The aim of this study is to discover the main cultural issues of building and using trust in China for small Northern European entrepreneur-led companies. The research will focus on Northern European entrepreneurial firms and the entrepreneurs behind them, who are currently or in the past, have been involved with business venturing in China.
Against the mainstream sociological inquiry in cross-cultural trust research, this dissertation adapts the cultural ecology lens deploys the humanistic philosophy, which taken theories from resource, climate and geographic studies to describe the differences in trust making between Chinese and Northern European people. The background literature covers the area of cross-cultural trust concept, traditional Chinese cultural concepts and international entrepreneurship. Using the phenomenological approach of inquiry, this research has examined the first hand experience of 12 Northern European entrepreneurs who have embarked their businesses in China through one-on-one interviews. The results identified the preservation of face, over-estimation of self-competence and problematic relational fit as the main causes of distrust in China; furthermore personal skills such as keeping a low profile and time forbearance are recommended for future western entrepreneurs who want to do business with China; and finally being personal and being vigilance are said to be the combinational method that will make the trust building work in China. The research may also serve as a blueprint for future western entrepreneurs that target to China.
Table of Contents
Chapter 1: Introduction
1.1 Background of the Study
1.1.1 Statement of the Problem
1.1.2 Purpose Statement
1.1.3 Scientific Paradigm
1.2 Rationale
1.2.1 Theoretical Rationale
1.2.2 Practical Rationale
1.3 Research Questions
1.4 Significance of the Study
1.4.1 Significance to Northern European Entrepreneurial Companies
1.4.2 Significance to the Academic Community
1.5 Operational Definition of Terms
Trust
Culture
Cultural Ecology
International Entrepreneur
1.6 Assumptions and Limitations
1.6.1 Assumptions
1.6.2 Limitations
1.7 Chapter Summary
Chapter 2: Review of Related Literature
2.1 The Concept of Trust
2.1.1 Business Trust
2.1.2 Trust in Cross-cultural Settings
2.1.3 Trust in China
2.1.4 Trust in Northern European Countries
2.1.5 Trust Differences between Chinese and Northern European in Business
2.2 Chinese cultural Concepts
2.2.1 Taoism and Confucianism in Business
2.2.2 Chinese Communist institutional effect
2.2.3 “Guanxi” and face as the Chinese Indigenous Concept
2.3 International Entrepreneurship
2.4 Cross-Cultural Ecology
2.5 Chapter Summary
Chapter 3: Theoretical Framework
3.1 Surviving and Thriving Trust in Two Types of Societies
3.2 Entrepreneurial Trust Transition Model
3.3 Chapter Summary
Chapter 4: Phenomenological Methodology
4.1 Using Phenomenology
4.1.1 Phenomenology as Human Science
4.1.2 The Philosophical Roots of Phenomenology
4.1.3 Phenomenology and the Current Study
4.2 Research Protocol
4.2.1 Data Analysis Procedure
4.2.2 Interviewees Profile
4.3 Chapter Summary
Chapter 5. Empirical Results and Analyzes
5.1 Description of the Interviews
5.2 Reduction of the Interview Data
5.2.1 What are the challenges Northern European entrepreneurs have in building trust in China?
5.2.2. What are the competencies/skills needed by Northern European entrepeneurs to bring about successful trust building in China?
5.2.3 Which method can be used in building trust in China?
5.3 Interpretation
5.3.1 Explication of the Northern European entrepreneurs’ essential structure of lived experience of trust building in China
6. Discussion and Conclusion
6.1 Discussion
6.1.1 Practical Contribution
6.1.2 Theoretical Contribution
6.1.3 Suggestions of Future Research
Conclusion
References
Appendix: Data gathering Interview Questions
ABSTRACT
Against the mainstream sociological inquiry in cross-cultural trust research, this dissertation adapts the cultural ecology lens deploys the humanistic philosophy, which taken theories from resource, climate and geographic studies to describe the differences in trust making between Chinese and Northern European people. The background literature covers the area of cross-cultural trust concept, traditional Chinese cultural concepts and international entrepreneurship. Using the phenomenological approach of inquiry, this research has examined the first hand experience of 12 Northern European entrepreneurs who have embarked their businesses in China through one-on-one interviews. The results identified the preservation of face, over-estimation of self-competence and problematic relational fit as the main causes of distrust in China; furthermore personal skills such as keeping a low profile and time forbearance are recommended for future western entrepreneurs who want to do business with China; and finally being personal and being vigilance are said to be the combinational method that will make the trust building work in China. The research may also serve as a blueprint for future western entrepreneurs that target to China.
Chapter 1: Introduction
China, the world’s largest emerging economy, has attracted investors and entrepreneurs from every corner of the globe. The remarkable and potential growth of the Chinese market is evident, and it has also become a top-listed research topic for many entrepreneurship researchers and social science scholars. Chinese area studies have formed an important part of entrepreneurship and sociological research in recent decades. However, there’s lack of human science oriented research in this scope. China’s unique culture, history, and institutional settings make its business environment very unique from that of the rest of the world.
1.1 Background of the Study
The long history of Sino-Northern European trade can be traced centuries back. In early 18th century, the Swedish merchant ship Göteborg has travelled some 40000 Kilometres to China to exchange Swedish timber, iron and copper with Chinese tea, silk and fine porcelains. From December 2007 until May 2009, the number of Swedish companies that either trade with foreign markets or have their own production in foreign markets increased from 22% to 28% (Boström, 2009). Many of these are entrepreneurial firms and China was a repeatedly mentioned market among 1,501 respondents (Hemming, 2009). The number of Danish companies operating in China has more than doubled from 231 to 465 from the period of 2003 to 2011 (China Daily, 2011), which in most cases are made up by small companies (Danish Chinese Business Forum, 2013). The future of the global economy is in East Asia and entrepreneurship is playing a central role in the change of economic demography. China by soon will become world’s largest base for entrepreneurship (Steinfeld, 2010) and the home of entrepreneurial capitalism (Huang, 2008).
Unlike in early 2000s, China is now changing its view of foreign direct investment (FDI) along with the growth of its economic dominance and the rising awareness of global business. Many of its governmental policies do not necessarily give priorities or bias to Foreign Direct Investment (FDI), especially from small-scale companies from abroad. Since China’s acceptance into the World Trade Organization (WTO) in 2001, there have been some restrictions on inward foreign investment.
This trend is reflected by the newly issued rules by China’s National Development and Reform Commission in 2007 concerning the sectors in which foreigners may invest reflect a move away from “quantity FDI to quality”, which is a move from traditional, export-oriented, high-energy and resource-use, and highly polluting industrial enterprises into areas such as environmental protection, modern manufacturing, and high-tech (US/China Media Brief, 2008). After the 18th national congress of the Chinese communist party held in the end of 2012, a new set of economic development goals for the future are set to shift the economy from investment oriented economy to a consumption oriented economy (Liu, 2012). While China does not need the extra capital, it needs the technology, market know-how, and managerial expertise that come with foreign investment (Enright & Hofmann, 2007), in which many smaller entrepreneurial firms are particularly competent.
With limited resources in capital, local contacts, and cultural understanding, international entrepreneurial firms and the entrepreneurs often face detrimental difficulties in accessing market information and contacts in China. Thus, it is crucial from the individual point of view for entrepreneurs to understand the changing nature of the current Chinese business landscape. In order to survive in the increasingly harsh competition from all sides, genuine comprehension of the Chinese structure of building trust is therefore useful and supportive. To understand the Chinese structure of trust building serves entrepreneurs as an advantage for leveraging resources and social capital for their success. The transition from industrial age to information age places trust at the core of the new form of governance (Gipouloux, 2000). As the core factor that causes markets and organizations either to thrive or to die, a lack of trust in relationships can usually cause business failures (PriceWaterhouseCoopers, 2009).
