Seeking partners in international alliances: The influence of cultural factors

Seeking partners in international alliances: The influence of cultural factors

Journal of Business Research 68 (2015) 1522–1526 Contents lists available at ScienceDirect Journal of Business Research Seeking partners in interna...

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Journal of Business Research 68 (2015) 1522–1526

Contents lists available at ScienceDirect

Journal of Business Research

Seeking partners in international alliances: The influence of cultural factors☆ Sonia Dasí-Rodríguez ⁎, Manuela Pardo-del-Val 1 University of Valencia, Spain

a r t i c l e

i n f o

Article history: Received February 2014 Received in revised form December 2014 Accepted January 2015 Available online 11 March 2015 Keywords: International alliances Organizational culture National culture Trust Size

a b s t r a c t Insufficient attention during the search and selection stages of a prospective partnership may jeopardize the cooperation agreement's chances of success. Therefore, in both of these phases, prospective partners must consider factors that could lead to problems in the cooperation agreement or hinder the international alliance. Following a literature review, the study presents five hypotheses to determine how considering the partner's country of origin, the partner's size, and trust between partners can alleviate future problems during the agreement. Regression analysis using data from 83 firms tests these hypotheses. Findings reveal the importance of trust and highlight an interesting line of future research into the role of the partner's size. © 2015 Published by Elsevier Inc.

1. Introduction When two or more firms initially consider working together and establish contact, their cultural diversity is likely to show. Such is the case with cooperation agreements. Cultural distance increases difficulties in inter-firm interaction (Brown & Reich, 1989; Lane & Beamish, 1990): Greater cultural distance means greater differences in organizational and administrative practices, employee expectations, and interpretation of and response to strategic problems (Kogut & Singh, 1988; Schneider & De Meyer, 1991). These differences generate a considerable cultural problem for partner firms, which will become apparent mainly in the development of the agreement. To reduce this problem as much as possible, firms must consider differences at the stages during which they seek and select partners (Dasí-Rodríguez, 2001). As Stafford (1994) reports, for cooperation to function well, firms must not rush these stages because doing so places the alliance at an immediate disadvantage.

☆ The authors are grateful to contributions from Salvador Roig-Dobón and Joaquín Aldás-Manzano, both from the University of Valencia, for their careful reading and suggestions on revising this essay, the Valencian Chamber of Commerce (particularly its Foreign Trade Department) for their support and assistance, the library service at the University of Valencia for their help with the use of databases, the firms that responded to the questionnaire, and Mr. Andrew Plumridge for his language recommendations. ⁎ Corresponding author at: Facultat d'Economia, Avda. Los Naranjos, s/n, Valencia, Spain. E-mail addresses: [email protected] (S. Dasí-Rodríguez), [email protected] (M. Pardo-del-Val). 1 Facultat d’Economia, Avda. Los Naranjos, s/n, Valencia, Spain.

http://dx.doi.org/10.1016/j.jbusres.2015.01.045 0148-2963/© 2015 Published by Elsevier Inc.

Hence, this study analyzes how cultural factors affect the search for and selection of partners in cooperation agreements. The study focuses on international alliances, where the influence of certain cultural factors might be greater than the influence of such factors in other alliances. 2. Cultural factors in the search for and selection of partners Cultural factors exert different influences at different stages of the cooperation process. Some cultural factors are most important when seeking and selecting partners. In international alliances, a key factor is national culture (i.e., culture of the country). Hofstede contributes notably to research into national cultures. He defines five basic dimensions that help to distinguish the differences between countries' cultures. In international cooperation, many authors draw on Hofstede's (1980, 1991) work when studying the subject (e.g., Barkema & Vermeulen, 1997; Cullen, Johnson, & Sakano, 2000; Meschi & Roger, 1994). Inter-firm cultural differences that derive from firms' country of origin mainly relate to different communication and decision-making systems, and different languages. Angué and Mayrhofer (2010) also report differences in religious beliefs, ethnicity, and social norms, and Ghemawat (2001) indicates that these differences influence how individuals interact with other individuals and with firms and institutions. National culture deeply influences management and leadership in strategic alliances (Dong & Glaister, 2007; Rodríguez, 2005) and shapes the dynamics of the relationship (Kumar & Nti, 2004). In general, national culture exerts an enormous and profound influence over firms from that country, and cultural collisions in

