U.S.–Mexican alliance negotiations: Impact of culture on authority, trust, and performance

• DOI: http://doi.org/10.1002/tie.10045
• Published date: 01 November 2002
• Date: 01 November 2002

O

749

U.S.–Mexican Alliance Negotiations:

Impact of Culture on Authority,

Trust, and Performance

Hildy J. Teegen ■Jonathan P. Doh

Executive Summary

In this article, we highlight the impact of culture on relationships of authority, trust,

and performance in U.S.–Mexican alliance negotiations. Using a sample of 55

Mexican firms with experience in alliances with U.S. counterpar ts, we propose cul-

tural foundations to explain the outcomes of these negotiations in terms of governance

structure (authority) and relationships (trust) in the alliance, and link these negoti-

ation outcomes to Mexican partner perceptions of alliance perfor mance. We find that

Mexican managers view authority balance as a positive contributor to alliance per-

formance, while authority advantage—even when benefiting the Mexican partner at

the expense of the U.S. par tner—is viewed as having a negative impact on perfor-

mance. Trust also plays an important role in alliance performance. We highlight sev-

eral examples of alliance negotiations between U.S. and Mexican corporations to illus-

trate these findings, and present other challenges and opportunities in cross-cultural

negotiations. We draw implications of our research for managers engaged in similar

cross-cultural negotiations. © 2002 Wiley Periodicals, Inc.

INTRODUCTION

n June 26, 1994, Vitro and Corning, the Mexican and U.S. glass companies,

respectively, decided to end joint ownership of their consumer glassware divi-

sions, although they would continue an alliance through supply and distribu-

tion agreements. In the fall of 1991, in the midst of the NAFTA negotiations,

Vitro Sociedad Anonima (Vitro), the $3 billion Mexican glassmaker, had

signed a tentative $800 million joint venture with Corning Inc. In the deal,

each company took an equity stake in the other and agreed to a series of mar-

keting, sales, and distribution relationships (“Glassmakers”, 1991). Just 2

years later, the joint venture was dissolved. According to company officials

Thunderbird International Business Review, Vol. 44(6) 749–775 • November–December 2002

© 2002 Wiley Periodicals, Inc. • Published online in Wiley InterScience (www.interscience.wiley.com).

DOI: 10.1002/tie.10045

Hildy J. Teegen is an associate professor of international business and international affairs at the

George Washington University. She researches and consults in the areas of international negotiation,

partnering, and market analysis in Latin America and the Caribbean region. Jonathan P. Doh is an

assistant professor of management at Villanova University, a senior associate at the Center for

Strategic and International Studies, and on the executive faculty of GSBA-Zurich.

and external analysts, cultural differences were a principal cause of

the alliance’s failure.

Economic integration among countries in the Western Hemisphere has

accelerated dramatically in the last decade. According to the

Organization of American States, there are no fewer than 40 bilateral,

subregional, and panregional trade agreements and customs unions

currently in force among the 34 democratically governed countries in

the region (Table 1). These trade agreements are both a cause and a

consequence of the increased economic integration among countries,

industries, and firms within the hemisphere. The North American Free

Trade Agreement (NAFTA), the Free Trade Agreement of the

Americas (FTAA), and many other trade and integration agreements in

the Western Hemisphere are fostering increased business exchanges

between Latin America and those of North American and European

economies. At the same time, economic reform and market growth in

Mexico, Central America, South America, and the Caribbean have also

contributed to greater interest by U.S., Canadian, and European firms

in doing business in the region. These firms are actively engaged in

Hildy J. Teegen ■Jonathan P. Doh

750 Thunderbird International Business Review • November–December 2002

Table 1. Trade Agreements Under Negotiation or in Effect in the Western Hemisphere

Multilateral Agreements WTO/GATT

Regional Scope Agreements FTAA LAIA/ALADI

Customs Unions Andean Community CARICOM

CACM MERCOSUR/

MERCOSUL

Temporary Non-reciprocal CARICOM– CARICOM– CARICOM–

Agreements Dominican Republic Venezuela Colombia

General Association and Association of Third Declaration

Cooperation Agreements Caribbean States of Tuxtla

Free Trade Agreements Colombia, Mexico, Central America– Mexico–

(Subregional) and Venezuela (G3) Chile European Union

NAFTA Bolivia–Mexico Mexic–Nicaragua

Canada–Chile Costa Rica–Mexico Canada–Costa Rica

Cen tral Ameri ca– Chil e– Mexico–Northern

Dominican Republic Mexico Triangle (El Salvador,

Guatemala, and

Honduras)

Bilateral Agreements Signed by:

(Economic Complementation, Argentina Dominican Republic Nicaragua

Free and Preferential Trade, Bolivia Ecuador Panama

and Partial Scope) Brazil El Salvador Paraguay

Chile Guatemala Peru

Colombia Honduras Uruguay

Costa Rica Mexico Venezuela

Adapted from OAS, 2001.