Trust is regarded as the most important and central tenet of business relationships (Fukuyama, 1995; Kriz, 2009; Kriz & Keating, 2010). Trust that is influenced by cultural values is not only present in our everyday personal lives, but it is also manifested through every business deal either at home or abroad. Trust in essence is manifested through the cultural values people carry. Even though the recognition of a changing China is on the research priority of international business (Fang, Zhao & Worm, 2008). Cultural legacies are still important, they are powerful and pervasive, and they persist, long after their original usefulness has passed (Gladwell, 2008). It influences the way in which people look at and determine trust. This is especially true in the business-venturing process led by industrialists and entrepreneurs from the developed world in emerging economies as people in the rapidly developing economies see the world fundamentally differently from people in the developed ones (Sirkin, Hemerling, & Bhattacharya, 2008). This “fundamental difference” is deeply embedded in the different ecologically influenced values and ways of thinking. People from the developed countries as oppose to people from the emerging markets therefore also understand trust differently. Particularly, trust, as a human cultural evolutionary product cannot be studied in isolation with the understanding of the macro environmental constraints. The concept of trust in this dissertation will be discussed in the light of cultural ecology.
Understanding trust in China is never an easy undertaking. Even with the importance of trust in the business setting, rarely has it been explored in the Chinese setting (Kriz, 2009; Kriz & Keating, 2010). Unlike the mainstream existing scholars whom defend the economic glory of China and the commercial achievement of Chinese government (Fang, 1999; Fang, Zhao & Worm, 2008, Li, 2013) that mostly viewed from the operations of the large Multinational firms, that disregard the actual experience of SMEs. As a native of Shanghai, who grew up in an entrepreneurial family throughout the 90s that has confronted and struggled routinely with the blackmails, threats of kidnapping and unlawful assaults of the Mafia like local Chinese communist party (CCP) officials on small business owners, and has also spent the past 15 years in the western democratic countries for studying and working. The difference between fear and distrust experienced in China versus the safety and confidence in democracy of the west inspired much of the interests for embarking this dissertation. This particular experience of researcher has been creating a daily inner dialogue of comparisons between the Westerners and Chinese. Since trust has been considered an essential element of all human interactions (Handy, 2000), the researcher has been constantly reflecting upon his own interactions with people from both China and the Northern European region. How Northern European entrepreneurs trust differently in China than in their home countries particularly interests the researcher. In researcher’s novel observation, Northern European entrepreneurs usually possess very high level trust in the initial stage when they first come into contact with China; however, this initial trust generally starts to diminish throughout their learning curve of doing business in China. The Chinese counterparts will seldom initially (or even gradually if the trust process is not taken reasonable care of) see people as the in-circle members. What brought to this transformation suggests there’s a theoretical explanation.
Attempted to view trust in China from a genetic-environmental coevolution lens, Kriz (2009) for example has established the importance of the interplay between natural environment and the physiological stance on trust. But the research failed to distinguish the different trust structures, particularly between China and the western countries, by applying so-called genetic-environmental coevolution theory. This study instead employs a cultural ecology approach to look at trust differences between China and the Northern European countries. Different ecological settings are believed to produce different structures of trust (Chou, 2010). Traditionally, China is a relationship-based society (Hofstede, 2001; Lewis, 2003) that ideally values in-group trust among social players (Yum, 1988). The skills of initiating in-group relationships based on different modes of trust hence play a significant role in the success of entrepreneurial firms. Though external policies are changing, whereby the Chinese government is trying to switch from a guanxi-based to a legal rule-based system of economic governance, the human embedding of the system in the society in which they evolved has been neglected (Holden, 2002). Personal relationship based trust therefore will remain as the key element in the Chinese entrepreneurial culture.
On the social level, even though China is constantly promoting different idealistic values such as harmony and benevolence, in fact, because of the social reality of harsh competition and the ill resource allocations, a part of the traditional values are forgotten and banished through the rapid economic development. Trust in China suffers from double moral complexities. On the one hand, the propaganda of creating a harmonious society (China Daily, 2005) postulates idealistic balanced trust among the social players. However, on the other hand, the general social milieu of harsh competition and phenomenal social class gaps deteriorates the trust levels. The issue of trust is thus a very complicated matter in China and cannot be fully grasped without an understanding of the essential cultural-ecology adaptation in this particular geographic–resource setting. Entrepreneurial activities thus must keep pace with this adaptation of double morals. How to maintain the outward trust along with the introverted judgemental intuition is therefore the key to success in the People’s Republic of China.
This proposed dissertation adopts phenomenology as a research tool to examine the lived experience of Northern European entrepreneurs in building trust in China as well as the macro-environmental variables (cultural ecology) that influence Northern European entrepreneurs’ trust building in China. Phenomenology is defined as the study of the shared meaning of experiencing a phenomenon for several individuals. “The understanding of meaningful concrete relations implicit in the original description of experience in the context of a particular situation is the primary target of phenomenological knowledge” (Moustakas, 1994). The researcher condenses data gathered in lengthy interviews describing the shared experiences of several individuals to the “essence” of the experience. By combining the phenomenological approach and the theories of trust, this research will enhance the understanding of the trust-building process in China for international entrepreneurs.
1.1.1 Statement of the Problem
China has become attractive to foreign entrepreneurs, especially from Northern European countries, because of its own limited market in general. However, China is currently under stricter policies when considering foreign investors. While China does not need the extra capital, it needs the technology, market know-how, and managerial expertise that foreign investment offers (Enright & Hofmann, 2007), in which many entrepreneurial companies are competent. With limited resources in capital, local contacts, and cultural understanding, small entrepreneurial companies often face detrimental difficulties in accessing market information and contacts in China. Thus, it is crucial for entrepreneurs to understand the true nature of the current Chinese business landscape. In order to survive in the increasingly harsh competition from all sides, genuine comprehension of the Chinese structure of building trust is therefore useful and supportive since trust is considered as the central tenet and most important aspect to build strong business relationships in China (Kriz & Keating, 2010). Having strong trust among business partners, especially for entrepreneurs, would give the entrepreneurs edge over the other competitor entrepreneurs who are interested to forge a business relationship with China. Even though the importance of trust is highlighted for international entrepreneurs to build and maintain strong business partnership with the business counterparts, rarely has trust been specifically explored in the Chinese business setting. Though the recent call to adopt entrepreneurial studies with the eastern philosophy to trust research (Li, 2013) is promoted within the trust academia, it however lacks of the application model that can be applied to practical life situations, which is not capable to go beyond the mere obfuscation by metaphor and pseudo-profundity (Landes, 1998). Therefore, there is a need to understand the concept of trust building in China from a more metaphysical level such as the ecological level in order for international entrepeneurs to survive competition over other entrepreneurial firms from other countries, and forge strong business relationships with China.
1.1.2 Purpose Statement
The aim of this study is to discover the main cultural issues of building and using trust in China for small Northern European entrepreneur-led companies. The research will focus on Northern European entrepreneurial firms and the entrepreneurs behind them, who are currently or in the past, have been involved with business venturing in China. International entrepreneurial firms are companies that possess ability to dive into the international market with specialised knowledge, network as well as the abilities to recognize and exploit the opportunities (McDougall & Oviatt, 2003). Because of the internal market and the scale of economy in Northern Europe are limited and thus overseas expansion is a must, entrepreneurial firms particularly make up a large proportion of small Northern European firms.
The purpose of this study is to expand upon the current literature by exploring and revealing the lived experiences of trust building of Northern European entrepreneurs in China. This study will provide another perspective on an element (trust) of human interaction that has been discussed extensively in the traditional philosophy, psychology, sociology, and business literature and that management literature has yet to develop with the aid of other inter-disciplinary literatures. In this study, the researcher will aim to define the Northern European entrepreneurs’ personal experience of initiating trust in business settings in China. Northern European entrepreneurs’ trust-building experience will be analysed by using the phenomenological approach, in which a comprehensive view of Northern European entrepreneurs’ trust building experience in China will be revealed. The intent is to capture the experiences in the context of a Northern European entrepreneur’s trust-building activities in China that might reveal critical insights and influence the direction of initiating trust in the industry and business. The researcher of this dissertation has been educated in various western countries (United States, Sweden, Estonia and Austria) during the past 15 years and he is currently working in both China and Scandinavia as an entrepreneur. Among his business activities, he has helped small Northern European firms establishing themselves in China. Furthermore, he has been acting a link for business projects and financing for domestic companies in China. This unique qualification entitles the researcher to approach the research matter from both a subjective and objective point of view. It is therefore safe to say it is rational to include researcher’s own experience in the scientific research, since in phenomenological research we are not trying to prove anything (Kristjánsdóttir, 2009), but as a qualitative research approve to help the interested audience to understand the phenomenon that is being examined.
