The Impact of Cultural Differences in U.S. Business-To-business

Industrial Marketing Management 35 (2006) 156 – 165

The impact of cultural differences in U.S. business-to-business export marketing channel strategic alliances Rajiv Mehtaa,1, Trina Larsenb,2, Bert Rosenbloomc,T, Joseph Ganitskyd,3 a School of Management, New Jersey Institute of Technology, Newark, NJ 07102, USA Department of Marketing, Drexel University, 32nd and Market Streets, Philadelphia, PA 19104, USA c Drexel University, 32nd and Market Streets, Philadelphia, PA 19104, USA d Loyola University New Orleans, New Orleans, Louisiana 70118, USA

b

Received 2 December 2003; received in revised form 6 February 2005; accepted 1 March 2005 Available online 12 May 2005

Abstract Given slower growth and fierce competition in the domestic market, combined with increasing opportunities in many overseas markets, more and more U.S. companies are going international. While many doing so may initially use a direct exporting approach that relies on foreign channel members to distribute the product in the host country, over time, strategic alliances among distribution partners may form based on trust, commitment, and cooperation. For these alliances to succeed, the partners’ perceptions of these variables need to be congruent so that expectations on each side of the dyad are reasonably similar. However, what happens when the cultural backgrounds of each channel partner are substantially different? This study empirically examines whether cultural differences do affect trust, commitment, and cooperation in international marketing channel alliances between U.S. exporters and their foreign distribution partners. Based on the survey responses from 149 U.S. exporters with marketing alliances abroad, cultural differences do affect trust, commitment, and cooperation. The greater the cultural differences between channel partners, the lower the levels of trust, commitment, and cooperation. Managerial implications are discussed, and study limitations are identified. D 2005 Elsevier Inc. All rights reserved. Keywords: Export; Marketing channels; Strategic alliances; Trust; Cooperation; Commitment

1. Introduction In the first decade of the 21st century, the U.S. economy is experiencing slower growth in domestic markets and fierce foreign competition. Entering foreign markets is no longer just something to think about, but rather an action that must be taken without delay by more and more U.S. companies.

* Corresponding author. Tel.: +1 215 895 6992; fax: +1 215 895 6975. E-mail addresses: [email protected] (R. Mehta), [email protected] (T. Larsen), [email protected] (B. Rosenbloom), [email protected] (J. Ganitsky). 1 Tel.: +1 973 596 6419; fax: +1 973 596 3074. 2 Tel.: +1 215 895 4995; fax: +1 215 895 6975. 3 Tel.: +1 504 864 7967; fax: +1 504 864 7970. 0019-8501/$ - see front matter D 2005 Elsevier Inc. All rights reserved. doi:10.1016/j.indmarman.2005.03.002

Many firms that enter international markets use a direct exporting approach that relies on overseas channel members taking products manufactured for the home U.S. market and making them available to final customers in the foreign countries to which they are exported. The use of such overseas distributors as an entry strategy for international marketing is usually quicker, less risky, and less capitalintensive than setting up joint ventures or establishing international subsidiaries to manufacture the products in foreign markets. On the other hand, using foreign distributors poses a formidable channel management challenge: the U.S. exporter needs to turn foreign distributor channel participants, who are essentially strangers, into partners willing to cooperate enthusiastically in promoting and distributing the U.S. manufacturer’s products. Consequently, the foreign manufacturer must not only develop an inter-organizational channel structure for reaching final

