Keywords

1 Introduction

Cross-cultural study in supply chain management has gained more scholarly interests as international business grows. Establishing and maintaining strong relationships would lead to a successful global supply chain, and it depends on the right selection of channel members [1]. Therefore, building a trustworthy relationship with partners is the prerequisite for a robust supply chain. While focusing on intercultural relations, the trust would be a vital element to its development [2].

However, cultural differences are regarded as significant obstacles to building trust with other parties in the global supply chain [3], which would lead to inefficiency and other undesirable consequences in supply chain managerial activities. Despite the negative effects, working with individuals and cooperation from other countries is still a necessary practice to reduce costs and expand the business scale for many enterprises. Therefore, investigating a way to enhance supply chain performances with trust from the cultural perspective is an important strategy in supply chain management.

Additionally, decision making is essential for supply chain. For upstream members, the suppliers for example, a forward-looking schedule and decision on their production policies are required. These decisions are based on two sources of information: the demand forecast reports from downstream and the exterior market and order history. For downstream members, the retailers for example, a decision must be made regarding their demand so that they are able to generate forecasting reports for upstream members to prepare for orders. Improper decisions will result in backlog and high inventory costs, which would consequently lead to reduced profit in the supply chain. For this reason, it is advisable to have strategic decision-making support to supply chain management.

Meanwhile, uncertainty avoidance proposed by Hofstede [4] was adopted as the qualifying measurement in the experiment to differentiate trust in different cultures, since it is one of the five dimensions of culture, as well as a moderator to trust [5]. However, it has not been studied how uncertainty avoidance specifically affects trust, hence, the objective of this study is to investigate how uncertainty avoidance impacts trust in global supply chain management through a computerized supply chain management (SCM) experiment.

2 Literature Review

2.1 Trust Within the Supply Chain

Trust was defined as a willingness to take risks frequently [6]. The prerequisite of trust is that a party shows certainty over the credibility and integrity of an exchange partner [7]. Therefore, as a beneficial and valuable contributor, trust influences several forms of exchange and network, including the supply chain [8]. Trust in the supply chain could lead to the “firm’s belief that another company will perform actions that will result in positive outcomes for the firm as well as not take unexpected actions that result in negative outcomes” [9]. Beccerra [10] reported that both negative and positive consequences would occur in low and high trust through field data analysis.

Trust is especially significant for the supply chain, as it could help people to determine the reliability of words and other given information [11]. Trust deficiency made it hard for advanced supply chain collaboration due to the higher costs of transactions and agency [1]; as a result, managers spend more time and energy dealing with low-trust relationships than high-trust relationships. Besides, it was pointed out that people with high trust were much more willing to sharing known information and believing received knowledge [10]. In summary, a lack of trust among supply chain partners often resulted in inefficient and poor performance as the transaction costs (verification, inspections, and certifications of their trading partners) mounting.

High trust is the intangible attribute for the success of supply chain [1], which reduces cycle time and then improves supply chain responsiveness [12, 13]. In other words, it indicated that trust increased the agility in the supply chain [14]. Mutually trusted partners had a positive supply chain relationship and established cooperation objectives to enhance product quality and add value to consumers [15]. With the increasing flexibility of supply chain and low level of out-of-date inventories, trust improved efficiency and constructed long-term relationship thorough supply chain members [16]. In a continuous supply chain relationship, the exchange partners would be willing to accept the short-term imbalance of the results to ensure the overall supply chain performances [17].

2.2 Impact of Cultures in Trust

Several factors have impacts on developing the trust-building process, and they could be divided into two aspects: subjective and objective. In terms of subjective, people tend to build trust based on emotions, including empathy, politeness, and attitudes (kind and friendly) [18]. As for objective measurements, people’s past experiences and numerical data would determine whether they should trust others or not. Confidentiality, credit, reliability, experiences from regular interaction, customization, information sharing, and even shared value were involved in objective consideration [19,20,21]. By considering the reciprocity, information sharing was the dominant factor in supply chain management. Trust could moderate people’s information sharing quality and willingness. Besides, cultural dimensions, including individualism, uncertainty avoidance was related to building trust [2].

The definition of culture varies according to previous researches. One defined culture as “the sum of learned beliefs, values, and customs that create behavioral norms for a given society” [22]. In addition, the culture was viewed as the “collective programming of the mind” [4], it revealed what people have, think, and do as members of their society [23]. Furthermore, Rokeach [24] pointed out that cultural values were the fundamental driving force of life and the prescription of behavior.

