Building Trust Relationship in Cross-culture Collaboration: Cases Studies

on Two Chinese Animation Companies

ABSTRACT

Internationalization and inter-firm collaboration is a trend of business nowadays, as firms begin to grow, gaining specific technology capability and developing products for different markets. In the meanwhile, cultural values and managerial practices vary from country to country, which makes cross-border management more challenging than the traditional in-house business model. A trusting relationship is essential to business success and continuity, yet details of how to build-up and maintain trust are unclear. This paper investigates trust development in cross-border collaboration. Literature review has covered key trust theories and its linkage with culture. To further understand the critical issues in of trust, two in-depth case studies are conducted from the Chinese animation game industry. It is found that in order to achieve long-term business collaboration, companies need to be continuously responsive and adapt their trust models. Based on the case analysis, a general model with trust “separation, integration and compromising” and a practical model is developed for further testing. Other research topics to further link trust with sustainability are also proposed in the end.

Keywords: Trust, Relationship Management, Cross-culture Management

INTRODUCTION

With the popularity of new technology and the trend of globalization, the business world new is witnessing increasingly more international collaboration. Taking the manufacturing sector for example, firms no longer conduct all parts of the production in-house, but rather, collaborating with suppliers and partners, all-together forming supply chains. The trend of expanding from single factory operations management towards inter-firm collaboration happen also in emerging new industries, among which is the creative sectors such as the animation game industry. Traditionally, companies such as Disney vertically integrate almost all parts of operations, including conceptualization, production, distribution, character business. However, currently there more animation products are created either through joint design or outsourcing. The collaboration between Disney and Pixar shows good example, where Disney in charge of promotion and distribution and Pixar mainly responsible for production and technology improvement. With mergers and acquisition, the two companies now can share resources, while keeping each specialty. In China, due to the fact that most animation companies are small, lacking experiences, joint development and participating in collaborative project provide opportunities to grow. With the Chinese government issuing supporting policies for the animation game industry, there are more than 70 industry clusters throughout China now, providing a platform to share resources.

One issue emerging as companies grow from in-house operations towards inter-firm network is trusting relationship. In fact, the sustainability of business is more and more relay on long-term trust. Here it is argued that “the sustainability of firms is not predicted in contracts but rather in underlying trust issues” (Aras and Growther, 2007). Trust is not just a marketing or public relationship issue, but can be regarded as a type of value embedded in organization. It should also be treated as intangible

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asset which help firms to win customer order, reduce risk, achieve technology advancement and develop competitive advantage in a sustainable way. Although trust may have different meanings, it is generally believed that trust is an integral part in supply chain and alliance networks. In fact, it is believed that “virtually every commercial transaction has within itself an element of trust, certainly any transaction conducted over a period of time. It can be plausibly argued that much of the economic backwardness in the world can be explained by the lack of mutual confidence” (Arrow, 1974). On an inter-personal level, trust can be seen as friendliness, kindness, and openness to different ideas. On the inter-firm level, trust can be extended as responsiveness, caring, willingness to share and competence co-development. Effective communication is important to form trust, especially in a cross-culture context. As the world is witnessing large scale of internationalization and globalization, understanding of different culture – as values and norms shared among a group or organization – is essential to business success and sustainability. Sometimes misunderstanding of different values can result in distrust, reputation risk, inefficiency, and thus results in business failure.

Another issue associated with inter-firm trust is culture difference, especially between the East and the West nowadays. With the trend of globalization, many firms are now involved in cross-border collaboration. For one thing, firms can assess to a variety of knowledge and resources, reaching new market. For another, different values and attitudes can result in misunderstanding, and thus make the relationship vulnerable than collaboration domestically. China as the world largest emerging economy is playing more active role in terms of internationalization. However, how to understanding Chinese culture, and thus do business in China remain difficult for many western companies. Similarly, as Chinese firm are seeking opportunists to meet the world, they should also realize and respect other cultures. In order to sustain business partnership, firms need to invest time on understanding each other, and eventually forming long-term trust. Managing global virtual team even requires more cross-border coordination and communication. With trust, firms can not only share resources, but also risk together.

Based on the important role of trust in business sustainability and internationalization, this chapter aims to explore the process and values related to trust issues in the across-border collaboration context. It will focus on China, with investigating into how Chinese animation firms develop trust with partners from other cultures. In particular, the chapter will answer the following three questions: 1) What are the key activities and process of trust leading to business sustainability? 2) What are the value differences in cross-culture collaboration? 3) What are the adaptation mechanisms to facilitate trust in a long-term? The chapter can contribute to the theory of trust and inter-firm relationship management. Moreover, it provides practical models on understanding trusting relationship across cultures, an important decision making area in the international business nowadays.

With introduction, the chapter will then review existing literature related to business sustainability, trust, cross-culture management and Chinese culture value of trust. To identify details of activities and processes, two case studies are conducted from the Chinese animation game industry. Both firms have achieved business sustainability through successfully building trust with foreign parterres, yet they follow different approaches. General issues related to inter-firm trust will be addressed, based on the cases, followed by practical implementation, conclusion and future research areas identification.

