Chapter 14
Conclusions on Trust, Culture and Russia

Introduction

This body of research aimed to identify those factors that enhance or decrease interpersonal/interorganisational trust between Russian and western partners to an east-west strategic alliance in Russia. 'Interpersonal' and 'interorganisational' trust are co-joined, as the view is taken that the interorganisational relationship is effected through the interpersonal (Child, 1998). The literatures on trust and on east-west business relationships strongly suggest that mutual trust between east-west partners is a key ingredient of success in Russian-western alliances in Russia. But what is trust and how is it created and destroyed? To answer this question, the researcher identified six determinants that it is posited will increase or decrease inter-partner trust in east-west business relationships.

Recognition of the Importance of Trust and Difficulties with its Investigation

Researchers on east-west business partnerships in Russia generally propose that the optimum kind of trust is affective, emotionally-based trust, which is much stronger and durable than cognitive or institutionally-based trust. In fact, Russia is not the only place where this is being promoted - business success and competitive advantage are now seen as potential benefits to be derived from trusting one's business partners and customers. The modern business trend of globalisation would seem to require that business relationships that cross organisational and cultural boundaries rely to a greater extent on bureaucratic and institutional trust arrangements rather than interpersonal, affective ones. Relying on trust in this context would appear to be less, rather than more, likely: 'Uncertainty and risk are greatly enhanced in business relations across national borders where common background assumptions cannot be taken for granted' (Lane, 1998: 2). However, writers on trust have observed that: 'Strategic alliances depend for their very existence on the establishment of effective cooperation between the partners', and further that: '[cooperation within [international strategic alliances] involves mutual reliance and requires trust to succeed' (Child, 1998: 242). These two approaches seem mutually exclusive.

Despite increasing recognition of the role of trust in modern business relations, much theorising but little empirical investigating has generally been going on. A gamut of academic disciplines has taken an interest in the issue of building trust, but something of an arm's-length approach seems to be preferred, with academics tending to stay put in their ivory towers of theory, rather than risk getting their hands and reputations muddy by trying to investigate what is really happening. The result is that, when trust is discussed, and theories are proposed, what this researcher terms 'semantic stickiness' - ie an overwhelming concern with defending definitions, specifying relationships, and developing units and levels of analysis - has prevailed. But managers in organisations have less of an interest in academic debate, and more of an interest in everyday practicalities: 'Many managers have a greater need to know what causes trust than to understand the construct itself (Butler, 1991: 649).

The Aims of this Research

This research adopts the focus of investigating factors that build or reduce trust in expatriate-local relationships in east-west enterprises in Russia. Serious attention has been paid to Flores and Solomon's (1998) comments that small infidelities and infelicities, routine frustrations, broken promises and commitments, ie the everyday 'trivia' of workplace relations, cause breakdowns or confirmations of trust: 'In business relationships, suspicion, distrust and dissolution usually follow not the grand betrayal (by which time a hundred smaller infidelities should have been evident) but those small infidelities and infelicities themselves' (Flores and Solomon, 1998: 224). Importance was also placed on Butler's comment that trust is both multidimensional as a construct, and is activated and sustained by a multidimensional set of conditions (1991). The considerable overlap between trust determinants was pertinent evidence of this fact.

Key Findings

The researcher specified as a key aim the development of a practical model, based on empirical data, which could help companies to understand the functioning and development of trust in east-west business relationships in Russia.

In business life, the evidence produced during the course of this research has suggested that the Russians appear to assess partners through a combination of process-/knowledge-based trust activities, with the aim of achieving affective, personal bases for doing business, and in the process reducing perceptions of outgroup, and increasing motives perceptions that may otherwise be negatively evaluated because of characteristic-based differences. These processes are ongoing from the very start of a business relationship - ie they are synchronic rather than sequential. Functional and local competence skills transfer is realised as much through the interpersonal as the formal. Westerners, on the other hand, setting up substantial business activities in a largely unknown environment, prefer calculative or institutional bases for business behaviour, perhaps fearful of the possible breaches in integrity and ethics inherent in reliance on process/characteristic-based trust. Yet to gain local competence and successfully transfer functional competence, affective, emotional bases are suggested as more likely to ensure success.

The key point about the transfer of all skills, and the building of relationships between western and Russian partners is that the Russians will seek partners for whom interpersonal approaches to business relationships represent their own choice of business behaviour, rather than a cynical means to reach a business end. Expatriates who are sent to Russia are the key to success - a point made explicit in Child's trust guardians. According to Child, these trust guardians should:

• be there for the (realistically) long term, in order that they have the opportunity to develop trust-based interpersonal relationships - ie demonstrate motives and interpersonal competence;
• not develop a 'ghetto mentality', as often manifested through overt outgroup behaviours such as only socialising with other expatriates, ignoring cultural factors in communication and behaviour, failing to speak the language - ie they should not underline outgroup membership, but should employ interpersonal competence skills;
• invest in measures that develop trust in local partners' abilities, rather than simply assuming the worst in matters of their skills sets, out of which a downward spiral results - ie do not assume that your own functional competence is automatically superior to that of locals, particularly as this relates to local competence, beware heavy monitoring activities and/or exclusion from decision-making (1998: 253).