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customers in overseas markets, but must build strategic alliances with these channel members as well. According to Webster (1992), strategic alliances require that channel partners share the same long-term strategic goals as well as commitment of capital and management resources. Building and managing these strategic alliances can be a difficult task. In the context of marketing channels, even though a written agreement may be signed by each channel partner, strategic alliances are usually not legally defined entities governed by state, national, or international laws. Rather, the real foundation underlying the relationship is based on trust, commitment, and cooperation between the parties. To work together successfully, the channel partners have to believe each other (trust), be willing to assist each other on a regular rather than on an ad hoc basis (commitment), and work together to achieve their goals (cooperate). Thus, the creation, nurturing, and sustaining of strategic alliances in international export channels must be based on substantial degrees of trust, commitment, and cooperation on the part of all channel members. Given that such strategic alliances are based on trust, commitment, and cooperation, the channel partners’ perceptions of these attributes need to be congruent so that the expectations on each side of the dyad will be reasonably similar. For example, both sides of the dyad would need to perceive essentially the same long-term strategic goals and share similar views about what each is expected to contribute in terms of capital and management resources (Webster, 1992). When both channel partners in a strategic alliance come from the same cultural background, such consistency in expectations should be a matter of course because each would most likely share the same culturally defined norms of what constitutes trust, commitment, and cooperation. But what happens when the cultural backgrounds of each channel partner are different, as is often the case when exporters use foreign distributors with very different backgrounds? In the context of strategic alliances in international business-to-business export channels, this is a common occurrence. The purpose of this paper is to examine empirically whether cultural difference affect trust, commitment, and cooperation in international business-to-business export channels between U.S. exporters and their foreign distributors.

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bridge the cultural gap. Additionally, in some countries, cultural values may differ and personal connections may outweigh profit maximization in the conduct of business (Johnson, Sakano, & Onzo, 1990). Despite globalization, such cultural differences have not disappeared. In a study spanning three decades, Barkema and Vereulen (1997) found that cultural values have been surprisingly stable over time. Yet, despite the importance of this behavioral issue, most research works on international strategic alliances have focused primarily on designing and implementing the structure of the alliance (see Parkhe, 1993 for a review) rather than addressing the ongoing management of the relationship. The latter reflects the fact that researchers usually have easier access to information coming from senior management, who give more attention to negotiating and signing the initial agreement than from lower-level managers usually responsible for the agreement’s day-to-day implementation. However, a number of studies of international strategic alliances exist where behavioral dimensions are considered to be important to the maintenance of international partnerships (Aulakh, Kotabe, & Sahay, 1996; Beamish & Banks, 1987; Madhok, 1995). These studies primarily focus on the role of trust in the partnership, especially on its role as a substitute for the hierarchical control that is feasible in ownership-based relationships. For example, Aulakh et al. (1996) developed a model of the antecedents of trust and performance in international manufacturer – foreign distributor and licensor –foreign licensee relationships. They argue that the role of trust and its underlying dynamics may vary in international strategic alliances due to the cultural environment that surrounds the partnership. Their findings imply that cultural differences affect the dynamics of partnerships in different countries and that management should be aware of these differences. Johnson, Cullen, Sakano, and Takenouchi (1996) also posited the potential effect of cultural difference and similarity on the success of international strategic alliances. However, they examined similarity at the organizational level. That is, they focused on similarity in firm size, product lines, and goals and objectives. For cultural sensitivity, they examined the extent to which managers understand and adapt to differences in their partner firm’s culture. Findings support the development of cultural sensitivity and the provision of cross-cultural preparation when entering international alliances.

2. Background Partners in a strategic alliance cooperate to achieve longterm goals that each firm alone could not easily attain (Mohr & Spekman, 1994). While all strategic alliances in marketing channels require trust, commitment, and cooperation, this is especially the case when the strategic alliance is cross-national. Due to different cultural environments, exporters may lack sufficient knowledge about the market and turn to a local distributor to act as an alliance partner to

3. Trust Trust has been defined as the willingness to rely on an exchange partner in whom one has confidence (Ganesan, 1994; Moorman, Zaltman, & Deshpande, 1992; Skarmeas & Katsikeas, 2001). Specifically, Ganesan (1994) proposed that the definition of trust should consist of two components: (1) credibility, which refers to the extent to which a

