Management of Cross-Cultural Cooperative Ventures: On the Relationship between Trust, Control, Problem-Solving Strategies and Success

The operating characteristics and performance of international cooperative ventures have been examined frequently in the international business literature on ownership strategies. An international cooperative venture could be a joint venture, an industrial collaboration agreement, licensing, franchising, subcontracting, a management contract or a counter trade agreement. Compared to a 100% equity ownership of a foreign affiliate, international cooperative ventures offer substantial economic and political advantages for internationalization strategies, especially for small and medium sized enterprises (SMEs): there is less risk; and some investment requirements can be eliminated through the use of the partners' existing infrastructure, for example local marketing and distribution resources. Sales volumes are also likely to be realized more quickly. Overall, international cooperative ventures appear to offer greater revenues, lower costs, and less financial risks than other foreign market entry options for SMEs.

However, as well as having advantages, international cooperative ventures are also one of the most sophisticated ownership options in international business: given that the goals of both partner companies in an international cooperative venture do not conflict, the performance for SMEs depends mainly upon qualitative variables such as the personalities of the entrepreneurs, administrative styles and management philosophies. International cooperative ventures are often complex organizational structures and difficult to manage effectively. So far as the general concept of cooperation is concerned in this context, the international dimension is much less important than the intercultural dimension. In a conventional transaction costs analysis, the focus is on the legal enforcement of contracts, and so the role of the nation state is clearly paramount, in respect to both its legislation and its judicial procedures. However, the mechanism of a functioning cooperation is trust rather than control, and legal sanctions and trust depend much more on the unifying influence of the social behaviour or the social group than on coercive legal power.

The fundamental necessity for trust in intercultural cooperative ventures is mostly associated with an improvement in decision-making concerning strategic priorities, goals and management systems. Cultural attitudes are certainly likely to dominate in respect of the disposition to cooperate with other firms. We might assume that cooperative ventures involving firms with different cultural backgrounds have a higher potential for conflict, require different strategies for conflict solving and control due to intercultural differences and potential misunderstandings between business partners. The evolution of trust and mutual understanding becomes even more difficult in cooperative ventures with companies from countries such as China, Mexico and Japan, where people are comparatively hesitant to trust anyone outside.

In summary we propose to analyse the phenomena of trust, control and conflict solving behaviour in relation to business success, by focussing on the following questions:

• What aspects of behaviour, which are reciprocally recognized by both German SMEs and their foreign cooperating partners, promote trust?
• How do German SMEs and their foreign cooperating partners try to create and develop trust?
• What measures of governance and control do the cooperating companies use?
• What kind of conflict solving behaviour do the cooperating partners use?
• Which effects of trustful cooperation have been noticed?