Journal of World Business 56 (2021) 101175

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Journal of World Business

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Research Note

Strategic agility, dynamic relational capability and trust among SMEs in

transitional economies
Frank Charles Nyamrunda a, Susan Freeman b, *
a
College of Business, Government and Law, Flinders University, Sturt Road, Bedford Park South Australia 5042, GPO Box 2100, Adelaide, SA 5001, Australia
b
University of South Australia Business School, University of South Australia, North Terrace, City West Campus, Adelaide, SA 5001, Australia

A R T I C L E I N F O A B S T R A C T

Keywords: Rapid growth and urbanizing populations are transforming Africa, despite environmental turbulence, uncer­
Transitional economies tainty and relational complexity. Research highlights how small firms rely upon trust-based buyer-supplier re­
Strategic agility lationships in such contexts. Our study adopts a micro-foundational perspective and builds on dynamic
Trust
capabilities literature and psychological trust theory. Our conceptual model shows how relational dimensions (i.
Dynamic relational capability
e. communication, social bonds, and knowledge), influenced by meta-capabilities (strategic sensitivity, resource
Small firms
fluidity and leadership unity) embedded in micro-foundational activities build trust in small business cross-
border buyer-seller relationships to support dynamic relational capability and enhance strategic agility in
transitional economies.

1. Introduction
Transitional economies typically experience constantly shifting hy­
percompetitive environments (Chakravarty, Grewal, & Sambamurthy,
2013; Schaeffner, 2018), with turbulence, rapid changes and disrup­
tions. African transitional economies are driven by globalization, po­
litical reforms, rapid technological changes and e-commerce
(Cuervo-Cazurra, Ciravegna, Melgarejo, & Lopez, 2018; Fourné, Jansen,
& Mom, 2014; Liang, Wang, Xue, & Ge, 2017; Maksimov, Wang, & Luo,
2017), human resource mobility, accelerated knowledge transfer,
innovation, changing consumer preferences (Chit, 2017; Fainshmidt,
Judge, Aguilera, & Smith, 2018), and product and business model
obsolescence (Clauss, Abebe, Tangpong, & Hock, 2019; Weber & Tarba,
2014). Firms operating in this context will inevitably confront contra­
dictory challenges, one being the challenge of remaining strategically
consistent versus the value of rapid change in response to unexpected
problems, opportunities, global imbalances (Cumming, Filatotchev,
Reinecke, & Wood, 2020) and escalating trends. Emphasis on previously
planned strategy might reduce temporal responsiveness, exacerbating
the immediate problems or opportunities. This might have devastating
effects. Strategic agility provides a potential path to address this paradox
(e Cunha, Gomes, Mellahi, Miner, & Rego, 2020).
The reality of tensions and paradoxes is especially difficult for small
firms (Arasti, Zandi, & Bahmani, 2014; Shin, Lee, Kim, & Rhim, 2015;
Xing, Liu, Boojihawon, & Tarba, 2020). Despite efforts to improve the
speed of their strategic adaptations and operational performance, Afri­
can SMEs struggle to respond to constant unpredictable rapid changes in
the business environment. SMEs must aim not only to be faster than
larger MNEs and those from established economies but must also focus
on building their agility and adaptability (Shin et al., 2015). Business
failure is especially likely for SMEs (Arasti et al., 2014; Xing et al., 2020)
as they balance tensions across formal processes in strategic planning
and opportunistic strategic agility (e Cunha et al., 2020; Weber & Tarba,
2014). However, SMEs are very different from larger MNEs, where most
of the strategic agility research has focused. SMEs differ in terms of their
reach, scope and breadth of resources, operational functions and depth
in senior management (Fourné et al., 2014). As they have far fewer se­
nior managers, individuals exert greater influence over the strategic
agility of their small firms. Managers’ capabilities and activities
comprise the micro-foundations embedded in organizational activities
(Bouguerra, Gölgeci, Gligor, & Tatoglu, 2019). Remarkably we know
little about how SMEs develop strategic agility (Shin et al., 2015),
address simultaneous tensions between organizing paradox (formaliza­
tion and decentralization) and organizational levels of learning para­
doxes (exploration and exploitation) (Al-Atwi, Amankwah-Amoah &
Khan, in press), and the micro-level variables (Bouguerra et al., 2019) in
transitional economies (Xing et al., 2020).
Recent studies confirm strategic agility is idiosyncratic in nature

* Corresponding author.
E-mail addresses: frank.nyamrunda@flinders.edu.au (F.C. Nyamrunda), susan.freeman@unisa.edu.au (S. Freeman).

https://doi.org/10.1016/j.jwb.2020.101175
Received 30 September 2019; Received in revised form 9 September 2020; Accepted 7 November 2020
Available online 28 November 2020
1090-9516/Crown Copyright © 2020 Published by Elsevier Inc. All rights reserved.
F.C. Nyamrunda and S. Freeman
(Fourné et al., 2014), relies heavily on the strategic cognition of indi­
vidual senior managers (Schaeffner, 2018) and that human resource
management (HRM) can enhance strategic agility by nourishing indi­
vidual contributions and entrepreneurial behaviors. Micro-foundations
research (Liu & Meyer, 2020) encourages examinations beyond single
influences to how multiple, enmeshed lower level drivers, namely ac­
tors, processes and structures (Felin, Foss, Heimeriks, & Madsen, 2012)
jointly impact actions of individuals inside and outside firms, which then
aggregate to strategic agility as a higher-level phenomenon. Collective
talents that are collaborative, improvised and creative are managed
through HRM processes (e Cunha et al., 2020; Xing et al., 2020). Spe­
cifically, “the role that key individuals play in the strategic agility pro­
cess is under-researched” (Morton, Stacey, & Mohn, 2018, p. 94).
The extant literature on the fundamentals to SME survival in sub­
stantially different contexts, such as transitional economies have
received even less inquiry (Bidault, De La Torre, Zanakis, & Ring, 2018;
Liu & Almor, 2016; Matanda & Freeman, 2009). This key gap in the
strategic agility and micro-foundational literatures is holding back
theoretical development. Identifying the more relevant mechanisms
through which strategic agility is achieved in SMEs with more nuanced
understanding of micro-foundational processes in transitional econo­
mies (Houjeir & Brennan, 2017), can open pathways through which
businesses can drive productivity-based development mechanisms that
support strategic agility. This is relevant “in times when the
macro-environment is less munificent or faced with economic crisis”
(Pereira et al., in press, p. 2). There is greater need for contextual un­
derstanding of diverse cultural effects that heighten uncertainty and
thus the relevance of HRM and the micro-foundations in SME business
relationships (Ashill & Jobber, 2010; Leonidou, Aykol, Hadjimarcou, &
Palihawadana, 2018; Xing et al., 2020). This is manifested in transi­
tional economies (Manolova, Manev, & Gyoshev, 2010) because of their
heterogeneity, instability and hypercompetitive context.
