8.1 Introduction
Trust offers numerous benefits in small and medium-sized enterprises (SMEs) entrepreneurial relationships. Trust often serves as the governance mechanism in SME interorganisational relationships due to a lack of recourse to elaborate contracts and mechanisms for enforcing contracts (Gaur et al. 2011). In these relationships, trust often substitutes for or complements contracts (Frankel et al. 1996; Sydow and Windeler 2003). Yet, trust is fragile and its violation may cause significant damage to relationships and, in very serious circumstances, threaten the existence of the business (Bachmann 2001) and the emotional well-being of the entrepreneur (see Chap. 7). However, trust violations are common in entrepreneurial relationships and may lead to conflict, loss of resources, and the termination of relationships. Hence, one of the main tasks for entrepreneurs following trust violation is finding ways to repair the damage and rebuild personal/interorganisational relationships (Amoako 2012; Janowicz-Panjaitan and Krishnan 2009; Amoaka and Lyon 2014). This is particularly significant against the background of SMEs operating in contexts where legal systems and enterprise-support institutions are weak. In these contexts, trust in personalised relationships is the key to doing business and repairing trust in relationships remains critically important.
Yet, there is very little knowledge about how trust is repaired in SME interorganisational relationships. There are only a few studies on trust repair and most are based on theoretical and controlled laboratory experiments (e.g. Lewicki and Bunker 1996; Kim et al. 2004; Gillespie and Dietz 2009; Dirks et al. 2011). Interestingly, most of the studies focus on interpersonal trust repair (e.g. Lewicki and Bunker 1996; Lewicki 2006), paying less attention to trust repair within and between organisations, even though processes of interpersonal trust repair may not work in organisational contexts (Gillespie and Dietz 2009; Bachmann et al. 2015). There is also a lack of studies on how institutional contexts, particularly culture, impact on the processes of trust and trust repairs (Ren and Gray 2009; Bachmann et al. 2015; Gillespie 2017). This is disturbing given the significant impact of context on trust development and perceived trust violations (see Ren and Gray 2009; Saunders et al. 2010; Amoako and Lyon 2014) particularly in entrepreneurial relationships.
There are a few theoretical studies on interorganisational trust repair in developed economies (e.g. Ren and Gray 2009; Gillespie and Dietz 2009), however, there is a dearth of knowledge on interorganisational trust repair in emerging economies involving entrepreneurs owning and managing SMEs (Amoako and Lyon 2011). While entrepreneurs and SMEs in advanced economies have recourse to strong institutions such as affordable courts and mediation bodies set up and supported by the state to assist in conflict resolution, entrepreneurs and SMEs in emerging economies do not have access to affordable and reliable courts and so generally they do not use the courts (see Amoako and Lyon 2014). However, there is very little knowledge, if any, about how entrepreneurs operating smaller businesses in emerging countries characterised by weak legal systems repair trust in interorganisational relationships (Amoako and Lyon 2011; Amoako 2012). This chapter seeks to provide insights on the role of institutions in trust repair in entrepreneurial relationships in emerging economies by addressing two questions: (1) ‘How do entrepreneurs owning and managing internationally trading SMEs repair trust?’ and (2) ‘What institutional logics influence trust repair and how?’
The author draws on the literature on trust repair and theory of institutional logics as well as empirical data from his work on trust repair in entrepreneurial relationships of internationally trading SMEs in Ghana to provide insights into how entrepreneurs repair trust (see Amoako and Lyon 2011; Amoako 2012). Institutional logics is defined as the ‘socially constructed, historical patterns of cultural symbols and material practices, including assumptions, values, and beliefs by which individuals and organisations provide meaning to their daily activity, organize time and space and reproduce their lives and experiences’ (Thornton et al. 2012, 2). In this chapter, the author examines how societal-level logics of state and indigenous cultural institutions and norms underpin entrepreneur’s decisions about trust repair.
Trust repair in entrepreneurial relationships. (Source: Own research)
This chapter contributes to the ongoing development of knowledge about trust repair (Dirks et al. 2009) and trust across cultural boundaries (Dietz et al. 2010). It shows how institutional logics of the traditional African justice system embedded in family/kinship, trade associations, communities, and religious bodies shape the processes of trust repair in entrepreneurial relationships in an African economy. By examining businesses operating in contexts with less-formalised institutional environments and legal systems in less-developed countries, it fills a gap in the literature that has previously focused on the developed economies of North America and Europe.
