Forming cross-border cooperation has become a popular strategy for companies to act successfully in today’s global marketplace. Despite their surging popularity, international cooperative arrangements are difficult to handle. Literature highlights that both mutual trust of business partners and control of the partner’s behavior contribute to the cooperation’s performance. So far, however, there is little empirical evidence on how both factors operate in different national business environments. Differences in national cultures and labor institutions may influence the way in which trust in and control of a foreign business partner is perceived and developed. A survey of 40 Chinese and 50 German small and medium-sized enterprises (SMEs) involved in Sino-German cooperation addressed trust formation, control, and performance. The results suggest that in German SMEs ascriptions of benevolence, integrity and predictability play an important role in trust-building, while the partner’s competence did not emerge as a strong antecedent of trust. In contrast, for Chinese SMEs, only the perception of the partner’s benevolence significantly contributes to the development of trust. In addition, data reveal that – depending on the SME’s home country – exercising control over the cooperation’s transactions differently relates to trust. In German SMEs trust and control show a reciprocal relationship, i.e. relying on formal controls will be more (less) intense when there is a low (high) level of trust. On the other hand for Chinese SMEs trusting the German business partner does not imply less exercise of controls. Trusting neither substitutes nor supplements control mechanisms in the relationship. Finally, it was found for SMEs from both countries that trusting the partner constitutes a more effective factor for the collaboration’s economic success than exercising formal controls. In sum, this research suggests that in order to fully understand the role of trust and control in cross-border business relationships, it is necessary to look at the socio-cultural contexts from which the partnering companies and individuals originate.
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