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channel partner believes the other member of the dyad has the expertise to perform a task effectively, and (2) benevolence, which refers to the extent to which a channel partner believes his opposite member in the dyad has intentions and motives beneficial to him when new conditions arise for which a specific promise has not been made. Thus, the credibility component of trust focuses on the common expectations of the channel partners’ actual dedication to their word or written statement, while benevolence focuses on the motives and intentions of the exchange partners. As noted above, strategic alliances or partnerships in channels of distribution are not usually legally defined entities governed by state, national, or international laws, and thus trust may be viewed as a substitute for control (Rousseau & Sitkin, 1998). That is, while a legal contract is one way of controlling an exchange partners’ behavior, detailed contracts can get in the way of effective exchange relationships (MacCauley, 1963). However, relational trust is developed between exchange partners through repeated interactions over time (Rousseau & Sitkin, 1998). As a partner is found to be reliable and dependable, positive expectations are formed regarding the partner’s intentions. Over time, attachments are formed between partners based on reciprocated care and concern (McAllister, 1995). Such trust is critical in strategic alliances among partners because strategic alliances require the coordination of two or more partners to pursue shared objectives (Doz, 1996; Kanter, 1994). It should be noted that trust is not an objective in and of itself. Rather, it is positively related to desirable outcomes. Williamson (1985) argues that, other things being equal, relationships that exhibit trust are associated with less stress and greater adaptability. Zand (1972) contends that the lack of trust will be deleterious to information exchange and to reciprocity of influence. This, in turn, will diminish the effectiveness of joint problem solving.

4. Commitment Gundlach, Achrol, and Mentzer (1995) describe commitment in terms of three dimensions. The first is the input or instrumental dimension, which refers to an affirmative action taken by one party that creates a self-interest stake in the relationship and demonstrates something more than a mere promise. The second dimension is an attitudinal one. In essence, this is an enduring intention by the parties to develop and maintain a stable, long-term relationship. The third is a temporal dimension. Specifically, commitment requires that the inputs or instrumentalities, as well as attitudes brought to the relationship, must be consistent over the long term. Consequently, commitment between parties implies a relationship with expectations on the part of each partner that his opposite member will be there in the future to jointly exploit opportunities and solve problems. Thus, a

high level of commitment provides the context in which both parties can achieve individual and joint goals without raising the spectre of opportunistic behavior. Because more committed partners will exert effort and balance short-term problems with long-term goal achievement, higher levels of commitment should be associated with successful strategic alliances (Perry & Angle, 1981). Channels of distribution scholars have found support for the proposition that the greater the commitment of distributors, the better the performance of the supplier in terms of market information, the greater the increased assistance from distributors, and the better the reduction of assistance and attention given by distributors to competitors’ products (Anderson & Weitz, 1992a,b). However, the empirical research examining the driving forces of commitment (Gundlach et al., 1995; Kumar, Scheer, & Steenkamp, 1995) and the end results of commitment (Brown, Lusch, & Nicholson, 1995; Morgan & Hunt, 1994) has been primarily undertaken in domestic markets. Relatively little research has addressed commitment in an international marketing channels context. A notable exception is the international study conducted by Czinkota and Kotabe (1999), which found that a strategy lacking commitment in Japan exacerbated the U.S. exporters’ lackluster performance. Another international study consisted of a comparative study of U.S. and Japanese marketing channels. Here, the authors found that a supplier needed to understand the importance of societal and cultural influences on distributor behavior, especially with regard to commitment and its impact on performance (Kim & Oh, 2002).

5. Cooperation The concept of cooperation has been conceptualized by authors in many ways. For example, behavioral scholars view cooperation as organizational interdependence (Aiken & Hague, 1968) and as joint accomplishment (Schermerhorn, 1975), while Stern and Reve (1980) defined it as joint striving towards individual and mutual goals. Similarly, Anderson and Narus (1990) define cooperation as occurring when partners work together to achieve mutual goals. All of these cooperation constructs share some elements of commonality: (1) cooperation requires interrelated behavior by two or more parties; (2) such behavior is voluntary; and (3) cooperation is motivated by the desire to achieve both individual and joint objectives. All of these elements are critical to success in strategic alliances in marketing channels. Marketing channels are composed of interdependent institutions that must cooperate to perform distribution tasks while simultaneously pursuing independent and collective goals (Bowersox, Cooper, Lambert, & Taylor, 1980). Functional interdependence requires a substantial level of cooperation to perform the specific tasks necessary to make products and services available to final customers. In fact, it has been widely

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agreed that cooperation is the predominant behavior in channels of distribution (Gill & Allerheiligen, 1996). Yet, traditionally in the marketing channels literature, much greater attention has been paid to competition and conflict in channels rather than to cooperation. This is, despite the fact that almost 40 years ago, Alderson (1965) called for a theory of cooperation to match the prevailing theories of competition and conflict.