The rest of the chapter is structured as follows. Section 8.2 reviews the different forms and processes of trust violations entrepreneurs encounter in relationships. Section 8.3 discusses the institutional logics shaping the processes of trust repair. Section 8.4 examines the trust repair tactics that entrepreneurs use in restoring trust in entrepreneurial relationships after violations, Sect. 8.5 discusses the outcomes of trust repair, and Sect. 8.6 concludes the chapter.
8.2 Trust Violations in Entrepreneurial Relationships
Trust repair processes in entrepreneurial relationships may start soon after trust is violated by a family/kinship member or a friend who is a business partner, or an entrepreneur, manager, or leader of a partner SME or larger organisation when his or her actions and behaviour and that of the organisation do not meet the expectations of the entrepreneur. In Ghana trust violations occurs at the personal/organisational level, institutional level, and at the parallel institutional level.
In Ghana trust violations are common at the personal/organisational level. Entrepreneurs may face challenges in enforcing agreements with some family members, kinsfolk, and friends who are business partners and also with some customers and suppliers. At times it can be particularly challenging to get some relatives and friends who receive trade credit from entrepreneurs to pay back the money due to norms of communalism and obligation in the African family system. Amoako and Lyon (2014) report that in spite of the immense benefits of the family in enhancing entrepreneurship some family members make poor exchange partners due to challenges in enforcing agreements with them (see Chaps. 6 and 7). Similarly, some kinsfolk make poor borrowers in Ghana (Hart 2000). This is due to the logics of family/kinship and friendship in Ghana and Africa which oblige entrepreneurs and indeed family members to support and cater for members of the extended family; these logics have been discussed in detail in Sect. 5.2. Nonetheless, there are many successful family businesses managed by family members who are aware of and adhere to values and norms that encourage accountability and trustworthiness.
Trust violations are also common in customer and supplier relationships. Customer-related violations often involve dishonesty relating to breaching promises and norms of trade credit. In domestic, West African, and international markets, breaches of trade credit terms may involve some customers delaying payments or telling lies about the quality of products already supplied in order not to pay the agreed full price of the goods supplied on trade credit. In rare and extreme circumstances, dishonest customers may relocate and thus disappear after receiving goods on credit. Furthermore, in international markets some customers may breach the terms of legal contracts and memorandums of understanding (MOUs), exploit loopholes in contracts and include non-enforceable clauses, and covertly seek changes in contract terms in order to take advantage of entrepreneurs. Supplier-related violations of trust relate to dishonest behaviour regarding violations of promises regarding contracts, product and service specifications, delivery times, or misusing trade credit for purposes other than supplying the goods/services already paid for; and in rare cases some suppliers may relocate after receiving substantial amounts of trade credit from entrepreneurs. However, in a developing economy context like Ghana, where there is a lack of public information on individual identity and addresses, when perpetrators of trust violations relocate it can cause a lot of problems for entrepreneurs and this is a key reason why many entrepreneurs prefer working with family members since they are easy to trace in cases of default.
At the institutional level, trust violations relate to some officials of state institutions and leaders of facilitator organisations involved in enterprise support engaging in and perpetuating corruption and nepotism. There are allegations of demands for bribes by dishonest officials and judges (Amoako and Lyon 2014). Hence, entrepreneurs widely perceive the judiciary/legal systems and the courts to be corrupt, expensive, and time consuming. Yet, these allegations may be difficult to prove and individual entrepreneurs who experience these malpractices may find it challenging to obtain redress. Nonetheless, as actors some entrepreneurs use collective action through, for example, trade associations to lobby and draw the attention of government and the authorities to these violations in th hope of combatting them. Interestingly, in 2015 the investigative activities of an undercover journalist, Anas Aremeyaw Anas, exposed widespread corruption by Ghanaian judges and officials of the judiciary. As a result, the Chief Justice and the government took steps to repair trust even though the government could have done more (Daily Graphic, October 2015). Case 8.1 shows how this was done and the impact the repair actions have had in rebuilding institutional trust in Ghana.
Due to perceptions of corruption and security concerns, entrepreneurs rarely use the courts in West African markets. In the context of international trade, entrepreneurs often remain helpless when trust is violated in international markets, as local Ghanaian courts lack jurisdiction outside the country and are thus unable to resolve disputes with international partners who do not live in Ghana. Moreover, the legal systems abroad are generally inaccessible and unaffordable to most entrepreneurs (Amoako 2012). Due to these barriers, entrepreneurs in Ghana rarely seek redress from the courts abroad.
