Chapter 13
Trust and the Cross-Cultural Experience

Trust, Norms and Expectations

This chapter explores in detail how the trust data and determinants identified in this research compare and contrast with other models of trust development.

McAllister's description introducing this chapter of the role of trust may be considered especially significant in cross-border collaborations, but the difficulty with establishing trust in a cross-border alliance is that: 'Trust is so closely related to basic norms of behavior and social customs that most actors take it for granted until it is violated' (Lewis and Weigert, 1995: 54). Or rather, in Lane and Bachmann's terms, expectations are violated: 'trust is produced among social actors when they hold shared beliefs and hence build up mutual expectations' (Lane and Bachmann, 1996, cited in Humphrey, 1998: 218).

This research, in seeking to identify the determinants of trust (Butler, 1991) in east-west relationships in Russia, has taken seriously Powell's question: 'If social norms are part of the reason for the presence of trust, how can it be manufactured?' (1996: 52). The research has clearly shown that the backgrounds of each side in an east-west relationship are very different, with a series of different norms, and resultant expectations. In the workplace, these differences may comprise, for example: 'the language barrier, mentality differences, the differences in upbringing, education' (Russian deputy general director), while for the western interviewees from an accounting firm, background differences in approaches to working for the firm between east and west meant Russians were perceived as only doing their work 'half-assed', interpreting any criticism from westerners to be 'nitpicking'. As another western interviewee put it: 'we start talking about work ethics, be here at 9, don't leave until 5.30, and work while you're here by the way, and by the way have you ever heard of goals and objectives, and we run a merit programme, and...! So things that we just grew up with, and kind of have an expectation around' (expatriate general director).

These comments all reflect the differences that arise in the workplace out of differing backgrounds and experiences, and their resulting expectations. In this context, the development of trust, so closely attached to the context of social norms and obligations, will be under threat, at least in the initial stages of a cross-border alliance.

Child describes this state of affairs as a challenge: 'The establishment and maintenance of trust within relationships between the partners and their staffs in international strategic alliances present a special challenge because these cross the boundaries of the cultural and institutional systems which importantly support trust through the sharing of a common social identity, norms of conduct and institutional safeguards such as the law. The fact that international strategic alliance partners as a result follow different assumptions of "what can be taken for granted" places particular difficulties in the way of creating trust-based relationships between them, over and above the tensions which might be expected to arise within strategic alliances in general' (1998: 242).

The working definition of trust employed here describes trust as the theories and perceptions of individuals or groups of individuals interacting within a relationship, as to how the individuals in the relationship will perform on some present or future occasion, based on the current and previous claims, either implicit or explicit of the parties to the relationship. Such trust is dynamic and evolving, and embedded both in the history of the relationship, and the social norms and cultures of each side in the relationship. The concept of risk, which is commonly a central factor in trust definitions, occurs implicitly in this characterisation, that takes as its starting point individuals' (uncertain) theories about the actions of others in a cross-border collaboration carried out in conditions of low knowledge.

The Social Constitution of Trust

This researcher sought implicit and explicit signals to detect those actions and symbols that create or inhibit trusting expectations. How these implicit and explicit signals are interpreted is a function of the cultural backgrounds of each side, and the behaviours and perceptions these give rise to. This causes problems - in a situation of cultural difference, signals can be subject to varying interpretations:¹ 'Trust is therefore an intersubjective social 'reality' that cannot exist, regardless of the good intentions of partners, unless the symbols used to signal trustworthiness have meaning for all partners' (Hardy, Phillips and Lawrence, 1998: 64). Or, perhaps more accurately in this context, have the same meaning for all partners.

Hardy et al are in fact describing the common argument in the trust literature that views trust as socially constituted. They go on to describe how in the case of trust 'a myth is created which facilitates the sharing of information, subtle reading of signals, and informal interactions that signal trustworthiness' (1998: 70). But, they posit, one problem of this is that 'the creation of a common myth is difficult when symbolic meanings are not consistent between individuals with different values and backgrounds, or when intended symbols have no meaning at all. The task of finding the appropriate presentational signals of trust may not be easy, particularly when a relationship is new and involves disparate groups' (ibid). This is crucial. The experiences of westerners and their Russian counterparts setting up business in Russia during the 1990s provided ample evidence of the subtle yet significant impact of such signals.

For example, western secondees may have viewed themselves as modern, people-oriented participative managers, devolving responsibility, treating all staff equally, encouraging openness and team working in the everyday work environment etc. While many Russians in this research appreciated such efforts, research elsewhere (see Chapter 12), and the difficulties that western respondents reported in getting staff to take initiative, to say nothing of actual instances of Russians explaining to westerners that they wanted to be told what to do, betray the difficulties, and potential risks of this approach in a country where autocratic management styles have prevailed.

Western managers may have been seen as weak, as unknowledgeable (see criticisms of the UK partners' lack of functional competence in Moose - Chapter 7) or as unsympathetic to the paternal elements of working in Russia when they adopted more participative approaches. The reverse of this situation is that of autocratic Russian managers being viewed with mistrust by their western counterparts, as was particularly apparent in western views of the Russian deputy in the Moose joint venture.

Assumption of a Functioning Institutional Environment

Child sees socially constituted trust as 'necessarily realized, and strengthened, by social interaction, cultural affinity between people and the support of institutional norms and sanction' (Child, 1998: 248). Evidence has been presented here on all three of these determinants: as described above, cultural differences are shown to cause mischief in the east-west exchange, and in Russia the social interaction element emerged as a key component in business relations. However, Child's third condition - supporting institutional norms and sanction - was missing in Russia during the mid-1990s, and this had a significant impact on trust development. As Bachmann has commented: 'Trust-based relationships are highly dependent on the nature of the institutional environment in which they are embedded' (1998: 299).