LITERATURE REVIEW

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The nature of trust can be examined from several aspects. Many literature and studies have explored dimensions and components of trust, for example in early years, Rempel et al.’s (1985) has discussed the predictability, dependability and faith in relationship. Later on, Sako (1992) has categoriezed three types of trust, namely competence, contractual and goodwill trust. Ganesan (1994) makes further definition of credibility and benevolence trust. To extend the concept, McAlister’s (1995) summarized cognitive and affective elements of trust. Mayer et al.’s (1995) also identified ability, integrity and benevolence trust. Based on the original philosophy of utilitarianism (Bentham, 1789), Aras and Crowther (2007) suggest that the sustainability of a firm relies more on trust, rather than negotiated contract. In the economic context, Schuitema’s (2000) maturity progression model has specified two different levels of trust – utilitarian and humanitarian. From the perspective of utilitarian, trust can be predicted on relation-specific skills; whereas humanitarian emphasizes belief and values of goodwill. Based on the this philosophy, Platts and Tomaevic (2004)’s provide the model of “can-will-does”, combining technical, contractual and goodwill trust, indicating the importance of learning and leadership.

The development of trust has different levels, both micro and macro levels (Lewis and Weigert 1985). Social psychology indicates that trust can be viewed in terms of a subjective state and a behavior (Suh et al., 2006). To explore the building-up stages trust, Lewicki and Bunker (1996) identified calculus-based trust, knowledge-based trust and identification-based trust. Similar models is seen in Doney and Cannon’s (1997) five steps of trust, namely calculation, prediction, capability, intentionality and transference in business relationship development. Another model on trust, confidence and cooperation (TCC) is proposed to clarify the formation stages and driving forces of trust, and link it with risk management (Siegrist, Earle and Gutsche, 2007). In research studies, Liu and de Jonge (2016) have summarized 16 dimensions to evaluate three types of trust. Specifically “technological capability”, “management styles”, “idea innovation”, and “business judgement” are used to describe competence trust. “Standard terms”, “negotiable contract”, “role specification” and “agreement fairness” are used to explain reliability trust. To further understand goodwill trust, “friendly attitude”, “passion factors”, “open-mindedness”, “willingness to share”, “long-term vision”, “coevolution”, “social community” and “relational background” can be explored. On a more macro-level concern, with the increasingly awareness of corporate social responsibility nowadays, trust is closely related with stakeholder management, and trust should be regarded as social contract with shareholders, suppliers, customers and employees (Aras and Crowther, 2007). Environment issues should also be considered, in order to become a trustworthy and ethical company (Aras and Crowther, 2007). Based on concept analysis, Aras and Crowther (2007) further develop a model for evaluation sustainability and trust, with four major elements: maintaining economic activity; conservation of the environment; ensuring social justice; and developing spiritual and cultural values. To exam essential components of trust in international business, Heffernan (2004) adopts a relationship lifecycle model, including five stages: pre-relationship stage, early interaction stage, relationship growth stage, partnership stage, and relationship end stage. Through interview and case studies, findings suggests: 1) Search trust, meaning trust based on information and evidence from indirect sources, is the only form of trust in the first stage; 2) Contract trust influences most in the second stage, namely early interaction stage. 3) Competence is important in the relationship growth stage.

Culture factors are found important to the establishment of inter-firm trust, especially in international collaboration. In fact, “trust is context sensitive: actors that may trust each other in one situation may not display the same level of trust in other situations” (Beckett et al., 2010). The way of selecting partners, communicating, negotiation and problem solving processes can be different under various

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cultural contexts. Culture has been explored since long ago in the level of national and organizational culture. Influential theories have provided dimensions to evaluate national culture differences. This can be generally categorized as time, changes, material and relationship factors. Factors indicating attitudes towards time include viewing time as linear, doing things one by one with a schedule (monochronic), or in a flexible way (polychronic) (Hall, 1969, Hampden-Turner and Trompenaar, 2000). Researchers also find that some countries are more long-term oriented, whereas others focus on now and short-term (Hofstede, 2001). Values on changes also vary in different cultural contexts, and the tendency of accepting unpredictability is describe as uncertainty avoidance (Hofstede, 1994). Cultures of high uncertainty prefer stability, while cultures of low uncertainty avoidance likes radical changes (Hofstede, 1994). Material factors such as degree of competition and achievement in the society can be explained through the dimension of masculinity vs. feminity (Hofstede, 1994). To quantify the hierarchical structure within an organization or society, Hofstede (1994) creates the dimension of power distance. The role of individual within group relationship is indicated as the dimension of individualism vs. collectivism (Hofstede, 1994). Other factors related to communication and interaction with external environment include high vs. low content (Hall, 1969) and specification vs. diffusion (Hampden-Turner and Trompenaar, 2000). These cultural dimension have been implemented in international business studies. On a practical level, the way of solving problems and improving inter-firm relationship also vary greatly between countries and culture backgrounds. Based on in-depth interviews, Suh et al. (2006) analyze trust dimensions in USA and South Korean cultures in service industry, identifying that direct experiences and recommendations are important factors affecting cross-culture trust. In addition, culture theories identify the concept of family to trust development as some Asia cultures prefer trusting relationship building as an extension of family (Hoyer and MacInnis, 1997).