Apart from the courts, entrepreneurs report violations of trust by enterprise facilitators. Some state officials are alleged to engage in corruption and favoritism. There are allegations that money and support meant for internationally trading entrepreneurs are at times diverted by unscrupulous officials to their cronies who are not involved in international business.
At the parallel institutional level, although entrepreneurs regard trade associations and their leaders to be more reliable, there are some allegations of trust violations. For example, Amoako and Lyon (2011) cite instances of some leaders of trade associations abusing their positions by exploiting opportunities for themselves instead of making them available to their members. Parallel institutional trust violations also result from allegations of the misuse of association funds and fraudulent accounting systems by a few association leaders (Amoako 2012). Apart from association leaders, religious leaders are also involved in trust violations. There are allegations of fake religious leaders violating trust by exploiting entrepreneurs in Ghana. In addition, there are allegations that some Christian, Muslim, and Africanist religious leaders make claims to authority and authenticity, and fraudulently fake miracles and connections to the spirits in order to deceive and defraud entrepreneurs and other followers. De Witte (2013) cites instances where some Pentecostal pastors use electric touch machines to fake the transmission of divine power—specifically the holy spirit—to followers (see Chaps. 4, 5 and 7). There are also allegations that a few unscrupulous customers or partners have exploited or abused entrepreneurs by using black magic, locally referred to as juju, in an attempt to charm and take advantage of their creditors or sponsors. Furthermore, there are perceptions that competitors could also destroy the businesses of others with juju and witchcraft. Hence, some entrepreneurs often make references to God, Allah, and the traditional gods as bastions for protection. Amidst these violations, entrepreneurs draw on institutional logics to repair trust at the personal/organisational, institutional, and parallel institutional levels. The next section discusses how institutional logics influence trust repair in Ghana.
8.3 Institutional Logics Shaping Trust Repair Processes
8.3.1 Logics of Weak Legal and Enterprise Support Systems
Institutional trust is important for the proper functioning of markets and is underpinned by the logics of state institutions including the government, justice/legal systems, property rights, the tax system, and other enterprise support institutions that offer incentives in the institutional environment (Zucker 1986; North 1990; Welter and Smallbone 2010). While culture and systems of institutions are important for institutional trust development, it is often the character, actions, and behaviour of officials or the key boundary spanners of institutions, and their inconsistency with the rules, regulations, and objectives of those institutions that determine trust violations in those institutions (Mitchell 1999). In Ghana, incidents of institutional trust violations relate to officials of state institutions and leaders of facilitator organisations involved in enterprise support, such as the judiciary/courts, allegedly practising and perpetuating norms of corruption and thereby breaching trust placed in them. As a result, trust repairs in entrepreneurial relationships in Ghana is influenced by the limited trust in state and market institutions. In particular, there is a lack of trust in the legal/court systems in Ghana due to allegations of corruption, higher costs, and long delays (Amoako and Lyon 2014). Consequently, entrepreneurs prefer the use of the traditional legal system which is less corrupt, less formal, less expensive, and less confrontational. Trust repairs is also shaped by the lack of enterprise support and particularly lack of access to finance, and higher costs of financial debts due to higher interest rates and inflation. As a result, developing trust and managing entrepreneurial relationships with customers, suppliers, and other personal networks is critical to SMEs. This in turn requires that entrepreneurs do not portray themselves as litigants who use the courts as their reputations could be negatively affected since the courts are regarded as expensive and adversarial.
8.3.2 Logics of Indigenous Cultural Institutions
Logics of the Traditional Justice System and Trust Repair
The majority of entrepreneurs rely on the traditional justice system to restore relationships after violations of trust in entrepreneurial relationships. The traditional justice system has been resilient in many communities especially at the grassroots level (Myers 1992). Conflict resolution and trust repair processes start at the family level and involve family heads, elders, queens, chiefs, and others who resolve, stop, and intercept conflict. The process is less formal, less intimidating, and less confrontational while aiming to restore broken relationships, rectify wrongs, and restore justice. The process is underpinned by respect for elders, parents, fellow people, and ancestors as well as internal and external control mechanisms based on shame, fear of supernatural forces, and the behaviour and actions of others that may signify their approval or disapproval (Okrah 2013). It is also grounded on the close ties and social capital between families and kinsfolk, which has however been reduced due to urbanisation. Nonetheless, as discussed in Chap. 4, the system faces additional challenges including negative attitudes from ‘modernised Africans’ and African governments and constitutions that regard the traditional system to be inferior to the formal judiciary of the state. Also, due to shifts in African traditional economic structures, dispute resolution by elders can be affected by bribery, corruption, and favouritism as the urban young may be significantly richer than the elders whose wealth through land, farming and livestock might have been eroded (see Kariuki 2015). Yet, the system is more enterprise friendly and it manifests itself in a number of African indigenous institutions used by entrepreneurs in conflict resolution including logics of family/kinship, trade associations, and religion.