Last not but the least, this dissertation will be approached from the Northern European tradition of entrepreneurship studies. Presented by Hjorth (2005), entrepreneurship has been a major topic for Northern European management researchers, in which the behavioural perspective based on qualitative research rather than the economic perspective is usually dominant. Knowledge, cultures, behaviors, and practices, in an emic perspective, are culture-bound activities that cannot be naively compared as if they were entities. Emic view in research implies that analysis of cultural phenomena from the perspective of the actual participate in the culture being studied (Creswell, 1998). The indigenous aspects of the studied culture will be mentioned in the final research production. Beyond the identification of network as an important element of international entrepreneurship, this dissertation will examine the necessary personal qualities that are required of entrepreneurs for launching a successful trust relationship with the Chinese business counterparts. Also in order to overcome the limitation of traditional management research as an applied science that relies on mostly surficial conventional wisdoms that lacks of the intellectual in-depth (Whitley, 1984) analysis in macro dynamic issues such as culture and ecology. Particularly, the attempts to study culture from the management scholars’ endeavor often proved incomprehensive due to the lack of generalized knowledge of other non-management humanity disciplines. This dissertation employs an inter-disciplinary approach to explore the phenomenon of trust in a root-cause manner, which will integrate the studies from the literatures of psychology, history, philosophy, organizational science as well as anthropology.
This dissertation aims to determine how to build trust between Northern European entrepreneurs and Chinese business counterparts in order to gain advantages in entering business deals between these two regions. In order to facilitate this, a phenomenological qualitative research will be performed accordantly. Phenomenology is a research design that aims to understand a given phenomenon through the lived experiences of human beings (MacKenzie & Knipe, 2006; Polkinghorn, 1983). These lived experiences will be gathered through face-to-face interviews that will be conducted by the researcher and consenting participants of the study.
1.1.3 Scientific Paradigm
The research paradigm is defined as the philosophical patterns (Kuhn, 1970) that affect researcher’s view of science. A paradigm is viewed as a set of basic beliefs that represents the researcher’s worldview particularly often adopted in the qualitative research (Guba & Lincoln, 1994). This is because in qualitative research, the role of the researcher is an active learner instead of being the expert (Creswell, 2003). As a learner, his or her worldview is crucial in determining what is going to be learnt. Therefore, the task to define a legitimate scientific paradigm is crucial. Guba and Lincoln (1994) see that the paradigmatic belief system also guides researchers in choices of method and the general ontological approach. The choice of paradigm directly links to the purpose and nature of the research (Creswell, 2003). As the explorative nature of this dissertation: the experience of Northern European entrepreneurs’ trust building in China entails a touch of social constructivism but not to its full extend. Both the epistemological and methodological reasoning of constructivism fulfil the agenda of studying the human experience such as the phenomenon of trust. First, this is especially true on the epistemological level, the knowledge is created in interaction between investigator and respondent (Guba & Lincoln, 1994) as the human experience consists both the subjective and objective dimensions. The interplay between the researcher and respondent will assure the research data relevancy in its quality. Second, on the methodological level, it is also realistic to adopt the hermeneutic approach to reconstruct the mode of experience (Guba & Lincoln, 1994). But on the ontological level, a pure constructivism paradigm that builds its premise on the possible full interpretation of the researcher on conflicting social realties makes this paradigmatic foundation incomprehensible.
Trust as a human experience, a subject that relies much of its background on anthropology, sociology and psychology can be assumed from a neo-evolutionary perspective. Trust as a risk taking behaviour has its evolutionary roots growing from the past (Sulkowski, 2010). But the pure evolutionary view is in much consistency with the Neo-Darwinism, in which the human conscious is seen as a predictable end (Gloud, 1984). This creates the fallacy that human conscious is controllable under the incremental evolution growth of human knowledge, which also gives the space for the subjective interpretation. On the epistemological level, the pure form of neo-evolutionary perspective still builds on the verification and falsification of human reality (Sulkowski, 2012), which is not a suitable sight for examining trust as a human phenomenon. According Vanberg (2011), our theoretical and empirical knowledge resulted from the human conscious cannot produce what is considered as desirable by the naturalistic state of evolution. What governs the social evolutionary process is not human desire and wishes but conduciveness to the survival. German philosopher Julian Nida-Rümelin (2005) argued that the essential part of the nature has a specific epistemic status that makes them immune against empirical data. Therefore combining all these arguments in ontological, epistemological and methodological aspects, there’s a potential to integrate both the neo-evolutionism and constructivism together to formulate a hybrid scientific view. Thus I will propose a view called evolutionary agnostic constructivism to view the human experience of building trust. In this view, the human and social realities will be seen as under constant pressure of the surrounding environment despite the existence of human knowledge creation. Culture and behaviour is viewed as a consequential formation of the surrounding ecology that human is evolved. The formation of trust therefore also faces evolutional and environmental constraints. But the consequence of the trust or distrust is unpredictable by mankind’s knowledge. Weather it is good or bad, trust and distrust all carry their evolutionary reasons that our human knowledge deserves no rights to judge its fitness. According to Sutton and Anderson (2010), the notion of that evolution has direction is false, and there’s no such a thing as direction in evolution. The researcher here can only be seen as a mediator that fosters the interaction between himself and the respondent to create the information that may be adopted as a part of the human knowledge and he or she doesn’t possess the power to construct the absolute knowledge.
1.2 Rationale
The rationale of a scientific study will have to persuade why the relevant research project is important for the audience that it is presented to. As the focus of this dissertation, the lived experience of Northern European entrepreneurs’ trust building in China will deserve a close investigational scrutiny to reveal the essential structure of trust building for international entrepreneurs. Theoretical and practical rationales are both discussed individually. Both the theoretical and practical rational will be matched by the practical and theoretical contributions in the end of this dissertation.
1.2.1 Theoretical Rationale
To clarify a sound theoretical rationale will provide a corner stone for this dissertation’s scholastic contribution to the literatures of trust from a qualitative perspective. As it argued by Minkov (2013), mono-variable cross-cultural research that compares only few societies provides a more suitable ground for idiographic approach, which is to assume each society has its own traits. Each culture in this view has its own set of institutions and social structures. Qualitative research in this regard is suitable as the issue of trust in two societies is discussed. As the current fashion in scholarship of trust, most methods examine trust from the quantitative aspects. Researches in game theory and its application to trust (Rabin, 1993; Berg, Dickhaut and McCabe, 1995) or the statistical observation of quantitative emotional variability (Eckel and Wilson, 2003) fit into the neo-economic agenda of rectify or falsify trust phenomena within human relations. Most pure game theoretical analyses predict that rational, self-interested players will make decisions to reach outcomes (Sanfey, 2007). However, the very nature of understanding trust – a human factor is downsized into the mere simulations and games (Govier, 1997). As humans, we are ubiquitously and constantly acting irrational and self-destructive in many situations (Ellis, 1976). As it is contested by Nida-Rümelin (2009), most normative behavior can’t be traced to its consequential ends. Thus, to get the essence of trust, one must consider the primary objective of understanding trust is to serve our humanity for the betterment of making social progress. Such mission cannot be fulfilled within the scope of abandoning the human reality and lunching the wishful trust creation in a noiseless laboratory setting or vacuum of Utopia. The theoretical rationale of this dissertation is achieved by integrating an approach of human science (phenomenology) to understand the essence of trust that will enhance the need of interdisciplinary in trust research. Furthermore, to overcome the current inadequacy of international entrepreneurship theories, the study of individual unit of entrepreneurs will enhance the theoretical inputs of the international entrepreneurship literature. This is done through the phenomenological inquiry to reveal the essential structure of lived trust building experience of Northern European entrepreneurs in China.