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international cooperation agreements can sometimes prove insurmountable (Park & Ungson, 1997). Therefore, considering these aspects during the search and selection stages is important to avoid conflict as much as possible, hence the following hypothesis: H1. Considering national culture when seeking and selecting a partner helps to avoid problems during the cooperation agreement. Firm size also significantly influences organizational culture: Different sizes may lead to different organizational cultures. When two organizations with significantly different sizes make contact, they will probably have completely different values, resources (Hladik, 1988; Park & Ungson, 1997), and corporate outlooks (Park & Ungson, 1997). Doz (1988) warns that joint ventures between small and large firms encounter difficulties because of the cultural distance between the firms. This cultural distance leads to differences in communication, decision-making and control systems, hierarchy, degree of formality, and so forth. Dissimilarity in size may cause insecurity, imbalance, and instability in the relationship, especially when problems start to appear in the agreement's daily workings (Kogut, 1988; Koot, 1988; Park & Ungson, 1997). The potential for problems to arise when firms of different sizes work together suggests a need for firms to consider size before signing any cooperation agreement. H2. Considering size when seeking and selecting a partner helps to avoid problems during the cooperation agreement. Although trust between partners is necessary to relieve cultural problems, trust alone is not a sufficient condition: Many other factors have influences, too. A culture with a basis of trust can help firms to overcome problems that formal procedures cannot solve (Park & Ungson, 1997). In fact, Ekanayake (2011) insists that inter-partner trust is a prerequisite for genuine cooperation, whereas Rodríguez and Wilson (2002) consider inter-partner trust a facilitator. Cullen et al. (2000), Parkhe (1998), and Robson, Skarmeas, and Spyropoulou (2006) report that trust improves performance, and Lui, Wong, and Liu (2009) conclude that trust facilitates cooperative behavior between partners, thereby increasing satisfaction with the cooperation agreement. To foster trust with partners, firms would ideally keep a record of previous alliances. According to Parkhe (1998) and Ekanayake (2011), doing so would help firms to familiarize themselves with one another and would encourage mutual learning. For this reason, firms often search for partners among those they already know, since previous relationships help to create a minimum level of trust. Lack of trust may lead partners to protect themselves by adopting “hidden agendas” (Doz, 1988, p. 323) and concealing their true motives for cooperating. Crucially, deterioration and absence of trust will lead to opportunistic behavior by partners and will ultimately cause alliances to fail (Parkhe, 1998). H3. Considering trust from prior relationships between partners helps to alleviate problems during the cooperation agreement. Firms seeking to cooperate must consider creating a hybrid culture (Stafford, 1994), cooperative culture (Brouthers, Brouthers, & Wilkinson, 1995), or third culture (Rodríguez, 2005; Rodríguez & Wilson, 2002) that is appropriate for cooperation and draws on elements from all partners' corporate cultures. Similarity between partners' cultures increases chances of success (Harrigan, 1988). Conversely, differences between partners' cultures hinder the creation of a common culture and may even cause the cooperation to fail (Killing, 1983). Every firm has its own values, attitudes, and beliefs inherent to its members, and cultural differences between firms are greater between firms from different countries. Hence, attempting to combine cultures