Studying the operation of business activities in Russia during its key development stages in the 1990s has offered researchers a laboratory in which to examine the impact of an emerging, fractious and in many ways absent formal institutional environment. As has been discussed at length in previous chapters, it is this context that also makes it important not to 'assume away' from the definition of trust certain common elements of traditional trust definitions (for a full discussion of this, see Chapter 1). The informal networks of the post-Soviet environment were shown in this research to have a significant impact at the macro level of the reform process, and constituted a significant contextual feature of the Russian business environment in which the newly-established enterprises of the 1990s were operating. This fact offers a good example of why exogenous factors and events are viewed here as having an important role in the development of the trust relationship. In traditional definitions, these types of external variables are 'assumed away' - the external environment is generally viewed as certain and known to economic actors. The foregoing chapters have shown that such an assumption could not be made in Russia's emerging business environment during the 1990s, and one should not assume their well-known and proper operation. For example, investors were shown as taking in some respects a great leap into the dark, and hoping rather than trusting. As one interviewee put it: 'It's going to be very expensive, a long-term investment, and the trouble is, once you spend that kind of money, you can't go, you're there for ever more!' (expatriate deputy general director).

The Role of Interpersonal Relationships

The fact that the institutional environment is still emerging is complicated in the post-Soviet business environment by the prevalence of the preference to do business with known friends and networks of contacts rather than through arm's-length contracting. Child, commenting on the matter of the status and role of contracts in the context of Chinese-foreign joint ventures, observes that: 'Different expectations on this issue constitute one of the most significant threats to trust between the partners, because from the Western perspective they can readily be interpreted as signs of the other partner's bad faith on the fundamentals of the alliance' (1998: 151).

The experiences of western and Russian business people, while recognising an important role for contracts, also provide abundant evidence that the key signal of trust, of being the right partner to do business with, is the establishment of business relations on the basis of friendship rather than contracts: 'the contract is seen as something which can be moulded round situations... that is why it is extremely important to develop a personal relationship, and one of trust, credibility and friendship with the organisations with whom you have contracts' (expatriate general director). While Child foresees the potential for westerners interpreting failure to adhere to terms of the contract as evidence of 'bad faith', many (although not all) experienced expatriate managers in Russia recognised that this was not a reason to distrust one's Russian partners, rather it was simply evidence of a different approach to doing business.

But the potentially negative consequences of accepting these aspects of the business environment were also evident, as the Russian preference to do business on a more personal basis was a signal that was easily open to misinterpretation by both sides. Russians may have interpreted western insistence on monitoring and contracts as evidence of questionable motives, of lack of trust, and as lack of faith in the Russians' functional competence. The westerners may have interpreted attempts at relationship-based business as evidence of questionable business behaviours and hence motives on the part of their partners. Further, they may have perceived the external environment as bedevilled by informal, interpersonal contracting, rather than formal mechanisms: 'the police... you can pay... off with cash, manifestly it is therefore a corrupt society and you could probably apply that to the tax police, the customs, to the legal profession' (expatriate financial controller).

Such activities may not necessarily feed into reduced trust in partners, but in the Moose joint venture, this informal element of local competence, and the resultant exclusion of the western partners from decision making, led to heavy suspicions of negative motives. Further, Russians, already sensitive to notions of 'victorious capitalists' (Holden et al, 1998), and confronted with western partners who insisted on formal contracts, may have felt subject to ascriptions of low trust, either on a motives or functional competence basis.

The Importance of Trust Guardians

It is the need to sensitively negotiate such sets of expectations that makes the personal qualities of the individuals managing the venture so crucial to its success, as put forward by the findings of this research, and reflecting eg Arino et al (1997) and Holden et al (1998). Child has made similar findings in his research into Chinese-foreign joint ventures: 'in reality there will be only certain individuals relating across the boundaries of cooperating organizations... the trust that can be said to exist between the organizations will to a large extent come down to the quality of mutual trust which exists between those individuals. This recalls that trust is actually an interpersonal phenomenon, upon which the quality of interorganizational relations is founded. The organizational members upon whom interorganizational cooperation depends can perhaps be best labelled "trust guardians".' Reflecting a finding of this research, he continues: 'It follows that if there is a frequent turnover of the personnel allocated by the partners to an alliance, the opportunities for developing trust-based cooperation between them will be diminished. Overseas tours of duty for the personnel of foreign international strategic alliance partners are often limited in duration, especially when the other partner is located in a developing country with "hardship" conditions attached' (1998: 253).

Both Russians and westerners interviewed by this researcher made the same point, stating that it was impossible to build relationships, and understand the people and the environment from a hotel room or at the end of a telephone. Also, Russians who were angry over pay differentials between themselves and westerners were baffled by the notion that foreigners saw an assignment in Russia as a 'hardship' one - as one of Holden et al's respondents commented: 'They want the benefits of the European lifestyle that Moscow and St Petersburg offer, and get paid hardship money as well' (1998: 33). The Moose joint venture may have been an extreme example, but when Mammoth, in the final stages of its involvement with the venture (see Chapter 15), pulled out the majority of their staff and left only four expatriate positions behind, they decided that the hardship on the relevant individuals and their families was too much to keep the posts as full-time expatriate ones.