1.2.2 Practical Rationale
Researching in trust without any practical usage is never going to be a relevant end when it comes to be applied to the entrepreneurship research. In the course of this dissertation, internationalization for entrepreneurial firms is viewed from trust structural change. International entrepreneurs’ adaptation from their structure of trust back home to the Chinese structure of trust will be analyzed as the concentrated factor of lived experience. This dissertation is focused on trust building of Northern European entrepreneurs in China, a set of defined skills and competence required for building trust in China will be given in the light of the interpretation of lived experience of Northern European entrepreneurs’ trust building in China. The result of this dissertation will also be able to provide relevant recommendations and suggestions for international entrepreneurs from other western countries who want to do business in China. Therefore, this dissertation will construct a workable experiential structure for business practitioners to apply in the real business world.
1.3 Research Questions
This research aims to examine 12 Northern European entrepreneurs’ trust building experience in order to conduct their business in China. In qualitative studies, research questions should be as broad as possible (Creswell 1998). The research questions for this research study have the primary purpose of discovering the essence of the phenomenon of building trust in China for Northern European entrepreneurs. Research questions also must design to demonstrate the relevance to the international entrepreneurs audience at large, which makes this dissertation applicable to both the business practitioners and academia. The research questions are formed in a lucid and straightforward way that can guide the literature inquiry and arguments that provoke the interests of potential readers. This research, by using the phenomenological approach, will examine the following research questions:
RQ1: What are the challenges Northern European entrepreneurs have in building trust in China?
RQ2: What are the competencies/skills needed by Northern European entrepeneurs to bring about successful trust building in China?
RQ3: Which method can be used in building trust in China?
1.4 Significance of the Study
This research study aims to understand how Northern European entrepreneurs build trust in order to conduct their business in China. The focused theme of trust is being viewed from the cultural differences and business variations. The significance of the study is divided into two categories: the study’s significance to the small Northern European companies that want to do business in China, and the study’s significance to the academic community. The details are further discussed in the succeeding sections of this chapter.
1.4.1 Significance to Northern European Entrepreneurial Companies
Just as what was previously discussed, small Northern European entrepreneurial companies are competing for market opportunities in China due to the country’s attractive general economic environment and overall entrepreneurial climate. With a study such as this dissertation, foreign entrepreneurial entities wanting to gain market opportunity edge and advantages in China, will understand how to foster trust with local counterparts through the first hand experience of Northern European entrepreneurs that is interviewed by the researcher. Trust is considered to be the most important element in establishing strong business relationships between entrepreneurs and business counterparts. With this dissertation, foreign entrepreneurs will have an idea on how to establish trust while considering the significant factors specific to local Chinese counterparts (suppliers, customers, employees, etc.). Understanding the aspects of trust relationships as well as the necessary skills and competence to initiate trust with Chinese counterparts, international entrepreneurs will have an edge over other companies competing for the same business and market opportunity. Effectively fostering trust with Chinese counterparts will also lead to a better relationship with the Chinese society at large, which may increase the possibility of repeated acquisition of business deals and better deals with the Chinese business counterparts; hence benefiting both parties.
1.4.2 Significance to the Academic Community
There are minimal studies in international entrepreneurship research that focus on trust in the Chinese business setting (Kriz, 2009). Particularly studies concerning Northern European entrepreneurs’ trust building experience in China are none-exist. Therefore the need to theorize an academically sound model cannot be ignored. As a qualitative study, this dissertation will line out the essential elements that are necessary for Northern European entrepreneurs to build trust with the Chinese business counterparts. These defined elements hopefully will be testified by the future deductive quantitative research. The phenomenological inquiries in business related studies are also found to be at its infant stage. Phenomenological studies in international entrepreneurship will go beyond the worldly existence of the entrepreneurs and to discover their concerns and cares (Seymour, 2007) through the exploration of their subjective experiences. A study such as this dissertation will truly be of benefit to the academic community from a human science approach because this research will dive into the essential structure of Northern European entrepreneurs’ trust building experience. It may trigger other entrepreneurship researchers to conduct more qualitative studies that are centered to trust in Chinese business. Hence, this study can serve as a reference for other future studies regarding trust, culture and the general studies on Chinese business setting.
1.5 Operational Definition of Terms
In this section, the terms that appear in this dissertation on a routine basis will be defined. These key terminologies will serve the readers as a guide to understand the overall design and description of this dissertation.
Trust in this particular dissertation refers to the confidence of one party that the other party will not do anything to compromise their mutual relationship, specifically in terms of business related transaction.
Culture refers to the collective factors that determine a people’s shared value and way of living (Hofstede, 1991; Hofstede, 2001; Hofstede, 2011).
Cultural Ecology refers to the interaction and relationship between culture and the environment through developmental adaptations (Berry, 1977; Cohen, 2001).
International Entrepreneur is a person who can discover, enact, evaluate and exploit the opportunities across national borders to create future goods and services (Mc Dougall & Oviatt, 2005).
Guanxi is a web of connections to secure favours in personal and organizational relations (Park and Luo, 2001) in the Chinese social setting.
1.6 Assumptions and Limitations
This study does not involve observations to actual occurrences in an uncontrolled environment, and the empirical data are selected with pre-identified criteria. For example, the size of firms and the years of experience in China of the studied audience, and the entrepreneurial nature of the studied audience should all be taken into consideration. Therefore there are assumptions and limitations that must be set forth in order to facilitate execution of the study.
1.6.1 Assumptions
The following are the assumptions of the dissertation:
(1) The Northern European entrepreneurial firms are in competition with other firms for specific market opportunities, especially since Chinese government is limiting foreign investments at this stage of time. A good understanding of how to build trust with the Chinese business counterparts thus will give international entrepreneurs a cutting-edge advantage in doing business in China.
(2) The respondents give accounts of their experiences as close to reality and their personal experiences as possible. The researcher aims to recall the interview respondents to reconstruct their lived experience.
1.6.2 Limitations
The following are the limitations to the dissertation:
(1) The study will only deal with business trust between entrepreneurs and Chinese counterparts.
(2) The Northern European entrepreneurs are seen as the foreign entrepreneurial individuals who seek and exploit market opportunities in China. Therefore, the analytical unit is based on individuals rather than the holistic company entities.
(3) The results of the study are very specific to business relationships between Northern European entrepreneurs and Chinese business counterparts.
(4) The qualitative nature of this dissertation adopts phenomenology as a tool of inquiry, which the quantitative dimension would have to be compensated by further deductive studies.
(5) This dissertation treats China as a whole. The existence of regional differences in China as recognized by conventional scholars (Fang, 1999; Zhang & Ke, 2002) only causes the cultural practice differences. The real values of given nations are held consistent; otherwise the nation state entities will collapse if people across the nation shares unrelated cultural values (Hofstede, 2001).
1.7 Chapter Summary
In this chapter, it was established that China is a very attractive investment country for Northern European entrepreneurs and their associated companies. Market competition is tough for these entrepreneurs, especially since China is limiting foreign investments within their countries. Since trust is said to be the most important element to forge a strong relationship and market advantage over competitors in the business environment, understanding how to build trust between business partners must be determined. Apart from this, the chapter also discussed scientific paradigm, rationale, significance, operational definitions, assumptions and limitations for this research study.
Chapter 2: Review of Related Literature
A well-covered literature review is designed to provide a glimpse of what has been achieved in the relevant areas that the research theme is going to describe. Because of the interdisciplinary nature of the study, the performance of literature review ranges from management, organizational studies, anthropology, history and psychology to political science studies. The extensiveness of the literature builds a strong theoretical backup for the actual analysis that occurs in the later stages of research. In the following sections, the main concepts of the dissertation topic will be explained and discussed through the demonstration of previous literature.