Logics of Family/Kinship and Trust Repair
An overwhelming number of entrepreneurs rely on logics of family/kinship in the restoration of violated trust. This is understandable given that the norms of family shape how trust violation is perceived. In instances when biological or business-related ‘family members’ violate trust, there is the tendency for the entrepreneur to ignore the violation or be coerced by family elders and members not to put money ahead of family and to reconcile and rebuild trust. Yet, these norms of resolving conflict in family businesses are not accepted by a number of entrepreneurs who may decide to withdraw from family businesses or not to work closely with family members in their businesses.
Logics of Trade Associations and Trust Repair
Trade associations play an important role in trust repair in Africa. For example, in West Africa, entrepreneurs prefer using the trade associations rather than the courts due to allegations and perceptions of corruption, higher costs, and long delays (Fafchamps 2004; Lyon and Porter 2009; Amoako and Lyon 2014). In Ghana and West Africa, trade association leaders play a unique role in conflict resolution and therefore in trust repair. Generally, when there is a breach of trust in business, entrepreneurs owning and managing smaller businesses often report incidents of violations to trade association leaders who draw on the norms of the traditional justice system to convene a court and a hearing, guided by the norms of the association, to resolve disagreements between exchange partners. To entrepreneurs, the use of trade association in conflict resolution saves time, is less confrontational and less expensive, and provides evidence that the entrepreneur is not a litigant and wants to resolve the dispute peacefully. This is important as most entrepreneurs and people in business regard the courts to be a route taken by controversial and heartless people to resolve conflicts. This in turn is informed by the amount of time and money, and the injustice, that may result due to corruption in courts.
There are other indigenous trading institutions embedded in the trade associations that are actively involved in conflict resolution in distant domestic and regional trade. For example, in West Africa, the efiewura (landlord) system is an indigenous institution that resolves conflicts between entrepreneurs and their trading partners from distant markets. The system is an indigenous institution that may operate as a trade association and yet involves agents (landlords) who sell goods (mostly food and agricultural produce) on behalf of entrepreneurs in distant domestic and regional markets for a commission. The agents take delivery of the goods, check and record the quantity, and then sell them. In addition, the agents also offer many other critical services to entrepreneurs in including bridging language barriers and providing market information, credit references, and accommodation. The landlord system therefore enables entrepreneurs who trade across cultures and borders in West Africa to overcome the ‘liability of foreignness’ resulting from differences in language and access to market spaces in the various markets. The system is sustained by shared norms of culture, language, payments, and trade associations. As mentioned earlier in Chap. 6, the structures of these indigenous institutions are based on the traditional legal and chieftaincy systems where the elders and chiefs resolve disputes among community members. Therefore, in cases of conflict or disagreement about payments or product quality, leaders are often requested by the parties to convene a court hearing to resolve the dispute. The system predates the colonisation of Africa, and yet still remains dominant in the small business and informal export sectors in the region (Lyon and Porter 2009; Amoako and Lyon 2014) contrary to assumptions that indigenous African institutions do not facilitate arm’s-length transactions. The activities of trade associations in managing entrepreneurial relationships and trust building have been explored further in Chaps. 5 and 6 respectively.
Logics of Religion and Trust Repair
Entrepreneurs rely on logics of religion and religious leaders to resolve disputes and repair trust with business partners. Some entrepreneurs request the mediation of ministers of religion—pastors, imams, and clerics—and traditional religious leaders, instead of the courts, to resolve disputes and to enforce agreements between them and their partners. In such interventions, the perpetrators may be requested to abide by their contractual obligations and the entrepreneur may be encouraged to forgive, reconcile, and rebuild trust. This is understandable due to entrepreneurs’ belief in supernatural bodies and their ability to reward or take revenge on people based on their actions and behaviour (see Kariuki 2009; Mbiti 1991).