The purpose of our study is to examine how culture as context plays a
pivotal role in the way individual entrepreneurs perceive themselves
and others (Kitayama & Uskul, 2011; Liu & Almor, 2016). The point of
difference in this paper, is the emphasis on a human-based micro-­
foundational dynamic capability that may be non-substitutable across
contextual domains (Fourné et al., 2014). Several objectives are offered
to make conceptual, contextual and theoretical contributions. As a first
objective, we argue that neither capability, leadership or organizational
is enough on its own to ensure strategic agility. For an organization to
achieve strategic agility, these two major capabilities must work
together in complementarity. Our study shows that this requires
development of a dynamic relational capability which can be achieved
only with an underlying structure of highly effective micro-foundational
processes. Further, entrepreneurs and managers from individualistic
cultures face greater difficulty assessing the interests of their foreign
business partners than those in collectivist cultures (Lee, Adair, & Seo,
2013), the latter typically found in transitional economies. Managers
must manage the various tensions and paradoxes (Fourné et al., 2014;
Liu & Almor, 2016; Robson, Katsikeas, Schlegelmilch, & Pramböck,
2019; Weber & Tarba, 2014). This study emphasizes the ‘leadership
capability’ because individuals managers, not organizations make sense
and decide on the direction and timing of changes and resource allo­
cations, though improvisation (e Cunha et al., 2020) in exchanges with
trading partners to work out how to execute their strategy. Related to
this objective, the study emphasizes that the ‘organizational design
capability’ depends on individuals who must decide how to creatively
make structural adaptations to routines and orchestrate mechanisms to
direct new courses of action. This is harder for SMEs with fewer re­
sources (human and financial) operating in fast-moving transitional
economies. We address this contextual gap to build theory.
The second objective of our study is to examine the context under­
lying the existence of business relationships in transitional economies as
fundamental to understanding the nuances of building relational capa­
bility. What is poorly understood, is that various specific relational
2
Journal of World Business 56 (2021) 101175
competencies are likely to underpin successful leadership and organi­
zational capabilities when operating in transitional economies. Prior
research defines strategic agility as an externally focused capability
(Shin et al., 2015) with three meta-capability vectors (i.e. paths, pillars)
(Doz, 2020) that create flexibility in individuals as an internally focused
competency (Shin et al., 2015). The paths comprise – ‘strategic sensi­
tivity’ (i.e., heightened perception, awareness and attention to strategic
situations as they occur), ‘resource fluidity’ (i.e., capability to free-up
resources from one activity to be deployed quickly to new opportu­
nities for growth), and finally, ‘leadership unity’ (ability of the senior
management team to make and then implement innovative decisions
quickly and the organizational leadership to avoid ‘win-lose’ politics)
(Doz & Kosonen, 2007, 2008a). We draw on this literature to show
effective development of micro-foundational processes, such as ‘stra­
tegic sensitivity’ in communication in cross-cultural settings (Narooz &
Child, 2017) as this is likely to support strong trust-based relationships.
This form of relationship will be essential for accurate information
transfer and deep knowledge sharing (Fiedler, Fath, & Whittaker, 2017)
that will be needed to support the willingness and speed of ‘resource
fluidity’. Finally, leadership unity that operates with collective
commitment is likely to build trust through strong social bonds needed
for knowledge development (Berger, Herstein, Silbiger, & Barnes, 2017;
Dikova, Jaklič, Burger, & Kunčič, 2016) and quick action between
managers. The interplay of these relational competencies resides with
individuals. Strategic agility is determined by the complementarity of
managers’ appropriate leadership styles and presence of supportive re­
lationships with others to create organizational adaptability. It is not
firms that make sense and identify major opportunities or threats. In­
dividual entrepreneurs/founders make the ultimate decision to respond
or not - and - how and when - and - with whom they will engage in
business. In transitional economies among African countries, firms rely
on trust-based buyer-seller relationships with their business partners
(Matanda & Freeman, 2009; Wilson, 1995) that underpin managerial
opportunity recognition. This will involve a small number of senior
managers in SMEs in their cross-border buyer-seller partnerships. Trust
development is most important, especially in the early phase of business
creation. Thus, greater clarity of micro-foundational influences on
relational capability, trust and strategic agility is needed. Our study aims
to explore how relational dimensions (i.e. communication, social bonds, and
knowledge), influenced by meta-abilities (strategic sensitivity, resource
fluidity and leadership unity) embedded in micro-foundational activities
impact trust in small business buyer-seller relationships to support dynamic
relational capability and influence strategic agility in transitional economies.