2.1 The Concept of Trust
As one of the weightiest human relational phenomena, the concept of trust can be understood in many different means (Rousseau, Sitkin, Burt, & Camerer, 1998). Even among the ancient thinkers, trust was of huge interest to mankind. Aristotle (384-322 BC), writing in the Rhetoric, proposed that the character of a person’s reliability – a factor of honesty and intention – is the most crucial thing in life. In the oriental philosophy, Confucius (551-497 BC) put forward in his Analects that trust is the critical element in leading people and society. Fukuyama (1995) affirmed that the refinement of trust as the source of spontaneous sociability allows ventures to grow beyond family into professionally managed organizations. Trust therefore influences both the organizational and the societal well-being.
So what is trust? Identified by Sobel (2002), trust is the willingness to permit the judgments of others to influence one’s welfare. Trust is also argued as the bet about the future contingent actions of others (Sztompka, 2002). In essence, the readiness to be vulnerable (Mayer, Davis, & Schoorman, 1995; Rousseu et al., 1998; Sztompka, 1999) towards others is the key to trust. Trust is certainty in the objective of positive behavior by a relational partner (Deutsch, 1960). Trust specified by Lewicki, McAllister and Bies (1998) is the confident positive expectations regarding another’s conduct. Das and Teng (1998) went further and contended that trust is a reflection of two concepts: first, the actor’s susceptibility toward trusting and second, actor’s beliefs about the other party. Yamagishi (1998) defined trust as a default expectation of the trustworthiness of others. In the Chinese indigenous term, trust is defined as the heart-and-mind confidence and belief of other person’s positive manner in conduct (Kriz, 2009). Trust in essence is the act of having faith in the integrity, honesty, reliability and competence in another individual other than oneself reiterate the person-to person nature (Parkhe, 1999). However, the current research landscape in trust according to Lewis & Weigert (1985) is like touching an elephant: the unwieldy topic of trust has been too massive and divergent for researchers to get their arms around. Philosophically, Nida-Rümelin (1997) suggests our cooperative reasons for acting, such as trust are out of non-consequential reasons on the metaphysical level. Therefore, modern reductionist theories on practical issues can be corroborated with the phenomenological normative rules.
2.1.1 Business Trust
Max Weber as early as in early 20th century has explored the concept of trust in his comparative study on religious faiths and their influences on business and enterprising spirit. He has put forwarded particularistic trust versus universalistic trust in accordance with the societal development. Particularistic trust was rooted in the community of blood and heavily rested upon familial or clan structure; while universalistic trust was built on the “Superior community of faith” that the Protestants practice which leads to the great business success during the late 19th century (Weber, 1951). In contemporary literatures, Morgan (1991) argues that economists’ game theory on trust is not reality oriented for business, since business activities are not taking place in a perfect market as economists would claim. Sako (1991) has contested three different levels of trust in business dealings: contractual trust that is weather the other party will faithfully carry out its agreements; competence trust that is other party’s capability of doing what it says; and finally goodwill trust that is other party’s commitment to take initiative for mutual benefit while refraining from unfair advantage taking. However not all business trust relationship fulfills all three criteria. While a person may completely trust another with regard to certain aspects of their behavior, they may positively distrust them in other matters (Blois, 1999). For example, a customer may trust a supplier’s quality standard in its products but because of past experience with problems with the customer service, not trusting their administrative and communication ability. Heffernan (2004) has constructed a relationship life cycle in line with the trust formation in a setting of cross-cultural business relationships: Pre-relationship stage that involves identification and selection of the potential partners whereas trust is mainly built on reputations; Early interaction stage that caters to heavy learning process about the new partners whereas contractual and competence trust centers; and for relationship growth stage that occupies a high level of engagement and investment in partners whereas goodwill trust becomes important. Attraction and liking are seen as less important of trusting in business relations, and competence and openness are even more important.
Trust in international relations also reduces the trade barriers in both micro and macro level. In a study done by den Butter and Mosch (2003), a cross-country data from 25 countries measures of both formal and of informal trust contribute to the explanation of bilateral trade flows. On the Micro level, Chow (2008) has confirmed that trust do significantly reduced business transaction costs after surveying 3000 firms in 31 Chinese cities.
2.1.2 Trust in Cross-cultural Settings
Cross-culturally, trust is perceived differently. Cultural differences influence the determinants of trust through institutional, economic, biological, social and environmental factors (Ferrin & Gillespie, 2009). In Western cultures, ‘obligated relational contracting’ (Dore, 1983), a type of rationality functioned social relationship, was established to guarantee the rule of law, democracy, and business transactions. In non-Western societies, trust is rather approached on a non-universal basis. Families and clans are the basic units for being naturally trusted. In universalistic western societies, deception is considered immoral and in particularistic societies, honesty is only a norm that concerns the in-group members (Worm & Frankenstein, 2000). The Chinese, for instance, adopt a long-term trust structure for the in-circle members (e.g. families and close friends) while using calculative trust for the out-circle groups (Luo & Wang, 2010). This is consistent to a large extent with Doney, Cannon, and Mullen’s (1998) cross-cultural studies on trust.
In theory, those who live in an environment where security is assured by the nature of incentives are not pressed by the necessity of judging whether or not others are trustworthy, therefore they are not taught to make such judgments properly (Yamagishi, 1998). People lived a low uncertainty environment are placed in a situation of high social uncertainty and forced to judge if others are trustworthy (Yamagishi, 1998). According to Doney et al. (1998), societies with high ambiguity and risk avoidance and power hierarchy values usually adopt a calculative model of trust or a trust by capacity structure. Calculative trust means the trustor must determine whether the target’s costs for opportunistic behaviour exceed the benefits, and trust by a capability process is defined as trust building by means of a trustor’s willingness to trust based on an assessment of the target’s ability to meet his or her obligations and the trustor’s expectations. Vice versa, trust that emerges via a projection, whereby a trustor determines a target’s previous activities and behavior, and trust by intentionality, where a trustor decides that a target’s intentions in exchange are benevolent, are positively associated with the tolerance and egalitarian values of societies.
Economically, low-trust societies are more likely than high-trust societies to experience poverty (Zak & Knack, 2001). The World Value Survey (WVS), for example, has established two variables to examine the general level of social trust: namely, the percentage of the population in a given country that believes that most others can be trusted and the percentage of the population in a given country that believes that one can never be too careful about trusting others (Inglehart et al., 2000). Low-trust societies are those places where most people believe one should be careful about trusting others, and vice versa, in high-trust societies, more than 50% of people believe that most others can be trusted. Uslaner (2008) went further and argued that trust is a stable value that is transmitted from parents to children and can hardly be changed. Trust operates as part of cultural heritage, in the same way that we “inherit” our religion and ethnic traditions from our families. People who share close kinships appear to have more similar institutionalized ideologies than those who are merely friends (Cavalli-Sforza, 2001).
This dissertation does not make any distinction between the concept of interpersonal trust and that of generalized trust. Interpersonal trust is the expectancy held by an individual that the word, promise, or oral or written statement of another person can be relied on (Rotter, 1980). Trust is operated from person to person. On the other hand, generalized trust refers to trust in strangers (Inglehart et al., 2000), and it usually occurs on a social level. Interpersonal trust is often the primary structure of trust within families and closed networks. A society with a low level of generalized trust usually has a high level of interpersonal trust (Govier, 1997), so as to defeat the “war of resources”. A society with a high level of generalized trust usually does not discriminate between interpersonal and generalized trust. The distinction between generalized social trust and inter-personal trust contains a misleading theoretical notion, simply because these two concepts cannot co-exist in some societies, where the clan nepotism and familism are strong and often dominate every possible social sphere.