The concept of national culture was noted as a mode of thinking, emotion, and action, which was rooted in shared values and social customs [25]. National culture was classified in many ways, high and low uncertainty avoidance proposed by Hofstede [4] were widely adopted in international marketing [26]. Besides, the importance of national culture was shown in numbers of studies since it has influences on the followings: personal values and lifestyles [27], perceptions of service quality and satisfaction [28], negotiations [29], perceptions about ethical behavior [30]. Hence, it was expected that culture would affect the trust in supply chain management.

Despite that culture was defined by many researchers, it was hard to interpret it. In global business activities, members must take their impact into account carefully to achieve the benefit of global works [31]. Johnson [6] reported that the main reason for those failing international businesses was the cultural challenges of overseas operation. Because managers would be unwilling to customize their management strategies and fit into local cultures. Cultural differences were the main obstacle to building trust among members in the global supply chain [3, 32].

According to Hofstede’s cultural dimensions theory, cultures can be specified with six dimensions, including power distance, individualism, masculinity, uncertainty avoidance, long term orientation, and indulgence while uncertainty avoidance indicates the degree of social members to the tolerance of uncertainty, ambiguity, and risk [21]. Moreover, most opinions about trust recognized that it was relevant to risk, which influenced choices and behaviors [33]. Therefore, people’s uncertainty avoidance could be an indicator of trust while conducting a study of cross-cultural decision making. Meanwhile, uncertainty avoidance index (range from 0 to 100) was applied to quantify uncertainty avoidance [4].

2.3 Scope and Limitation of Research

Using the measurement of culture at the individual level would be useful to implement further interpretation. More specifically, uncertainty avoidance was posited as a moderator to trust [5]. Their research assessed cultural characteristics through personality tests and found the moderating effect of uncertainty avoidance in the relationship between subjective norms and behavioral intentions.

Accordingly, uncertainty avoidance was related to prediction, intentionality, capability, and transference; an individual’s intent to avoid uncertainty or risk remained a significant predictor of trust between upstream and downstream in the supply chain.

3 Research Framework and Methodology

3.1 Objectives and Hypotheses

Previous studies have proven that trust is one of the major factors to be considered in the development of supply chain management strategies, and culture will affect trust among different countries. However, few studies focused on how cultural factors affect trust in the global supply chain. Therefore, this study provided a quantitative analysis of trust and measured cultural factors with uncertainty avoidance index (UAI). The UAI’s range between 0 and 50 is low UAI, and between 50 to 100 is high UAI. This study will start with the following research hypotheses:

  • Hypothesis 1: In a cross-cultural supply chain, there is a correlation between trust level and UAI of retailers and wholesalers.

  • Hypothesis 2: For high UAI countries, there is a low trust level with high integrity partners in the cross-cultural supply chain.

  • Hypothesis 3: For low UAI countries, there is a high trust level with low integrity partners in the cross-cultural supply chain.

  • Hypothesis 4: For high UAI countries, building trust with partners is easier and faster than those with low UAI in the cross-cultural supply chain.

The above hypotheses were principally proposed based on studies done on trust and culture [7, 8, 34, 35]. Several works have been conducted on the establishment of trust, but mainly within the western countries, few Asian countries are involved. Hence, this study will identify and fill gaps between western and Asian countries as reported in previous works by applying an experiment and the measurement of uncertainty avoidance in sampled countries. There are two independent variables, the UAI and the trust level.

3.2 Task and Setting

Participants are required to play the role of a wholesaler and computers to play the role of a retailer. In the simple supply chain, the retailer will give the demand forecast to wholesalers for them to prepare goods or inventory for the retailers in advance. However, in a real-world situation of the supply chain, retailers tend to inflate their forecasts to wholesalers to guarantee sufficient goods to sell. As for wholesalers, knowing the forecast is inflated, they tend to prepare fewer goods or inventory for retailers to avoid high inventory cost. Therefore, it is fair to assume, the smaller the gap between demand forecast received and inventory prepared, the higher the trust level is seen in the supply chain. Otherwise, it is a low trust supply chain. In this experiment, the computer is set to high integrity, which means that the computer would tend to provide accurate quantities of demand forecast to participants.

Therefore, to test the trust level of participants in this supply chain, we set the quantities of demand forecast given by retailer (computer) following uniform distribution [100,400]. The wholesalers (participants) would give feedback on quantities of goods or inventory prepared according to the demand forecast.