The final objective is to use a micro-foundational approach to
establish the theoretical association between strategic agility and a new
dynamic relational capability, the three meta-capability paths (strategic
sensitivity, resource fluidity and leadership unity) and their influence on
the three relational capability dimensions (communication, knowledge
sharing and social bonds). The social network literature regards these
three relational capability dimensions as fundamental to the develop­
ment of trust, where trust is perceived as a social mechanism that grows
through relationships among two or more exchange parties (Manolova
et al., 2010). This study uses the lens of psychological trust theory
(Deutsch, 1958) to explain these various micro-level influences among
strategic behavior and trust building in early SME business relationship
development, where trust formation is most vulnerable. Further, we
situate our study in a transitional economy, where such relationship
approaches are regarded as fundamental to business creation and
growth (Dowell, Morrison, & Heffernan, 2015; Shin et al., 2015). To
achieve the final objective, we respond to calls in the micro-foundations
research to give more attention to clarity on matters “of aggregation and
emergences and how the organizational context shapes behavior (Felin,
Foss, & Ployhart, 2015, p. 609). We draw on analyses of 26
semi-structured in-depth interviews in the unique business culture of
Tanzanian SME founders/owners and senior executives in East Africa
engaging in cross-cultural buyer-seller relationships. We investigate
F.C. Nyamrunda and S. Freeman
linkages between dynamic (multi-faceted) and operational (single-­
generic) capabilities (Biesenthal, Gudergan, & Ambrosini, 2019; Clauss
et al., 2019; Shin et al., 2015). The findings of the study demonstrate
that, at the firm level, key relational dimensions influence trust in
trading-partner relationships that develop dynamic relational capability
to support strategic agility of SMEs in transitional economies. At the
individual level, we identify three novel capability dimensions -
‘collaborative communication capability’, ‘social network learning’ and
‘internal knowledge alignment’ - of dynamic relational capability that
directly influence trust in business relationships. This new theorized and
identified dynamic capability is essential for complementarity in the
major capabilities of ‘leadership’ and ‘organizational design’ that builds
strategic agility of SMEs. SMEs able to develop dynamic relational
capability have few stable rules and systems that outline standardized
ways of modifying cultural clashes and disruption to knowledge and
human-based resources in transitional economies. Adopting a
micro-foundational perspective (Felin & Foss, 2005; Felin et al., 2015;
Zimmerman, Barsky, & Brouthers, 2010) and building on contextual
differences (Cumming et al., 2020), dynamic capabilities literature and
psychological trust theory, we show that managers of SMEs in transi­
tional economies rely on improvised and sophisticated cross-cultural
communication styles and social bonds to balance simultaneous ten­
sions for innovation and knowledge transfer in early buyer-seller rela­
tionship development to build strategic agility through strong, creative,
trust-based partnerships.
In the next section, we discuss the contribution to building strategic
agility in the early phase of relationship development and its signifi­
cance in transitional economies. We discuss the role of trust, improvi­
sation and creativity in communication approaches, and social networks
that build bonds and knowledge sharing as key dimensions of dynamic
relational capability that drive strategic agility in SMEs. We then outline
the qualitative research design and 15 case-studies we use to explore our
research aims and objectives at different organizational levels. We pre­
sent empirical findings through cross-case analysis and develop a new
conceptual model. Finally, we offer theoretical contributions, address
the study’s limitations, and provide future research directions and
managerial implications.
2. Strategic agility in transitional economies
2.1. Integrating a trust-based perspective and a micro-foundational
approach
Our research will help managers understand how to develop re­
lationships with companies in transitional economies. In this context,
the objectives of the present research are twofold. The first objective is
to identify multi-dimensional attributes that influence the development
of cognitive and affective trust that support strategic agility in African
SMEs. Cognitive trust based on contract, competence and goodwill in­
fluences business relationships, created through experience of working
with trading-partners. Affective trust is a psychological state that refers
to sentiments of security and durable attachment. It includes relational
trust (i.e. faith in the norm of reciprocity) (Dowell et al., 2015) and
intuitive trust (i.e. emotions) (Allen, George, & Davis, 2018) that create
socio-emotional bonds and benefits between parties (Akrout, Diallo,
Akrout, & Chandon, 2016).
In order to highlight unique contextual and multi-dimensional
micro-foundational attributes of agility in SMEs in a transitional econ­
omy context, our second objective is to draw from e Cunha et al. (2020),
Fourné et al. (2014), Kale, Aknar, and Başar (2019) and Shin et al.
(2015) and propose an integrated definition of strategic agility. We
define it as a meta-capability that creates and deploys a dynamic balance
between sensing local opportunities, enacting mutual complementarities, and
capturing local value over time through the small firm’s strategic intent to
achieve agile operations. This flexibility-agility is driven by a few senior
managers’ emphasis on micro-foundational activities and processes that
3
Journal of World Business 56 (2021) 101175
improve their time-based competitive advantage, namely responsiveness and
adaptability, using improvisation and creativity. This allows managers of
SMEs to meet the needs of and develop new interactions with cross-border
trading-partners. In our study, we draw on international management,
HRM, strategy and psychology literature to link strategic agility to in­
ternational business knowledge. We contribute theoretically, confirming
the conceptualizing of strategic agility as a second order factor (not
confined to a single capability). It is an integrated strategy or manage­
ment practice, built upon three multi-faceted underlying
relational-based capability dimensions: communication, social bonds
and knowledge in the development of trust between individual man­
agers to develop dynamic relational capability that supports strategic
agility of their SMEs in transitional economies.
Building on the above, we need to differentiate individuals operating
in established economies from those involved in this context of
modernization, urbanization, heterogeneity, cultural diversity and
growing population demand in transitional economies. We contribute,
by highlighting the flexibility required as an internally focused compe­
tency (Shin et al., 2015) that managers need to develop to support
successful trust-based business relationships through improvisation and
creativity (e Cunha et al., 2020) in the early phase of cross-border
relationship development. Given the increasing technological
complexity and convergence and a shift in brainpower from West to East
there is need for more nuanced understanding of the role played by
managers. Our study examines how managers/founders balance the
competing tensions (Debellis, De Massis, Petruzzelli, Frattini, & Del
Giudice, 2020) between greater innovation and at the same time making
sure their small businesses are more agile and efficient (Clauss et al.,
2019; Wilson & Doz, 2011) in order to create and evolve businesses
successfully in transitional economies (Fourné et al., 2014; Shin et al.,
2015).
The increasing pace, and the variability, degree and causes of change
in the modern business environment to manage contradictory challenges
are reflected in the growing significance of agility displayed by firms in
order to continually adapt, improvise (e Cunha et al., 2020) and adjust
to perceived external threats as well as opportunities (Boojihawon,
Richeri, Liu, & Chicksand, 2020; Bouguerra et al., 2019; Fourné et al.,
2014; Weber & Tarba, 2014). These conditions characterized as envi­
ronmental turbulence (Cumming et al., 2020) are the result of shorter
product life cycles, rapid technology, faster time-to-market forces, and
the requirement to develop comprehensive global product pipelines
(Brueller, Carmeli, & Drori, 2014). This changing global landscape is
driven by growth in transitional economies (Liu & Meyer, 2020).
Western MNEs lack experience and host market knowledge and a firmly
established competitive position compared to local firms in transitional
economies. Existing insights, expertise, technology and brand names
may not be transferrable. In such contexts, using an integrated
perspective is the best way to understand the flexibility-agility association
(Kale et al., 2019), with agility regarded as an externally focused capa­
bility, while flexibility is an internally focused competency (Shin et al.,
2015).