2.1.3 Trust in China
Following the French thinker Rousseau and the English anarchist William Godwin in the conviction that society was on a path toward “perfection”, Daniel Malthus (1766-1834), an English parson, had a strong objection to the idea of an equalitarian society (Gilbert, 1993) and first realized that excessive population growth can cause not only adverse economic and political consequences but also severe environmental and resource impacts. The classical Malthusian theory (1798) of populations’ outturn of their food supply states that the shortage of resources can cause intensive food-chain-like competition. This theory proposes that variations in population growth and density across regions during the agricultural stage of development primarily reflect cross-regional variation in technology and land productivity. The geometric population growth is an essential point for social and resource competition since food supply will always grow arithmetically. In other words, the growth of the population will always surpass the growth of the food supply, for which competition will always be present. Food resources are fundamental to the survival as well as the human cooperative behavior (Hames, 2001). Competition deteriorates the level of social trust (Brandts, Riedl & van Winden, 2006). In terms of equality, agricultural societies often rely on a hierarchical division of labour (Woodburn, 1982), where equality is often absent from the social structure. Malthusianism remains as a useful prediction tool in modern times for foreseeing the occurrence of wars and social economic struggles (Nefedov, 2012). Therefore, societies with strong agricultural roots often experience low level of social trust in the modern time.
Throughout history, China has been described as a land of famine (Nathan, 1965). China as a country with some 7 percent of the earth’s land area has to support 21 percent of world’s population (Landes, 1998) puts a lot of stress on the production of food. Yates (1990) observed that between the late second millennium BC and the fall of the Han dynasty in AD 220, food shortages were already present owing to natural disasters and wars.
These resource shortage disasters in ancient Chinese history continued throughout modern history. The enormous population growth in recent Chinese history had caught up with and overtaken China’s efficient agricultural system, which also make the Chinese exceptionally survival oriented (Unz, 2013). In the Maoist China of the 1950s, the irrational widespread construction of dams and reservoirs without any assessment had a negative impact on the water tables, which led to great famines across China (Riskin, 1990). These historical events of food shortages carry a permanent impaired imprint on the Chinese psyche. Therefore, the majority of Chinese shares great feelings of insecurity for survival. Blood and clan relationship as the main bond to satisfy the need of subsistence thus is legitimized in the Chinese culture (Ning, 2012). Gathering resources for in-groups’ survival to defeat the uncertainties in life has become a top priority for many Chinese people.
Winnowed by ages of grim elimination in a land populated to the uttermost limits of subsistence, the Chinese race is selected as no other for survival under the fiercest conditions of economic stress…when removed to the easier environment of other lands, the Chinese brings with him a working capacity which simply appalls his competitors. (Stoddard, 1921; as cited in Unz, 2013)
As will be explained in this work, China is a low-social trust society (Fukuyama, 1995). As a traditionally hierarchical society (Hofstede, 2001; Gesteland, 2005) based on fierce competitions, individuals in China are regarded as responding to instinct rather than reason. Strangers are initially not trusted in social interactions; the spirit of individualism is therefore mistrusted and to be suppressed within social relationships (Tabellini, 2006). Chinese are unlikely to deploy a win-win strategy for cooperation with the people outside their family circles. Due to the collectivism in the centuries-long history of agricultural labour division and familism (Kriz, 2009), the Chinese culture does not have the norm of treating strangers fairly and it is easy for Chinese people to classify people into different social groups and hierarchical layers. Within the sociological context, the Chinese generally do not believe in equality among the men. Equality means one is given respect and esteem by others (Deutsch, 1975) in a manner that is without any form of discrimination on irrelevant grounds (Raphael, 1946). Chinese people often ignore the pre-designation of dignity for all (Koehn & Leung, 2008). This means that no stranger is initially bestowed with dignity in the eyes of others before one can demonstrate it. Both stranger’s self-worthiness and verbal consents are mostly disregarded by people throughout the initial social interaction. Trust takes gradual continuous interactions before one’s dignity can be respected and earned (Kriz, 2009). Therefore, one will not be treated with dignity before one proves oneself to possess it. The reasons for such behaviour derive from the combination of the old agricultural system and the population–resource struggles as depicted by Malthusian theory.
In order to gain trust in China, a stranger thus first has to prove one’s dignity by showing one’s material worth or having an important backup person with high social prestige (Kriz, 2009) before earning preliminary trust. Luo and Wang (2010) divided the Chinese trust into in-circles and out-circles in accordance with the social importance and perceived utilities of Chinese people and their social institutions. The quality of service is allocated a higher priority for the in-circle members than for others. Trust is only facilitated and kept within in-circles, which involve mainly family members and close personal acquaintances (Kriz, 2009). Hwang (1987) further categorized Chinese relationships into expressive ties and instrumental ties. An expressive-tie relationship dictates that profits and internal benefits should be distributed to satisfy the recipients’ legitimate needs, regardless of their contributions. Equality thus operates within expressive ties. Expressive ties occur only among in-circles and within families. Instead, for the instrumental-tie relationship, equity applies, in which each person’s gain should be judged by his or her contributions in labour, efforts, or monetary means. Equity denotes the general equivalence between outcome and input (Cook & Hegtvedt, 1983). To summarize, expressive ties often occur within in-circles, and instrumental ties are adopted in contractual relationships with out-circle members. The preference for equity or equality values vary based on factors typically associated with interpersonal similarities, proximities, and the degree of self-disclosure (Cook & Hegtvedt, 1983). More inter-personal similarities, proximities, and self-disclosure lead to more equality. As a traditional agricultural competition-minded culture, the spirit of equality is often neglected on a social level and this may result in a deformation of social trust. Advocated by Child and Möllering (2003), the high level of regulatory inconsistency, arbitrariness, and corruption in the Chinese government makes the institutional foundation for trust remain underdeveloped. Thus, the active trust developments initiated by the trustors are needed. Of course, the assumption of mistrust in Chinese society is generally oversimplified. The modal distribution of distrust in China should not exclude the marginal population of high trust, as any form of cultural value cannot be taken as the absolute extreme (Hofstede, 2001). Businesswise, in a length interview research of 43 Chinese businessmen and businesswomen in Shanghai, Beijing, Taipei, Hong Kong and Xiamen, Kriz (2009) has identified Chinese indigenous terminology of trust, xinren builds on a person-to-person emotional level and much of the assessment of trust is based on the subjective feeling of liking the words, tonality, visual and facial expression. Confidence and belief are found to be important in building trust in the Chinese context. For western business people, Kriz (2009) suggest sincerity and a preparedness to acculturate in the Chinese culture is important. Trust building in China progressed from the initial no connection, to shallow tie, and through the careful and delicate development, transformed into instrumental ties and finally into a deep level of trust (Kriz, 2009).
Possibility of self-reported high trust levels of Chinese nationals, which includes respondents from Mainland China, Taiwan and Hong Kong, was explored in the study of Steinhardt (2012). The study finds a relatively strong link between institutional confidence and trust in Mainland China, which suggests that high confidence in institutions controlled by an absolute power contributes to high general self-reported trust levels of individuals. Results of the study in terms of measurement validity are mixed. Even though the results do not directly suggest that political fear causes a significant distortion in trust levels, the study finds circumstantial evidence for a culturally induced response bias to the standard item in Mainland China. People in survey researches generally have tendency to endorse statements on the basis of their implicit social desirability rather than on their actual content (Phillips & Clancy, 1972). What people say and do therefore does not always represent what they truly think or belief (Cronk, 1995). Chinese in general may also see themselves as high trust because they have absolute trust in their kin (Kriz, 2009). This would have crucial implications for comparative research on generalized trust beyond the Chinese context (Steinhardt, 2012).
2.1.4 Trust in Northern European Countries
The World Values Survey (WVS) grew out those surveys initiated in 1981 to study the values and attitudes of the general public across countries of different economic, institutional, and cultural backgrounds. To date four waves have been conducted: 1981-1984, 1990-1993, 1995-1997, and 1999-2004. The data cover over 65 countries across the globe. One of the archetypical questions the WVS deals with is the general trust in different societies. “Generally speaking, would you say that most people can be trusted or that you can’t be too careful in dealing with people?” has appeared in all these four waves of surveys.
