MARCO HISTORICO La Auditoria de Gestión

(Source: Morgan and Hunt 1994, p.21)

This is flawed as clearly many organisations manifest different configurations of governance depending on exchange situation and frequency (Pels et al., 2000; O'Toole and Donaldson, 2000). The flexibility therein is reflected in the more realistic definition of Heide (1994) who states that governance is “a multi-dimensional phenomenon, encompassing the initiation, termination, and ongoing relationship maintenance between a set of parties” (p.72). Here, exchange frequency in particular, is said to have a moderating effect in that the temporal nature of relationship fosters trust, commitment, social norms, and interdependence (Dwyer et al., 1987; Johanson and Mattsson, 1985; Morgan and Hunt, 1994; Scanzoni, 1979; Wilson, 1995), facilitating bilateral contribution between the focal and partner firms.

Nevertheless, not all relationships are equal with disproportionate power often residing accordingly with the largest and least dependent firm in the dyad (e.g., Frazier et al., 1989; Frazier and Summers, 1986). In this regard, a relationship approach would not seem to bode well for the MCE in that their lack of resources beyond intellectual inputs may place them at the mercy of the larger and more opportunistic firm (Williamson, 1975).

Focal Firm

Immediate

Customers CustomersUltimate

Government Non-profit Organization Competitors Services Suppliers Goods Suppliers Business Units Employees Functional Departments Supplier Partnerships Internal Partnerships Buyer Partnerships Lateral Partnerships 1 2 3 4 5 6 7 8 9 10 Focal Firm Immediate

Customers CustomersUltimate

Government Non-profit Organization Competitors Services Suppliers Goods Suppliers Business Units Employees Functional Departments Supplier Partnerships Internal Partnerships Buyer Partnerships Lateral Partnerships 1 2 3 4 5 6 7 8 9 10

However, the manner in which these and other constructs have been operationalised in the literature varies considerably (Ambler and Styles, 2000; Rexha and Miyamoto, 2000) and none more clearly than through SE (Anderson and Narus, 1984; Dwyer et al., 1987; Håkansson, 1982; Morgan and Hunt, 1994) and TCA (Anderson and Weitz, 1992; Pfeffer and Salancik, 1978; Kumar, Scheer, and Steenkamp, 1998) perspectives2. Whereas the former emphasises ongoing, reciprocal exchange based on trust and commitment, the latter focuses on reciprocal bargaining and power (Rexha and Miyamoto, 2000). On the basis of the obvious contrasts inherent within these, and the likelihood that the MCE may largely adopt one or the other to enter the foreign market, it is important that RM from the theoretical perspectives of SE and TCA is considered.

2.5

Relationship Marketing from SE and TCA Perspectives

To this point it has been shown that whilst RM manifests in a number of different forms, the perspectives of SE and TCA are not only dominant in the literature but perhaps offer the greatest potential for understanding the internationalising small firm. This is because the main feature of these two approaches is the manner in which risk is managed (e.g., Dunning, 1988; Heide and John, 1988; Larson, 1992; Pels et al., 2000; Yli-Renko, Sapienza, and Hay, 2001; Venkataraman and Macmillan, 1997).

For instance, Covin and Slevin (1989) found that small US manufacturers managed risk by either possessing an organic, flexible structure or a mechanistic, conservative one depending on the competitive environment they were in. However, risk management through manipulation of internal infrastructural resources (due to their non-existence) is not an option for the MCE (e.g., Larson, 1992), therefore the manipulation must emerge in the manner its relationships are structured.

In this regard, SE and TCA may be expressed in terms of the MCE’s inclination to control relationships socially or contractually3. Larson’s (1992) work provides an exemplar of this thinking, finding that the extent of the use of the former by the

2 _{In this research SE and TCA are chosen overall as best representing relational and transactional constructs even though these have} also been conceptualised within differing theoretical domains. For example Macneil (1982) presents both SE and TCA constructs in the context of relational exchange theory. Pfeffer and Salancik (1978) discusses the emergence of TCA variables within resource- dependence theory. Network theorists (Achrol, 1997; IMP Group, 1987) also place particular emphasis on SE in describing the linkages between multiple sets of dyads.