In our study, we take the view that this perspective is consistent with
the conceptualization of agility as a dynamic capability (Teece, Pisano,
& Shuen, 1997). “Agility” is “a capability to notice an opportunity and
make a rapid yet precise move using extraordinary accelerating power”
(Brueller et al., 2014, p. 41). Comparable to the agility of responding to
the market, operational adjustment agility is important for the devel­
opment of organizational agility (Lu & Ramamurthy, 2011). So too is
HRM agility in strategic partnerships that allows for cultural diversity
(Wang, Fan, Freeman, & Zhu, 2017) and fostering open strategic con­
versations (Morton et al., 2018). The significant role of HRM processes
in supporting knowledge sharing has been highlighted in studies in how
to manage cultural tensions (Weber & Fried, 2011) and to retain key
employees (Ahammad, Tarba, Liu, & Glaister, 2016; Liu & Meyer,
2020). HRM practices and development of HR capabilities have been
emphasized as a major challenge in HRM, especially in transitional
F.C. Nyamrunda and S. Freeman
economies because managers there lack international experience
(Cooke, Wu, Zhou, Zhong, & Wang, 2018). People related dynamics are
manifested as flexibility (internally focused competency) and significant
for ensuring agility (externally focused capability). It is the synthesis of
HRM activities that comprise individual level competency which en­
ables the smoothing over of tensions (Fourné et al., 2014) and paradoxes
simultaneously (Al-Atwi, Amankwah-Amoah & Khan, in press; Debellis
et al., 2020) that provides firms with agility.
Firms need greater ability to govern the increasing complexities
embedded in activities and processes that depend not only on planning,
but much more on individual competencies. The latter provide flexi­
bility in adapting both to the external evolution of the competitive
environment and more importantly to the development of individual
relationships in the firm’s buyer-seller partnerships. The flexibility
component residing in individual micro-foundational processes is less
researched and thus the focus of our study. Integrating micro-
foundational research into an international business context, our study
builds on HRM and international business strategy literature, revealing
the dynamic and fundamental role of the individual, as an internal level
competency that leads to superior competitiveness of the firm. It is
through people (i.e. internal competency), primarily, that organizations
can ensure agility, an externally focused capability.
In summary, micro-foundational activities through improvisational
capabilities (Clauss et al., 2019; e Cunha et al., 2020), as well as tech­
nology and innovation – all need to be integrated to enable agility (Kidd,
1994). Faced with concurrent and immediate demands and rapidly
changing environmental contexts, managers are frequently faced with
the paradox of learning or organizational response (Debellis et al.,
2020), that is, whether to explore or exploit these activities, as chal­
lenges or opportunities, simultaneously (Al-Atwi, Amankwah-Amoah &
Khan, in press). Explicitly, we adopt a micro-foundational perspective to
highlight certain collective actions and functions that underpin agile
businesses, namely, meeting customer expectations quickly, getting new
products to market in a timely fashion, and making sure to move into as
well as out of strategic partnerships swiftly (Gehani, 1995). All are more
difficult to manage in transitional economies because of their volatility,
speed of change, level of competition and heterogeneity (Fourné et al.,
2014). Remarkably, very little research effort has been directed to this
significant context and stream of research. In the context of this study,
international HRM practices are regarded as especially critical as they
influence motivations of individuals at the center of knowledge sharing
activities in an international business context (Liu & Meyer, 2020).
Motivations and cognitive processes are theorized in our study through
psychological trust theory (Deutsch, 1958). Further, we build on the
strategic agility literature by linking to psychology research to show that
the ability to be agile is directly related to the cognition of senior
management (Schaeffner, 2018; Xing et al., 2020) and to effective
human performance, as they direct the micro-foundational processes
and technologies in the organization (Al-Azzam, Irtaimeh, & Khaddam,
2017). This will be more complex in transitional economies because of
cultural challenges in interpersonal relationships (Wang et al., 2017).
A strategically agile organization can adapt to changing market
needs, quickly learn about changes to the market, and benefit from these
external changes, by altering their products and services (Kumkale,
2016) to align with the external changes (Ahammad, Glaister, & Gomes,
2020; Braunscheidel & Suresh, 2009) and thereby actively influence the
competitive environment (Schaeffner, 2018). In this manner, external
changes can be conceived as and converted to opportunities, so long as
the organization has the human resource capabilities to simultaneously
align their internal organizational system and their strategy with the
external environment, by gathering information quickly and responding
swiftly to “incessant technological change and evermore volatile and
uncertain market conditions” (Brueller, Carmeli & Drori, p. 40) and al­
terations (Kumkale, 2016). This perspective views context as highly
relevant in building theoretical understanding. Strategic agility, thus,
helps advance the competitive activity inventory of organizations and
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Journal of World Business 56 (2021) 101175
the necessary responses to fluctuations in the environment, thereby
enhancing performance (Ahammad et al., 2020; Kale et al., 2019;
Schaeffner, 2018; Tallon & Pinsonneault, 2011). Our point of difference,
is to emphasize that the externally focused capability (agility) is
underpinned by the internally focused competency (flexibility), by using
a micro-foundational perspective (e.g. manager/founder) in conceptu­
alizing strategic agility in small firms in transitional economies. Our
contribution to context, strategic agility and international business
literature is to highlight that individual level processes are more critical
to business level outcomes in transitional economies.
The external fluctuations are more unpredictable and pronounced in
transitional economies. For these reasons, strategic agility is seen as a
significant mediator between corporate risk management practices and
the performance of the firm (Teoh, Lee, & Muthuveloo, 2017). In this
context, the organization’s capacity to identify, assimilate and exploit
new knowledge gathered from its environment (Cohen & Levinthal,
1989; Kale et al., 2019) is more important than in most established
economies. This organizational capacity is defined as absorptive ca­
pacity. The parallel body of research that studies absorptive capacity,
conceptualizes it as a set of organizational routines and processes that
enable the firm to acquire and assimilate (potential absorptive capacity),
and to transform and to exploit assimilated knowledge (to produce a
dynamic organizational capability) (Zahra & George, 2002). The value
of the new information, however, then needs to be recognized, in order
to assimilate it and then apply it to commercial ends (realized absorptive
capacity) (Flatten, Greve, & Brettel, 2011; Zahra & George, 2002). Some
studies show indirect support for the relationship between strategic
agility and absorptive capacity, and performance (Kale et al., 2019)
through firms combining external information with in-house informa­
tion, and transforming it into useful information for the entire
organization.