A total of 40 rounds were given to each participant in this experiment since time was needed for participants to familiarize themselves with the flow of the experiment. Therefore, it is fair to assume that after the participants got familiar with the rule, the result would be meaningful and useful. In sum, the trust level for every participant could be defined by

$$ {\text{T}} = \frac{{\mathop \sum \nolimits_{i = stable}^{40} \left| {m_{i} - n_{i} } \right|}}{40 - stable} $$
(1)

In Formula (1). i represents the rounds, mi represents the quantities of demand forecast by a retailer (computer played), and ni represents the quantities of prepared goods or inventory by a wholesaler (participants played). Since participants might be unfamiliar with the experiment flow, an unnecessary fluctuation might occur in the data collected from them. To address this issue, stable was defined as the number of the last round, when the deviation between demand forecast and prepared goods of a round remains less than ten for continuous five rounds. According to Formula (1), great T means participants have low trust level relationships in this supply chain, and small T means participants have a high trust level relationship in this supply chain.

To test hypothesis 4 based on the definition of stable by Formula (1), the speed of building trust can be defined as

$$ V = stable $$
(2)

3.3 Procedure

There are two main parts of the supply chain management experiment. The first part is a paper-based experiment aiming to help participants get familiar with the business processes in the supply chain and to attain their permission to participate. The second part is the computerized experiment aiming to let the participants play the role of wholesalers, and the computer plays the role of the retailers. This part was conducted with Z-tree software [36] with 40 rounds for participants to complete. A monthly trade between a wholesaler and a retailer is regarded as a completed round.

3.4 Participants

Forty-two participants from 17 different countries with supply chain management related background were invited to participate in the experiment: 10 of them were Chinese (UAI = 30), 3 of them were Vietnamese (UAI = 30), 3 of them were Thai (UAI = 64), 2 of them were Polish (UAI = 93), 3 of them were Pakistanis (UAI = 70), 2 of them were Nepalese (UAI = 40), 2 of them were Malaysian (UAI = 36), 6 Indian (UAI = 40), 2 Egyptian (UAI = 80), 2 Bangladeshi (UAI = 60), 1 Yemen (UAI ≈ 75), 1 Russians (UAI = 95), 1 Rwandan (UAI ≈ 80), 1 Liberians (UAI = 68), 1 Iranian (UAI = 59), 1 Guinean (UAI ≈  80), and 1 Belgian (UAI = 94). Thus, these subjects could highlight the influence of culture on the level of trust within global supply chain relationships.

According to different index of uncertainty avoidance, this study divides subjects into two categories: 19 of them are with high uncertainty avoidance (UAI ≥ 50), and 23 of them are with low uncertainty avoidance (UAI < 50).

4 Results

4.1 The Relationships Between UAI and Trust Level

To Explore whether there is a correlation between the UAI and trust level, the mean values of the trust level of different people are divided into two kinds of groups- low uncertainty avoidance groups (0 ≤ UAI < 50) and high uncertainty avoidance groups (50 ≤ UAI ≤ 100). According to the category of UAI, a two-sample T-test was used to test if there was a statistically significant difference between low UAI and high UAI with the trust level. An outlier test was conducted before T-test (as Table 1), and five outlier trust level was eliminated.

Table 1. The comparison of the low and high UAI towards different trust levels.
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Table 2. T-test result for H1, H2, and H3
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According to Table 2, the p-value is smaller than 0.05, which meant that the trust level is significantly different between low UAI and high UAI group, and there existed a correlation between trust level and UAI. The results of Hypothesis 1 indicated that there should exist a correlation between trust level and UAI in cross-cultural business. Hence, UAI had to be considered by the business before designing cooperative conditions and terms across countries. Although the trust relationship would reach a balance point in their future cooperation, it might take a long time to make it stable, especially in the supply chain. Since the competition in the global market would concentrate more on the advanced and reliable supply chain, establishing a stable and long-term relationship is foremost in supply chain management.

Based on Table 1, the mean value was 3.16, and the value of high uncertainty avoidance groups was 5.53, which means participants from countries with high UAI showed a low trust level in the supply chain collaboration scenario. In contrast, those from countries with low UAI behaved oppositely.

The results of Hypothesis 2 and 3 indicated that people in countries with lower UAI have a higher level of trust in cross-cultural business trade. For these countries, the results are practical and efficient before cross-cultural business trade. For countries with a low UAI, participants tended to show more trust in their partners, and reward the trust back from their partners. Even if the quantities of the order fluctuate, this trust relationship will exist and remain reliable. However, for countries with a high UAI, the trust had been built in the long run, the trust level of them remained at a low level. Since they would be vigilant and protect themselves from loss in trade and would feel threatened by uncertain or unknown situations. Thus, their partners tended to be facing more risks from them.

4.2 The Relationship Between UAI and the Speed of Building Trust

Table 3 displays the descriptive statistics of the low and high UAI towards the different stable groups. According to Table 4, the p-value is greater than 0.05, the difference is not statistically significant. Therefore, higher stability of trust was observed in the cooperation between computer and participants of low uncertainty avoidance level, although fluctuations existed.