3 _{It is important to note that the existence of a written contract between the focal and partner firm does not preclude social control. In} fact, the flexible contract has been shown to enhance trust through mutual understanding and learning (Blomqvist et al., 2005), as opposed to those which attempt to precisely account for every eventuality (e.g., Macneil, 1978).

entrepreneurial firm is determined by aspects such as partner familiarity and reputation, mutuality of goals, ease of interaction, duration of the relationship, and the integration of both social and economic exchanges (e.g., Håkansson, 1982). Whilst Larson indicates that a SE approach provides the optimal mechanism for governance, it may in fact be the only viable option for the small firm due to the lack of resources that they have for both contract monitoring and enforcement (Heide and John, 1988; Heide and John, 1990). Although this situation seems highly likely for the internationalising MCE, before addressing this notion, both TCA and SE relationship development approaches are first examined in more detail.

2.5.1 TCA Approach to Developing Relationships

The TCA perspective states that any business seeking to maximise profitability will endeavour to minimise the transaction costs of undertaking its revenue generating activities. A significant proportion of these are incurred in relationship initiation, handling, and control, with a particular emphasis on the prevention of opportunistic behaviour (Williamson, 1975). Costs rise disproportionately with increases in exchange frequency, specificity of terms, and uncertainty (Williamson, 1991). Strategies for their reduction include vertical integration (internalisation), implementation of specific contracts and/or mechanisms for monitoring/enforcing performance, or market driven exchange (Macneil, 1980).

The latter two strategies are available to the small firm as these are primarily concerned with the management of external parties. With respect to a TCA approach these are usually associated with unilateral and market governance respectively (Heide, 1994) with partner behaviour occurring within the parameters of discrete as opposed to relational norms (Macneil, 1980). Under these conditions it is difficult for trust and commitment to form and in fact reliance upon specified contractual terms inherent within these relationship types reduces the likelihood of long term exchange (Macauley, 1963).

Given this, even TCA theorists acknowledge that the introduction of relational elements into contracts can enhance trust and stability (e.g., Anderson and Weitz, 1992; Noordewier et al., 1990). Whilst conceptually possible, observation of a purely TCA

approach would be rare with even the most hierarchical of firms moderating its approach depending on the value of the relationship and exchange setting (Heide, 1994; Carson, Gilmore, and Walsh, 2004; Pels et al., 2000; Styles and Ambler, 2003). Heide and John (1992) extend this argument by stating that supportivenorm (relational) based structures may be complementary to TCA contractual prescriptions by reducing firm vulnerability. They explain further using the example of a buyer’s interactions with a supplier, stating that the mutual presence of norms of flexibility, information exchange, and solidarity will protect against misuse of control.

Although TCA does not discount the value of behaviours which encourage long term relationships, it differs from SE proponents, arguing that “hollow words” are not a replacement for “locking in” partners through requiring specific actions, non- redeemable idiosyncratic (or transaction-specific) investments, and contractual accountability (Anderson and Weitz, 1992; Williamson, 1991; Yli-Renko et al., 2001). This view would seem to be strong counsel against the onset of trust although Lewicki, McAllister, and Bies (1998) view is more sophisticated, indicating that both trust and distrust can manifest and be comfortably present within the same relationship. They add support to a TCA approach arguing that trust and distrust are not bipolar but may be present simultaneously on different dimensions.

Ultimately though, the relational elements of TCA only exist within the confines of specified boundaries as only by assuming risk and uncertainty may trust develop (Blau, 1964). For the small firm attempting to penetrate the international market for the first time, TCA is an approach which may hinder or even prevent progress (McDougall and Oviatt, 1997), because of the inherent suspicion of others and a resulting unwillingness to rely on their behaviour. This may manifest in other characteristics of TCA such as the use of power and coercion in asymmetrically dependent relationships (Joshi and Arnold, 1997). For example, where alternative sources of product are few, the buyer is likely to comply to bend to the seller’s desires (Frazier et al., 1989). This is supported by Berthon et al., (2003) who found that norms play a non-significant role in moderation of opportunism where many buyers were faced with only one supplier. In fact even when dependence is approaching symmetry, opportunistic or punitive actions may occur albeit increasing the likelihood of reciprocation (Kumar et al., 1998).