What is missing from this body of research, like research in strategic
agility, is engagement with the micro-foundational literature (Bou­
guerra et al., 2019). The limitation means much of organizational
management and strategy literature fails to fully conceptualize or
recognize the underlying reality that the use of in-house information
needed to transform the organization is primarily and fundamentally
reliant on the inspiration and creativity of individuals and their re­
lationships with others (e Cunha et al., 2020), in various roles to allow
the necessary flexibility to build strategic agility of the organization
(Shin et al., 2015). In our study, we address this lack of engagement with
small firms and relationship development, especially trust-based busi­
ness relationships found in transitional economies, where we have even
less international business research. We do so in order to build theory
using a micro-foundational approach and draw from psychological trust
theory.
Surprisingly, the extant literature on strategic agility is primarily
focused at the organizational level on large, established MNEs (Fourné
et al., 2014), with little attention devoted to SMEs especially those that
are entrepreneurial, new and operating in different contexts. Yet SMEs
are likely to have different ideas for how agility might be conceptualized
in diverse contexts (Xing et al., 2020), especially when the internal level
relational nuances between trading partners are unfamiliar. This situa­
tion is likely to lead to very high levels of uncertainty for creating,
developing and maintaining cross-cultural competencies (Wang et al.,
2017) through business relationships that drive SME development and
growth in transitional economies. This internally focused competency
that supports an externally focused organizational capability includes
not only the ability to act, adapt, and change direction quickly, but to be
able to anticipate and influence the competition (Schaeffner, 2018).
Thus, being able to take immediate advantage of changes (Jamrog,
Vickers, & Bear, 2006) in the business environment increasingly char­
acterized as hypercompetitive in transitional economies (D’Aveni,
Dagnino, & Smith, 2010).
Our point of departure is our focus on SMEs to highlight the more
significant and powerful role senior managers play here compared to
F.C. Nyamrunda and S. Freeman
larger MNEs, for two reasons. First, the more complex contexts requiring
higher levels of sensitivity, flexibility and careful HRM practices given
the scarcity of resources, especially human resources in SMEs. Second,
where cultural interactions, such as those found in transitional econo­
mies, require higher levels of cross-cultural communication compe­
tencies (Wang et al., 2017) than in established economies. Xing et al.
(2020) demonstrate that outcomes are not wholly determined by
serendipity, as the entrepreneurial team or senior manager has consid­
erable influence over the success of their SME. However, their
decision-making capabilities, ability to learn, and organizational skills
to adapt quickly with new trading partners in the early phase of their
relational evolution remains largely unknow. We build on current
studies (Bouguerra et al., 2019) acknowledging the significance of
“collaborative processes, which constitute …interorganizational re­
lationships and network partners [to] enhance production capabilities”
(p. 2). These micro-foundational processes will directly influence “the
degree of operational agility” (Bouguerra et al., 2019 p. 2). This dearth
of research is a serious impediment to moving the research domain of
international business, entrepreneurship, strategic agility, a
micro-foundational approach and SME capabilities forward. This is
because relational dynamic capability is likely to be a significant influence
on the strategic agility and performance of SMEs in the contexts found in
transitional economies.
2.2. Strategic agility and ambidexterity in SMEs
Another steam of research focuses on structural solutions that
separate individual efforts from operational activities. By linking this
research to ambidexterity and HRM practices, the researchers present
this as a dual dilemma or a major paradox management challenge
(March, 1991; O’Reilly & Tushman, 2013; Raisch, Birkinshaw, Probst, &
Tushman, 2009). Namely the enduring tension between exploration and
exploitation and associated organizational difficulties of attempting to
balance the two (i.e. ambidexterity). Just how organizations can balance
enough exploitation to support and sustain their current position, with
simultaneously, devoting sufficient time, resources and direction to
exploration for their future sustainability – is presented as the ‘dual
dilemma’ - where tensions are seen as constructive (Andriopoulos &
Lewis, 2009; Lewis, Andriopoulos, & Smith, 2014). However, when
MNEs operate in more dynamic, uncertain, politically unstable and
disruptive environments, such as those typically found in transitional
economies, and try to manage businesses in such hypercompetitive en­
vironments, they face additional tensions or paradoxes. In our study we
highlight those tensions that relate primarily to business development
and micro-level processes (Bouguerra et al., 2019) that have been
largely ignored in international business literature.
This is surprising, given the fundamental role of interconnections
and interactions between managers/founders and their trading partners
in these types of economies. Much of their success is linked to their
networks and strong business relationships (Berger et al., 2017) residing
outside the organizational boundaries. This phenomenon is far more
prevalent in transitional economies where inter-firm interactions place
greater reliance on trust-based relationships (Maksimov et al., 2017) for
successful cross-border activities between buyer-sellers in SMEs (Mata­
nda & Freeman, 2009). Yet how these tensions should be resolved by
MNEs remains unknown (Smith & Lewis, 2011), especially for SMEs,
where there is little research. While research on ambidexterity is similar
to that occurring in strategic agility, recent studies are moving the
impact of ambidexterity down further into the organizational level of
business management (Birkinshaw & Gibson, 2004), that links it to HRM
practices (Junni, Sarala, Tarba, & Cooper, 2015). It is still largely
conceived, however, as a structural issue that separates individual
competencies from operational activities.
In our study, we highlight a number of limitations in current litera­
ture on ambidexterity. The main concern is that research into ambi­
dexterity does not provide a comprehensive understanding of the
5
Journal of World Business 56 (2021) 101175
combination of forces that draws together the skills, behaviors and ca­
pabilities needed by managers to combine their collective practices and
actions (Doz, 2020). By contrast, prior research in strategic agility de­
scribes these forces as three meta-capability vectors (i.e. paths) – ‘stra­
tegic sensitivity’, ‘resource fluidity’, and ‘leadership unity’ (Doz &
Kosonen, 2007). Our point of difference in this study, is to link this
previous research on meta-capability vectors to the micro-foundational
approach in order to highlight the fundamental contribution that in­
dividuals make at the micro-level (through their relational contributions
to the three paths), to drive strategic agility in firms at the organizational
level.
