Trust in the Global Economy
Trust – people’s willingness to make themselves vulnerable to others despite the potential for exploitation – matters. People around the world understand the importance of trust, but they do not all think about trust in exactly the same way.
Authors wanted to know if there were systematic cultural differences in the process of deciding to trust and, if so, why.
Their interviews revealed four key actions and four core standards that managers used when searching for and deciding to trust.
The key actions:
- Due diligence
- Brokering
- Goodwill building
- Testing
The core standards (CORR):
- Competence
- Openness
- Respect
- Rapport
Authors used tightness-looseness culture and high-low trust framework.
- East Asia – high trust and culturally tight.
- Middle East/South Asia – low trust and culturally tight.
- West – high trust and culturally loose.
- Latin America – low trust and culturally loose.
The most important similarity across the regions is how central in-person interaction is to the decision to trust.
Doing comparative cultural research is challenging. Interpreting it to generate general and practical knowledge is even more challenging.
Culture matters when people are searching for trust. Culture is the unwritten rules, called norms, that govern social interaction in the group. Whereas the problem of trust (being vulnerable to others in social interaction) is the same regardless of culture, the process of trust (deciding whether to trust another person) may be different.
Nations within different regions share two very important elements of culture that are central to the trust decision: level of trust and tightness-looseness.
Searching for and Deciding to Trust – Key Actions and CORR Standards
To decide whether to trust a potential new partner, managers compared the information they gathered via one or more of the key actions to their preferred CORR standard of trust.
- Due diligence refers to a search for information about the potential partner and the company the partner represents.
- Brokering refers to the action of a third party that change the relationship between two or more other parties. In brokering, the third-party brokers stake their own reputations for trustworthiness on the potential partners being trustworthy in their relationship with each other.
- Goodwill building refers to engaging in social interaction to get to know the potential partners.
- Testing refers to getting the potential partner to act or react and thereby provide firsthand data to evaluate trust.
The source of information distinguishes due diligence and brokerage from goodwill building and testing. Information about trustworthiness gathered from due diligence and brokering comes indirectly from third-party sources; information gathered from goodwill building and testing comes directly from social interaction between potential partners.
- Being competent goes beyond being capable. Competent people are experts, proficient, and qualified.
- People are open also are honest, objective, forthright, and willing to share information.
- Respect signals regard for another person.
- People who have rapport have a close and harmonious relationship.
Trust and Tightness-Looseness – Culture and Deciding to Trust
At the most fundamental level, culture provides functional solutions to problems of social interaction. In other words, different cultures often generate different, but effective, ways to address the same social problem.
Cultural norms are the informal rules that guide people’s behavior in group settings. In some cultures, norms are very strong because families, community members, and governments closely monitor behavior, and sanction deviance. Cultural scholars call these ‘tight cultures’. On the other side we have ‘loose cultures’.
In a loose culture, close enough is usually good enough. In a tight culture, such as Japan, it isn’t.
Authors used the World Values Survey measure to test whether trust varies by region. Trust is stable over time and national differences in trust are meaningful.
High-trust nations tend to be ethnically homogeneous and historically influenced by Protestant religious traditions. High-trust nations also experienced wealth, greater income equality, and good government.
We use the Gelfand measure of tightness-looseness to illustrate that some regions are tighter, others looser. The data provided by Gelfand are standardized at the national level.
Middle East and South Asia – Respect Rules
In deciding to trust, managers in the Middle East and South Asia followed a systematic process to learn about the person they were considering as a potential business partner. Three of the four key actions are: due diligence, brokering and especially goodwill. Testing was not key action in this region.
The primary standard for making the decision to trust in the Middle East and South Africa was respect for cultural differences.
In this region, the first step in the process of deciding whether to trust involves due diligence, specifically, seeking references of good character.
Just having a good reputation or a brokered introduction is not enough information to trust a potential partner in the Middle East/South Asia. Managers wanted to meet the potential partner in person.
Respect is the ultimate standard for trust in this region.
People from the Middle East and South Asia interpreted overstatements and overconfidence as indicators that a potential partner should not be trusted.
Several recommendations to help build trusting relationship with potential partners in this region:
- Identify someone who has worked with the potential partner to introduce you.
- You need multiple positive references.
- Set up in-person meeting.
- Find out local norms.
- Show respect.
- Be gracious accepting hospitality and offering hospitality in return.
- Respect cultural norms.
- Be patient.
- Demonstrate humility and not haughtiness.