RESEARCH METHODOLOGY

Current research has explored the impact of culture on trust relationship. However, the study on how trust can be established and continued in cross-culture context is limited. From literature review, the Hofstede’s culture dimensions are demonstrated in inter-firm long vs. short term commitment. However, it is not enough as there are many other areas of inter-firm relationship which are impacted by culture but are not yet studied clearly. Practice review on the manufacturing sectors and animation industry suggests that trust is a culture sensitive area which needs further study. Literature of national culture covers “long-term commitment”, “formality”, “power” and “shared vision” under certain national culture context. However, there are limited systematic studies on how national culture dimensions interact with different types of trust, in particular under cross-culture collaboration between Chinese and non-Chinese companies. Literature on trust also lacks of process based model, and the details interaction mechanism between trust and culture.

Based on the research gap, this chapter aims to uncover the activities related to trust development in cross-culture collaboration. Trust issues will be explored from two aspects: key process and key values. According to the definition and meaning of culture, it is a system of values and norms shared by a group of people (national or organizational level) that can influence behaviors. Therefore the impact of national culture on trust issues can be seen from: 1) how the activities and behavior differ during the development process of trust, and 2) how the concept and meaning of trust differs from country to country with prioritized values. Based on these, the main objective of the research is to improve the understanding of the development of inter-firm trust in cross-culture collaboration

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context. More specifically, it aims to:

- Map the process of how inter-firm trust is formed, developed and continued in cross-culture collaboration projects.

- Identify the key constructing elements and attitudes of inter-firm trust, including competence, reliability and goodwill trust.

- Develop practical suggestion for companies on cross-culture collaboration.

The research adopts the approach of theory building with qualitative methods. Although the existing literature of culture and trust can help to generate a research framework, findings are limited, and thus cannot provide a meaningful hypothesis to be tested. Instead, theory-building with qualitative method can provide a good way to understand issues which have not been explored (Yin, 1994; Eisenhardt, 1989). Among the qualitative methods, case studies into Chinese animation companies are chosen. The primary concern of conducting case studies is to understand better the research questions, to build theory according to the research framework and to make a linkage between the established theory and practice. Therefore case companies selected should support the aim of developing and testing. Criteria of suitable case companies from the animation industry are established as follows:

- The case company is involved in international or domestic Chinese animation industry supply network. The collaboration can be outsourcing, co-development, or other forms.

- Cases are selected with different culture backgrounds, e.g. cases from western culture and oriental culture such as Japan are included.

- There are typical collaborated project between the focal company and its partners, to make it easy to follow the process of inter-firm trust build-up. The project can be the making of certain product, or on a more general level, a series of products development over long time.

- The case companies agree to give adequate access to the researchers, and people are willing to give comments and opinions on trust issues in inter-firm relationship management.

Based on the above criteria, two Chinese companies involving cross-culture collaboration animation product design and development are selected. For the reason of culture diversity and the accessibility of data, Case One company has successfully co-developed product with a Japanese partner, while Case Two company has maintained long-term collaborative relationship with a USA company. Chinese culture represents an oriental style with priorities on polycronic time, high power distance, collectivism, slightly high in feminity and long-term orientation (Hofstede, 2010). USA culture represents a western culture which monocronic time orientation, specification, low power distance, individualism, and masculinity. The Japanese culture has some similarity with Chinese culture, yet it is identified as unique and different from other cultures (Hofstede, 1980). It is generally believed to be polychronic time oriented, high in power distance, collectivism, masculinity, uncertainty avoidance, and has long-term orientation. In addition, these two case companies are along the earliest ones in China to conducting international collaboration. During the collaboration, they met problems related to trust development, and thereafter made effort to sustain the relationship. Their internationalization strategy and inter-firm relationship management can be potentially helpful to other Chinese firms. Table 1 shows basic information of the case companies.

Table 1: Case company information

Location Types of companies Length of Source of

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(culture) collaboration dataCase One

ChinaJapan

TV channel, production housesPublisher, production house,Character developer

2 years InterviewDocuments

Case Two

ChinaUSA

Game OEMGame outsourcing

3 years Interview

The case data sources are from online report, documents provided by the companies, observations and face-to-face semi-structured interviews with the general director of the companies. There are two types of data to be collected: activities and process, and attitudes and values. Activities and process refer to the visible procedure of building up partnership, maintaining relationship during collaboration, and the development of further relationship. It includes both business procedure and social activities. To analyze trust process along with business collaboration process, three stages can be defined as trust formation, trust development and trust continuation (Liu and de Jonge, 2016). Trust formation refers to the inter-firm relationship issues from the moment of idea conceptualization, towards selecting partners, until formally collaborated (usually with a contract). Trust development is correlated with the collaborated project. Trust continuation is from the end of project towards a new co-operation and further relationship development. Detailed information on data collection is listed in Table 2.