Each of the meta-capability paths results from a different combina­
tion of forces. We build on this conceptualization by linking the three
meta paths to relational capability dimensions (communication,
knowledge sharing and social bonds) (Dowell et al., 2015; Shin et al.,
2015) to how they integrate to support dynamic micro-foundational
processes. First, taken at an aggregate level, strategic sensitivity re­
quires an open communication process for strategy development, and
high levels of strategic alertness and superior quality dialogue between
senior managers, residing at the individual level of analysis. Second,
knowledge sharing is a critical competency of individual managers to
ensure resource fluidity in terms of structures (formal and informal), and
decentralization of initiatives. This is because knowledge availability
and mobility of people to ensure transferability of specific knowledge is
undertaken by individuals through micro-processes. Finally, the most
difficult to manage is leadership unity between managers with their
trading partnerships to undertake quick, adaptive, creative joint de­
cisions required for strategic agility. This depends on collective
commitment to build strong social bonds through trust and mutual de­
pendency (Leonidou et al., 2018). Collective commitment assists man­
agers in creating a shared vision (Doz & Kosonen, 2007) that is
effectively communicated across the whole organization (Doz, 2020),
and to their trading partners, outside their small firms. Yet this entire
relationally driven process is fundamentally embedded in people pro­
cesses involving a few managers residing inside small firms in transi­
tional economies.
Based on the strategic agility and ambidexterity literature and recent
studies using the micro-foundational approach (Al-Atwi,
Amankwah-Amoah & Khan, in press; Boojihawon et al., 2020; Bouguerra
et al., 2019; e Cunha et al., 2020; Liu & Meyer, 2020; Mäkelä,
Barner-Rasmussen, Ehrnrooth, & Koveshnikov, 2019; McWilliam, Kim,
Mudambi, & Nielsen, 2020; Zimmerman et al., 2010), we make several
contributions to advancing a fuller and more nuanced understanding of
micro-foundational processes, dynamic relational capability and stra­
tegic agility within SME buyer-seller relationships in transitional econ­
omies. We respond, in particular, to calls in the micro-foundations
literature to give more attention to informal (e.g. individual factors) and
formal (e.g. organizational factors) that directly impact on the contextual
drivers (Cumming et al., 2020) and the tensions associated with collec­
tive commitment to shared goals in small firms in transitional econo­
mies. In particular, we build on studies of micro-foundational
influences, managerial behavior (Zimmerman et al., 2010) and mutual
dependency by extending our understanding of senior managers in
cross-cultural buyer-seller partnerships where trust-based relationships
are essential to the process of building co-dependency in transitional
economies. According to Zhou, Wu, and Luo (2007) in the development
phase of buyer-seller relationships, affective trust supports mutual goals
and benefits of the relationship. But tensions exist between early in­
teractions and the trial phase in relationship development, where there
is limited predictability and this can create uncertainty for small firms as
this involves nuanced communication and negotiation skills (Zhang,
2018). It is possible to assume that these paths will be more difficult to
manage simultaneously and to balance, and that the emphasis on each is
likely to vary over time, especially in cross-cultural situations that occur
in international business activities (Fourné et al., 2014). More so in
unfamiliar contexts with high volatility, and in early phases of relational
F.C. Nyamrunda and S. Freeman
interaction and development, where there is less familiarity, more un­
certainty, higher risk and greater vulnerabilities between partners
(Matanda & Freeman, 2009). We respond to this research gap in our
study by focusing in on the tensions inherent in informal and formal
interactions in newly forming cross-border buyer-seller relationships
involving SMEs doing business in transitional economies.
This is the first empirical study, to our knowledge, to examine the
interplay between senior managers’ communication approaches, trust-
building and the link to agile buyer-seller relationships, in SME cross-
border activities in transitional economies. In a recent conceptual
paper, Debellis et al. (2020) highlight the very limited attention in
existing research on “international business dynamics” that exposes the
complexities that firms with “few resources” face when interacting
abroad “where [legal] contracts are [not] the main mechanism to exert
control and coordination”. Rather, firm success depends only in part on
initial formal planning, and “much more on the strategic agility of
partner companies in adapting to both the external evolution of the
competitive environment and the internal strategies of individual part­
ners” (p. 8). For example, to demonstrate the ambidexterity required of
small firms to manage the exploration vs exploitation paradox, man­
agers must engage in continuous learning, re-evaluation, and readjust­
ment (exploration) with their cross-border partners that is an active
relational competency in order to grow their business (exploitation). In
transitional economies, this is likely to be all the more salient, as early
relationship development is dynamic and requires significant input from
individuals in creating, managing, developing and sustaining in­
teractions that support open and honest communication that builds
trust. A non-contractual trust-based approach to business creation is
fundamental to early cross-cultural business development in order to
support strategic agility in SMEs in transitional economies.
In our study, we argue that this is because trust is a social mechanism
that develops through relationships between parties (Leonidou et al.,
2018). As operational and strategic managers interact across the myriad
of functions needed to drive the strategic agility of their SMEs, it is in­
dividuals that need to recognize external changes and implement swift
new alterations and firm alignment through adaptation between parties
(Child et al., 2017). This leads to reduced tensions and uncertainties
between partners. In such contexts, volatility, hypercompetitive forces
and uncertainty prevail, impacting small firm strategy and survival, as
senior managers balance formal planning and opportunistic strategic
agility. There is little empirical and theoretical research that takes a
micro-foundational perspective in examining how small MNEs exercise
greater strategic agility in such unorganized contexts (e.g. Boojihawon
et al., 2020). Managers of SMEs in transitional economies have unique
characteristics that affect their involvement in international activities
differently from their established economy counterparts. Indeed, tran­
sitional economy SMEs face a paradox entailing a lower willingness to
expose tensions in their unstable contexts to business partners but a
higher ability to govern them through an informal social governance
mechanism (Debellis et al., 2020). They do so through cross-cultural
relationship management, hence facilitating common action and
generating value through their cross-border buyer-seller relationships.
To the authors knowledge, there are no relevant studies that focus on
SMEs. This paper aims to fill this theoretical gap in two ways. First, by
attempting to show why trust is a central element of dynamic relational
capability for SMEs in transitional economies. Second, how external
institutional and micro-foundational cultural factors that operate in
transitional economies create unique conditions with substantial
complexity, uncertainty and risk for managers/founders of SMEs.
3. Psychological trust theory and a micro-foundational
perspective
Psychological trust theory (Deutsch, 1958) focuses on the state of
mind of an individual to explain the mechanism of trust building be­
tween parties. Deutsch (1958) defines trust as an individual’s confidence
6
Journal of World Business 56 (2021) 101175
in another person’s expectations, intentions and motives. Psychological
trust theory emphasizes cognition as the key dimension of trust. Ac­
cording to Rousseau, Sitkin, Burt, and Camerer (1998), trust may be
influenced by cognitive cues including perceived individual ability or
competence. However, in the early phases of relationship development,
ability or competence may be difficult to assess without some familiar­
ity, awareness and heightened perception with the (potential) partners.