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in international cooperation is complex. Nonetheless, although firms should analyze cultural distance when selecting partners, firms whose organizational cultures differ should not necessarily avoid cooperating with one another. Sometimes differences can enhance cooperation agreements and help firms to complement each other (Buckley & Casson, 1988; Shenkar & Zeira, 1992). Indeed, differences may even improve an international alliance's viability (Patel, 2007) or encourage creativity (Cox & Blake, 1991). Firms can achieve cultural compatibility, even though differences may still exist. Knowing the partner's culture, and to some extent anticipating this culture, might help to prevent misunderstandings. A “reciprocal education process” (Mughan, 1993, p. 82) must start in the selection phase, to cover the key interaction areas where cultural differences may be most salient. Although such a process requires great time and effort, partners can eventually harmonize their cultures (Stafford, 1994). H4. When seeking and selecting a partner, a firm that considers a potential partner's national culture and size and that benefits from mutual trust with the potential partner can create a hybrid culture more easily than other firms can. H5. Creating a hybrid culture helps firms to achieve their aims in the cooperation agreement. 3. Methodology Most cultural variables are intangible and are therefore difficult to measure. Lorsch (1986) proposes questionnaires that use managers' responses to analyze firm culture. This research does the same. The sample comprises Spanish firms. Thus, the study benefits from dealing with firms sharing the same national culture and a single language—making the questionnaire easier to administer. Nevertheless, sampled Spanish firms in international alliances are not significantly different from foreign firms, so results are not country specific. To identify firms in international alliances, this study used three different sources. The first source was Eureka, an intergovernmental network that supports market-oriented R&D and innovation projects across all technological sectors in 41 countries. Browsing the Eureka Projects Database and limiting the search to firms with a Spanish partner yielded 208 organizations. The second source was the Foreign Trade department at the Valencian Chamber of Commerce, which collaborated by providing a list of 156 firms. The third source was the Orbis Database, a source of news about Spanish firms involved in international joint ventures. This source yielded data on 25 firms. All 389 organizations received a brief explanatory e-mail message with a link to an online questionnaire. To increase the probability of receiving responses, respondents received assurance that their answers would remain confidential. Respondents also received an invitation to obtain a copy of the study results and to participate in the raffle to win a gift card from a well-known Spanish department store. After two weeks and several reminders, respondents returned 86 questionnaires, 83 of which were valid. The questionnaire consisted of 11 closed questions. First, questions referred to the kind of agreement, and second, the questionnaire asked respondents to focus on one single partner and mark the partner's country of origin. To identify their goals and degree of satisfaction, respondents had to answer questions about five common goals of these alliances on a 5-point Likert scale to assess each goal's importance and the extent to which the firm had achieved each goal. Using the most common factors from the literature, question 4 asked how much certain factors influenced the choice of partner. Question 5 referred to problems that appear most often in the literature, again asking respondents to answer on a 5-point Likert scale. Question 6 collected data on willingness, trust, creation of a hybrid/third culture and self-perceptions of culture's effects, to which respondents also had to mark their agreement/

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disagreement on a 5-point Likert scale. The scale from Luo (2002) measured the trust between firms. The remaining questions were important to gain a deeper knowledge about the sample. These questions solicited information on the resources each firm provided to the alliance, the alliance's maturity, the firm's industry, and the number of employees in the firm.

employees. Some 45% of respondent firms are cooperating with others that are similar in size to them. Firms cite technological goals and access to resources they currently lack as the two most important goals for starting international alliances. Calculating the correlation between each goal's importance and respondents' satisfaction with the goal yields a positive, significant relationship, except for the goal of overcoming political and legal barriers.

4. Results 4.1. Sample description

4.2. Testing the hypotheses

Most firms are acting in consortium (51.8%). Other cooperation agreements are R&D agreements (26.5%), joint ventures (8.4%), production agreements (6.0%), licenses (4.8%), and joint production agreements (2.4%). About two thirds of sampled firms cooperate with other European businesses, most commonly in Germany. Other countries where partner firms operate are Israel, Turkey, Brazil, and China, among others. Firms operate in many industries, most notably in high technology, but also in food, heavy industry, and chemicals. Finally, several firms operate in traditional sectors such as furniture or shoemaking. Half of the agreements have been running between 1 and 3 years, and only 5% have been running longer than 5 years. One third of the alliances are less than 1 year old. The sample consists mostly of small and medium-sized enterprises—only about 20% of firms have more than 250

The results of the regressions to test the hypotheses appear in Table 1. Surprisingly, data fail to support hypothesis 1 because all regressions are non-significant, yet scholars often cite the variable national culture as a factor that helps firms to avoid problems during cooperation agreements. Therefore, additional analysis explores the effect of national culture using an item from question 6 (i.e., respondents' selfperceptions about cultural differences' negative effect on the cooperation agreement—variable P6D). As before, however, results are nonsignificant. The data relating to firm size provide support for hypothesis 2, suggesting a significant relationship between considering size and avoiding cultural conflict during the cooperation agreement (Std. β = 0.226; t = 2.057). After making an additional attempt to analyze H2