Table 2: Data collection on activities and processes

Trusting relationship before collaborative projectThe process/procedure from selecting a partner to collaborate.Length of partnership.The way to approach potential partners (through internet, exhibition, or personal relationship)Resource from professional agency or local governmentThe way to assess the moral history of potential partner (honesty, responsibility etc.)Major risks.\Rules to consider in the contract.Time to negotiate on the agreementWay to measure the performance / capability of partner.Type of collaboration mode to choose.Other open issues related with inter-firm relationshipTrusting relationship during the collaborative projectWhat happens if your partner has some problems meeting the requirement (delivery, quality)Way to control for the quality and production processOperation management issues that are most trust-sensitive (e.g. information sharing)Information sharing systemIP protection systemWay to promote a trust / innovative environment.Way to develop competence requirement.Way to renegotiate agreementWay to solve problems.Way to over-come culture differences, and adaptationOther open issues related with inter-firm relationshipTrusting relationship after the collaborative project

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The criteria of a good / bad relationshipMajor problem / enhancement of trust during the projectLong-term cooperation concernWay to improve the relationship, and develop more partnershipOther open issues related with inter-firm relationship

The second type of data, attitudes and values, refers to the principals that companies give priority when they build up trust with partners. Values can be observed by behavior, and can be found from the interviewees’ opinions and attitudes when they talk about trust and expecting certain features from their partners. Besides the above questions, more open questions are asked used to obtain companies’ values on trust, inter-firm relationship, and culture issues. To summarize the trust dimensions in existing literature, the components of competence, reliability and goodwill are mostly identified. This will be further adopted in this study, in particular:

- Competence trust: meaning trust build upon skills, expertise and capability.- Reliability trust: meaning trust build upon contract and agreement.- Goodwill trust: meaning trust built upon benevolence and friendship.

For each case study, in trust formation stages, data analysis focus on the process and criteria of selecting a partner, the way of assessing the moral behavior and good intention of the partners, the way of assessing the performance and technological behavior of the partner, and contract issues, including identification of risk. In trust development stages, data analysis cover the way of controlling and information sharing, the way of inter-firm interaction and communication, problems related to distrust and bad relationship, and the solutions of technology, management, and inter-firm relationship related problems. In trust continuation stages, data analysis cover the re-assessment of behavior, the re-assessment of overall performances, the consideration of long-term collaboration, and the activities to facilitate further interaction. Process mapping tools are used along with the three phases. Key values are summarized through content analysis from the perspectives of competence trust (trust based on skills and techniques), reliability trust (trust based on contract), and goodwill trust. In addition to single case studies, cross-case analysis focuses on the similarities and activities. With key processes and values summarized, it then develops a general model on cross-culture inter-firm trust development mechanisms.

CASE STUDY ONE – COLLABORATION BETWEEN A CHINESE AND JAPANESE COMPANY

Company profile

Case One is the collaboration between a Chinese animation firm 1A and a Japanese firm 1B from 2008 to 2010. 1A is a Beijing-based Chinese company, who has rich network with major media players in China. 1B has a large business range covering animation production and distribution. The TV series they co-developed was based on “The Three Kingdoms”, a particular story in China. For business continuity, they later worked on character business, through collaboration with 1A and its Japanese partners.

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Activities and process

At the beginning of negotiation, due to unclear of the project and lack of previous collaboration experience, 1B wanted to control the whole project, leaving only the production part to 1A. 1A was therefore unhappy with this unfair treatment. There were three months of disagreement, till 1A realized that to form a fair relationship, they had to demonstrate product quality and technical competence, which were highly regarded from 1B’s side. Therefore 1A proposed a plan in which both companies make an animation sample independently, and compare for the quality. The competition was as a way to respect the value of 1B, according to 1A’s director. The two samples were evaluated by external experts. The result turned out that 1A’s product was of high quality with advanced drawing skills, while 1B showed its professional skills in story-board making. By realizing their partner’s competence, 1B became friendly and modest. In the meanwhile, 1A felt confident in its own potentials after the competition. They made a contract with details about technology standard, time, cost and HR issues. Moreover, common goal was highlight in the contract.

During the collaboration, 1B totally trusted 1A’s production technique and design skills. It also took more responsibility on story-board making in which they had more experiences. According to 1A, their partner was professional and kind, listening to 1A’s opinion as patiently as possible. 1A was happy about it, and thereafter thought they should paid attention to the quality as carefully as 1B. Though the contract had specified individual role, in the reality, most of the production was jointly done, in which companies learned from each other. When there was a mistake, they formed a small team to communicate immediately. Both companies trusted each other so much that they did not even review the daily cost report.

