032.

Aulakh, P. S., Marshall, S. J., & Li, S. 2013. Licensee technological potential and exclusive rights in international licensing: A multilevel model. Journal of International Business Studies, 44(7): 699–718.

Beugelsdijk, S., Ambos, B., & Nell, P. C. (2018). Conceptualizing and measuring distance in international business research: Recurring questions and best practice guidelines. Journal of International Business Studies, 49(9), 1113-1137. https://doi.org/10.1057/s41267-018-0182-4.

Block, J. H. , & Walter, G. S. (2017). Hofstede’s cultural dimensions and modes of entry into entrepreneurship. In J.Bonnet, M.Dejardin, & D.Garcia Perez De Lema (Eds.), Exploring the entrepreneurial society institutions, behaviors and outcome s(pp. 22–34). Cheltenham, UK: Edward Elgar Publishing.

Bodenhausen, G. V., Kang, S. K., & Peery, D. (2012). Social categorization and the perception of social groups. In S. T. Fiske, & C. N. Macrae (Eds), The Sage

(40)

Chang, Y.-C., Kao, M.-S., Kuo, A. & Chiu, C.-F. (2012). How cultural distance influences entry mode choice: The contingent role of host country’s governance quality. Journal of Business Research, 65(8), pp.1160–1170. Chen, H. & Chen, T.J. (2002), “Asymmetric strategic alliances: a network view”,

Journal of Business Research, Vol. 55 No. 12, pp. 1007-1013.

Chen, H., & Chen, T. J. (2003). Governance structures in strategic alliances: Transaction cost versus resource-based perspective. Journal of World

Business, 38(1), 1-14.

Choi, J. & Contractor, F.J. (2015). Choosing an appropriate alliance governance mode: The role of institutional, cultural and geographical distance in international research & development (R&D) collaborations. Journal of

International Business Studies, 47(2), pp.210–232.

Couper, C., Reuber, A. R., & Prashantham, S. (2020). Lost that lovin’ feeling: The erosion of trust between small, high-distance partners. Journal of

International Business Studies,51: 326–352.

Currall, S. & Inkpen, A., (2002). A Multilevel Approach to Trust in Joint Ventures. Journal of International Business Studies, 33(3), pp.479-495. Dietz, G., Gillespie, N. & Chao, G. T. (2010). Unravelling the complexities of trust

and culture. In Saunders, M. N. K., Skinner, D., Dietz, G., Gillespie, N., Lewicki, R. J. (Eds.), Organizational trust: A cultural perspective:3-41. New York: Cambridge University Press.

Dyer, J.H. & Singh, H. (1998). The relational view: Cooperative strategy and sources of interorganizational competitive advantage. Academy of

(41)

Eden L. & Miller S. (2004). Distance matters: Liability of foreignness, institutional distance and ownership strategy. In Hitt M.Cheng J. (Eds.), Advances in

international management: 187–221. New York: Elsevier.

Ertug, G., Cuypers, I.R.P., Noorderhaven, N.G. & Bensaou, B.M. (2013). Trust between international joint venture partners: Effects of home

countries. Journal of International Business Studies, 44(3), pp.263–282. Glaister, K. W., Husan, R., & Buckley, P. J. (2003). Learning to manage

international joint ventures. International Business Review, 12(1): 83–108. Gomes, E., Barnes, B.R. & Mahmood, T. (2016). A 22-year review of strategic

alliance research in the leading management journals. International Business

Review, 25(1), pp.15–27.

Gooris, J., & Peeters, C. (2014). Home–host country distance in offshore governance choices. Journal of International Management, 20 (1): 73–86.

Guillen MF. & Garcia‐Canal E. (2009). The American model of the multinational firm and the ‘new multinationals’ from emerging markets. Academy of

Management Perspectives 23(2): 23– 35.

Guiso, L., Sapienza, P., & Zingales, L. (2006). Does culture affect economic outcomes? Journal of Economic Perspectives, 20(2): 23–48.

Gulati, R. (1995). Does familiarity breed trust? The implications of repeated ties for contractual choice in alliances. Academy of Management Journal, 38(1), 85-112.

Gulati, R. & Sytch, M. (2007). Dependence Asymmetry and Joint Dependence in Interorganizational Relationships: Effects of Embeddedness on a

Manufacturer's Performance in Procurement Relationships. Administrative

(42)

Hofstede, G. (1991). Culture: Software of the Mind. McGraw-Hill, London. Hofstede, G. (2001). Culture's Consequences: Comparing Values, Behaviors,

Institutions and Organizations Across Nations. Sage Publications, Thousand Oaks, CA.