By using the two trust data sets from the World Value Surveys (WVSs) of 1990-1993 and 1995-97, Delhey and Newton (2005) found that in only five Western countries (Norway, Sweden, Denmark, the Netherlands, Canada and China) do as much as half of the population express trust, and three of these countries are based in the Northern Europe. (Though China is also on the list, the fallacy of Chinese preference on endorsing socially desirable answers rather than the actual desired ones made such results questionable. Uslaner (2012) has also recognized that high survey based trust in China do not match to the experience of reality) Northern European countries exemplify safe societies, where people can put their own safety in the hands of others (Delhey & Newton, 2005). Other determinants such as the corruption level, bureaucratic quality, and taxation compliance also suggest that the Northern European countries are high in trust (La Porta, Lopez-de-Silanes, Shleifer, & Vishny, 1997). By controlling various political, religious, and income inequality factors, Bjørnskov (2005) found that the remnants of Viking norms of honesty even contribute to the high trust level in all the Northern European countries. According to Rothstein (2010), the universal welfare states that devote non-biased social programmes to all with almost no corruption promote social trust where most indigenous citizens will cooperate instead of acting as “free riders”.
In the study of Delhey and Newton (2005), trust in 60 countries with different cultures was investigated, focusing their analysis on the differences in the general trust levels of the 60 countries. Delhey and Newton (2005) defined social trust as the confidence that others will not deliberately harm an individual for as long as they can avoid it. The results showed highlighted trust to be a significant part of the interrelationship of social, political, and economic conditions of the nation. Highly trusting people come from countries that have ethnic homogeneity, are predominantly Protestant, have good government, are wealthy, and have income equality. More specifically, Delhey and Newton (2005) saw these relationships to be dominant in Northern Europe. The weakness of the Delhey and Newton (2005) study is the inability to establish cause and effect relationship to further explain the findings of the direct relationships found in the study.
Anthropologically, Van de Vliert (2009) constructed rather persuasive speculation about the climatic conditions in social cooperation to explain the particular case of social trust in the Northern Europe. In cold climates with prolonged winters, meeting the basic needs for food, safety, and security is much more demanding than it is in warm climates, so a more positive relation exists between the attainment of one’s own goal and that of other people’s goal. As a consequence, over many generations, people have evolved more shared responsibilities and more need for common joint efforts (Van de Vliert, 2009; Bergh & Bjørnskov, 2011). Trust is thus taken for granted throughout the social behaviour environment adaptation.
The high-trust social milieu is also reflected by the Northern European managerial style, where equality, non-confrontation, and egalitarianism dominate the corporate culture (Stensaker, Larsen, & Schramm-Nielsen, 2007). Even across the Atlantic, the trust levels of Americans are largely influenced by their ancestors’ origins. North Americans with Northern European origins have the highest level of trust within American society (Tabellini, 2007). The share of people with Northern European origins improves the overall trust level within several Western countries (Uslaner, 2008; Dincer & Uslaner, 2009). Although descendants of Scandinavians that migrated to the US in the 1930s score as highly on the trust as the modern Danes, Norwegians and Swedes, but their grandparents migrated before the modern welfare state got into motion already generations ago (Bjørnskov, 2006). The factors of income equality, non-hierarchical Protestant beliefs (Bjørnskov, 2006), and homogeneous ethnic composition (Delhey & Newton, 2005) all contribute to the high level of trust that Northern European societies enjoy.
2.1.5 Trust Differences between Chinese and Northern European in Business
Recognized by Worm & Frankenstein (2000), Northern European cultures are the most different from the Chinese culture from the continuums of comparisons. In the business world, the trust differences between the Chinese and Northern Europeans are also found by multiple researches. Isaksson (2009) through a study of oral comments and case histories of five Chinese managers and four Swedish managers in innovation businesses found “high trust culture” is regarded as central to the Swedish leadership style; while Chinese managers defined their trust relations based on hierarchy and the roles of tasks. Trust is not assumed but acquired through positions and roles. Roles with higher positions are bestowed with more trust and confidence. After interviewing 24 northern European managers and 15 Chinese managers, Kumar and Worm (2002) noticed that trust to Northern European managers are pre-conditioned while to Chinese managers the development of trust takes time. Worm & Frankenstein (2000) also suggested that Scandinavian culture is a high trust culture that adheres implicit and explicit rules of society insures transactions between strangers. And in the Chinese culture, trust is only extended on the basis of personal relationships. Compared Swedish and Chinese in entrepreneurial leadership styles, Bremer (2009) concludes Swedish leadership is vague and imprecise in its commands of orders, which demonstrates high trust for co-workers while Chinese uses social network confidentially to solve the problems, where trust is kept in a in-circle manner.
In another study done by Ramström (2008) found that the high trust in Northern European firms is organizational and professionally based. For Chinese business people, trust is more personal and private. Northern Europeans therefore relies fact that people are typically trusted until they have proven they cannot be trusted. For the Chinese, it is typically the other way around: people are distrusted until they have proven they can be trusted.
2.2 Chinese cultural Concepts
In this section, the main building blocks of the Chinese culture will be introduced as a comprehensive reference for understanding the current study on how Northern European entrepreneurs building their trust in China. The background setting of this research relies much on the trans-cultural nature. For Northern European entrepreneurs enter China, a rather opposite social setting as it is in Northern European region will come about, that is based on a total different social codes and human dynamics. Chinese culture is embedded in an old civilization, which can be dated back to 3000 BC. Because of the long history of isolation to the outside world, many of the Chinese cultural concepts are still fairly new to the western academia and international entrepreneurs, which needs special treatment in explanation and theoretical input. Finally, as contested by Kriz (2009), trust in Chinese market is connected to the notion of Confucian and Taoist beliefs and guanxi.
2.2.1 Taoism and Confucianism in Business
Taoism and Confucianism are two sets of the most important philosophical doctrines in Chinese culture. These two beliefs have been termed in China as being the most influential schools of thoughts. It is common for Chinese people to take on both Confucianism and Taoism outlooks to compliment each other in their worldviews (Hoiman & King, 2012). Taoism is said to be the guiding principle for Chinese’ inner strengthen (Creel, 1956) and Confucianism acts as the moral principle for Chinese people conducting their daily affairs (Jacob, Gao & Herbig, 1995). As recognized by Fang (1999), Chinese are “intensely practical” people who can follow different wisdoms at the same time. A well gasp of these two schools of thinking thus can not be undermined if one desires to understand the Chinese behavior and mentality in a in-depth manner.
Confucius lived from 551 to 479 BC and is considered one of the dominant early figures in Chinese ethics and philosophy. His views and teachings are late developed by Mencius (372 – 289 BC), who stressed on the positive cultivating influence on human nature. The school of Confucianism focuses on the pragmatic and present-oriented philosophy (Yum, 1988) that expounds a man-centered universe (Chen, 1973). The main concern of Confucianism is the fundamental principle of humanity. It deals with the human conduct of social value, social practice, and the image of the ideal person (Hoiman & King, 2012). Embedded in this ‘rule by man’ philosophy is the concept of wulun, that is based on reciprocal indebtedness from emperor to subject, father to son, husband to wife, elder to younger brothers and friend to friend (Kriz, 2009). It functions as an underlying ideology infusing the way of life in China (Yum, 1988; Yao, 2000). Confucianism provides teachings on virtually every aspects of conducting one’s life to its fulfillment. Thus Confucianism insists on the importance of human relationships as the basis of maintaining a harmonious society (Yum, 1988). Confucius advised that social interactions should be assessed on the role and hierarchy, that it is righteous to favor the intimate (Hwang, 1999; Ning, 2012). The particulars of each relationship should be treated with individual care. In China, it is common to structure groups of people by social importance (Jacob et al. 1995) and their assigned roles in the social hierarchy. As for the close relationships, it is important to rely on the principles of ren (benevolence), yi (faithfulness), li (propriety). Ren in Confucianism denotes an awareness of reciprocity, which is said by Confucius not to do another man what you yourself don’t want (Yum, 1988). Ren stresses that social interactions and relations between humans will take priority over personal interest (Hoiman & King, 2012). Yi on the other hand comprises a kind of righteousness that apprehends close relationships should be based on the common goodness. Li finally represents the ethical standing for ruling, in which the use of subjective feeling instead of objective criteria should be adopted in judging the right and wrong (Jacob et al. 1995). Confucianism view on social relationships thus relies the importance on situational circumstances. Different relationships according to the level of intimacy are groups into particular regulatory mechanisms (Yum, 1988). In business and management, western business people are advised to not exclusively rely on constructive legal standardized mechanisms such as lawsuit (Jacob et al. 1995) and contract (Fang, 1999) to function their businesses in China as Confucianism advocates it, the situational and relational dynamics should be respected in order to serve the continuity of business.
