Overcoming the liability of outsidership in institutional voids: Trust, emerging goals, and learning about opportunities

• Published in: International small business journal Vol. 35; no. 3; pp. 262 - 284
• Main Authors: Fiedler, Antje, Fath, Benjamin P, Whittaker, D Hugh
• Format: Journal Article
• Language: English
• Published: London, England SAGE Publications 01.05.2017; Sage Publications Ltd
• Subjects: Business; Cognition; Complementarity; Emerging markets; Globalization; Institution building; Learning; Liability; Markets; Qualitative research; Small & medium sized enterprises-SME; New Zealand; China; effectuation; emerging markets; affective and cognitive trust; institutional voids; Uppsala model
• ISSN: 0266-2426; 1741-2870
• DOI: 10.1177/0266242616662510

Building on the complementarity of the revisited Uppsala model and effectual logic, this article examines the role of affective and cognitive trust for developing knowledge in the context of small- and medium-sized enterprise (SME) internationalization in emerging markets. Drawing on qualitative interview data from New Zealand SMEs engaging with Chinese business partners, the article first shows that an overreliance on affective trust can result in a situation of ‘persistent mediation’, in which learning about opportunities is impaired. Second, utilization of the affordable loss principle and a focus on control facilitates relationship-specific knowledge, which may also lead to cognitive trust. However, cognitive trust does not necessarily transform in the substantive business market knowledge needed to overcome the liability of outsidership. Third, business market knowledge is advanced when partners mutually set goals and develop the opportunity, which potentially also fosters cognitive and affective trust.