6. National culture Authors from a variety of backgrounds have developed definitions and frameworks of culture. For example, culture has been described as everything that people have, think, and do as members of their society (Ferraro, 1990, p. 18), or as ‘‘the software of the mind’’ (Hofstede, 1991). Hofstede’s extensive research on culture has helped conceptualize one of the most popular theories of cultural types. His approach identified five underlying value dimensions: (1) individualism versus collectivism, (2) large versus small power distance, (3) strong versus weak uncertainty avoidance, (4) masculinity versus femininity, and (5) Confucian dynamism, otherwise known as long-term versus short-term orientation. Trompenaars and Hampden-Turner (1988) developed the 7D model of culture based on 50,000 cases of managers from multinational and international corporations from over 100 countries. In their approach, cultures differ in the specific solutions they choose for problems. They then identify cultures based on seven fundamental dimensions. While the above approaches are relevant to the development of many types of managerial strategies and tactics, in this study, we are specifically concerned with trust, commitment, and cooperation between international marketing channel partners. To establish trust, commitment, and cooperation, effective communication between the partners is crucial (Mohr & Nevin, 1990; Snyder & Morris, 1984).

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An approach to national culture developed by Hall specifically focuses on communication. He asserts that while cultures are systems that are shared, culture is ultimately experienced personally. If an individual is to communicate effectively with someone from another culture, he must – if not understand the hidden codes in communication –at least have a code breaker. Thus, Hall developed a framework for the translation of behavior across cultures based on communication styles. Recognizing that there is more to communication than explicitly coded words, Hall delineated cultures along the high/low context continuum. That is, the context in which communication takes place encompasses the meaning of that event, and that context carries varying proportions of the meaning of communication in different cultures. In the case of interfirm relationships such as international marketing channel alliances, one can differentiate between the ‘‘context-excluded’’ and ‘‘context-embedded’’ links among partners (Kim & Oh, 2002). That is, some aspects of the interfirm relationship are unaffected by cultural influences and others are. Kim and Oh (2002) argue that distributor commitment is ‘‘context-embedded.’’ Other studies have shown that forces such as bilateral communication (Anderson & Weitz, 1992a,b), trustworthiness of the supplier (Morgan & Hunt, 1994), and supplier’s commitment to the distributor (Anderson & Weitz, 1992b) are driving forces of distributor commitment. Consequently, context may be critical in interfirm international channel relationships. Because Hall’s framework for culture flows directly from an understanding of communication and context, his approach is used in this study. In Hall’s framework, in low context (LC) cultures, most of the information flowing between sender and receiver (exporter and foreign distributor, for example) is contained in the message itself. So, the message needs to be explicit and detailed because each party will rely almost solely on the information contained in the

Table 1 Cultural context classification of export channel partner respondents Location

Contextual classification

Number

Location

Contextual classification

Number

(1) Argentina (2. Azerbaijan (3) Brazil (4) Canada (5) Chile (6) China (7) Colombia (8) Czech Republic (9) Ecuador (10) Egypt (11) France (12) Germany (13) Hungary (14) Hong Kong (15) India (16) Indonesia

High context High context High context Low context High context High context High context Low context High context High context Low context Low context Low context High context High context High context

2 2 2 8 4 4 2 7 4 2 14 12 4 2 5 2

(17) (18) (19) (20) (21) (22) (23) (24) (25) (26) (27) (28) (29) (30) (31) (32)

Low context High context High context High context High context High context High context Low context High context High context High context High context High context High context Low context High context

6 8 2 6 2 7 4 8 4 2 2 4 2 2 10 4a

a

Total sample size = 149.