Child's label of 'trust guardians' highlights the absolutely key role of the individuals seconded to the venture, and he correctly puts this in the context of a long-term commitment rather than a short-term assignment. In fact, he accurately describes the antithesis of the ideal type thus: 'There was insufficient reciprocal partner competence built into the relationship to create a sense of trustworthiness in the foreign general manager's eyes. The situation was exacerbated by his own lack of relevant cultural experience, his inability to speak Chinese, and the ghetto mentality which he consequently developed' (1998: 265).

Certainly, the implications of a 'ghetto mentality' have been discussed in this research through the negative impact on trust of expatriates behaving as just that a group apart, socialising separately, failing to speak the language and so on. In this way, foreigners underline their outgroup membership; indeed, one Russian went so far as to describe east-west integration in her organisation as similar to 'the blacks and the whites in America'. The Moose expatriate deputy's Russian language abilities certainly helped with his own personal relationship building with the Russians following his arrival at the joint venture, whereas the other westerners were frequently to be found around the local town's bars in the evening, and not enjoying good relations with their Russian colleagues.

Low-Trust and High-Trust Options

Child's mention of reciprocal partner competence rings the familiar bell of functional competence ascriptions. In his characterisation of joint ventures in China, 'most Chinese partners suffer severe financial, managerial, and technological disadvantages. This has led many multinationals to reconsider their role and adopt a more hands-on approach to joint venture management' (1998: 261). In such a situation, the Chinese yield power to the foreigners in a 'low trust option' (1998: 263), in which they accept foreign leadership. Child describes as the opposite of this the 'high trust option... to rely on the Chinese partner to cope with significant aspects of the complex environment, be they relations with governmental authorities, access to the market, or management of the workforce' (ibid).

The foregoing chapters in this book indicate that Child is in fact describing two different kinds of, initially exclusive, competences: functional competence (both managerial and technical), generally provided by the western partners at least in the initial stages, with the aim of transferring these to the local partners; and local competence, generally at least in the initial stages, and very often well into the maturation of the alliance, provided by the local partners.

Upon first entering the market, western investors in Russia, in common with Child's characterisation, were generally shown to take a 'hands-on' approach attempting to implement their worldwide policies, using expatriate managers to run the business etc in the partnership's functional competence aspects. At this stage, in matters of functional competence, the westerners tended to be running the business according to a low-trust option. However, the aim was, once skills had been transferred, for this to evolve into a high-trust option - one in which locals ran the business when possessed of both the requisite functional skills sets, and also in a manner that provided the western partners with some degree of assurance over the appropriate protection and running of their investment, both from a functional competence and a local competence perspective. The expatriate deputy of Moose stated this explicitly: '[w]e want enough on-site presence to ensure we've got adequate control and that we're actually managing the business in the way we as shareholders would wish to manage it'. This was reflected elsewhere in comments such as: 'It's the feel for western business we would be after' (expatriate general director).

Therefore, it is possible now to have some reservations over Child's characterisation of the handing over of local dealings to local staff as representing a high-trust option. In the early stages of the business relationship at least, western partners have no knowledge of the local environment, and they may never gain full competence in this regard, just get better and more experienced at it. As a result, in conditions of no choice but to abdicate responsibility for certain elements of their business dealings - ie the local ones - to their Russian partners, in Gambetta's terms, they would hope rather than trust. It is only when the westerners are confident in the managerial and technical abilities of their Russian counterparts to properly run the business - ie they have confidence in their functional competence - and they are satisfied that local competence issues will be managed in a way that they find appropriate from the viewpoint of the organisation's ethics policies and the like, that they hand over the lion's share of, or all business functions to Russian partners, and this approach becomes a high-trust one. As one Russian deputy strongly put it across, western businesses that came in from the outset trying to control the local competence as well as the functional competence aspects quickly came unstuck.

Increased Monitoring and a Downward Spiral of Low Trust

The Moose joint venture showed the damaging consequences of low trust arising out of and feeding into poor interpersonal relationships and insistence on monitoring in a joint venture (see Chapter 5 and Chapter 8). The use of high-monitoring approaches has been discussed in the trust literature. Sako describes some of the difficulties of emphasising the formal over the informal: 'legalistic "remedies" including formalizing contracts and rules, work for a certain dimension of trust only, namely task reliability (Sitkin and Roth 1993) or competence trust' (1998: 99). This is an important distinction - western investors in Russia are shown in the foregoing chapters to be attempting to implement their worldwide modes of operation in order that the end-product is the same - not just in the sense of the actual product itself, but also in the way the staff deliver it, policies and procedures are followed etc - ie the functional competence elements of the operation are closely specified. This occurs not just on the technical side of how something is produced and run, but also in the managerial sense of how one works with colleagues, deals with customers, external agencies and so on. But this is where the difficulties arise. Foreign investors see competence in the narrow sense of how one does one's job - and that includes how one interacts with and within the external environment - the result is that functional and local competence are being confused. Sako has highlighted how high monitoring may be appropriate for task reliability (ie functional competence according the trust determinants presented here), but this does not necessarily extend into local competence, where excessive formalisation may run into difficulties in the post-Soviet environment, and where more interpersonal approaches have a role to play. The local competence element must be both a learning curve, and a point of careful negotiation for 'outsiders'.

Further on this, Sako points out that: 'According to Sitkin and Roth, legal procedures may be used to substitute for interpersonal trust which may not be available in organizations due to the absence of a history of face-to-face contact' (ibid). This was certainly the case for the first western investors in Russia entering a high-risk business environment in which their partners were at least initially an unknown quantity. But, Sitkin and Roth argue that these legalistic remedies cannot cure the distrust that 'stems from the absence of a shared set of values between the parties... legalistic remedies cannot promote value congruence because the formulation of rules and regulations would only exacerbate the problem of distrust, by maintaining the distance between the parties involved, and by increasing the suspicion that rules are imposed in order to reduce the degree of discretion available to each party' (Sako, 1998: 99-100). This is typical of the dilemma being faced at the Moose joint venture, and which is no doubt repeated elsewhere across other strategic alliances.