Pels et al., (2000) recognise the myriad of possible relationship iterations by proposing a dynamic Buyer-Seller Exchange Situation Model which allows for the impact of environmental influences upon exchange processes, as well as perceptions within the dyad. They give the example of a buyer not always desiring a relationship with the seller, particularly in the situation where they perceive the offering as being generic. They add that the converse of this is also true.

Pillai and Sharma (2003) further explore this dynamism arguing that there is a small but growing amount of evidence challenging the well accepted notion of buyer-seller relationships moving from transactional-to-relational with the onset of trust and commitment. They give examples where the converse occurs in mature SE based relationships, stating that a TCA orientation may begin to manifest with adjustments in, the quality of alternatives, knowledge of opportunistic practices, the degree of supplier innovation, the extent of dissatisfaction, and the intensity of personal/social interaction. Findings such as these though, do bring into question the extent of the relational orientation which existed in the first place.

2.5.1.1 The Moderating Effects of Norms

Perhaps the most serious deficiency in TCA, is its failure to account for the temporal effects of social norms (Brown et al., 2000; Cannon et al., 2000; Gundlach and Achrol, 1993; Macneil, 1980), in that their development serves as a governance mechanism to moderate opportunism (Heide and John, 1992; Joshi and Arnold, 1997). Relational social norms, defined as mutual expectations as to what constitutes appropriate and inappropriate behaviour (Gundlach and Achrol, 1993; Morgan and Hunt, 1994) include among others, solidarity, mutuality, flexibility, role integrity, and harmonisation of conflict (Gundlach and Achrol, 1993). In fact Heide and John (1992) assert that the presence of norms is important in ensuring the efficiency of relationships between independent firms. They summarise their position by arguing that because opportunism is not normal relational behaviour, TCA research has not catered for the "implications of a deviance from opportunism" (p.32).

The presence of norms or shared values between actors is said to be an antecedent to the development of trust, commitment and ultimately relationship performance (Morgan

and Hunt, 1994). Manifestations of these include the existence of mutual understanding (Leonidou and Kaleka, 1998), match (Hallén, Johanson, and Mohamed, 1987), or closeness (Håkansson, 1982). Communication is also an important factor in determining relationship performance within the channel (Ambler and Styles, 2000; Madsen, 1989). An integral part of communicating is the implementation of information exchange processes, technical and social, enabling among other things, mutual adaptation and coordination of processes and procedures over time (Hallén et al., 1987; Johanson and Mattsson, 1988b; Metcalf et al., 1992). These kinds of mutual adaptations are said to be influential in relationship longevity (Hallén et al., 1987; Metcalf et al., 1992) and export performance (Leonidou and Kaleka, 1998).

2.5.2 SE Relationships

In light of such observations, more recent RM literature has emphasised the significance of SE based relationships that do embody relational norms as important governance mechanisms (e.g., Cannon et al., 2000; Heide and John, 1992; Joshi and Arnold, 1998). Underpinned by relational building constructs such as trust, commitment, reciprocity, and norms, they are manifestations of the moral obligations inherent within these types. An examination of these key constructs is now made.

2.5.2.1 Trust

Trust although difficult to operationalise in research (Hosmer, 1995; Moorman et al., 1992; Morgan and Hunt, 1994), is said to be reliance based, manifesting through positive perceptions of honesty, credibility, and benevolence (Doney and Cannon, 1997; Zaltman and Moorman, 1988). It is essential to interdependence (Dwyer et al., 1987; Gundlach and Achrol, 1993; Morgan and Hunt, 1994; Scanzoni, 1979) and can also generate mutually beneficial reciprocation between actors (Pfeffer and Salancik, 2003; Larson, 1992). It has also been conceptualised as a state of reduced uncertainty (Ford, 1980), an expectation or confidence as to a pattern of behaviour or the occurrence of particular actions (Anderson and Narus, 1990; Doney and Cannon, 1997), an assumption that there exists an implicit moral duty (Hosmer, 1995), or confidence in ones reliance and integrity (Morgan and Hunt, 1994).