Table 1 Analysis of the hypotheses. Hypothesis

Dependent variable

Independent variable

Std. β

t

R2

Fa

H1

P5A P5B P5C P5D P5E P5F P5G P6D P5A P5B P5C P5D P5E P5F P5G P6D P5A P5B P5C P5D P5E P5F P5G P6C P5A

P4B (considering partner's country of origin)

−0.127 −0.017 −0.008 0.020 0.045 0.123 −0.004 −0.033 −0.097 −0.149 0.059 0.226⁎⁎ 0.055 0.128 −0.112 0.071 −0.196⁎ −0.150 −0.194⁎ −0.101 0.101 0.089 −0.176 0.268⁎⁎ −0.411⁎⁎⁎

−1.135 −0.147 −0.067 0.175 0.398 1.095 −0.035 −0.284 −0.862 −1.324 0.525 2.057 0.487 1.144 −0.994 .0622 −1.774 −1.333 −1.762 −0.905 0.901 0.793 −1.578 2.457 −3.931

0.016 0.000 0.000 0.000 0.002 0.015 0.000 0.001 0.009 0.022 0.003 0.051 0.003 0.016 0.013 0.005 0.038 0.023 0.038 0.010 0.010 0.008 0.031 0.072 0.169

– – – – – – – – – – – – – – – – – – – – – – – – –

−0.371⁎⁎⁎ −0.572⁎⁎⁎ −0.526⁎⁎⁎ −0.166 −0.186 −0.268 0.410⁎⁎⁎ 0.213⁎⁎

−3.435 −6.078 −5.387 −1.472 −1.650 −2.425 3.922 1.932

0.138 0.327 0.276 0.028 0.035 0.072 0.168 0.156

– – – – – – – 4.490⁎⁎⁎

0.097 0.288⁎⁎⁎ 0.338⁎⁎

0.877 2.672 3.133

0.114



H2

H3

H3a

H4

H5

P5B P5C P5D P5E P5F P5G P6C P6F (creation of a hybrid culture)

P3Sat (satisfaction with main goals)

P4A (considering partner's size)

P4F (considering previous trust between partners)

P7Trust (trust between partners)

P4A P4B P7Trust P6F (creating a hybrid culture)

⁎ p b 0.08. ⁎⁎ p b 0.05. ⁎⁎⁎ p b 0.01. a Unless otherwise stated, F equals t because the regression has a single independent variable.

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with P6D to re-test respondents' self-perceptions of problems (Table 1), however, the data fail to support H2. To address hypothesis 3, the study uses a single item, which asks respondents to assess the extent to which previous trust with the partner influences the decision to select the same partner. Only two problems—delay in achieving goals (P5A) and problems in managing the agreement (P5B)—are moderately significant. Again, the relationship between previous trust and respondents' self-perceptions about cultural differences' positive effects on the cooperation agreement (variable P6C) is significant (Std. β = 0.268; t = 2.457). Luo's (2002) scale for measuring interorganizational trust determines the level of trust among partners. Results imply the scale is reliable (Cronbach's α = 0.85). The two variables—previous trust and interorganizational trust—correlate strongly with one another (ρ = 0.37; p b 0.01). Checking the relation between interorganizational trust (P7Trust) and the problems that could arise during the agreement (H3a) highlights a significant relationship between problems relating to achievement of goals, management of the agreement, and cultural conflict. Self-perception of cultural problems' effect is also significant, as Table 1 shows. Regarding hypothesis 4, considering national culture (Std. β = 0.097), size of the partner (Std. β = 0.213; p b 0.05), and mutual trust (Std. β = 0.288; p b 0.01) influences the creation of a hybrid (or third) culture. For hypothesis 5, measuring degree of success of the agreement's goals proves challenging because the questionnaire includes several possible goals and because respondents could rank the goals' importance using a 5-point Likert scale. Thus, new variables emerge by extracting respondents' satisfaction with their most important goals (those marked with 4 or 5 on question 3). The new variable (P3Sat) equates to the mean of respondents' satisfaction with the most important goals. Results show that the relation is significant (Std. β = 0.338; t = 3.133). 5. Discussion Hypothesis 1 posits a positive effect between considering the partner's country of origin and the problems arising during the cooperation agreement. Results fail to provide evidence of this relationship. Hence, results of the empirical analysis suggest that considering the partner's country of origin does not influence the most common problems arising during a cooperation agreement. Although the literature reports that national culture influences problems during cooperation agreements, this study's results indicate that considering the country of origin during partner selection does not necessarily help to avoid such problems. Hypothesis 2 predicts a relationship between considering the partner's size and problems during the agreement. Data reveal a significant relation, suggesting that considering the potential partner's size relates to cultural problems during the agreement. Notably, however, the relationship is positive. Some studies show that firms cooperating with similar-sized partners often face tougher negotiations because the relationship lacks a bigger partner able to impose its will during negotiations. This view contradicts the initial belief that similar size among partners results in an easier and more manageable alliance (DasíRodríguez, Martínez-Pérez, & Pardo-del-Val, 2003) but would explain why firms that consider size at the search and selection stages experience more problems during the agreement. Hypothesis 3 posits a link between trust and problems during the agreement. Data show that considering previous trust helps firms to benefit from cultural differences during the agreement. Broadening the scope by measuring interorganizational trust yields results showing that four items have significant, negative relationships with trust—all higher than 99%. Hence, according to this research, trust helps to mitigate delays or even failure in achieving the agreement's goals. In addition, trust reduces cultural conflict and problems in managing the