Logics of Industry Shaping Trust Repair Processes
The nature of a product/service and an industry also shape trust repair processes. Yet, currently, there is sparse theory and therefore little understanding of how the nature of an industry and products/services play in trust repair (see Bachmann et al. 2015). In Chaps. 6 and 7 it was highlighted that entrepreneurs exporting agricultural products to West African and international markets are more dependent on their customers abroad and therefore more vulnerable. Their vulnerability accrues from the short shelf life of raw agricultural products such as eggs and fresh vegetables and the lack of refrigeration facilities that can mitigate this limitation. Therefore, entrepreneurs producing vegetables, eggs, and fresh fruit are generally more cautious in their interpretations of trust violations compared to those dealing in manufactured goods. For example, during peak harvesting periods when there is a glut in the fruit industry, entrepreneurs exporting fresh oranges to distant Ghanaian and West African markets encourage their customers who have defaulted to pay their debts by instalments while they continue to supply them. Similarly, the hotel industry is characterised by norms of trade credit with key business customers without whom hotels may not have sustainable revenues. This is due to the perishability of services in the industry which implies that once they are booked they cannot be stored, saved, returned, or resold once the specific booked time has elapsed (O’Neil and Matilla 2004). As a result, long-term customer relationships, customer loyalty and customer retention are critically important to entrepreneurs and SMEs operating in the sector. Hence, norms of payment and interpretations of trust violations due to default are more flexible compared to the manufacturing sector. Therefore, entrepreneurs operating in the sector are keen to keep their key business customers and do not accept that long delays in the payment of trade credit are a violation of trust even though they often make efforts to understand why payments are delayed. This approach to interpretation and repair of trust can be understood given the intangible nature and distinct perishability of some of the services such as hotel accommodation and conferences in the hospitality sector.
8.3.3 Logics of Relationships Shaping Trust Repair
Trust repair processes are primarily influenced by the nature of the relationship based on the benefits and resources received, liquidity concerns, and switching costs. For example, in relationships where the resources and benefits derived are substantial or when the switching costs are high the entrepreneur is more likely to ignore violations of trust. Therefore, trust repair efforts are more common in such relationships. Entrepreneurs rationally calibrate the benefits and switching costs as well as the seriousness of the violations before making a decision about whether to repair violated trust or abrogate a working relationship. Yet, in relationships that are embedded in logics of family and religion, the trust propensity of the entrepreneur influences his or her willingness to repair trust due to norms of obligations and fatalism. In these relationships trust repair is more habituated and routinised.
8.4 Personal/Organisational-Level Trust Repair Tactics
Trust repair at the customer/supplier level aims to restore trust. At the interpersonal level, there has been a number of studies that have delineated strategies for restoring trust after violations. For example, Lewicki and Bunker (1996) suggest that to repair trust, perpetrators must: (1) acknowledge that a violation has occurred; (2) determine the causes of the violation and admit culpability; (3) admit that the violation was destructive; and (4) accept responsibility. However, the weakness in this model relates to the assumptions about the passive role of the victim. Later models recognise trust repair as interactive with the trustor’s actions (Kim et al. 2009) and the victim’s cognitions of the perpetrator’s repentance (Dirks et al. 2011). Kim et al. (2009) suggest that trust repair processes involve three levels where the trustor determines: (1) whether the trustee is guilty or not; (2) if guilty then whether the violation was caused by external situational factors or by the trustee’s actions; and (3) if the violation is caused by the trustee’s actions then can he or she rectify the wrongdoing that has occurred in the past or meet the trustor’s expectations in the future. Kim et al. acknowledge the role of contextual factors in the trust repair process. To repair trust this model suggests three main approaches: (1) the trustee can claim innocence by presenting evidence or deny the breach; (2) the perpetrator may attempt to make attributions of the violations, fully or partly, to external factors in order to claim innocence and to repair trust; or (3) the perpetrator accepts responsibility and make trust repair efforts aimed to rectify the past breach and to offer assurances that future violations will not occur. While these studies and many others have provided huge insights into trust repair at the interpersonal level (e.g. Lewicki and Bunker 1996; Kim et al. 2004), at the organisational level, the conceptualisation of trust repair remains complex because of the multiple levels of organisational trustworthiness and violation (Gillespie and Dietz 2009; Dirks et al. 2009).
Concerning organisational trust repair, Gillespie and Dietz (2009) argue that the target for trust repair may be individuals or groups of individuals that make up an organisation. Consequently, trust repair at the organisational level creates a further degree of uncertainty and may be more difficult due to the multiplicity of organisational membership and the need for individuals to change their views towards the violating organisation. However, larger organisations that have violated trust with key stakeholders based on scandals and corruption may repair trust by tightening organisational rules and processes (Erberl et al. 2015; Gillespie and Dietz 2009).