Ireland Italy Jamaica Japan Malaysia Mexico Nigeria New Zealand Saudi Arabia Singapore South Korea Spain Thailand Taiwan United Kingdom Venezuela

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message itself. On the other hand, in a high context (HC) culture, less explicit and detailed information is carried in the message. Instead, the sender and receiver rely more on the context of the communication process to convey the message. So personal relationships tend to play a much larger role in HC cultures. Commonly cited examples of countries characterized by low context cultures are the United States, Germany, and Switzerland. Examples of countries with high context cultures include Brazil, Japan, and Mexico (see Table 1 for other examples). In the context of Hall’s HC/LC cultural paradigm, culturally similar channel partners (HC to HC; LC to LC) should be capable of communicating more effectively than culturally dissimilar channel partners (HC to LC; LC to HC).

As discussed above, interdependence between the channel partners in a strategic alliance is the foundation of cooperation between them. The essence of cooperation is the notion that either party could not achieve their objectives on their own. Rather, they are dependent upon each others’ expertise to accomplish both individual and joint goals. For the relationship to result in cooperation rather than conflict, each party must be ‘‘on the same page’’ in terms of understanding what is expected of them. The exporter expects certain actions from the foreign distributor and vice versa. When cultures are similar, the clarity of each partners’ expectations is likely to be greater than when there is a great difference between the cultures.

7. Hypotheses

H3. International strategic alliances between culturally similar exporters and distributors will exhibit greater cooperation than international alliances between culturally different exporters and distributors.

As discussed earlier, in a strategic alliance within an international marketing business-to-business export channel, trust becomes a crucial factor in the relationship. The exporter needs to know that he can rely on the foreign distributor to implement his export strategies. On the other side of the dyad, the foreign distributor needs to believe that the exporter is acting in good faith to achieve not only his objectives, but the foreign distributor’s objectives as well. Thus, cues that each party sends must be clearly understood. In a situation of great cultural similarity, accurate perception of these cues by each partner should be more likely than in a situation of greater cultural difference. Therefore: H1. International strategic alliances between culturally similar exporters and distributors will exhibit greater trust than international alliances between culturally different exporters and distributors. In a strategic alliance in international marketing channels, all three dimensions of commitment (instrumental, attitudinal, and temporal) discussed earlier are likely to be involved. First, commitment is based on the expectation that each strategic alliance partner will go beyond a mere promise (instrumental dimension). The exporter must believe that the foreign distributor will work with him in a reliable fashion (attitudinal dimension). Finally, the foreign distributor expects that the exporter will provide a continuous source of supply and support his efforts to market the products successfully in his country over the long run (temporal dimension). So, a clear understanding of the actions taken by each party as the relationship unfolds within the alliance is essential. In a situation of greater cultural similarity, such an outcome is more likely to occur than when there are substantial differences in the cultures. H2. International strategic alliances between culturally similar exporters and distributors will exhibit greater commitment than international alliances between culturally different exporters and distributors.

8. Methodology To test the hypotheses, data were drawn from a sample of manufacturers of a variety of industrial products who depend on foreign distributors to market these products overseas. An international trade association that was interested in learning about international marketing channel practices provided assistance gathering the data. The association’s primary objective was to identify and recommend the best channel management strategies and initiatives that its members could ultimately use to achieve their objectives in the international market. As sponsors of the study, the association and 12 of its largest members funded the data collection costs. From the internal databases of the trade association, a random sample of 480 manufacturers that marketed products regularly and continuously in international markets via foreign channel partners such as distributors, dealers, and import agents was drawn. It was the view of the association that these export relationships already were, or were evolving into, strategic alliances. The survey was administered using a multi-step process. In the first stage, a cover letter signed by all the sponsors was mailed to the members of the selected sample. It explained the purpose of the study and elicited the cooperation of the key respondents to fill out a questionnaire to be received the following week. In the second stage, a packet containing another letter, a questionnaire, and a postage-paid reply envelope were mailed to the potential participants. The letter explained the importance of participation and identified the time frame for returning the survey. To encourage a greater response rate, respondents were informed that the information they provided would be kept confidential and offered an executive summary of the findings upon completion of the study. In the third phase of the data collection procedure, the

