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Wary managers: Unfavorable environments, perceived vulnerability, and the development of trust in foreign enterprises in China

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Abstract

Vulnerability is salient among international managers, who tend to be wary when operating in transition economies like China. Systematic research is lacking, though, on how the local environment influences foreign managers’ perception of vulnerability, and how foreign managers can develop trust even when their perceived vulnerability is high. We conducted in-depth case studies of two foreign-controlled enterprises in China, and developed a theoretical model that links perceptions of the macro-level environment to micro-level management. Our results illustrate the antecedents and consequences of perceived vulnerability and the processes of trust building in unfavorable environments. Through comparative analysis of the two cases, we found that the foreign managers’ perceived vulnerability was shaped by the institutional, technological, and market conditions of the local environment, and we learned how this perceived vulnerability influenced their trust in the local workforce and the joint investment in formal and social control they used in building trust. The effect of perceived vulnerability on trust was moderated over time when the implementation of control was combined with active investments in trust, which led to behavioral changes on the part of the local employees, which in turn increased their trustworthiness. The implications of these findings are discussed.

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Acknowledgements

This manuscript is a substantially revised version of the paper that won the Carolyn Dexter Best International Paper Award at the 2007 Annual Meeting of the Academy of Management in Philadelphia. We are grateful to Christopher Paul Earley, Chris Long, Laura Poppo, Peter Smith Ring, Eric Tsang, and Antoinette Weibel; three anonymous reviewers of the Academy of Management OMT Division; Witold Henisz, the editor, and three reviewers of JIBS for very useful comments on the earlier versions of the paper. We thank Eden Ling, Hwee Hoon Low, Kay Heng Phang, Li Li Phua, Derek Tan, Stephen Wan, and Qiu Leong Yew for their research assistance. The research described herein was supported by a research grant from Nanyang Business School, Nanyang Technological University, Singapore and a travel grant from the Max Planck Institute for the Study of Societies, Germany.

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Authors and Affiliations

  1. Nanyang Business School, Nanyang Technological University of Singapore, Singapore

    Lai Si Tsui-Auch

  2. Max Planck Institute for the Study of Societies, Cologne, Germany

    Guido Möllering

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  1. Lai Si Tsui-Auch
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  2. Guido Möllering
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Correspondence to Lai Si Tsui-Auch.

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Accepted by Witold Henisz, Area Editor, 21 November 2008. This paper has been with the authors for two revisions.

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Tsui-Auch, L., Möllering, G. Wary managers: Unfavorable environments, perceived vulnerability, and the development of trust in foreign enterprises in China. J Int Bus Stud 41, 1016–1035 (2010). https://doi.org/10.1057/jibs.2009.28

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