Yet, there is a dearth of studies on trust repair in interorganisational relationships (IOR) but a notable exception is Janowicz-Panjaitan and Krishnan’s (2009) theoretical model for investigating trust repair in larger companies. The model suggests that the nature of trust repair depends on the type of violation. These include whether the violation was integrity based or competence based, whether the violation occurred at the corporate level or the operating level, and the level of constraints limiting the boundary spanner. The model proposes that trust repair at the corporate level involves legalistic measures to repair trust or exit the relationship. Non-legalistic means are only effective when trust violations occur at lower levels—the operating level. Yet the author argues that for entrepreneurs owning and managing SMEs, legalistic modes of trust repair are not generally applicable or affordable to them since IOR are more personalised and informal. The analysis and discussions in this chapter therefore focus on the repair of trust violations in family/kinship and friendships, as well as customer-supplier and facilitator relationships and pays less attention to legalistic modes of trust repair.
8.4.1 Trust Repair in Family/Kinship- and Friendship-Related Violations
When trust is violated by a family member, kinsman/woman or friend who is a business partner, entrepreneurs often draw on the traditional African justice system embedded in the extended family system to contact elders and heads of family/kinship to seek assistance in resolving the dispute and repair trust (Amoako and Lyon 2014). However, based on the logics of the African family system, in instances when biological or business-related ‘family members’ violate trust, there is a tendency for the entrepreneur to ignore the violation, reconcile, and rebuild trust based on the norms of the African family which require family members to refrain from ‘putting money ahead of family’. However, when an entrepreneur decides to seek redress, the first option is the use of the African justice system which begins with the family. An elder (or elders) of the family convenes a hearing and both parties are given the opportunity to tell their side of the story (Okrah 2013; Osei-Hwedie and Rankopo 2012). The perpetrator has the opportunity to acknowledge or deny the violation, and if found culpable to apologise and make a promise to rectify the violation. The system is flexible, less intimidating, quick and cost effective, and less adversarial as the emphasis is on reconciliation (Okrah 2013). Even though entrepreneurs abide mainly by the rulings of the elders, some may decide to withdraw from family businesses or not to work closely with family members in their private businesses after a violation.
8.4.2 Trust Repair with Customers and Suppliers
Trust repair mechanisms within entrepreneurial customer-supplier relationships tend to focus on restoring the observance of agreements and the norms of the relationships. Generally, the perpetrator may initiate repair processes through phone calls, emails, text messages, personal visits, and meetings. In these cases, the entrepreneur (who is the victim) waits until the perpetrator establishes contact. However, the victim may play an active role in the process and may often initiate the repair process. Against the background of SMEs operating in contexts of weak institutions, three main tactics are utilised in repairing trust at the personal/organisational level: (1) acknowledgement or denial based on explanations of causes of violations; (2) showing regret and apologising; and (3) the use of intermediaries.
The first common tactic used in domestic, West African, and international markets in trust repair is the acknowledgement or denial of the violation based on explanations. The violation may be acknowledged or denied. Generally, an acknowledgement of a trust violation facilitates the repair process since it presupposes that the perpetrator empathises with the victim. More importantly, it opens windows of opportunities for explanations of what caused the violations (Amoako 2012).
Generally, explanations of the causes of the violation lead to either denying or accepting responsibility for the violation or denying responsibility by attributing the violation to external causes. This is common as support systems and processes such as logistics, electricity, and banking services may fail in the Ghanaian context. While such attributions may be acceptable in domestic and West African markets, they tend not to be acceptable in international markets.
The second tactic used in repairing trust is the expression of regret and an apology following the violation. In expressing regret and offering an apology, the perpetrators of violations in domestic and West African markets mainly use telephone calls and personal visits. Apologies are particularly important in the restoration of trust after violations (Lewicki and Bunker 1996; Kim et al. 2004) and yet, to be effective, apologies must be timely, credible, and backed up with substantive actions such as punishment and compensation (Gillespie and Dietz 2009; Bottom et al. 2002). Generally, apologies without showing signs of regret do not work effectively as entrepreneurs may think that the incident could be repeated. In international markets, expressions of regret and apologies are often done directly from violator to victim and mostly without recourse to intermediation. An expression of regret and an apology simultaneously open doors for discussions, which may lead to repairing trust (Amoako and Lyon 2011).
The use of intermediaries in trust repair is the third common tactic used in repairing trust in entrepreneurial relationships. Intermediaries often used include friends, family members, community leaders, religious leaders, and trade association leaders. In domestic and West African markets, intermediaries often culturally bridge the distance between parties regarding language and cultural norms associated with pleading for clemency. This practice is more common in domestic and West African markets than in international markets even though there are instances when entrepreneurs rely on embassy staff and the organisers of trade fairs as intermediaries in resolving disputes in overseas markets.