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respondents received a follow-up letter that was mailed a week later, reminding them to complete and return the survey by the pre-specified date. Table 2 Factor analysis results for commitment, cooperation, and trust Factors and scales

Extracted factor loadings (labeled) Comment Cooperation Trust

Commitment We feel very little loyalty to our partner.a We really care about the fate of our partner. Deciding to enter into a relationship with this partner was a definite mistake on our part.a For us, our partner was the best possible company to form a venture with. We are proud to tell others about our venture with our partner. We could just as well have a relationship with another partner as long as the rewards are similar.a We consider that the choice of our partner was the correct one. It would take little change in our present circumstance to quit our venture with our partner.a

.7783 .8146 .8593

A questionnaire was developed in cooperation with several members of the international trade association. This joint questionnaire development process helped determine whether relevant constructs were captured by the various measurement scales. Key respondents were asked to provide information on demographic characteristics and to then respond to various issues concerning their primary strategic international channel partner. The questionnaire was pretested on key respondents of 20 randomly selected members of the international trade association. Based on responses from the pre-test, minor modifications were made to the questionnaire. 8.2. Measurement scales

.6689

As suggested by Churchill (1979) and Nunnally (1978), existing multi-item scales, with psychometric properties that have been previously assessed with adequate reported reliability and validity, were utilized to assess the constructs. Trust was operationalized using the scales adapted by Aulakh et al. (1996) that were originally developed by Moorman, Deshpande and Zaltman (1993) (see Table 2). The scales evoke the level of trust in their primary international channel partner, as perceived by the manufacturer The response format for these scales ranged from (1) ‘‘strongly disagree’’ to (5)‘‘strongly agree.’’ Key informants were asked to rate the level of commitment of their principal strategic international channel partner using scales developed by Cullen, Johnson, and Sakano (1995), which were modifications of scales derived from Mowday, Steers, and Porter’s (1979) Organizational Commitment Questionnaire (see Table 2). Cooperation was assessed by modifying scales that were originally developed by Childers, Ruekert and Boush (1984). These scales reflect the degree to which a manufacturer perceives that its key international channel partner coalesces towards attaining individual or mutual goals (or the level of cooperation that exists among them). As shown in Table 1, the countries in which the strategic international channel partner of U.S. manufacturers were located were classified based on the dichotomy of high and low context cultures of Hall (1977, 1983) and Hall and Hall (1990).

.7878

.6371 .6245

Trust Our business relationship with our partner is characterized by high levels of trust. Our firm and our partner generally trust that each will stay within the terms of our contractual agreement. We and our partner are generally skeptical of the information provided to each other.a Percent of variation explained 41.3 Eigenvalue 5.62 Scales reversed before factor analysis.

8.1. Questionnaire development

.6875

Cooperation Our future goals are best reached by working with, rather than against, our foreign partner. Our future profits are dependent on maintaining a good partnership. Our partnership’s future promises to be beneficial to both of us. Our partner recognizes the effort we put into supplying their products and they support us for it. If our partner achieves its competitive goals, we will also be in a better position to compete with other competitors. Our partner works ‘‘around us’’ more than ‘‘with us’’ in trying to achieve our collective goals.a We could probably be as successful with other partners as we are with our primary foreign partner.a

a

161

.7494

.8081 .8118 .5834

.6945

.5074

.6613

.7204

9. Results .7595

9.1. Response rate .8297

22.8 3.45

19.8 3.22

A total of 166 questionnaires were returned within the specified time, yielding a response rate of 34.6%. Seventeen surveys were deemed unusable because of incomplete responses and were discarded from the study. This yielded a response rate of 31.0%.