When production was finished, for mutual interest, they decided to move into character business together. As 1A’s R&D group was not experienced enough, 1B further did market research, and introduced another Japanese character designer company into the network. To attract more investment, they put product samples on an international animation exhibition in April 2009 for the further co-operation.

Attitudes and values

1B and 1A showed value differences from the very beginning. As a Japanese company, 1B preferred more competence trust, whereas 1A preferred friendship and relationship.

Competence trust1B viewed highly upon technical professions and quality management. At the beginning, it insisted on controlling R&D, being not sure of 1A’s capability. The emphasis on quality and improvement of performance, being careful of uncertainty may reflect some culture factors. On the other hand, 1A viewed itself more capable in China, according to 1A, “in China, we are much more experienced; we know the market, cost, people and companies far better than 1B. Therefore foreign partners should listen to us.” But at the beginning 1A was not so keen on demonstrating actual ability. They did not know that just saying they were capable did not make partners believe so. 1A’s opinions showed its preference on social networking, but ignoring showing actual competence clearly, which may also reflect some culture factors.

Reliability trust

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The Japanese company 1B may treat contract as a formal one, while the Chinese 1A prefer a less formal way. Being high in uncertainty avoidance, 1B tried best to reduce risk, whereas 1A paid less attention to the details. However, both companies emphasized collective interest, co-development and common goal.

Goodwill trust“We collaborated mainly with those who are kind to us. Kindness means that they will listen to our opinions, being considerate of our mutual goal and interest.” According the 1A’s director, this is the most important issue when they selected partners. It reflected both values of 1A. However, this concept was not so important for 1B. At the beginning 1B tried to control everything with its power, having a superior feeling that its capability was much better than that of 1A. This lacking of consideration and controlling attitudes caused distrust at the beginning.

On the other side, both two companies would like to keep relationship as long as possible. For 1B, relationship provided a feeling of safety. It acted was a central hub for a collaboration network, and getting the surrounding small companies as long-term partners. The small companies can provide services and resources as quickly as possible to 1B as a result of the stable relationship, whereas the continuously growing of 1B also benefited the financial performances of partners. In this case 1B brought another Japanese firm later on as a collaborator. This was based on long-term relationship. Also, relational connection was regarded highly to 1B. 1B first came to 1A because of 1A’s strong network in China. As a Chinese company, 1A also regarded highly on relational connection. 1A had a rich network with long-term collaborators. According to 1A, “when there is a need, we always turn to collaborators. We have long-term co-operation experience. They can always help us, and there is seldom conflict comparing to collaborating with new partners.” 1A brought in outsourcing studios during the project based on long-term relationship and goodwill.

Roadmap of trust sustainability

From the activities and value priorities, mappings can be made to address key issues of trust. As seen from Figure and Figure 1, 2, both 1A and 1B changes (highlighted in red) their original process to meet mutual benefit during trust formation stage. Due to such modification, they achieved agreement and integrate the process of trust development and continuation (Figure 3, 4)

Insert Figure 1 around hereFigure 1: Modified trust formation process of 1A

Insert Figure 2 around here Figure 2: Modified trust formation process of 1B

Insert Figure 3 around hereFigure 3: Trust development process between1A and 1B

Insert Figure 4 around hereFigure 4: Trust continuation process between 1A and 1B

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CASE STUDY TWO – COLLABORATION BETWEEN A CHINESE AND USA COMPANY

Company profile

Case Two is the collaboration project between 2A, a Chinese outsourcing studio and its USA partner 2B, a game OEM. Established in Nanjing 1999, 2A mainly do the 3D animation production as outsourcing projects for animation and game OEMs. In the meanwhile, it continuously develops skills of original design, especially concept design, and software development, in order to be competitive in the Chinese animation game industry.

Activities and process

Due to the low cost, many foreign companies outsource part of production to China. 2B is among them. The fact that 2A can make 3-dimensional animations of high quality attracted 2B, who came to China to visit 2A’s facility. 2A agreed to the IP and technology issues, providing a sample to make 2B satisfied. As an outsourcing studio, 2A tried to expand its business by collaborating with large western companies. By attended international conferences, 2A gradually knew western way of management and the importance of improving technology competence. Accordingly, it bought high-end software and trained employees. In addition, 2A paid attention on the contract building and tried to make the agreement fair. “We negotiated at the very beginning to avoid over-commitment and unfair relationship,” said the COO of 2A. For example, in order to avoid the payment risk, they suggested that the big project be cut into small pieces, and get parts of payment by several times (e.g. every three months). They took training classes in risk management. “It’s important to communicate with clients for the contract, and try to achieve mutual benefit.” They also followed the way of clearly specifying responsibilities in the contract proposed by 2B.