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agreement. Results also show a significant relationship between trust and the positive effect of cultural differences among partners. A comparison between previous trust (i.e., the trust that firms consider when evaluating potential partners during the search and selection stages) and interorganizational trust (i.e., the trust that firms build during the cooperation agreement) indicates that the latter is more important to alleviate subsequent problems in the agreement. The statistical analysis yields support for hypothesis 4 and implies that creating a hybrid culture (or third culture) is easier when firms consider partners' national culture and size during the search and selection stages and when mutual trust exists. Close examination of the coefficients reveals that the most important variable is trust and that the second most important variable is size. Considering national culture is itself non-significant. Finally, data support hypothesis 5 and indicate a positive relationship between creating a hybrid culture and satisfaction with the alliance's most important aims. 6. Conclusions Considering cultural factors when seeking and selecting partners may constitute a major competitive strength because cultural factors strongly influence the success of international agreements. Not all cultural factors, however, exert the same influence at all stages of the cooperation process; some are especially important during the search and selection stages for the agreement to succeed. Literature suggests that national culture, size, and trust are (1) the most important cultural factors that influence the cooperation agreement during the search and selection stages and (2) factors that support the creation of a hybrid culture. The empirical research supports the idea of considering size and trust when seeking and selecting partners. Unexpectedly, however, the relationship between considering size and cultural problems is positive. This finding warrants further investigation. Apparently, size is so important during the negotiation stage that some of its effects are hard to consider beforehand. Future research should analyze the influence of differences in size among partners, as well as the role of these differences during the agreement, especially at the negotiation stage. Previous trust emerges as a significant factor to alleviate subsequent problems. Data suggest that the role of mutual trust in lessening potential problems is fundamental, as is creating a third culture. Finally, this research offers evidence of a positive relationship between the creation of a third culture and the firms' satisfaction with the alliance. As with all studies, however, results are subject to certain limitations. First, analysis uses a small number of respondents, and scholars must interpret data and calculations with care. Second, the sample includes firms that either focus on R&D (i.e., firms from the Eureka network) or cooperate mainly commercially (i.e., firms that appear on the Chamber of Commerce's records), so any other goals for agreements fall outside the sample. Finally, questionnaire responses are from only one partner in the alliance, but the data would benefit from two-sided responses. Future research should extend analysis into size's role, as stated previously. In addition, applying Hofstede's (1980) research when studying the search and selection stages could yield interesting findings. Praxmarer-Carus (2014) defends the need to measure how cultural characteristics moderate the way individuals build trust. Finally, future research should seek to improve methods for measuring hybrid culture creation and its influence on cooperation agreements. References Angué, K., & Mayrhofer, U. (2010). International R&D cooperation: The effects of distance on the choice of the country of partners. Management, 13(1), 1–37. Barkema, H. G., & Vermeulen, F. (1997). What differences in the cultural backgrounds of partners are detrimental for international joint ventures? Journal of International Business Studies, 28(4), 845–864.

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