As stated in Chapter 13, it is possible to criticise Child's model of low- and high-trust options for its failure to recognise two separate sets of competencies -local and functional (a similar comment could be made of Arino et al who subsumed under partner-related criteria local and functional competence). Western partners will have superior functional competence skills at the outset of an alliance, while the Russians will have greater local competence abilities. Both the Russian and western partners will have as a key aim the transfer of functional competence skills from west to east; the western partners may have as an aim the acquisition of a degree of local competence skills.

The initial arrangement would be characterised as low trust, as westerners implement ways of doing business in their own image, and transfer functional competence to Russian partners and staff. However, in the area of local competence, a high-trust arrangement would appear to be required, as the westerners would find themselves in a situation where, to a large extent, they have to abdicate large parts of the responsibility for this to the Russian partners. To echo Gambetta's comments (1988), this would probably be hope rather than trust. In view of the descriptions given here of the traditional operation of such local competence, this may inevitably lead to west to east suspicions of untrustworthy activities, and trust may already be coming under threat. However, once functional competence has been transferred, both the westerners and the Russians would anticipate the management of the venture evolving into a high-trust option. The westerners in this scenario feel confident that the Russians share their approach and philosophy towards running the business, and the westerners may well have made local competence in-roads themselves, instituting policies that may protect against some of the perceived ethically dubious local practices, or developing enough local skills to work through issues with sufficient knowledge on a hands-off basis.

However, although this may be a high-trust option, it may not represent, in Lewicki and Bunker's (1996) terms, identification-based trust. Although the western partners, in seeking the transfer of the 'feel for the western business', would be intending that the Russian partners come to identify with the aims and philosophy of the western business, this may not be easily achieved. The length of time that many western businesses have taken to hand over key positions to Russian staff may be evidence of this fact.

It is possible to represent the context of trust in east-west strategic alliances in post-Soviet Russia thus:

Figure 14.1 Post-Soviet Reform - the Context of Trust in East-West Alliances

Further, drawing on the continuum in Chapter 12, it is possible to map the operation of two of the trust determinants within the Russian context thus:

Figure 14.2 The Monitoring-Interpersonal Continuum within the Russian Context

The contextual factors of the macro environment included - during the 1990s at least, and ongoing in many respects today (see Chapter 15) - an emerging legal system that was still captive to Soviet-type behaviours, subject to inconsistent and inexperienced application, potentially anti-market or anti-western in its actions, and skewed by lobbying from opaque network activities. This was occurring in conditions of an almost bankrupt economy and, certainly during the 1990s, a lack of 'basic' items in many respects such as reliable distribution networks and access to information. At the micro level, macro level difficulties combined with lack of previous knowledge of partners, limited deterrence options, legacies of Soviet workplace behaviour, eg expectation of hierarchy and responsibility avoidance, wide variations in expectations of what constitutes appropriate professional qualifications and workplace behaviours, and lack of consistency in the interpretation of implicit and explicit signals, all led to trust being threatened.

The continuum assumes 'good' partners in a business relationship: 'if the partner isn't a good one, then you're in trouble' (interviewee quotation in Arino et al, 1997: 21). There is a trade-off to be made in pursuing one or the other strategy to its fullest extent, and in reality, some form of negotiation and compromise should occur between business partners to meet at a mid-point.

For example, insisting on calculative bases may give greater protection to the investment in the western sense, as worldwide procedures and policies may be perceived as more likely to be followed. However, inter-partner trust will probably be greatly reduced, or may not even exist at all: as a result monitoring costs will be much higher as key positions remain expatriate ones, and Russian resentment and lack of buy-in may result. On the other hand, movement towards affective-bases may strengthen trust and the business relationship, thereby increasing the likelihood of Russian buy-in to the western side's philosophy and ways of operating, thereby reducing risk from, for example, dubious local business practices. But, one should also bear in mind Shekshnia's warning of 'Sovietization' in which the venture suffers 'little initiative and little real action, even though a lot of noise and talk, numerous "tea" and "smoking breaks", and birthday parties full of fun' (1996: 247), ie the outcome can be just as negative as is the case with insisting on calculative bases for trust if this policy is not well implemented by enthusiastic, empowered individuals.