Therefore, the early development of trust may be influenced by the
strategic sensitivity (Doz, 2020; Doz & Kosonen, 2007) of initial actions
and communication processes between parties.
Although psychological trust theory (Deutsch, 1958) may incorpo­
rate behavioral aspects, the point of difference in our study is our focus
on understanding the complex interpersonal states associated with af­
fective trust, including expectations and dispositions that shape an in­
dividual’s decision-making behavior. However, the psychological view
of trust is mainly perceptual in nature (Lewicki, Tomlinson, & Gillespie,
2006) and does not capture the process of trust development in re­
lationships (Huemer, 2014). Therefore, the behavioral aspect of psy­
chological trust theory provides a guideline to understanding the
interpersonal and affective trust development between individual part­
ners. Psychological trust theory emphasizes the qualities and individual
characteristics required to judge trustworthiness in a relationship.
However, due to the nature of business relationships, one party may
assess the perceived trustworthiness of another party based on factors
related to the process of relationship development. As suggested by
Luhmann, Davis, Raffan, and Rooney (1979) and Leonidou et al. (2018),
trust should be treated as a social mechanism that develops in the
relationship between two or more exchange parties. The objective of our
study is to examine the early phases of relationship development as it is
here that the foundations for trust-based partnerships are laid.
3.1. Early phases of business relationship development
A business relationship may depend initially on the actions of either
party (Leonidou, Aykol, Fotiadis, Christodoulides, & Zeriti, 2017).
Considering the early phases allows us to offer a more productive
explanation of the process. This study adopts Ford’s (1980) model of
relational development but addresses the functionality of each phase
rather than the idea of an ordained sequence. Business relationships in
the early phases of development in a transitional economy face signifi­
cant challenges due to the rapidly changing volatile environment
(Fourné et al., 2014; Manolova et al., 2010). Parties may have difficulty
obtaining critical resources (such as finance and knowledge) because
institutional factors are underdeveloped in transitional economies
(Fainshmidt et al., 2018). Resource fluidity becomes a critical
meta-capability path. It represents a combination of skills, behaviors and
capabilities needed by managers to transfer resources quickly from one
activity to another opportunity for growth (Doz, 2020). Transitional
economies present a unique setting in which to explore the initial phases
of business relationship development and to understand how cognitive
and affective trust develop during this process to support resource
fluidity. Importantly, an agile organization needs to be capable of
‘knowledge sensemaking’ through ‘preferential relationships’ with the
providers of this type of information to allow them the agility to be the
first to be aware of emerging trends and to address them (Brueller et al.,
2014).
Before the first trial of interactions, the parties are involved in a
detailed evaluation of a potential partner (Ford, 1980). In this phase, a
firm’s evaluation of a potential partner takes place with some degree of
uncertainty (Bachmann & Inkpen, 2011; Vida & Obadia, 2018). Parties
may typically have inaccurate or negative predispositions towards each
other due to cultural stereotypes and the firm’s image (Ellegaard &
Medlin, 2018), especially in transitional economies with perceived low
levels of trust from their counterparts (Ramadani, Ademi, Ratten, Pal­
alic, & Krueger, 2018). However, predicting the behavior of a potential
partner through strategic sensitivity helps to develop more trust, and
F.C. Nyamrunda and S. Freeman
this may encourage more interactions and thereby allow both parties to
move to the next phase. Thus, there is need to further understand the
meta-capability vectors (i.e. paths) and the factors that associate with
cognitive and affective trust development in order to predict how SMEs
can initiate and manage relationship development during this critical
phase, given the uncertainty of the external conditions prevailing in
transitional economies.
Once contact has been made, the parties typically move to an early
interaction phase which involves communications and negotiations
about the specifics of the relationship (Ford, 1980; Zhang, 2018). This
phase represents early interactions, such as a trial purchase or supply
(Ford, 1980) that provide an opportunity for each party to understand
more about the other. In this phase, interacting with others who are not
fully predictable creates uncomfortable and uncertain situations espe­
cially for SMEs. Familiarity that is associated with heightened awareness
and attention to strategic situations as they occur in this phase enhances
confidence in the overall relationship by allowing parties to assess their
perceptions and knowledge of each other. Research shows that indi­
vidual ability or competency (cognitive trust) is difficult to access
without a certain degree of familiarity with a potential partner (Fiedler
et al., 2017). Therefore, early interactions and familiarity along with
strategic sensitivity between business partners is likely to strengthen
cognitive trust.
In the development phase, the relationship between the parties has
progressed beyond the initial interactions as a result of their increased
mutual understanding (Ford, 1980). The development phase is strongly
associated with adaptation between parties (Child et al., 2017) and
leadership unity as the third meta-capability path. Collective commit­
ment requires the senior management team to make and then implement
decisions quickly with the right organizational leadership to avoid a
win-lose situation (Doz & Kosonen, 2007). The degree of cognitive and
affective trust developed during the previous phases (pre-relationship
and early interaction) determines relationship dynamics, together with
the appropriate collective commitment to cross-cultural adaptations
needed in leadership approaches between managers operating in
cross-border activities in transitional economies. At the development
phase, affective trust allows the exchange parties to have a stronger
understanding of the mutual goals and benefits of the relationship. Ac­
cording to Zhou et al. (2007), partners are mutually expecting to benefit
each other at this phase. Collective commitment (Doz, 2020) will assist
‘nimble decision-making’ for the partners to be quick to act on or grasp
their position or capabilities based on their prior experience and avoid
organizational resistance to new opportunities (e.g. win-lose politics)
(Brueller et al., 2014).
Therefore, the presence of affective trust enhances strong emotional
bonds between parties based on a sense of shared goals and values
(Lewicki et al., 2006). Any suspicious behavior will prompt the parties to
take (opportunistic) actions that may reduce their vulnerability in an
attempt to protect their own interests (Luhmann et al., 1979). Given the
dynamics of transitional economies, with high levels of growth, trust is
becoming an economic imperative in order to operate in such a context.