In the domestic markets, entrepreneurs regard the use of intermediaries as more cost effective than going to court. In the process, intermediaries who may know either the perpetrator or the victim are often implored by either of the parties to resolve the dispute and repair trust amicably. These intermediaries may influence either party to compromise or give in to the demands of the other. The use of intermediaries in repairing trust in entrepreneurial relationships is drawn from the traditional legal and chieftaincy systems in which the intermediary (dwanetoafo in Akan-Twi) mediates on behalf of the perpetrator for leniency. The intermediary also serves as a witness in case the perpetrator does not cooperate and the victim decides to escalate the demand for redress in the courts since going to court is regarded as an extreme approach adopted by litigants due to its cumbersome nature, high cost, and long delays associated with the process (Amoako and Lyon 2011).
In circumstances when trust is not fully repaired, entrepreneurs may reach an agreement with the perpetrator on reviewing contract terms. In domestic markets, such reviews may penalise the perpetrator. For example, entrepreneurs may either reduce the amount of trade credit or withdraw the trade credit altogether and instead insist on cash payments. Similarly, in West African market entrepreneurs may reduce or withdraw trade credit and insist on cash payments by trade debtors who violate trust. The reduction or withdrawal of trade credit facilities is also common in international markets. However, due to the relatively more frequent use of legal contracts and MOUs in international relationships, compared to local and West African markets, in addition, reviewing the contract terms may include inserting clauses in contracts to impose sanctions and penalties such as payment of money for every day missed in a supply contract. Nonetheless, when all attempts to repair trust fail, and efforts to continue working together under new contract or credit terms, entrepreneurs may terminate the relationship.
8.4.3 Institutional-Level Trust Repair Tactics
Institutional trust is important for the proper functioning of markets. Institutional trust is based on trust in formal institutions including government, justice/legal systems, property rights, the tax system, and other enterprise-support institutions that offer incentives in the institutional environment (Zucker 1986; North 1990; Welter and Smallbone 2010). While culture and systems of institutions are important for institutional trust development, it is often the character, actions, and behaviour of officials or the key boundary spanners of institutions and their inconsistency with the rules, regulations, and objectives of those institutions that determine trust violations in those institutions (Mitchell 1999).
Entrepreneurs widely perceive the judiciary/legal systems and the courts to be weak and corrupt. In particular, allegations of corruption in the judiciary and courts are common in the domestic market. There are allegations of dishonest officials and judges making demands for bribes (Amoako and Lyon 2014). Yet, these allegations may be difficult to prove and, as a result, individual entrepreneurs who experience these malpractices apparently remain victims without recourse to redress. Yet, as actors, some entrepreneurs use collective action through, for example, trade associations to lobby and draw the attention of government and the authorities to these violations, calling for action to combat them. Since 2015, due to the exposure of widespread corruption by judges and staff of the judiciary and the courts, the Chief Justice and the government have taken steps to repair trust even though more could have been done. Case 8.1 shows how this was done and the impact these actions have had in rebuilding institutional trust in Ghana. Within West African markets, repair with the courts is uncommon due to perceived corruption as well as security concerns.
In the context of international trade, for entrepreneurs the main obstacles to lack of engagement concern the inability of the courts in Ghana, due to lack of jurisdiction, to resolve disputes with international partners who do not live in Ghana.
Case 8.1 Trust Repair at the Institutional Level in Ghana
The role of government in repairing institutional trust can be significant, as shown by government action on corruption in the courts in Ghana. On 22 September 2015, videos showing corruption in the judiciary recorded on camera by an undercover journalist Anas Ameriyaw Anas were shown on television revealing lower and high court judges and judicial staff requesting bribes and pay-offs (Daily Graphic, October 6 2015). The videos confirmed widespread violations of trust in the judiciary and courts in the country. To repair trust in the courts, the Chief Justice with the blessing of the President of the Republic of Ghana took dramatic steps by dismissing 20 lower court judges, 19 senior administrative staff, and suspending seven high court judges. In a statement, the Chief Justice sought to rebuild trust by reassuring the public that the judiciary council would take prompt and resolute action to redeem the image of the judiciary. Later, in 2017, the government passed a bill setting up the Office of the Special Prosecutor to combat corruption in the country. The Special Prosecutor will have a mandate to investigate and prosecute cases of alleged corruption-related offences involving political office holders, public officers and their accomplices. Due to the government’s actions in rebuilding trust, there seems to be an upsurge of trust in the country, albeit a slow one. The Transparency International Corruption Perception Index (CPI) shows that Ghanaian’s perceptions of corruption score of 48 points in 2014 reduced to 40 points in 2017 (Transparency International 2018), thus showing an improvement in trust in the judiciary/courts and in the country.