During the collaboration, 2A was keen on competence improvement. When 2A found a shortage of technology capability, they would send employees to 2B (normally three people for one month) to learn the latest skills. They also realized that 2B concerned much on IP issues. So they put much effort on establishing IP protection structures containing both hardware (isolation of project teams, putting notices on walls) and software (IP protecting database, control of emails). The system was designed not only for one project, but can be developed for long-term use. They continuously improved the system to make the balance with protection and efficiency. For the goodwill aspects, they communicated frequently with 2B on web-meeting about problems to avoid misunderstanding. They also invited 2B’s CEO to visit China, and to deliver lectures. “Culture difference can cause many problems. However, if you provide them chances to know you and your culture, lots of misunderstanding will disappear,” according to the comment from 2A. Also, when 2B met financial difficulty, 2A showed consideration, and negotiated on the delay of payment. Because of mutual understanding and caring, the changing of agreement by 2B to modify key character design was also quickly approved by 2A. This also won the respect and trust from 2B.

After the project ended, 2A thought about how to develop a further relationship with 2B. 2A considered both competence and goodwill. They continuously enhanced the company competitive advantage from developing 3-dimensional animation to CG and concept design. Based on existing collaborated project, they further expanded the project range with high value added activities. “It is true that every outsourcing company wants to move up along the supply chain to become OEM, but

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our key competitiveness will lose. So far, we must improve these specific production skills to remain top in the industry,” said 2A. Besides getting more production skills, 2A also learned original design skills by working with Chinese partners. The long-term relationship with designers improved the designing competence of 2A, which attracted more western customers on high value-added projects. Because of its advanced technology capability and design concept, further collaboration was achieved between 2A and 2B on promotion video making. New contract was reached after the previous project.

Attitudes and values

The USA company 2B valued high on competence and contract, whereas 2A preferred goodwill and relationship. However, through the collaboration with western OEMs, 2A gradually knew how to change their behavior to suit the requirement of western OEMs. In this case, 2A adapted its behavior to demonstrate and improve competence and reliability trust.

Competence trust“The first time we look for a USA partner was very difficult. We had many ideas, but they would rather see our products first, to make sure that we were able to do something better than others.” It was from that moment 2A began to pay attention to upgrade computers, and to train staff to be professional on using the most advanced 3-dimensional drawing software. In 2005, 2B came to 2A to see its production line and other hardware facility. 2B was satisfied with 2A’s technology capability and the way of its project management.

Reliability trust2A sometime treat contract as informal way when it working with close Chinese partners. However, contract was important in its partnership with 2B, since 2B had a standard way of creating contract with clear responsibility and technical specification. As a result, 2A followed the way of 2B. “Our contract clearly defined almost everything, from details of responsibility, IP issues, software, to daily cost and operation issues”.

During the collaboration, there was once that 2B wanted to change character design, and modified the agreement. 2A kindly agreed on it. Also because 2A continuously developed its design ability, it re-negotiated with 2B, to make sure that the agreement was fair. There were further collaboration between them besides the outsourcing parts, for example, co-design of some characters and the making of promotion videos.

2B preferred to develop strict and clear contract with specified product and technology details. This was a very USA way of doing business, especially in international outsourcing collaboration, according to 2A. Through gradual familiarity with western organization behavior, 2A adapted to the way of developing contract, and also learnt to protect its own right.

Goodwill trust2A actively solved problem through frequent communication. It also invited 2B to China to experience the Chinese culture. This improved the mutual understanding of both companies. Also, to collaborate with 2B, 2A continuously improve its capability actively. It knew clearly, that personal friendship and relationship alone cannot sustain the collaboration. It was the combination of goodwill and competence development that helped 2A win continuous trust from 2B.

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Roadmap of trust sustainability

As seen from Case Two, it was 2A who continuously changed its trust process according to 2B’s requirement. Figure 5, 6, 7 address the key changes.

Insert Figure 5 around hereFigure 5: Modified trust formation process of 2A

Insert Figure 6 around hereFigure 6: Modified trust development process of 2A

Insert Figure 7 around hereFigure 7: Modified trust continuation process of 2A

CROSS-CASE ANALYSIS AND DISCUSSION

Cross-case analysis

As seen from the case companies’ collaboration process mappings, to achieve trust and overcome cultural differences, companies make several changes to their original processes, so that the new adapted processes do not conflict with their partners. In Case One, the changes happened to both 1B and 1A. 1B improved goodwill to meet the values of 1A, whereas 1A demonstrated competence to make 1B feel secured. They integrated the processes together in an atmosphere with friendship and high quality of production. The result was high level of trust aiming at long-term co-development. In Case Two, there were limited changes of activities in 2B. However, 2A made changes throughout the project, to be consistent with 2B’s expectation on competence and reliability.