Table 3. The comparison of the low and high UAI towards the different stable groups
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Table 4. T-test result for H4
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Although the research is devoted to studying the varying speeds of building trust between countries with high and low UAI, as the results from testing of the fourth research hypothesis (H4) indicated that there is no significant statistical difference in the speed of building trust for a different culture. However, which it does not necessarily mean that there are is no correlation because since the sample was limited by 42 and this conclusion cannot be indicated drawn with by limitation of sample numbers by in a statistic method. Therefore, future related researches can collect more sample data that will need to be collected in future researches to study and prove this hypothesis. If this hypothesis can be proven true, more strategies need to be considered beforehand when trading with high uncertainty avoidance culture countries.

Our results show that not all the above hypotheses on the moderating effects of UAI on the trust-building processes in business trading can be could be proven true. The only significant effect was shown for the level of trust, which is conceptually very close to the definition of uncertainty avoidance. The subjects come from 17 countries, but the total samples are only 42. Moreover, the distribution of people in these countries is not uniform even. Fortunately, the UAI categorization category method did not rely on the countries but relied on the UAI. Therefore, for future researches, more country-based data need to be collected because there are fewer so as to avoid system errors and help prove the last hypothesis.

5 Discussions

It is critical for managers to assess possible differences between domestic and foreign markets, especially when it comes to choosing the appropriate strategies for the foreign markets [37]. Though there is a limitation due to the scope of data, this study can offer managers an insight into the impact and importance of culture on supply chain relationships.

5.1 Trust Relationship Will Eventually Be Established

There are findings from our experience that trust is significant to whatever culture-based countries. The Brazilian distributor lends further credence to the work of Hutchings and Weir [38], who found through their work in China and the Middle East that no matter high or low UAI culture one deals with, relationships and trust are of the utmost importance. The experiment’s result shows that whatever culture they belong to and how high the UAI is, if their partner keeps high integrity consistently, they will trust their partner in the end even if someone needs more time to reach the state of trust. After all, trust-building relies on long-term cooperation. Hence, the point that trust can always be built in the long run for everyone can be identified by this experiment. However, even if people can build trust with each other in the long run, the trust level is different among them, and there is a correlation between trust level and culture.

5.2 Suggestions for Trading with High and Low UAI Countries’ Company

High UAI countries tend to have a low trust level, so companies have to prepare their strategies accordingly before trading with high UAI countries. First, the company may need to sign more terms and conditions with these countries’ companies to ensure a stable and persistent relationship. Secondly, more time and effort are needed to maintain a transparent and reliable communication process, especially when a company is stepping into a new market of high UAI countries.

Furthermore, the company should pay more attention to definite word-of-mouth improvement, such as getting customer trust through recommendation when available, been proven to have a powerful indirect impact on trust. On the other hand, a transparent customer relationship with integrity is even more important for companies from lower UAI background, since it is the way for them to establish trust. Therefore, the possible higher cost incurred during cooperation with high UAI can be regarded as a reasonable opportunity cost.

6 Conclusions

To sum up, this study investigates the effect of cultural factors on trust in the global supply chain and reveals the hardship of building a trust relationship when collaborating with people from countries with high UAI. Thus, it indicated that a more considerate and well-round plan should be adopted in the collaboration to develop a long-term trust relationship since it may take time and effort to achieve stable trust between partners. Also, trust was found as one of the crucial factors for supply chain management, particularly for a cross-cultural supply chain. Therefore, a thorough understanding of partners’ cultural backgrounds, such as their decision-making processes and business models, would be conducive to developing and maintaining a long-term cooperative relationship.

As economic globalization proceeds, the most critical challenge will be to understand and tackle the often-subtle cultural differences. The findings of this study have demonstrated how culture affects the level of trust among different countries in business trading and how to use the difference of culture to prompt the development of the global supply chain in the future. It is recommended that companies prioritize trust as a critical factor to consider and explore how to establish and maintain it while entering a new market and then narrow down the trust level gap between two companies. Before the global business trading session starts, it is advisable that the companies bear in mind how UAI is conducive to making decisions for long-term cooperation with partners. When it comes to the stage of maintaining the business relationship, more personal contacts, such as telephone calls and visits, are suggested to be made from time to time.

The results of this study will provide useful information for all cross-cultural companies to help establish and maintain successful global supply chain relationships and for current supply management professionals have to develop cross-cultural skills. Effective management of the global supply chain and the realization of the primary role of trust in this relationship will have a direct and positive impact on the company’s competitive advantages in the market.