Latin America – Rapport Is a Requirement
In Latin America, the decision to trust depends on rapport. The logic is that people are less likely to violate trust if they have a personal relationship based on shared values and worldview. Two of the four actions are: due diligence and goodwill building.
Managers in Latin America were using goodwill building as an opportunity to judge character.
In low-trust, loose cultures such as in Latin America, managers built rapport to insulate themselves against being exploited in a new business relationship. A low-trust, loose cultures implies that the society has neither institutional systems, nor social systems, that are strong enough to protect people from exploitation by others.
Rapport, the core value in Latin America, rests on similarities. In contrast, respect, the core value in the Middle East/South Asia, rests on recognizing and honoring differences.
Several recommendations to help build trusting relationship with potential partners in this region:
- Get references from people you know, who know the person.
- Be prepared to commit time to building a personal relationship.
- Don’t be afraid to talk about your personal values and beliefs or your family.
- Attend a social event.
- Share a meal together.
- If you plan to get someone to broker an introduction, make sure the person is someone you trust highly.
East Asia – Trustworthy, Competent, Adherent
The dominant CORR standard for deciding to trust in East Asia is competence. However, determining competence is a middle step in the structured East Asian process of deciding to trust. The first step is brokering. East Asians also engage in due diligence. Brokering, however, is the preferred method of vetting a potential partner.
In East Asia, a brokered introduction is the preferred way to meet a potential business partner. East Asian managers rely heavily on brokering but, perhaps paradoxically, they also have to expend considerable effort interpreting the broker’s recommendation.
They also engage in due diligence, particularly concerning the reputation of the company they are considering partnering with. The reputation of the person representing the company is also important. Due diligence may be used to investigate competence.
After passing the hurdles of proving one’s reputation and competence via information gathered indirectly in brokering and due diligence, the next key action in the trust development process in East Asia is organizing in-person business meetings. The purpose of these in-person meetings is to test (again) for competence. To pass the competency test, East Asians wants facts and data, not rhetoric.
Indirect communication is not necessarily a worse or a better mode of communication than direct communication – it is just different. East Asians are well aware that communication in their culture is indirect.
In East Asia goodwill building, which on the surface appears to be a social celebration of the new relationship, nevertheless has an element of assessment.
Failure to adhere to social norms or failure to show respect for hierarchy can be costly in East Asia.
The decision to trust occurs in stages. Stage one established reputation. Stage two, competence. Stage three, adherence to social norms.
East Asians use of in-person testing and goodwill building focuses on business relationships more than personal relationships.
In high-trust, homogeneous, tight cultures such as in East Asia, social norms and monitoring and sanctioning of deviations from normative behavior support high levels of trust.
Several recommendations to help building trusting relationships with potential partners in East Asia:
- Make a concerted effort to get an introduction.
- Be sure to demonstrate credentials, facts, achievements, and any other reputational information early on in interactions.
- Be aware that communication is indirect in East Asia.
- The group or company’s reputation is more important than an individual’s reputation.
- Try to meet face to face.
- Don’t expect social gatherings to happen until the new business relationship is in place.
- Demonstrate respect for social hierarchy and seniors.
The West – Be Open to Sharing Information
In the West, people generally assume others are trustworthy but, to avoid being taken advantage of, they are likely to test that assumption.
In the West, managers placed a priority on the business relationship and assumed that if personal relationship developed, it would follow from the business relationship.
Western culture managers used all four key actions (due diligence, brokering, goodwill building and testing) to generate information relevant to the decision to trust but they relied primarily on testing.
In the West, the process of deciding to trust is a two-way street with regards to openness.
Western culture managers are not blind to the conduct of people they are meeting and interacting with. They prefer eye contact, a firm handshake, and expressions of warmth and respect. A lack of professionalism makes it more difficult to trust.
Western managers use small talk or “schmoozing” strategically to ease into opening the business meeting.
Western managers engaged in due diligence, but there was no consistent timing for it. They tended to be cautious in their use of reputational information gleaned from due diligence or brokering.
Western managers recognized the value of introduction. But they did not treat introductions as brokered in the way East Asian managers did.
Western manager primarily relied on their own individual assessment of a potential partner as opposed to placing significant weight on what others said about the partner.
High trust and looseness generate a unique Western culture process of deciding to trust. Trust by verify.
There is more uncertainty about whether others can be trusted in high-trust, loose Western than in high-trust, tight East Asian cultures.