According to the degrees of changing trust related activities from the cases. Three different strategies can be proposed as “separation” (both no change), and “integration” (both change, Case One) and “compromising” (one changes, Case Two). “Separation” means that although there are values conflicts on how to develop inter-firm trust, yet both companies still stick to their own way without listening to partners. It can be imagined that collaboration cannot sustain due to ignoring culture differences. “Integration” means that both participating companies realize the differences values on trust. They both change activities to be compatible to the partners’ value and reach the expectation of their partner. “Compromising” means that one company mainly sticks to its own way and activities, while the partners change behavior to meet the cultural and value expectation of its partner. Based on this, a comparison of Case One and Two is made in Table 3. Detailed meanings of separation, integration and compromising are described in Table 4.

Findings from the cases can also be developed into a general process (Figure 8).It indicates culture’s influence on inter-firm issues, and ways in which companies could follow in cross-culture collaboration. The participating companies are from national culture I and national culture II. All of them have prioritized values on trust, and original trust building-up process according to their values. When companies know the values and process of their partners, they can modify their activities to achieve synergy and mutual trust.

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Table 3: Comparison of Case One and Case TwoCase Culture differences Values differences Adaptation mechanism Results

Case One

1B (Japan): Masculinity, high uncertainty avoidance1A (China): Feminity

1B: Competence (business judgment, technology competence), Reliability (formal contract)1A: Goodwill (Fair atmosphere, friendly attitude, passion factors)

Integration1B: Add goodwill trust- Listen to 1A’s idea on character/play writing- Frequent communication- Common goal and contribution attitude- No strict control on schedule and cost1A: Add competence trust- Improve skills and propose quality competition- Allocate job according to each specialties

Trust continues

Case Two

2B (China): Short-term, Masculinity, Specification2A (USA): Long-term orientation, Feminity, Diffusion

2B: Goodwill (Friendly attitude, passion factors, common goal, long-term vision)2A: Competence (business judgment, technology competence)

Compromising2B: Add competence trust- Upgrade technology- Training- IP protection system- Continuously upgrade to value-added activities2A: Limitedly add goodwill- Give gifts for encouragement- Attend social activities to know more about partners

Trust continues on condition that 2B meet the competence requirement from 2A

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Table 4: Three types of adaptation mechanism in cross-culture inter-firm trust

Adaptation mechanism

Process & resultsTrust formation Trust development Trust continuation Performance and results

Separation - Companies may or may not realize their values differences, but they ignore the differences- Companies do not take actions to meet the requirement of their partner, and do not discuss about a compatible solution- Contract may be the way to secure the collaboration

- Companies do not listen to each other- Companies focus on their own task, and solve their own part of the problems

- Companies may break up relationship because many value conflicts lead to disagreement

Trust may be not low at the beginning, but it declines gradually towards low level of trust

Integration - Both companies realise the differences of their values towards trust and other culture related differences- Both companies respect the other, and take actions to meet the requirement of their partner, or discuss about a compatible solution recognized by both sides- Contract is not the most important way to secure the collaboration. The adjusted common values is the key to the relationship

- Companies listen to each other during the project- Collective work to solve problems

- Companies rely on each other, and may continuously maintain the relationship

Trust may be low at the beginning, but it continuously grows towards high level of trust.

Compromising

- One company realizes the differences of values towards trust. The other company may or may not realize it- One company highly respects the other, and take actions to meet the requirement of their partner- Contract is one way to secure the collaboration, along with other preferred values by the dominating

- One company listen to the other- Collective work to solve problems

- Company may still keep the relationship, but may not be a stable long-term close relationship

Trust may be high from the very beginning, but it fluctuate and not stable during the way

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company

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A procedure of cross-culture trust development

In practice, a procedure for a company can be illustrated in Figure 9. First of all, it is important to identify the cultural values of the company itself and its partner, by using the dimensions and evaluation system. Contract will then be made based on mutual understanding. During the project, company should pay attention to the biggest value challenge and its related activities. They also should adapt their behavior to modify those decision making areas. Finally, when the project ends, they can re-assess trust values of themselves and of their partners, to see whether the process is sustainable, and then to establish possible areas for future collaboration.

Insert Figure 8 around hereFigure 8: A framework of cross-culture inter-firm trust

Insert Figure 9 around hereFigure 9: Practical procedure for inter-firm trust development

Understanding the different meanings of trust

Generally speaking, Chinese culture has the feature of long-term orientation, polychronicity, high power distance, collectivism and diffusion. USA has the culture of short-term-orientation, monochronicity, low power, individualism, masculinity and specification. Japan has the culture of long-term orientation, polychronicity, collectivism and masculinity. Table 5 shows main features of the three cultures according to several culture studies.