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Although the response rate attained is similar to those reported in a number of empirical studies on marketing channels (see, for instance, Bandyopadhyay & Robicheaux, 1997; Gatignon & Robertson, 1989; Heide & John, 1988; Seifert & Ford, 1989), tests for non-response bias were still conducted.

Table 4 MANOVA results for commitment, cooperation, and trust Variables

Wilks’ k Significance Small cultural Large cultural F-value of F distance distance (n = 69) (n = 80)

Mean (S.D.)

(1) Commitment 4.32 (.64) (2) Cooperation 4.39 (.59) (3) Trust 4.19 (.71)

9.2. Tests for non-response bias Non-response bias was assessed using two widely used practices. First, as advocated by Churchill (1991), 30 randomly selected non-respondents were contacted by telephone and asked to respond to several questions regarding general company demographic characteristics. ttests were computed to ascertain if any differences emerged between respondents and non-respondents with regard to key organizational characteristics. No statistically significant differences in these organizational characteristics ( p < .05) were found for annual sales revenues, number of employees, and years affiliated with strategic international channel partner. A second test for non-response bias, as suggested by Armstrong and Overton (1977), longitudinally examined the differences between early and late respondents on the same set of variables (annual sales revenues, number of employees, and years affiliated with strategic international channel partner). Again, t-tests computed by comparing early and late respondents yielded no significant differences. Thus, non-response bias does not appear to pose any problems in this investigation. 9.3. Construct validation: factor analysis and reliability Prior to testing the hypotheses, the psychometric properties of the various measurement scales were analyzed for construct validity, as suggested by Churchill (1979) and Peter (1981). Employing a varimax, orthogonal rotation, the results of the principal components factor analysis reveal a three-factor solution, which cumulatively accounted for 83.9% of the variation (Table 2). Using .5 as a cut-off for factor selection, all the items loaded significantly on their corresponding a priori constructs. The eigenvalues for trust, commitment, and cooperation, were 3.22, 5.62, and 3.45, respectively. To assess the internal consistency of the multi-item scales used in this study, Cronbach coefficient a reliability Table 3 Intercorrelations and reliabilities results for commitment, cooperation, and trust Variables

(1)

(2)

(3)

(1) Commitment (2) Cooperation (3) Trust Cronbach’s a

1.000 .7586* .6879 .92

.7586 1.000 .8084 .94

.6879 .8084 1.000 .89

T All pairwise correlations significant beyond p < .05.

3.10 (.84) 3.28 (.88) 3.17 (1.01)

36.09

.0001

estimates were computed (Churchill, 1979; Cronbach, 1951; Peter, 1979). The reliability estimates reveal that the a values were .89 for trust, .92 for commitment, and .94 for cooperation. Reliabilities within the range of 0.60– 1.00 are considered to be sufficient (Nunnally, 1978) (See Table 3). To examine the overall impact of cultural difference on the levels of trust, commitment, and cooperation exhibited by international channel partners as perceived by U.S. manufacturers, the data were subjected to a multivariate analysis of variance test (MANOVA). This procedure is consistent with prior international channel management research, which has used this procedure to test the hypotheses in cross-cultural settings (Bandyopadhyay, Robicheaux, & Hill, 1994) (see Table 4). This analysis yielded a statistically significant finding (Wilks’ k Fvalue = 36.09, p < .001), indicating support for a relationship between the degree of cultural difference and the levels of trust, commitment, and cooperation, exhibited by international strategic alliance partners in export channels. An examination of the mean values for trust, commitment, and cooperation revealed a high level of consistency with which U.S. manufacturers assessed their international channel partners. More specifically, those international partners in export channels categorized by large cultural differences exhibited similar levels of trust, commitment, and cooperation with one another, while those that were categorized as culturally similar exhibited similar levels of commitment, cooperation, and trust. In addition, the mean values indicate that international alliances between culturally similar exporters and distributors exhibited greater trust, greater commitment, and greater cooperation than international alliances between culturally different exporters and distributors.