Trust (with its inherent expectation of reciprocation) can develop discretely between the focal firm and any of its exchange partners involved directly or indirectly in the business process (Morgan and Hunt, 1994; Aulakh et al., 1996), which may include its employees (Doney, Cannon, and Mullen, 1998), competitors (Blomqvist, Hurmelinna, and Seppanen, 2005; Chetty and Wilson, 2003), service agencies (Moorman et al., 1992), suppliers (Rexha and Miyamoto, 2000), distributors (Frazier and Summers, 1986; Marshall, 2003), and customers (Berry, 1983). The importance of the onset of trust within these types is further heightened for the small firm going international because it acts as a substitute for hierarchical governance4 (Aulakh et al., 1996), and a buffer against the distance from many of its exchange partners (e.g., Ford, 1980; Aulakh et al., 1996). However, some of the risk inherent in trusting external parties may be offset by membership to formalised network structures which incorporate founding principles based on collaborative internationalisation success (Chetty and Patterson, 2002).

For the small and structurally vulnerable entrepreneurial firm, acquiring a knowledge and appreciation of the capabilities of the relationship partner can also manifest into a personal and economic trust transference (Larson, 1992; Doney and Cannon, 1997). Over time and repeated exchanges this trust is supported by behavioural predictability (Pfeffer and Salancik, 2003) and may be accelerated through reciprocity of self- disclosure (Davis and Skinner, 1974; Leuthesser and Kohli, 1995). Importantly, trust usually precedes commitment (Achrol, 1991; Doney and Cannon, 1997; Ford, 1980; Gundlach and Achrol, 1993; Morgan and Hunt, 1994; Moorman et al., 1992; Rexha and Miyamoto, 2000), often occurring during the partner selection and goal setting stages of the relationship (Wilson, 1995). Ultimately, if trust becomes embedded between a focal and partner firm, opportunism is unlikely as long term interests will supersede potential short term gains.

2.5.2.2 Commitment

Commitment has been conceptualised as two parties seeking the benefits of a long term relationship at the expense of short term transactional rewards (Anderson and Weitz, 1992; Blankenburg Holm et al., 1999; Gundlach et al., 1995; Morgan and Hunt, 1994;

Leonidou and Kaleka, 1998). It arises from the belief that a particular relationship should endure indefinitely and therefore merits utmost efforts to retain this status (Morgan and Hunt, 1994). It has also been referred to as a relational norm essential to growing interdependence (Blankenburg Holm et al., 1999), and is mutual and incrementally pledged as successive exchanges take place (Anderson and Weitz, 1992).

In internationalisation research, commitment can also result in a mature relationship remaining stable in spite of reduced inputs by the focal firm to its foreign bridgehead5

customer, which are instead diverted to that customer’s contacts within their local embedded network (Chetty and Eriksson, 2002). In this regard, the mature relationship is proposed to be self-maintaining, liberating the focal firm to pursue additional opportunities. Blankenburg Holm et al., (1999) support this arguing that the "relationship development process will comprise commitments that pertain not only to the dyad itself, but also to the surrounding business network" (p.474). It should also have a purpose and a focus which, in the case of the small enterprise and its relationship partners, would likely be the expectation of mutual benefits to be derived (Leonidou and Kaleka, 1998; Morgan and Hunt, 1994) from internationalising their offering. Whilst benefits may not be immediately accruable, mutual commitment should be strategically directed at creating value for both partners through managing interdependent actions (Blankenburg Holm et al., 1999).