Table 5: Culture differences among China, Japan, and USA

Culture dimensions

China Japan USA

Long vs. short-term

Long-term (118) (Hofstede, 2001)

Long-term (80) (Hofstede, 2001)

Short-term (29) (Hofstede, 2001)

Monochronic vs. polychronic

Polychronicity (Hall, 1969) Polychronicity (Hall, 1969) Monochronicity (Hall, 1969)Sequential (Hampden-Turner and Trompenaars, 2000)

Power distance High (80) (Hofstede, 2001)Particularism(Hampden-Turner and Trompenaars, 2000)

Slightly high (54) (Hofstede, 2001)Particularism(Hampden-Turner and Trompenaars, 2000)

Slightly low (40) ((Hofstede, 2001)Universalism(Hampden-Turner and Trompenaars, 2000)

Individualism vs. collectivism

Collectivism (20) (Hofstede, 2001)

Slightly collectivism (46) (Hofstede, 2001)Communitarianism (Hampden-Turner and Trompenaars, 2000)

Individualism (91) (Hofstede, 2001)Individualism(Hampden-Turner and Trompenaars, 2000)

Masculinity vs. feminity

Medium (66) (Hofstede, 2001)

Masculinity (95) (Hofstede, 2001)

Medium (62) (Hofstede, 2001)

Uncertainty Low (30) (Hofstede, 2001) High (92) (Hofstede, 2001e) Slightly Low (46) (Hofstede,

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avoidance 2001)Specification vs. diffusion

Diffusion (Hall, 1969) Diffusion (Hall, 1969) Specification (Hall, 1969)

Accordingly, the Chinese culture values friendship and family. It takes time to develop a trusting relationship; however, once goodwill is built, business relationship can go smoothly, sometimes even without a formal contract. In fact, the word trust (Xin Ren) in the Chinese language has two components. “Xin” means to believe, whereas “Ren” means to assign a position or task. The meaning of trust in traditional Chinese culture combines both concept and behavior, providing a consequence of forming an attitude first, followed by actions. In the Japanese culture, acquiring skills, working hard and patience are virtues (Lawrence and Yeh, 1994). With a high collective culture, goodwill trust and relationship building is also important; however rather that regarding business relationship as extension of family or personal relationship, Japanese companies also value quality and contract. This is due to its culture of high uncertainty avoidance. With quality assurance and continuous improvement, Japanese companies feel secure of the long-term collaboration. USA represents a typical culture of individualism, monochronicity and masculinity. With less emphasis and patience on relationship building, they prefer quality, competence and contract development. Therefore a clear demonstration of competence and a well-developed contract is important when collaborating with USA partners. The results of case studies show major differences in understanding trust in Chinese, USA and Japanese culture contexts, which can be summarized as Table 6.

Table 6: Meanings of trust in different culture contexts

Chinese culture USA culture Japanese cultureTrust formation:- If there is collaboration

before, priority will be given.

- Personal network and relationship building is important before the real business collaboration.

- Sometimes contract is flexible and not important, as long as there is exiting goodwill trust.

Trust development:- Information sharing and

learning is important.- Multi-level .communication,

including personal relationship building can smoothen the learning process.

Trust formation:- Regardless of previous

collaboration experience, each contract is new.

- Competence assessment is highly important. In particular the capability should be measurable.

- Sometimes no need to develop personal relationship as long as the contract is clear.

Trust development:- Collaboration is based on

the contract with clear definition of each role and responsibility.

- Sometimes shared learning; however each party should develop specialty.

Trust formation:- Both long-term goodwill

and quality demonstration is important when choosing a partner.

- It takes time to develop business relationship. Generally, Japanese people are patient.

- Careful quality assessment of unfamiliar partners, to avoid potential risk.

Trust development:- Information sharing and

learning is important.- Sometimes external experts

are invited to continuously obtain new knowledge.

- Common interest and harmony is important.

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Trust continuation:- Co-learning can take place

after the collaboration.- Network extension based on

existing relationship.- Long-term relationship is

highly valued after the collaboration.

Trust continuation:- Long-term relationship is

built upon competence recognition.

- Collaboration can be long-term; however contract may be built case-by-case.

Trust continuation:- If the collaboration is

successful, long-term relationship is considered.

- Co-learning and continuous quality development is important for further collaboration.

CONCLUSION

This paper has explored trust relationship in cross-culture collaboration, an important social factor for business sustainability. In fact, trust today is more like a social contract through which companies are linked with the society. Based on two case studies, the paper has offered processes of how trust is created along with business collaboration. Based on the key activities and values, three types adaptation mechanisms in order to achieve trust in cross-cultural collaboration are proposed. In practice, business models from these case companies can help companies to evaluate themselves as well as understand their partners in the contexts of competence, contract and goodwill. This theory building oriented research is based on qualitative methods with case studies. This methodology itself has some limitation, as case studies cannot represent companies of a large scale. As for future research, more investigation should be made to further link trust with business sustainability. Quantitative studies need to be conducted on a large scale to further verify the findings. As manufacturing nowadays grows from inter-firm collaboration to a more sustainable system, the issues of green management, which involves the interaction with environmental and societal factors, become important. The topics of “how trust should be developed” and “what are the new requirements for culture” in this sustainable system will be of great value.

ACKNOWLEDGEMENTS

This research is supported by the National Natural Science Foundation of China (Grant No. 71272164). We also would like to express our sincere thanks to all the company managers who are involved during our company visits and interviews in the research.

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