Several recommendations to help build trusting relationships with potential partners int this region:
- Go into the relationship knowing that you are likely to be trusted initially and tested continually throughout your conversations.
- Be ready to share information.
- Require reciprocity of information sharing.
- Don’t expect extensive time spent discussing personal matters.
- Be professional and demonstrate good business etiquette.
- Anticipate that some potential partners will do extensive research, but others will ask you for references after the meeting.
Similarities and Differences – Points of Contact between Regions
Even though managers in two different regions may take similar approaches to the process of deciding to trust, their approaches may manifest in different ways. They may use the same key actions to search for different information.
Managers in two different regions may take similar approaches to the process of deciding to trust but their approaches may manifest in their use of the different key actions.
The cultural starting point of low versus high trust manifests in the difference between focus on the personal relationship in Latin America and the Middle East/South Asia and the focus on the business relationship in East Asia and the West. The cultural starting point of tightness versus looseness manifests in the stronger reliance on others’ opinions of potential partners’ trustworthiness in East Asia and the Middle East/South Asia than in Latin America and the West.
There are two major benefits of understanding the cultural origins of the way people act. The first is seeing differences as cultural. The second is creativity. Creativity in searching a response that respects cultural differences.
Building a good reputation in a tight culture takes commitment to social norms.
In the West two factor contributes to relatively high level of interpersonal trust. One is the nature of the institutional environment in Western nations – regulated and transparent. The second factor is the pervasive influence of the Protestant ethic: do unto others as you would have others do unto you.
East Asia and West are both focused on the business relationship and engagement in testing. East Asian are testing competence, The West is testing for openness.
Low trust in the Middle East/South Asia reflects history of tribal, religious and ethnic conflict. On the other hand in Latin America, heterogeneous culture lack the strong social norm. Because it is hard to predict who is and who is not trustworthy in these general low-trust cultures, they both engage in goodwill building to find out. The joint point of contact for those cultures is shared focus on the personal relationship and engagement in goodwill building. Middle East/South Asia uses goodwill building to establish respect, Latin America to establish rapport.
Tight cultures rely on own and other’s opinions. Loose cultures rely on own opinions.
Searching for Trust during a Pandemic
Pandemic-related barriers to meeting in person were significantly limiting the development of the new business relationship.
The pandemic made it extremely difficult to develop new business relationship in many regions of the world. Two new themes emerged from our 2020 interviews: the challenge of meeting new business prospects and the challenge of not being able to meet in person to decide whether to trust a potential partner.
Especially in the West, before COVID-19, interviewees were comfortable cold calling and cold emailing. The pandemic changed all that. The pandemic put an end to spontaneous calls. So too, the efficacy of cold emails has declined or possibly even ended.
The problem with emails is basic but challenging: getting the email read even if it gets to the right person.
To get the access to potential partners and keep their business alive, managers especially in the West and Latin America, who in pre-COVID-19 days did not rely heavily on introductions, were probing their networks to find people, friends, acquaintances, and prior business partners whom they hoped could make introductions for them.
In East Asia, references and brokered introductions – which were central to the process of searching for trust prior to the pandemic continued to be key actions to start the process of business development in that region.
The significant downside of meeting online versus in person was how it complicated the decision to trust.
It seemed that it would be especially difficult to judge respect and rapport online, since they both rest on interpretation of intangible information deducted from social interactions and references. Competence and openness are based on somewhat more tangible information that can be cross-checked.
Moving from in-person to online interaction in the Middle East/South Asia and East Asia, as well as in the West, the conditions imposed by the COVID-19 pandemic meant taking fewer risks. In Latin America, it meant taking greater risks.
The Future of Searching for Trust
Tight, high-trust East Asia cultures weathered the pandemic better than other cultural regions with respect to health and economic outcomes.
The West, with its loose but high-trust culture, managed COVID-19 poorly. Loose culture responds to lack of compliance with public health measures.
People in loose cultures innovate in the face of uncertainty.
The tight and low trust culture like Middle East limited new business activities until it could proceed under the guidance of normal standards.
Points of Application
Conflict in intercultural relationships often is due to differences in cultural norms and standards.
Cultural intelligence (CQ) is the ability to understand, act, and manage effectively in culturally diverse settings. People whose CQ is high have general knowledge about cultural differences, such as available in this book, but they take it a step further, recognizing differences as cultural, having the motivation to find solutions to cultural challenges, and having the ability to adjust their own behavior to cultural conditions.