Although specific contracted actions, including the investment of non-redeemable idiosyncratic investments (Anderson and Weitz, 1992; Ford and Rosson, 1982; Gundlach and Achrol, 1993; Heide and John, 1988; Leonidou and Kaleka, 1998) such as the granting of an exclusive sales territory may be expected forms of commitment (Anderson and Weitz, 1992), Gundlach et al., (1995) observe more than just these instrumental antecedents. They argue that attitudinal (in the form of intentions) and temporal (consistency in attitude and input) components are also important in the initial commitment structure. They further state that social norm development and subsequent relationship viability can be determined by this package of commitment forms. For example commitment to internationalisation has been observed with respect to resources, people, dedication to the process (Welch and Luostarinen, 1988) and

5 _{This is a term given to the customer which was critical in facilitating entry into an international customer network (Chetty and} Eriksson, 2002).

converging values and goals (Metcalf et al., 1992), and as inter-firm ties deepen the willingness to commit more resources to foreign markets will increase (Sharma and Blomstermo, 2003).

Specific examples of this commitment from a seller-buyer perspective include the willingness to adapt or customise to specific requirements (Ford, 1980; Ford and Rosson, 1982; Leonidou and Kaleka, 1998), the intensity of resources and contact made (Ford and Rosson, 1982), the transparency of information exchange as distance is reduced (Ford, 1980), and the relationship’s durability (Doney and Cannon, 1997; Håkansson, 1982; Ford, 1980). This durability can be a function of each partners’ willingness and ability to resolve conflict (Morgan and Hunt, 1994; Scanzoni, 1979), in preference to being forced to find an alternative (Anderson and Narus, 1984; Thibaut and Kelley, 1959). Of interest here is that whilst one party perceives that their partner is more committed when the relationship is exclusive, in itself exclusivity has not been found to be a determinant of commitment (Anderson and Weitz, 1992).

2.5.2.3 Adaptation

An advanced manifestation of commitment may be observed in the mutual willingness to make adaptations (Dwyer et al., 1987; Håkansson, 1982; Leonidou and Kaleka, 1998), which is defined as “the extent to which the buyer and seller makes substantial investments (systems, processes, values and goals) in the relationship” (Metcalf et al., 1992, p.29). In fact, this is said to be a feature of a maturing SE relationship and as such signals significant, often non-retrievable forms of investment (Gundlach and Achrol, 1993). For instance, observations have been made of supplier involvement in product design, the implementation of Just-in-Time distribution systems (Metcalf et al., 1992), and the mutual the alignment of goals, procedures and processes with the internationalising firm (Leonidou and Kaleka, 1998).

2.5.2.4 Reciprocity

Reciprocity (Gouldner, 1960; Kumar et al., 1998; Molm, Takahashi, and Peterson, 2000; Perugini, Gallucci, Presaghi, and Ercolani, 2003; Scanzoni, 1979) is stated as being a general tendency that can be found in most societies (Gouldner, 1960; Thibaut and Kelley, 1959), and is sometimes referred to as a meta-norm (Axelrod, 1986), which

governs trust, norms and exchange episodes. Reciprocal actions can be positive or negative depending on previous dealings with the target or beliefs about the target’s likely reactions (e.g., Kumar et al., 1998; Perugini et al., 2003). From a TCA perspective, reciprocity can be observed where coercion or acts of power (Coviello and Munro, 1995; Frazier et al., 1989; Frazier and Summers, 1986; Leonidou, 1989; Thibaut and Kelley, 1959) are employed. These ‘power plays’, or negotiated exchange (Kelly and Thibaut, 1978), can also determine the structure of behavioural commitment (Gundlach and Achrol, 1993) to the relationship (Molm et al., 2000).

However in SE, reciprocity is articulated as being internalised (Perugini et al., 2003), whereby individuals grant their time, knowledge or resources without expressly negotiating, knowing about, or even expecting a response in kind (Molm et al., 2000). This, in turn produces stronger trust and affective (attitudinal) commitment to the relationship. Conversely, whilst negotiated exchanges, such as contracts subject to specific terms, might guarantee the commitment of particular resources, it does also reduce trust (Molm et al., 2000). In fact, it is argued that essential to the development of trust and commitment is the assumption of risk, uncertainty, and vulnerability that accompanies reciprocal exchange (Blau, 1964; Moorman et al., 1992). Furthermore, negotiated exchange must assume some social elements and is not immune from incurring risk (Granovetter, 1985), as it is impossible to factor in every potential