Sako refers to Fox's 'vicious circle of "low-trust dynamics" (Fox 1973), in which low trust generates less open communication (leading to misunderstandings) and tighter control to eliminate any scope for discretion, which in turn reinforces the low trust attitude's' (1998: 99). This lack of communication is recognised by Reineke as creating a downward spiral of assumptions about each side in the east-west relationship: 'Misunderstandings and rumours arise between and within Eastern and Western companies as a result of communication problems. There is a tendency to elaborate "worst-case scenarios" in which each side assumes the worst of the other' (1996:99).

Certainly within Moose, insistence on Mammoth's monitoring and procedures fed Russian suspicions of arrogant westerners attempting to control 'their' organisation - ie to reduce the discretion available to the Russian side. Indeed, the Mammoth side were warned to find a way 'to change their tactics of control, a way to blend with the Russians and be part of the process' (expatriate interviewee, Moose). The ex-Soviet enterprise director in Chapter 7 who complained of a western tendency to ignore local expertise, and insist on, eg English language abilities in the accounts department, was stating a similar point of view.

What all of this makes clear is that formal monitoring of the inter-partner relationship is appropriate only in certain defined circumstances, and that formal monitoring cannot substitute for informal interaction - or interpersonal competence as described in the foregoing chapters. The interaction of the formal and informal in business relationships is significant. To consider this point in more detail, some models of different types of trust, and trust development, are considered next.

Formal Monitoring or Interpersonal Skills?

In finding that legalistic approaches and monitoring may be inappropriately used by western partners to regulate the transfer of local and functional competence, when in fact interpersonal mechanisms may be more relevant, one is led into a consideration of the role of the 'softer' trust determinants - eg positive motives ascriptions, reduced outgroup perceptions, that have by now been identified as central to building trust in east-west alliances in Russia. As stated above, monitoring may be employed by western partners to regulate the functional and local competence areas of building trust. But in Russia, at least during the 1990s, business was conducted more extensively on an interpersonal basis (see Chapter 6 and Chapter 8) - ie, there was a strong need for positive motives ascriptions, genuine interpersonal competence, and a reduction in outgroup perceptions if optimal business success was to be assured.

Regulating local competence on an arm's-length basis may be straightforward in an established western market system, where certain rules and procedures are well-known and generally respected. However, in Russia, particularly the emerging business environment of the 1990s, the regulatory and bureaucratic aspects of business life may be conducted less on an arm's-length and more on a relationship-driven basis - formal processes may not be operable here. In addition, in situations when business affairs are actually conducted on an arm's-length basis, in an emerging legal environment, recourse to meso- and macro-level institutional guarantors cannot be assumed or assured.

Child recognises the weakness of traditional discussions of trust that assume a functioning institutional environment, commenting on Lewicki and Bunker's (1996) model that it may need modification as it does not allow for 'the possibility that, in the absence of effective external institutional guarantees, it may be necessary to develop a degree of cognitive trust alongside that based on calculations about the deterrents and motivations which the other party perceives to apply to the relationship. Otherwise an adequate foundation for the calculation will not exist' (1998: 248).

Child's discussion is employing some common stalwarts of the 'terminology of trust' - before continuing with this analysis, it is necessary to look in more detail at some of the trust models, and their derived terminology and concepts that are most appropriate for understanding trust and its development in east-west enterprises in Russia.

Sociological and Psycho-Sociological Models of Trust

Lewis and Weigert set forth a model of trust in social systems - trust is divided into: 1. emotional trust, where trusting behaviour results from 'strong positive affect² for the object of trust'; and 2. cognitive trust, in which there are 'good rational reasons for vesting trust in another (1985: 972). This distinction between rational and emotional bases for trust is reflected across a wide variety of trust models.

McAllister (1995) developed Lewis and Weigert's model, looking closely at informal relations 'with the understanding that they are central to the real work of organizations. Findings establish the affective foundations upon which trust between managers is built as an essential counterpart to other foundations for interpersonal trust and highlight affect-based trust's role in facilitating effective coordinated action in organizations' (1995: 40). McAllister's model identifies two principal forms of interpersonal trust: 'cognition-based trust, grounded in individual beliefs about peer reliability and dependability, and affect-based trust, grounded in reciprocated interpersonal care and concern' (1995: 25).

Cognition-based trust is preceded by:

• (a) the success of past interaction - individuals in the dyad seek evidence of how the other has carried out their role-related duties, that they follow through on commitments, and that their behaviour is consistent with norms of reciprocity and fairness;
• (b) the extent of social similarity - ethnic background, age and gender may be significant in such evaluations: 'Individuals are more likely to perceive outgroup members as dishonest, untrustworthy, and uncooperative than they are to so perceive in-group members (Brewer, 1979)' (McAllister, 1995:26);
• (c) organisational context considerations - this is an element that concerns formal role specifications that set out the boundaries for trust and professional credentials.

Affect-based trust, McAllister states, arises out of 'insights into the motives of relationship partners' (1995: 26). These motives may be exhibited through:

• (a) behaviour recognized as personally chosen rather than role-prescribed;
• (b) serving to meet legitimate needs
• (c) demonstrating interpersonal care and concern rather than enlightened self-interest.