Hofstede, G. (2011). Dimensionalizing cultures: The Hofstede model in context.

Online Readings in Psychology and Culture, 2. h p://dx.doi.

org/10.9707/2307-0919.1014.

Hofstede Insights. (2018). Hofstede Insights. [online] Available at: https://www.hofstede-insights.com.

Hofstede, G. & Bond, M.H. (1984). Hofstede’s Culture Dimensions. Journal of

Cross-Cultural Psychology, 15(4), pp.417–433.

Hofstede, G. & Bond, M.H. (1988). The Confucius connection: From cultural roots to economic growth. Organizational Dynamics, 16(4), pp.5–21.

Janowicz, M., & Noorderhaven, N. (2006). Levels of interorganizational trust: Conceptualization and measurement. In R. Bachmann, & A. Zaheer (Eds),

Handbook of trust research: 264. Northampton, MA: Edward Elgar.

Jha, A., Y. J. Kim, & S. Gutierrez-Wirsching (2019). “Formation of Cross-border Corporate Strategic Alliances: The Roles of Trust and Cultural, Institutional, and Geographical Distances.” Journal of Behavioral and Experimental

Finance 21.

Kauffman, D., Kraay, A., & Mastruzzi, M. (2007a). Governance matters VI:

(43)

Kaufmann, D., Kraay, A. & Mastruzzi, M. (2011). The Worldwide Governance Indicators: Methodology and Analytical Issues. Hague Journal on the Rule of

Law, 3(02), pp.220–246.

Keefer, Philip, and Stephen Knack, “Why Don’t Poor Countries Catch Up? A Cross-National Test of an Institutional Explanation.” IRIS Center Working Paper No. 60, University of Maryland, College Park, 1993.

Kogut, B. & Singh, H. (1988), “The Effect of National Culture on the Choice of Entry Mode,” Journal of International Business Studies, 19 (3), 411–32. Kumar, N. (2009). How emerging giants are rewriting the rules of M&A. Harvard

Business Review, 87, 115–121.

Kwon, S.-W., Haleblian, J. & Hagedoorn, J. (2016). In country we trust? National trust and the governance of international R&D alliances. Journal of

International Business Studies, 47(7), pp.807–829.

Lavie, D. & Miller, S.R. (2008). Alliance Portfolio Internationalization and Firm Performance. Organization Science, 19(4), pp.623–646.

Li, J. & Zhong, J. (2003) ‘Explaining the growth of international R&D alliances in China’, Managerial and Decision Economics 24(2–3): 101–115.

Lu, H. P., Weng, C. I. (2018). Smart manufacturing technology, market maturity analysis and technology roadmap in the computer and electronic product manufacturing industry. Technol. Forecast. Soc. Chang. 133 (1), 85e94. Luo, Y. (2001). Determinants of entry in an emerging economy: a multilevel

approach. Journal of Management Studies 38, 443–472.

(44)

Macrae, C. N., & Bodenhausen, G. V. (2000). Social cognition: Thinking categorically about others. Annual Review of Psychology, 51: 93–120. Marquis, C. & Raynard, M. (2015). Institutional Strategies in Emerging Markets.

Academy of Management Annals, 9(1), pp.291–335.

Meier, M., Lütkewitte, M., Mellewigt, T. & Decker, C. (2015). How managers can build trust in strategic alliances: a meta-analysis on the central trust-building mechanisms. Journal of Business Economics, [online] 86(3), pp.229–257. Available at: https://link.springer.com/article/10.1007/s11573-015-0777-1. Moorman, C., Deshpande, R., & Zaltman, G. (1993). Factors affecting trust in

market research relationships. Journal of Marketing, 57, 81–101.

Morgan, R. M., & Hunt, S. D. (1994). The commitment-trust theory of relationship marketing. Journal of Marketing, 58, 20–38.

Morris, M. W., Leung, K., Ames, D. & Lickel, B. (1999). Views from inside and outside: Integrating emic and etic insights about culture and justice judgment.

Academy of Management Review, 24, 781–796.

Neter, J., Wasserman, W., & Kutner, M. H. (1985). Applied linear statistical models, 2nd edn, Homewood, IL: Homewood.

Oxley, J. E. (1997). ‘Appropriability hazards and governance in strategic alliances: A transaction cost approach’, Journal of Law, Economics and

Organization, 13(2), pp. 387–409.

National trust and the uncertainty of the institutional environment: implication for the choice of governance structures

MASTER THESIS