The final part of this chapter presents a 'model' for trust development in east-west joint ventures in Russia. Before moving on to the model, the trust determinants identified thus far will be discussed in relation to their operation in the model (the key 'task-related' transfer is taken to be that of functional competence, and also the development of some degree of local competence, while the aim is seen to be that of building durable, trusting relationships):

• functional competence - this is measurable and changeable, it starts as low in Russians, high in westerners, and the aim is to go from low in Russians to high in Russians, thereby evolving the business into Child's high-trust option;
• local competence - this is measurable and changeable, it starts as high among the Russians, very low amongst the westerners, and an aim may be for it to go from low among the westerners to higher. To evolve the business into a high-trust option, the westerners, bound by the codes of their parent organisations' business environments, need confidence that local competence activities are not conducted in ethically-questionable ways;
• monitoring - regulates the development of functional and local competence from low trust to high trust, but its higher or lower implementation vis-à-vis interpersonal competence activities may make the transfer more or less effective. It is the counterpoint to interpersonal competence - the other regulator of functional and local competence development and implementation. It is inappropriate for the positive development of motives and outgroup perceptions. Heavy reliance on monitoring will impede the development of affect-based relationships;
• interpersonal competence - this is the counterpoint to monitoring, as it too regulates the development and implementation of local and functional competence. Its higher or lower use vis-à-vis monitoring activities may make the transfer more or less effective. It is a stable within-party factor that is unlikely to change a great deal - either an expatriate possesses such skills or does not. The higher the interpersonal competence skills of the expatriate, the lower will be outgroup perceptions, the higher will be positive motives ascriptions. The higher the interpersonal competence activities, the higher the likelihood of affect-based relationships developing;
• motives - positive ascriptions of motives will improve business relations, and vice versa;
• outgroup - high perceptions of outgroup will reduce the likelihood and effectiveness of business relations.

Trust Building as a Dynamic Process

Figure 14.3 explicates the development of trust over time in east-west business relationships, showing in particular the significance of knowledge-gathering activities to the building of inter-partner trust. This model is a further development of the suggestion above that intense knowledge-based gathering activities will be active in east-west partnership development. It illustrates the suggestion that while under the 'western' market system, calculative bases such as comprehensive contracting and worldwide procedures are commonly regarded as sufficient for business relationships and may continue as the main element in the business relationship for quite some time or indefinitely, in the post-Soviet environment, when entering a long-term relationship, business partners place less emphasis on calculative bases, instead seeking out interpersonal bases arising out of goodwill exchange and gift giving (Sako, 1998) over time that are inferred from knowledge-(Lewicki and Bunker, 1996) or process-based (Zucker, 1986) trust building activities.

The evidence presented here suggests that process-based and knowledge-based activities may take the form of, eg buying equipment, offering technical help, providing information or introductions etc over and above what is actually required by the formal agreement between partners, and through interpersonal behaviours such as banya visiting, socialising with family and friends, taking a personal interest in partners' welfare, drinking together and so on. This largely entails interpersonal competence activities that enable outgroup perceptions to be reduced and positive motives ascriptions to be made.

Positive motives ascriptions have been shown to be particularly important in relation to local competence activities, where western partners need to perceive positive motives on the part of partners engaging in the more informal aspects of negotiating the Russian business environment: 'It's a different way of doing things ... I wouldn't say that it's right and wrong, but they're more used to getting things done by... it's the sort of thing that we don't always understand, or as westerners we're uncomfortable with that sort of thing - going to buy tickets and you've got a bottle of champagne with you which you pass across' (expatriate deputy general manager).

Further, in matters of knowledge gathering, reciprocal technical abilities are expected by Russian partners from their western counterparts or, as the Moose joint venture shows, low functional competence ascriptions may damage the relationship: 'When I first came to this office, I didn't have the respect of the people at work - from the Russians. The expatriates all knew the type of firm environment that I had grown up through, the type of work I had done, they knew my skill level and skill set, but the Russians did not. They were not familiar with what the US firm is like, so had no trust or faith in my skills or abilities, and I had to earn those, by becoming technically capable in Russian legislation...' (western focus group respondent).

As has been described in detail, calculative bases comprise contracting, implementation of worldwide policies and procedures, adherence to headquarters organisation's bureaucracy etc. For example, Chapter 7 and Chapter 9 showed that the external authorities take a dim view of insistence on set policies and procedures: 'Businesses that say we're going to ignore all this, we want our worldwide accounting system, are the ones that are being fined out of existence' (expatriate director).

The Moose joint venture showed in particular how inappropriate insistence on these measures, as opposed to concentrating one's efforts on interpersonal knowledge-based approaches, engender uncooperative attitudes, increased outgroup perceptions, and negative motives ascriptions: 'The first step must be made by the westerners to control damage - to change their tactics of control, a way to blend with the Russians and be part of the process, the westerners are being pushed out of the decision making process' (permanent expatriate, Moose).