Broad models such as McAllister's that make a division between cognition and affective bases for trust run parallel with other more detailed models of trust that make a threefold distinction between calculative, cognitive and normative trust bases (Child, 1998: 244). For example, Zucker (1986) identifies: 1. Process-based trust, 'where trust is tied to past or expected exchange such as in reputation or gift exchange' (1986: 53); 2. Characteristic-based trust, 'where trust is tied to person, depending on characteristics such as family background or ethnicity' (1986: 53), and the resultant norms of obligation and cooperation; and 3. Institution-based trust 'where trust is tied to formal societal structures, depending on individual or firm-specific attributes (eg certification as an accountant) or on intermediary mechanisms (eg use of escrow accounts)' (1986: 53).

In institution-based trust, Zucker is recognising explicitly the importance of the institutional environment, rather than, as in the case of McAllister, subsuming it within cognition-based trust - in fact, all three of Zucker's elements appear to be subsumed under McAllister's single category of cognition-based trust. While this may be a drawback of McAllister's model, he at least provides for more emotional bases of trust in his affect-based category. Such emotional bases of trust are implicit in Zucker's characteristic-based trust.

Commentary on these 'Static' Trust Models

McAllister's model, notwithstanding its failure to explicitly discuss the role of the institutional environment in which trust-based activities take place, can offer useful insight into the relational aspects of east-west enterprises in Russia because of its explicit description of affective [emotional] bases for business relationships. Looking at these bases in detail, it is possible to make certain comments about east-west relationships in Russia.

McAllister's affect-based model details the signals that individuals will use to interpret partners' motives. First, he describes how positive motives will be ascribed through evidence of personally chosen, rather than role-prescribed, behaviour. For example, the Russian who enthuses of his western counterpart: 'We love him... He's more Russian than English, he's international... while working in Russia, he's drank so much vodka - he's really Russian now!', is typifying this tendency.

In Russia, personally chosen behaviour of the genuinely interpersonal variety will be positively evaluated - ie those western managers who are friendly, approachable and open with their Russian counterparts and staff are more likely to succeed, and their motives are more likely to be more positively perceived. Insistence on formalisation, on monitoring, on arm's-length contact and contracts will probably have the reverse effect. The key point is that positive behaviour must be personally chosen, it must not be a means to a business end - ie it must not be role-prescribed.

Conversely, westerners, perceiving personally-chosen behaviour in the workplace and in business dealings generally that does not accord with their more formal, arm's-length expectations of how business is done, may evaluate negatively either partners' or the environment's motives. Indeed, they see personally-chosen behaviour in use when, in their view, formal role specifications should regulate reactions and behaviours (see Chapter 6 and Chapter 8).

The second of McAllister's conditions - that behaviour must be seen as serving to meet legitimate needs - ties in with this final point. Through indulging in the more interpersonal bases for conducting business activities, the Russians are causing western partners to harbour doubts over the motives of their Russian partners, and in the general business environment. This is a fact that was particularly evident in the Moose joint venture through the exclusion of the western partners from local decision making, and western suspicions of hidden agendas operating amongst Russians working within the enterprise.

The other side of this may be that Russians, perceiving behaviours on the part of their western colleagues that lack the personal approach and which insist on the more formal aspects, suspect illegitimate ends, be they proving the victory of the capitalist system - as the Russian deputy director in the case study growled: 'we all here are sick and tired of the constant necessity to prove our technologies, our renown' - or not trusting the westerners to do the job properly, or just not trusting them full stop, as the Russian deputy once again complained: 'a [Mammoth] person is very arrogant and trying to show himself as the big boss or the big expert, and in reality being just a nonentity, being nothing in terms of professionalism or whatever'.

McAllister's final condition reflects many of the westerners' experiences in Russia - ie that the need to demonstrate interpersonal care and concern is a key factor. This may take the form of 'gift giving' (Sako, 1998: 101) - perhaps, as in the case of one set of joint venture partners, setting up introductions with business associates and offering advice on other business ventures: 'we've brought people over from their companies, we've helped set up meetings for them... various brokering that we've done on their behalf, supplying information etc' (expatriate deputy general director); or, as in another, providing extra equipment and technical knowledge over and above what is required: 'You might have to buy someone a piece of equipment for their office to help them do their business... it's just being customer oriented... to help them run their business better... Providing training for people, distributors say for example' (expatriate deputy general director).

At the personal level, socialising together is the nub of making this work, perhaps inviting partners to one's home, visiting the sauna together. And beyond this, to take an interest in each other's problems, celebrate birthdays together and so on. The apparently more successful western interviewees generally seemed to report their indulgence in these kinds of activities, and talk, for example, of the moment 'when I knew I'd been accepted, they were actually going to come to my room for a late night drinking session, and that was great'. In Moose, the UK partners of the joint venture were seen as not indulging in such activities to their detriment, in comparison to the original but now defunct north American partners who would celebrate holidays with the locals, spend leisure time together, even take things through customs and bring back 'shopping lists' of needed items for friends or for the venture.

As is the case with the other two of McAllister's three conditions for affect-based trust, western partners may view with suspicion Russian partners seeking to do business in this way. This often came out in the form of complaints about conduct in meetings or about the 'god king' paternalistic management style that westerners observed as the behaviour of Russian counterparts. Of course, in such a situation, the issue of redundancies, or of not keeping staff who do not pull their weight would become a difficult issue. Finally, in relations with external agencies or awarding contracts to suppliers, loose reciprocity over time that indebts one party to doing favours for another at a future point (Sako, 1998: 101) also causes suspicions; consider, for example, the Mammoth complaints of hidden agendas, of senior Russians' wives working for suppliers and so on, in Chapter 9.

