Author(s):
1. Frank Nyamrunda, 2. Susan Freeman, Prirodno-matematički fakultet Banja Luka, Australia
3. Christopher Medlin, The University of Adelaide, Australia

Abstract:
This study seeks to understand the link between trust and distrust in the small-to-medium sized enterprises (SMEs) export-import relationships. Although considerable research has explored the role of trust in inter-firm relationships, especially in developed economies, scholars have devoted less attention to understand how trust and distrust together influence business relationships in transitional market contexts. The political and economic reforms in transitional economies in recent years have provided rich opportunities for SMEs to emerge and develop through internationalization. Since the institutional systems in these economies are mostly underdeveloped, SMEs rely heavily on trusted trading partnerships. In this new business setting there is a need for SMEs from transitional economies to take advantage of new business ventures and various other opportunities by establishing partnerships with foreign partners (Bachmann and Inkpen, 2011). However, cross-border relationships can be complex and challenging especially for SMEs since they have limited resources to rely on expensive partnerships like larger firms (Dyer and Chu, 2010). Therefore, the extant literature suggests understanding of social mechanisms such as trust and distrust is very important for SMEs in establishing successful cross-border business relationships (Gaur et al., 2011; Manolova et al., 2010). The present study adds to this discussion by suggesting that the impact of trust may depend on the extent to which distrust is present in export-import relationships. Distrust is consistently ignored in prior studies (Connelly et al., 2012). As a result, distrust has been conceptualized as a simple reversal of trust although it is associated (Welter, 2012). Distrust arises from a perception of incongruence between a focal organization’s values and those of its partner. Therefore, distrust portends general suspicion that a partner will behave opportunistically (Connelly et al., 2012).To draw on this background, the present study furthers our understanding regarding the link between trust and distrust and how trust and distrust act as governance mechanisms (Bachmann and Inkpen, 2011), as well as how these constructs can contribute to a more favourable or unfavourable business environment. Given the nature and aims of the research questions, this study adopts a qualitative methodology (in-depth interviewing technique) which helps us to gain deep and rich insights into various phenomena under study. To foster further understanding of factors which drive trust and distrust formation in SME export-import relationships, the current findings suggest that this situation has been driven by various interrelated factors rather than a single dominant factor. We show new understanding, such as relationship benefits, opportunistic behaviours, the impact of repeated interactions and experiences, the importance of social networks and communication in SME export-import relationships. Indeed, the findings explain the impact of trust and distrust on relationship quality. This study provides refined theoretical understanding of the trust-based relationships in an export-import arena by refining social network theory, transactional cost theory and trust-commitment theory. Finally, this study contributes to the research by providing a new path for future studies since the concept of trust and distrust in SMEs relationships in the context of transitional economies is relatively unexplored in the literature. Also, a number of managerial implications

Key words:
Trust, distrust, transitional economy

Date of abstract submission:
23.11.2013.

Conference:
REDETE 2014 - Researching Economic Development and Entrepreneurship in Transition Economies