8.5 Trust Repair Outcomes
The empirical study shows that the outcomes of trust repair are twofold. In the overwhelming majority of cases, trust repair leads to the restoration of trust and entrepreneurs and their partners continue to work together. However, even though relationships may be restored, it is possible that trust violations may be a wake-up call for entrepreneurs to search for other partners. This may lead to the establishment of newer partnerships and, as a result, the level of commitment in relationships prior to violations may not be fully restored. For example, in cases when customers do not take delivery of goods/services, entrepreneurs may look for other customers and, in most cases, the entrepreneur will continue to supply the customer even after the trust violation may be repaired. In such cases, the perpetrators may not receive the quantities they used to receive previously.
Yet, in other cases when trust repair is unsuccessful, entrepreneurs may terminate the relationship. However, depending on the nature of the relationship, entrepreneurs may have to develop new relationships and, as discussed in Chap. 7, this may require a lot of time in identifying new partners and developing new relationships.
8.6 Conclusion
This chapter provides an understanding of how entrepreneurs owning and managing internationally trading SMEs repair trust in interorganisational relationships in Ghana. It also identifies the institutions and the institutional logics that influence trust repair processes. It shows that in SMEs’ interorganisational relationships, trust repair processes start after a partner entrepreneur, manager, key boundary spanner of a larger partner organisation, leader of a trade association, or an official of an institution that is expected to facilitate entrepreneurship violates trust. The violations relate to breaches of the entrepreneur’s expectations. The chapter also shows how family members (who may be business partners), customers, suppliers, officials of state institutions, and leaders of facilitator organisations involved in enterprise support may violate trust. Furthermore, some trade association leaders may violate trust by breaching the expectations of entrepreneurs who are members of the associations.
Thus trust repair processes within entrepreneurial relationships tend to focus on restoring the observance of agreements, expectations in relationships. In customer- and supplier-related violations, the perpetrator may initiate trust repair processes through telephone calls, emails, text messages, personal visits, and meetings. In these cases, the entrepreneur who is the victim waits until the perpetrator establishes contact. However, the victim may play an active role in the process and may also initiate the trust repair process. Trust repair involves three main tactics at the personal/organisational level and they are: (1) acknowledgement or denial based on explanations for the causes of violations; (2) showing regret and apologising; and (3) the use of intermediaries. This chapter shows regret and apologies as well as explanations facilitate trust repair (Lewicki and Bunker 1996; Kim et al. 2004). It also shows the importance of intermediaries in the trust repair process. This tactic draws on the traditional chieftaincy and judicial systems in which intermediaries plead for clemency for the perpetrator of an offence. However, in institutional trust repair, this chapter shows the challenges that entrepreneurs may face when corrupt officials abuse their positions and violate trust. It also shows the importance of government in repairing trust through sanctioning corrupt officials and restoring trust in state institutions.
The chapter provides a valuable understanding of trust repair in relation to interorganisational relationships for small businesses in an African country and in other emerging economies. It contributes to the ongoing development of knowledge about the importance of culture in trust development, trust violations espoused by Ren and Gray (2009) and Dietz et al. (2010). Yet this chapter also extends knowledge about the role of culture in trust repair processes by pointing to the cultural-specific logics of the traditional African justice system embedded in family/kinship, trade associations, communities, and religious bodies and how these logics shape the process of trust repair in entrepreneurial relationships. It also shows the tactics that entrepreneurs use to repair trust. By examining businesses operating in the context of less-formalised institutional environments and legal systems in less-developed countries, this chapter fills a gap in the literature by showing how specific institutional logics allow trust to be repaired.
Finally, from a practical point of view, the chapter shows that trust violations are common in entrepreneurial relationships, and it is important for entrepreneurs to understand the logics of weak state and market institutions, cultural institutions, industry, and relationships that enable the repair of trust without entrepreneurs resorting to litigation and the courts which can be expensive, a waste of time, and damage their reputation. For policy makers, this chapter shows how government action in tackling corruption is important. By sanctioning corrupt officials of the judiciary and the courts, governments can repair trust in state and market institutions.