The end-result is that western managers, entering a new business environment, and subject to their own western-based expectations as to the proper -ie more calculative - operation of business affairs, may be reluctant to engage in the more emotional types of business behaviours that are required for trust to develop between them and their Russian colleagues. The Russian partners, on the other hand, while also seeking some form of calculative basis for their business dealings with unknown western partners, are more inclined to do business on affective bases, and this may reduce their trust in the western partners when they fail to embrace the emotional aspects of business life.

Trust as a Dynamic Concept

The above description of trust development in east-west joint ventures lends evidence to the fact that trust is a dynamic concept, as suggested by the iterative models of trust development: 'the distinction between calculative, cognitive, and normative trust opens a window on the way that the evolution of trust is integral to this dynamic process of evolving cooperation' (Child, 1998:247).

To turn to Lewicki and Bunker's (1996) model, they argue that trust is not static, but dynamic and ever-changing - a sequential iteration occurs 'in which the achievement of trust at one level enables the development of trust at the next level' (1996: 119). Partners move step-like through:

• (a) calculus/deterrence-based trust - grounded in external institutionally-based safeguards such as contracts, the courts etc, that prevent undesired actions;
• (b) knowledge-based trust - that relies on information rather than deterrence, and develops over time;
• (c) identification-based - this comprises full identification with the other's aims and wants.

In Lewicki and Bunker's model it is possible to see reflected Zucker s institution-based (calculus-based), process-based (knowledge-based) and characteristic-based (identification-based) trust. This model, in common with Zucker's, separates out calculus-based trust, recognising it as reliant on a functioning institutional environment, while McAllister's model simply combines the calculus elements with other more informal ones such as social similarity and past interaction. Ring (1996) focuses on the institutional underpinnings of McAllister's model - he equates his own model of fragile trust (dealing in guarded ways) with McAllister's cognition-based trust, and resilient trust (belief in the goodwill of others) with McAllister's affect-based trust. Where resilient trust is in place, partnerships 'survive the occasional fall from grace of A in the eyes of economic actor B' (Ring, 1996: 156). Lewis and Weigert recognised the same: 'the stronger the emotional content relative to the cognitive content, the less likely contrary behaviour evidence will weaken the relationship' (1985: 972). Thus, Ring goes on to posit that in alliances that cross national borders, fragile trust will be relied upon, because resilient trust will tend to occur in situations where eg kinship ties prevail.

Discussion of Iterative Trust Models

'The distinction between cognition and affect in trust-based cooperative relationships suggests that these are likely to form on the basis of essentially cognitive considerations, including calculation, but that as the relationship matures it may increasingly incorporate affect through the development of friendship ties' (Child, 1998: 246).

In Lewicki and Bunker's model, relationship building starts with calculus-based trust activities - monitoring and guarantors are the name of the game - this is akin to fragile trust (Ring and Van de Ven, 1992; Ring, 1996). If the decision to trust is not breached, or is not breached significantly (deterrence is not required frequently), this allows a knowledge base to develop. The key to this process is regular communication, through which relationships can be built, and the other's wants, preferences and priorities can be tested; as a result, partners may move into knowledge-based trust. As knowledge increases further, the parties may come to identify with the other's wants, preferences and priorities so much so that they see them as their own. This may be exhibited through group membership, no surveillance of the other's activities, a collective identity, co-location in the same building, joint products and goals, and committing to commonly shared values.

In Russia, the Russian and western partners will want calculative bases for their business activities at the outset, because they are unknown to each other. However, as has been discussed extensively, in Chapter 8 in particular, once the contract has been signed (and also in the process leading up to it), it is the quality of the personal relationships that will guide the development and the operation of the business alliance. Indeed, one may speculate that disappointment over western partners' early refusal to interact interpersonally with their Russian counterparts may threaten ever getting to the contract stage; conversely, Russian insistence on informal aspects to an inappropriate extent in westerners' eyes may be an element in a decision to withdraw.

Once the contract has been signed, western and Russian partners' views as to how the relationship will proceed may well diverge. The westerners may well foresee continued reliance on the terms of the contract, on instituting further monitoring and procedures, on arm's-length arrangements with both partners and outside agencies etc. Yet the Russian partners, having exhibited their own good faith and perceived it in their western partners through committing to a contract, may then expect interpersonal relations to guild the future development of the business.

In some ways, a very intensive process of knowledge-based trust development may be embarked upon at this stage, or in fact have been ongoing since the initial stages of the relationship running parallel to contract development activities. Such knowledge-based information, if found to be in the affirmative, goes to reduce outgroup perceptions, increase the prevalence of the interpersonal in business relations, and therefore create positive motives ascriptions between partners, so that a more affective basis for business relations can be established. As one long-experienced expatriate observes: 'You feel all this energy to get out and do business with British friends, and they want to pick up the phone and talk to everyone in the company and find information, and sometimes it doesn't come back and they get really angry... Russians like to talk to everyone in a big family' (expatriate general director).

The westerners may find such behaviour surprising - as authors such as Ring have stated, calculative, fragile bases of trust are sufficient for cross-border business activities, and indeed are more likely, given the absence of closer ties that constitute resilient, or characteristic-based trust. The western partners, their investment protected through comprehensive contracting and the implementation of their worldwide procedures in place, with training policies set up to ensure that when Russians have acquired the requisite functional competence they can run the business according to the company's standard policies, may well be happy to maintain business activities on this basis. However, the Russian business environment, at least in the local competence aspects, but in business life more generally, seems to be requiring western partners to intensively exchange knowledge - akin to Zucker's process-based trust - in order to move onto more affective bases of trust and business relationships, in which characteristic-based differences (ie outgroup) are reduced.

