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How the yin-yang perspective dissolves the power and trust paradox and leads to collaborative business relationships //

It becomes increasingly visible that to a lesser extend single companies but international supply networks, or meta-organizations, will increasingly compete with each other in the future. The governance of these networks poses new challenges to focal firms as well as surrounding organizations in terms of collaboration and management. Hence, the quality of collaboration can become a source of differentiation in competition to gain or maintain a competitive advantage through cooperation. Whereas contracting is usually applied to enter a collaborative relationship, the existing literature points out that relational or interpersonal factors are especially important factors for successful collaboration in business. Herein, power and trust play a pivotal role and are often seen as orthogonal components in a business relationship. The latter is either determined by power differentials or by deep trust. Both can hardly merge. While buyers or suppliers commonly show their power through contracts to motivate particular actions with their exchange partners, doing so can compromise a sense of trust within the relationship. This happens because organizations and managers over whom power is being exerted may feel that their autonomy and overall self-determination are being threatened, a perception which often leads these partners to feel that their values and motives are incongruent, which can compromise their mutual sense of trust and cooperation.

“Contrary to the conventional antagonistic view of power and trust, we find a different relationship between both, namely a rather natural, mutually integrative and dependent one”

By challenging the typical antagonistic view of power and trust, we have explored in our study the interrelatedness of the two by applying the yin-yang lens. We find a different relationship between power and trust, namely a rather natural, mutually integrative and dependent one. We assume that Taoist ideals, in particular the forces of yin-yang, explain this apparent contradiction. Guided by the yin-yang perspective on power and trust balancing, we identify six management paradigms regarding how power and trust relationships can be developed and managed to increase collaboration performance.

“We identify six management paradigms regarding how power and trust relationships can be developed and managed to increase collaboration performance”

In a nutshell, the six management paradigms contain the following. The focal firms shall maintain (1) a relationship and competence focus. It should (2) proactively delegate tasks to a trustworthy and competent tier 1 supplier. Further, the focal firm needs to engage in (3) setting up and organizing ‘formally informal’ private events to increase the community spirit and (4) establish a spirit of paternalistic benevolence across the network, in which the hierarchy is considered to be natural, comforting, and reliable. Next, (5) a spirit of open information sharing, collaboration, and unconditional passionate commitment on business-level and private-level needs to be developed. This may be the hardest part, especially for firms drawing on Western ideals of corporate governance. Finally, (6) great emphasis should be placed on personal interaction, as being committed to developing and maintaining human relationships is fundamental to a business relationship.

We believe that utilizing the yin-yang perspective can enable a new view on relationships that may help to increase network cohesion as well as organizational performance within a business ecosystem.

More here:

Horak, S. & Long, C. 2018. Dissolving the Paradox: Toward a Yin–Yang Perspective on the Power and Trust Antagonism in Collaborative Business Relationships. Supply Chain Management, 23(6), 573-590.
DOI: http://dx.doi.org/10.1108/SCM-01-2018-0013

* Photo credit: Micro Ecosystem by Pierre Pocs is licensed with CC BY-SA 2.0.

The inability to integrate into informal networks when doing business abroad can become a risk for the organization //

Owing to increased business activities by multinational corporations (MNCs) as well as to the further opening of new and large overseas markets (e.g., China, India, Brazil), the use of the expatriate manager has steadily increased within recent decades. International assignments represent a significant cost factor for a firm. Considering an assignees fringe benefits and the potential cost attached to the relocation of the expatriate’s family, expatriates are significantly more expensive for a firm than local employees are. Moreover, the success and failure of the expatriate has a direct impact on the performance of the MNC’s investment abroad. Hence, the effectiveness of an expatriate in the respective host country is important and a key concern for MNCs.

“Becoming a part of local informal networks is essential for an expatriate manager to do business abroad”

Research has so far rarely taken into account the influence of informal networks that local managers maintain and cultivate on expatriate effectiveness, i.e. on expatriate performance and adjustment. We have explored this knowledge gap recently by choosing East Asia as an environment to explore, a region where large numbers of expatriate mangers are sent to these days and this trend is increasing. By interviewing foreign top managers in South Korea, the study discovered seven antecedents critical to expatriate effectiveness. Most antecedents hinder expatriate effectiveness due to the expatriates’ inability to become a part of local informal networks, as they are to a great extent ascribed or difficult to penetrate as a foreigner on a time-wise limited stay. Often the managers have difficulties to identify and understand the workings of informal networks, which can expose the organization to risks.

“None of the mangers we talked to regard themselves as fully accepted and integrated members of the local informal networks”

Whereas some of the managers we talked to, especially the ones with ca. 10–20 years of experience in Korea, mention having good or close relationships even friendships with local stakeholders, none of them regard themselves as fully accepted and integrated members of the distinct local informal networks. This has a negative influence on the task fulfillment of the manager. Before being expatriated, most managers we talked to thought their managerial influence and scope of actions would have had a higher impact on the local organization. After one or two years, they realized that what they can achieve compared to what the position actually requires is very limited. Some expatriates appeared to be frustrated that their job role overly developed towards firm inward-oriented tasks such as trying to make their headquarters’ policies and guidelines work locally. Furthermore, firm-external tasks such as conducting contract negotiations are difficult to perform for most expatriates, as they require informal preparation before and after the actual negotiation date so that on that date no ‘surprises’ appear. As informal preparation is done via informal networks that the expatriate hardly possesses, their influence is limited.

Insights gained from the field work points towards the need for a better understanding and control of informal networks in global management. So far, however, many international firms have not made this a central task in preparing their managers for assignments abroad. The lack of local networking competence can get managers into inconvenient situations as a managing director report: “Personally speaking, I can confess that I am unable to establish with company x and company y [names anonymized] these informal relationships. I always have to have a Korean partner who has these relationships or who at least knows how to establish these informal ties. That makes me dependent, but that’s the only way to go”.

We believe that due to the importance of establishing informal network ties locally, more knowledge needs to be generated about their antecedents and distinctive nature. Informal networks are known in Korea under the term yongo or inmaek, guanxi in China, blat and svyazi in Russia or wasta in the Middle East. This knowledge would help expatriates to manage successfully and it would help firms to stay competitive and become an integrated player in the respective local market.

More here:
Horak, S. & Yang, I. 2016. Affective networks, informal ties, and the limits of expatriate effectiveness. International Business Review, 25(5), 1030-1042.
DOI: http://dx.doi.org/10.1016/j.ibusrev.2016.01.006

* Photo credit: “King Penguins” by D-Stanley is licensed with CC BY 2.0.