Unknown Territory – How Smes Manage Trust While Doing Business Internationally: Cases From 18 Small And Medium Sized Swiss Enterprises

Abstract

The decision to enter a new international business venture often depends on the level of trust between the potential business partners. The level of trust can also pose challenges at the beginning of any new business relationship, especially international ones, as partners have little or no experience of each other. This research explores whether having trust in one’s business partner is a mandatory precondition for Small and Medium Sized Swiss Enterprises (SMEs) to undertake international business opportunities (ex-ante trust). The research also considers if the SMEs would rather follow an effectual approach, in which trust formation is an ongoing process, being built ex-post after contracts are signed (ex-post trust). The research looks at the procedures Swiss SMEs implement to examine the trustworthiness of their potential new business partners, in the early stages of the formation of international business partnerships. Eighteen in-depth interviews were conducted with Swiss SMEs that have engaged in international operations. Results show that Swiss SMEs do not act opportunistically, but instead rely on detailed consideration to ascertain whether a potential partner is the right match, and whether the potential partner is trustworthy, by implementing systematic and objective methods prior to entering a contractual agreement as an assurance of ex-ante trust