Finally, Lewicki and Bunker foresee movement onto identification-based trust as a possibility once knowledge-based trust is in place. However, identification-based trust, in this author's opinion, does not adequately describe what is really happening, at least in the east-west relationships explored in this research. Formally, three of Lewicki and Bunker's four identification-based trust signals are often apparent within an east-west enterprise - co-location, joint products, a common logo. However, the fourth element - commitment to commonly shared values, cannot be substantiated in many instances. In substance, the first three determinants of identification-based trust may well represent the imposition of the western organisation's visible signage, plus perhaps management and techniques, rather than indicating a set of shared values that have been mutually negotiated, agreed and endorsed in the joint venture. The Moose joint venture appeared to be a case in point.

The experiences of western and Russian staff in east-west strategic alliances suggest that getting commitment to values that are truly commonly shared is achieved with great difficulty, and may not be a realistic goal. While many of the western management techniques are applauded by Russians, there is strong evidence of a 'them and us' situation. For example, the Russian interviewee who described east-west integration as akin to 'the blacks and the whites in America', or the Russian interviewee at Moose who described how 'the department is mine' when his western counterpart is away, are just two examples of this. This may suggest that from the Russian perspective, the western side of the organisation is seen as imposing its own ways of doing business, especially when expatriates are seen, or behave as, a race apart. Or, from the western perspective, perhaps the local Russians are seen as attempting to continue to work in and insist on traditional 'Soviet' ways.

Therefore, a business that has its signage outside, and its typical office furniture and policy statements inside may be simply 'wearing the clothes', rather than sharing a common approach between partners. Indeed, one accounting firm deliberately avoided the joint venture form: 'So we said philosophically we don't do that... this will be a Russian business, but we're not going to take on what is effectively either emerging or an old Soviet business and try to adapt that, because we will just get too much of a culture clash, we will never be able to deliver a service culture' (expatriate director).

One indicator of commitment to common values, in Lewicki and Bunker's terms, is minimal or no surveillance of the other side's activities. The difficulties that many western businesses were reporting with having the confidence to hand over to local staff suggests this may be a long time coming: '[I]n the businesses that you would have talked to, they would have said, "well we thought we'd put in an expat general manager for three years or five years", and it's always taken much longer than they thought' (expatriate director). In the Moose joint venture, it was only economic necessity following the crash in 1998 that led the UK partners to transfer functions to the Russians, and even then surveillance continued across the four posts of deputy general director, the finance director, technical development coordinator, and field superintendent. Further, the total exclusion of the western side of Moose from local decision making, far from being an example of a high-trust, minimal surveillance option suggesting identification-based trust, was actually fraught with low-trust suspicion over motives and 'them and us' attitudes.

Putting the Findings about the Trust Determinants into Effect

This chapter has highlighted the operation of the trust determinants. Trust was shown as being inhibited when outgroup and monitoring perceptions are high, and trust was enhanced when interpersonal, local and functional competence skills are perceived as high, and motives ascriptions are positive. So, for example, the Russian partners in Moose considered the Mammoth partners to have low functional skills, low interpersonal competence skills, no local competence skills, insisted on too much monitoring, and through their tendency to socialise only with each other underlined outgroup membership. As a result the Russians believed the UK partners could not do the job properly, they were also not to be trusted because they were a separate 'tribe' almost, who wanted nothing to do with them socially and who were patronising professionally.

What was also particularly apparent was that perceptions of each of the determinants often had knock-on effects for other determinants. Although it is not necessarily advisable to rank these determinants in order of importance, some seem more fundamental to the effective functioning of the business relationship than others. In particular, interpersonal competence skills and motives seem to be two key elements. If motives are ascribed to be good, then, for example, low functional competence skills are more likely to be overlooked. Conversely, positive motives ascriptions can only be made on the basis of effective communication - this relies on interpersonal competence skills to be put into effect. Indeed, it is only through the act of interpersonal communication that partners can reach conclusions about each other. Of course, if, through the process of interpersonal communication, motives are perceived to be bad, then a negative effect will result.

It is possible to observe a possible continuum for managing the business relationship that ranges from monitoring at one end, to interpersonal skills at the other. This would be represented thus:

It can be observed that managing business activities towards the interpersonal skills end of the continuum represents a higher trust option, while managing business activities towards the monitoring end of the continuum represents a lower trust option. Russian partners in an east-west alliance appear to prefer to conduct their business relationships with partners towards the interpersonal, high-trust end of the continuum, while western partners exhibit a preference to conduct relationships towards the monitoring, low-trust end. Westerners operating in Russia may well need to negotiate and make compromises with their partners and move towards the interpersonal end of the continuum, while the Russians need to make efforts in the direction of increased monitoring to meet their western partners' expectations.

Western partners who insist on remaining at the high monitoring end of the continuum may risk less effectiveness in the transfer of both functional competence skills and its organisational culture and philosophy (which would install, for example, employees' customer focus, ethical dealings etc). This is because, by insisting on formal monitoring, and by appearing to 'impose' its own way of doing business, the western partner damages inter-partner trust, and thereby risks failure by the Russians to 'buy in' fully to the western partner's approach. This was shown in the Moose joint venture to cause great rifts in the interpersonal relationships between partners in the enterprise, and to cause different approaches to work to be addressed in a less than cooperative way - as one Russian interviewee said of his western counterpart: 'when he's not here, the whole department is mine, and I try to implement as many ideas of mine in his absence.'