The main founders of Taoism are Laotze (600 BC) and Zhuangzi (400 BC). The teaching of taoism at large provides Chinese an intrinsic way of looking at life in general. Tao means the pristine goodness or original perfection of nature without the development of human consciousness (Chen, 1973). Tao is the totality of all being and all pervasive (Hoiman & King, 2012). In life and business, one should not therefore subjectively push his or her goals and agendas too much. The forceful pursuit of objectives disturbs the harmony of natural forces and often it will lead to the opposite end of what one expects. What is designated is already decided within the Mandate of heaven. This is what taoism call as Wu wei, meaning doing nothing and everything will be done according to the tao or the given natural force. In taoist view, all things are relative. What is “right” and “wrong” are just words and we may apply to the same thing, depends on the viewpoint we see it from (Creel, 1956). According to Hwang (1999), tao is the dialectic unification of two opposing yet complementary forces: yin and yang, or being and not being. All things in the universe have two opposing side, being it male and female, good versus evil and sun besides moon (Fang, 1999).
Abbildung in dieser Leseprobe nicht enthalten
Figure 1. Yin Yang Symbol
Hence, Yin-Yang symbol or Taichi indicates a kaleidoscope-like movement. Yin is the dark part that represents the soft, weak, passive and feminine qualities and while yang symbolizes the masculine qualities of aggressiveness, power and strength. This means the faction between Yin and Yang are mutual related to each other, interdependent, and continuously revolving and transforming into the each other. Therefore, both are co-exist with the other, for each also contains the quintessence of the other. Night follows by day, and day converts into night. Birth follows by death, and death gives the rise to new lives. Yin and Yang is the ultimate invisible guiding force of all things. Thus to most Chinese people, there’s no absolute truth in any earthly facts. Things and events are viewed as in their constant change. In I Ching, or the book of change, the oldest Chinese classic text stated:
Its tao is forever changing -
Alteration, movement without rest,
Flowing through the six empty places;
Rising and sinking without fixed law,
Firm and yielding transform each other.
They cannot be confined within a rule;
It is only change that is at work here.
(I Ching, Book 2)
In business and management, according to Guildford (1995), Chinese believes that highly structured and planned approaches to business may prevent the timely effective action. Instead a keen sensitivity to events and a continuous stream of small intuitive action is more effective than a grand plan (Guildford, 1995). To a Chinese business person, the attempt to develop a detailed model for running the business is not suitable because the world in general is always more complex than people can predict (Guildford, 1995).
Both Confucianism and Taoism are premeditated to minimalize the effect of savage nature of people. It is aimed to cultivate and enlighten the behaviors and life values of the Chinese people.
2.2.2 Chinese Communist institutional effect
In order to understand the current contemporary Chinese culture, one cannot ignore the fact that China’s institutional environment makes it distinctive from the rest of the world. This is what Fang (1999) calls as “guo qing”, or the national condition and People’s Republic of China character. The People’s Republic of China is structured in 1949 after hijacking the former legitimate Chinese national government. As a socialist country with Marxism-Leninism and Mao’s thought as its principle political ideology (Fang, 1999), Chinese communist party aims to destroy the traditional Chinese values by replacing with terror and absolute state control. This principle of such ideology preaches that there was no such thing as the moral belief in God and the authority to rule rested entirely in men. Chinese communists disliked religious practices that helped bond the community (Gamer, 2012). In modern China, ancient traditions such as Taoism and Confucianism become merely ceremonial rituals for ordinary people and the political attachments to the Marxism-Leninist state diminished the needs of traditional identity (Cohen, 1991) for the Chinese people. The Marxist image of society based on class struggles and conflicts also contradict with the Confucian version of a harmonious and benevolent society (Hoiman & King, 2012). Instead, the interlocking structure of the communist party, the state and the government conferred the ultimate power in the hands of few people (Fang, 1999) that sets up the phase of modern Chinese cultural identity. The communist party of China has about 80 million members, with about 2 million primary organization meetings in the local level. These local branches elect a local secretary, a local party committee, who then select individuals to serve on the county and provincial congresses. After all, these provincial and county congresses send about 2300 to the National Party Congress that is served as a team of rubber stampers for the ruling elites (Gamer, 2012). The real power rested in the standing committee of the politburo that consists merely a handful of members, which controls the military commission and leading government ministers (Gamer, 2012). The semi-authoritative state structure reinforces the like-hood of human rights abuses and social frustration of the common people. According to Ryckmans (1990), the Chinese communist party is in essence a secret society presenting a striking resemblance to an underworld mob or Mafia, it feeds upon deception and conspiracy, and rules by intimidation and fear.
The communist tradition for destroying the social level trust begun in the 60s by the devastating cultural revolution of Mao (Kriz, 2009), the current Chinese Communist Party (CCP) strictly believed materialism and that one could make his or her own paradise (Vogel, 1989). This is especially true after the open door policy of Deng Xiaoping in 1979, the use of materialistic payoffs is designed to legitimize the moral order of CCP (Pye, 1990). The danger of neo-Leninism based on materialism according to Pei (2006), blend one party rule elitism and absolute state control of key sectors of the economy, which leads to rampant corruption, environmental damages and widening social inequality in wealth. This is also reflected by the make up of Chinese political structure, whereas the most important controlling organ of the communist China, Politburo Standing Committee is mostly made of the offspring and family members of revolutionaries and former high-ranking party functionaries (Li, 2012). They and their relatives often play central role in business closely entwined with the state and serving as middlemen to host MNCs and wealthy tycoons that want to do business in China (Barboza & LaFraniere, 2012). Thus to assure the continuity of these few families and their immediate networks is to guarantee the allocation of resources and wealth on certain privileged people that directly or indirectly influence the survival of CCP and the political entity of People’s Republic of China. The culture of nepotism and corruption (Gamer, 2012) through the ruling party of CCP is fostered from the top to flowed downward in China (Barboza & LaFraniere, 2012). Estimated 78 percent of commercial fraud in amount over USD 600000 involved senior officials and their relatives, which accounts 14 percent of China’s annual GDP (Gamer, 2012). On the other hand, Chinese authorities create problems under the name of regulations for seemingly unaccountable reasons for the vast majority of ordinary Chinese people (Pye, 1990) in the public life. The strong level of government’s intervention regulations also influenced the decline of social trust (Aghion, Algan, Cahuc & Shleifer, 2010) in modern China. Such domestic political environment in the long run also makes the Chinese nation suspicious about liberalism and lack of the ability to become a full-ranged global power (Shambaugh, 2013). The communist institutional characteristics in fact facilitate the survival instinct that builds on the animalistic competition for resources and opportunities (Unz, 2013) rather than the harmonious social cooperation that Confucianism advocates. Trust is also deteriorated within this institutional condition.
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- Linjie Chou Zanadu (Autor), 2015, Phenomenology of Trust Behaviour in China, Múnich, GRIN Verlag, https://www.grin.com/document/538077
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¡Carge sus propios textos! Gane dinero y un iPhone X. -
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¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X. -
¡Carge sus propios textos! Gane dinero y un iPhone X.