An institutional view of the communication flows between relation-based and rule-based countries

The purpose of this paper is to examine the strategic decision-making process regarding communication flows and trust and their impact on firm cooperation in the context of buyer-supplier relationships in rule-based vs relation-based countries. An institutional view is explored to demonstrate how informal institutions shape a firm’s strategic decision making in the internationalization process.

A conceptual model and accompanying research hypotheses are tested on data from a survey of 169 US and 110 Brazilian buyers. Structural equation modeling is used to test the hypotheses.

Results suggest that the pattern of flows of communication on building trust and increasing strategic cooperation is based upon the governance of the individual’s country of origin. Quality communication is found to have a greater impact on trust in the USA, while two-way communication is the factor with the greatest effect on trust in Brazil. Frequency of communication and socialization are also found to have indirect, but important distinct roles in the flows of communication in both countries. Trust is also found to be a strong predictor of strategic cooperation.

Results provide insight into what patterns of communication flows are most influential in increasing a buyer’s trust in a supplier, so that suppliers can better formulate strategies to enter overseas markets.

This study extends the communication, trust, and cooperation literature to the context of buyer-supplier relationships in distinct county settings. Comparisons are made between one developed country characterized by rule-based governance, with a low-context style of communication and high country trust and one emerging market characterized by relation-based governance, with a high-context style of communication and low country trust.