Further, where monitoring is high, and trust is low, motives are more likely to be negatively perceived, outgroup perceptions may be increased, and local competence skills - often reliant on the informal as much or more than the informal - may not be effectively transferred. Once again, Moose showed the difficulties that ensue when the western side is excluded from local decision-making.

The potentially negative outcomes for the western partner in a business relationship in Russia taking a high monitoring approach are summarised in Table 13.1.

Table 13.1 Outcomes of High Monitoring Option in Managing the East-West Business Relationship

At the other end of the scale is the reduced monitoring, higher trust option, in which westerners' interpersonal skills rather than their application of contracts and procedures, establish business relationships. As a result, outgroup perceptions are reduced, and motives ascriptions are higher. In such a situation, greater local competence skills are likely to be acquired by the westerners, and functional competence may be transferred on a more 'holistic' basis, as Russian partners are part of a consensual, negotiated process, not a system imposed from elsewhere. Table 13.2 summarises the outcomes of a reduced monitoring option.

Table 13.2 Outcomes of Reduced Monitoring Option in Managing the East-West Business Relationship

The key point is that higher trust between partners and optimal business results are more likely to be assured if less emphasis is placed on monitoring, and expatriate managers instead are possessed of good interpersonal skills, and the authority (from the western partner organisation) to make judgements about the requirements of the local situation. This is not a win-lose situation in the sense that it is only the western partners that benefit from better transfer of skills and organisational philosophy to the Russian partners, while the Russians are 'duped' into compliance by a western partner who is only nice to people because the job (from the western perspective) gets done better that way.

The Russian partners entering into a strategic alliance seek not only the financial contribution of the western partner and skills transfer, but good interpersonal relations with partners they can trust. The reduced monitoring option should permit skills to be transferred more completely, therefore permitting increased business success, while permitting the type of business relationships Russians prefer. Western partners employing interpersonal skills should be doing so for the intrinsic value they receive from such interpersonal relations - attempts to conduct operations on this basis towards nothing more than a cynical business end will be quickly picked up by Russians who value friendship in business. So genuine efforts in this regard should make for a better experience of the business partnership all round.

A Warning

Table 13.2 described the outcomes of 'reduced' monitoring rather than 'low' monitoring. While it is prudent not to exercise high levels of monitoring in east-west business relationships in Russia, this is not to claim that no monitoring should take place at all. Monitoring should be reduced, and the interpersonal stressed, through a process of negotiation and compromise that represents a win-win situation for both partners. There is a risk that too much movement towards the interpersonal end of the continuum could cause considerable implementation difficulties for the western partners.

Shekshma (1996) in particular sets out the worst results of too much compromise by western partners in this regard: 'What I saw were different degrees of 'westernisation' (positive outcome) and 'sovietization' (negative outcome) of joint ventures, when one side has outweighed another and the whole venture has adopted its organizational culture, values, style, ethics.

'Unfortunately, "sovietization" is not a rare outcome at all. Often Western expatriates as conductors of new organizational culture are sucked up by the old culture imposed by Russian employees. Such ventures look very strange - a western name on a fa?ade and an atmosphere of a typical Soviet organization inside - strong rein of the boss (Russian or Westerner, doesn't matter), 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. No matter how comfortable both expatriates and Russians may feel themselves in those organizations, their fun has time limits - Soviet-style managed companies are doomed to fail - history proved it once on a national scale, it will do it again at the micro level.

'It is sad to see how the efforts of Western managers expatriated to Russia to introduce new organizational culture and build new organizations vanish into the ocean of resistance. But at least they try hard and sincerely. What, however, can also be seen is some kind of indifference on the part of expatriates who do not try to change anything. They perform their functions (those of marketing, finance, and operations managers), but they do not build an organization, they do not coach Russian employees, do not introduce them into a new corporate culture. Worse, some of them prefer not to deal with local people at all. As one American manager quite openly expressed it: "I'm here to do my job, not to teach others to do theirs. I'm not getting paid for that." It's not a secret that not many experienced managers want to relocate to Russia, companies have to send younger people who often don't understand their role of introducing a new business culture and management style, and who then regard that assignment just as a next step in their own careers' (1996: 247).

Shekshnia in the above account crucially distinguishes between different expatriates who may be seconded to Russia. As the foregoing chapters have strongly suggested, his second categorisation - those who are just there to get on with the job and preferably not deal with locals - may well put organisational aims at risk, or at least make them more difficult and expensive to achieve, through the threat to skills transfer and development of local competence skills that they pose. As has already been stated, the expatriates seconded to Russia are crucial to an operation's success: 'there are definitely two types - there are the types who are here for the money, who basically hate it, and there are types who are here as an adventure and really, really love it... The ones who do well are the ones who take the latter attitude, the flexible adventure, enjoying it type of attitude. Everything spills out from yourself. If the Russian staff see you enjoying it... then you get on a lot better than someone who is permanently putting themselves on a pedestal in a sense and isolating themselves completely from the environment, which a lot of people do. That's good for them, that fits in with the way they want to live, but I don't think that's the best way, and we would certainly never employ anybody here that fell into that category' (expatriate deputy general director).

Clearly, investing in expatriate staff who have the right mix of interpersonal skills, drive and business judgement to develop the appropriate level of trusting relationships is one of the key challenges for western business setting up operations in Russia.

¹ By the researcher, as well as the researched.

² In discussions of interpersonal trust, the terms 'affect' and 'affective' refer to emotions.