In Moose, the western partner s bureaucratic structure was a key factor in disagreements between the two sides, as they were seen as arrogantly insisting on their own superior approach; this led to close surveillance of other matters by the Russian counterparts of their western partners, such as of functional competence skills that were perceived to be lacking, and interpersonal skills that were perceived to be non-existent. Local competence gathering by the western partner was severely limited in the resulting adversarial context, and a downward spiral in which neither benevolent intentions nor trust between the parties appeared to result: 'there's two teams, the Russian team and the western team, and it's unfortunate because it's a joint venture' (permanent expatriate, Moose). As a result, it is possible to speculate that knowledge-based processual activities, rather than calculative ones, will be active at an early stage and on an ongoing basis when building sustainable business relationships.

This is shown in the model below - at the calculative early stages, breaches in contracts are observed, at the knowledge-based stages, positive ascriptions of motives and outgroup are made through acceptable levels of interpersonal approaches, and movement onto the next basis for the relationship is possible. Over time, knowledge-based activities will start at an earlier stage, and will be ongoing for longer than may be expected if more formal calculative bases for business relationships were the norm. As a result, affective bases for the relationship can develop, and a more satisfactory and holistic transfer of functions can result.

Figure 14.3 A Model of Trust Development for Western Organisations in Russia, and its Potential Impact on Achieving Business Aims

What is actually being presented is an 'ideal' model of trust development in east-west enterprises in Russia - it is a model that takes the perspective of a western organisation setting up operations in Russia. It is named an 'ideal' model in the sense that investors would wish to approach cautiously setting up business operations in a high-risk business environment such as Russia, and would therefore tend more towards the left rather than the right hand side of the model. However, as has been shown, more affective approaches that emphasise and increase interpersonal trust are an important, if not a key element in business success in Russia - as indicated towards the right hand side of the model.

Concluding Remarks

This research has contributed empirical data, and a model of trust development derived from them, to the knowledge and body of literature on east-west partnerships in Russia, and on trust. The researcher applied 'real' trust determinants identified in the course of this research to existing models of trust, and as a result, the 'meat' of reality has been applied to the 'bare bones' of theory.

Through identifying these trust determinants, the researcher has contributed a refinement of the concepts by means of which the development of trust relationships can be explored, interpreted and tested. By sub-dividing a determinant that other authors have simply named 'competence' in various ways, the researcher has made more precise the language of trust discussions. Competence in this research comprises functional, interpersonal and local competence; functional competence is then shown to comprise the discrete elements of technological and managerial competence. Further, within local competence, while dealing with local bureaucracy and relationship building are extensively discussed as core elements, there may be further ones of eg managing the local workforce, knowledge of former Soviet technologies - typical of trust's multidimensional nature, these could also fit into functional competence.

Also contributed is the development into a model using real-life trust determinants, of findings by researchers in the field of east-west business in Russia that interpersonal relationships and trust building are important factors in success in Russia. The central tenet is that managing the business relationship in Russia, from the western perspective, at the interpersonal, rather than calculative end of the continuums proposed in Chapter 12, and above, will yield more durable, optimal results than would be the case were calculative bases for the relationship stressed. This can be expressed thus:

However, this researcher, although assuming 'good' rather than 'dodgy' western and Russian partners, warns against taking reliance on trust and relationship building too far in this unknown, and still high-risk environment.

The proposed model reflects an 'ideal' set of actions from a western perspective, aimed at fulfilling a western business agenda. However, the data presented here strongly suggest that through moving business relations onto affective bases, Russian preferences and expectations will be better fulfilled, representing more of a win-win situation for everyone. As the researcher has constantly stressed, movement towards affective bases for the business relationship must be effectuated by western individuals who embark on such interpersonal relationships for the intrinsic value they gain from them, rather than as a means to some economic end. This finding poses a considerable challenge to western businesses seconding expatriates to manage operations in Russia.

The monitoring-interpersonal skills continuum, and the proposed development of business relationships through the ideal model, represent baselines. They permit testing of the point along them at which western businesses in Russia are choosing to place the management of their Russian operations, and the drawing of conclusions on the characteristics of the key individuals involved, and the business results that are engendered.

The transformation process in Russia during the 1990s permitted researchers a window onto the operation of trust when the institutional environment was emergent, weak, and subject to hijack by partisan interest groups, where the reform process was uneven, arbitrary and always in doubt, where the economy was bankrupt, skills sets were low, and the outlook was bleak, and yet risk and expectations were spectacularly high. This research has taken the opportunity to develop a model of trust in such a melting pot of experiences and expectations.

The next chapter will provide an addendum to the body of research presented here by considering the situation in Russian in 2003, and hypothesising where the findings may contribute to our understanding of the situation prevailing after a decade of reform.