10. Discussion Building trust, commitment, and cooperation among channel members operating in domestic channels where the partners come from similar cultural backgrounds can be challenging. When the strategic alliance occurs in an international marketing channel context where the cultural backgrounds of channel members are often dissimilar, the challenge will be even greater. In short, when cultures are substantively different, trust, commitment, and cooperation among channel members are more difficult to attain.

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This study confirms this proposition. Managers responsible for developing international marketing channels where the partners in the strategic alliance have different cultural backgrounds need to be aware of the issue of cultural difference and the impact that it can have on trust, commitment, and cooperation. Exporters from cultures that are different from their foreign distribution partners will need to take proactive steps to mitigate the impact of that cultural difference. To simply ignore the potential impact of cultural differences may adversely affect the performance of the alliance by undermining trust, commitment, and cooperation in the channel. The first and most critical step will be for exporters to recognize that cultural differences exist and that they may distort communication across cultures, even at the subconscious level. This effect was referred to by cultural anthropologist, James A. Lee, as the self-reference criterion (Lee, 1966). To deal with this issue, an exporting firm may require its employees to gain basic knowledge about the culture of their foreign distributor. This can be done relatively easily through a variety of widely available cross-cultural training books and videos. Another strategy beyond requiring employees to learn about their channel partner counterparts’ culture is for exporters to appoint bicultural or multi-cultural professionals responsible for leading their international marketing strategies. This approach, first implemented by Dutch-based traders, is now widely used by the emerging web of Chinese businesses operating across many cultures (Kao, 1993). Additionally, exporters might consider investing time and attention in selecting channel partners, especially when cultures are substantively different rather than rush into relationships based on short-term considerations. If anything, when cultures are different, managers should take as much time as necessary to assure that both partners have learned as much as possible from each other before establishing a relationship. For example, 3M invested more than 7 years in establishing a beachhead in the People’s Republic of China (a high context culture) in the late 1970s. Although in a low context culture this lengthy approach may be perceived as extreme, this is a useful example of what an exporter might need to do to avoid having to fix miscommunications that undermine trust, commitment, and cooperation with their foreign distribution partners.

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the dyad, a better insight about cultural differences as perceived by opposite members might emerge.

12. Conclusion To continue to grow, more and more U.S. firms have looked overseas in recent years to find markets for their products and services. Yet, international marketing may still be a mysterious universe for many of these firms and so they tend to look for foreign market entry strategies that minimize risk and financial commitment. The use of foreign distributors to penetrate unfamiliar overseas markets has thus been an appealing approach for many U.S. companies. Foreign distributors presumably have the market knowledge and logistical capabilities to introduce the manufacturer’s products to his customers while reducing the risk for the exporter. In theory, this is a win– win situation; the exporter can gain access to overseas markets relatively inexpensively while the foreign distributor gains access to a desirable product or service that adds to his revenues and profits. The problem arises from the mechanism used to implement this foreign market entry strategy and the marketing channel that ties the exporter and foreign distributor together. As this marketing channel emerges, all of the issues associated with interorganizational management emerge as well. These include no clear lines of authority, no defined loci of responsibilities, and no explicit superior/subordinate relationship. In an attempt to overcome these challenges, partnerships and strategic alliances have been developed in recent years as the basis for channel relationships in both domestic and foreign marketing channels. Such strategic alliances, by their very nature, are based on trust, commitment, and cooperation between the channel members. Strategic alliances in an international marketing channels are essentially a meeting of the minds between channel members in that each will perform the tasks expected of him in such a way as to enhance the performance of his exchange partner. When cultural differences exist between exporters and their foreign channel partners, the alliance can be undermined if the cultural differences are significant enough to affect the communication process between the channel partners. Managers responsible for developing exports via foreign distributors need to pay close attention to the challenge of cultural differences in the channel.

11. Limitations and suggestions for future research References A limitation of this study, of course, is that it deals only with U.S. firms’ perceptions about their overseas alliance partners. Future research that focuses on manufacturers in other countries of origin might produce results different from the findings of this study. Further, the study addresses only one side of the marketing channel dyad. In future research, if it is possible to obtain data from both sides of

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