Therefore, trust between managers/founders is likely to smooth over
tensions in order to improve the potential for SMEs to succeed by
increasing their internal flexibility to competitive threats and opportu­
nities externally, through strong business relationships (Berger et al.,
2017). Despite this, there is little empirical research on the development
of cognitive and affective trust in transitional economies (Maksimov
et al., 2017), a comprehensive understanding of the combined forces of
the three meta-capability paths (Doz, 2020) and how, in combination,
they can support strategic agility in small firms engaged in international
business activities.
3.2. Communication
Communication between business partners is a critical element for
trust building in SME business relationships and in their overall success
7
Journal of World Business 56 (2021) 101175
(Zhou et al., 2007). The role of communication has been underestimated
in the business literature, especially in a cross-cultural setting (Narooz &
Child, 2017). Fiedler et al. (2017) show that communication allows
potential business partners to share sensitive information, knowledge
and views. It is likely to be directly influenced by strategic sensitivity
between partners (Doz, 2020). Thus, increased perception, awareness
and attention to strategic events as they unfold is likely to enhance the
closeness between parties in order to achieve their mutual goals (Child
et al., 2017). Further, strategic agility will be directly supported by the
resource fluidity capability of managers to free up resources quickly
from one activity (Doz, 2020) and using ‘rapid resource deployment’ to
implement changes quickly and thus capitalize on opportunities (Bru­
eller et al., 2014).
Other studies have found that the relationship between communi­
cation and trust (cognitive/affective) is interactive in nature, and
effective communication is a necessary antecedent of cognitive and af­
fective trust (Fleming, Lynch, & Kelliher, 2016). Affective trust is
developed through open and honest communication between business
partners, which builds confidence in relationships. Strategic sensitivity
between partners that builds perception, awareness and attention to
situations (Doz, 2020), and thus, trust, is likely to reinforce positive
communication. Additionally, the reliability of communication through
the initial interactions between exchange partners can influence cogni­
tive trust (Fleming et al., 2016). In contrast, other studies assume that
trust precedes effective communication (Fischer & Pascucci, 2017). To
address this inconsistency, our study aims to examine the role of
communication in both affective and cognitive trust. SMEs are increas­
ingly involved in cross-cultural relationships and are therefore more
likely to be committed to those partners who make particular effort to
communicate openly and clearly (i.e. leadership unity, Doz, 2020),
along with a style of organizational leadership that demonstrates a
strong desire to avoid negative outcomes for the other party. Despite the
increasing importance of the role of communication, many business
partners continue to struggle to establish relationships with their
counterparts, and to understand each other’s thoughts and motives. This
inability to understand the role of communication makes it difficult for
parties to develop cognitive and affective trust but these are likely to be
enhanced through strategic sensitivity between partners. To date, there
is a scarcity of studies examining the influence of communication on
trust, and the impact of the three meta-capability pillars, which we re­
gard as micro-foundational internal competencies by individual
managers.
3.3. Social bonds and knowledge
Berger et al. (2017) show the positive influence social bonds have on
trust by creating beneficial interactions between exchange parties.
Previously not addressed in SME business relationships in a transitional
economy, the social bond in business relationships is defined as “the
degree of mutual personal friendship and liking shared by the exchange
partners” (Wilson, 1995, p. 339). Business partners may develop strong
interpersonal relationships that tend to draw a business relationship
together (Bidault et al., 2018; Ferro, Padin, Svensson, & Payan, 2016).
Business partners may become more socially bonded and this may allow
them to commit time, energy and resources to develop a relationship
(Berger et al., 2017). The importance of skills, behaviors and capabilities
that managers develop through strategic sensitivity, resource fluidity
and leadership unity (Doz, 2020) highlights the fundamental role of
individual managers and their business relationships in building social
bonds between partners, using a micro-foundation approach. Similarly,
Houjeir and Brennan (2017) suggest that the development of social
bonds between parties is likely to have considerable influence on af­
fective trust by enhancing relational connections in relationships. The
psychology literature reveals that interpersonal relationships between
individuals become stronger as the social bonds evolve, and affective
trust strengthens (Dikova et al., 2016). This helps to manage
F.C. Nyamrunda and S. Freeman
organizational tensions (ambidexterity) at the micro-foundational level
as managers build strategic agility in their SMEs through strong
inter-personal connections (i.e. social bonds). This can occur because the
orientation of the elements that comprise dynamic relational capability
ranges from local to global.
Trying to find a balance between globally or internationally oriented
and locally focused dynamic capabilities is difficult because of cultural
differences in mindsets and preferences. These tensions could be viewed
as “tensions of [not] belong[ing]” (Fourné et al., 2014, p. 27) to that
culture requiring adaptations by both local and international managers
to support strong social bonds that drives trust development in each
other. Drawing from the psychology, strategic agility and ambidexterity
literatures, we link this to international business research, using psy­
chological trust theory and a micro-foundational approach to explain
how environmental turbulence and relational unfamiliarity between
trading partners in the early phase of relationship development in a
transitional economy are likely to exacerbate the tensions between
managers in buyer-seller relationships, with the need for stronger social
bonds to support affective trust development that drives the strategic
agility in their small firms. Thus, a major contribution in this study, is to
link this previous research in psychology and into meta-capability vec­
tors to the micro-foundational approach in order to highlight the
fundamental contribution that individuals make (through their relational
interactions in the three paths - strategic sensitivity, resource fluidity and
leadership unity), to drive strategic agility in firms at the organizational
level.
4. Methodology
4.1. Contextual focus
Cumming et al. (2020) and Doz (2020) suggest that ‘context
awareness’ can impact organizational agility in terms of the way plans
and fast decisions are made by individual managers and executives.
They regard it as essential to consider the context when exploring a
specific business situation. As previously mentioned, attempts to un­
derstand the impact of cognitive and affective trust on strategic agility of
SMEs, as distinct from larger MNEs, and with a strong contextual focus,
such as transitional economies, are rare. Tanzania is one of the few
transitional economies in Africa that continues to have political stabil­
ity, allowing the country to maintain a favorable business environment
in the region of East Africa (International Monetary Fund, 2018). This
enables the Tanzanian government to focus on facilitating business
environment reforms such as infrastructure development, grow the SME
sector, and develop trade policy (McKinsey & Company, 2017) making it
a unique context for investigation. The presence of bureaucracy and
corruption, however, continues to create difficulties within Tanzania’s
small business environment (International Monetary Fund, 2018).
Thus, political influence/power/connection are critically important
in any business dealings in transitional economies (Costa, Soares, &
Sousa, 2017). Examining SME business relationships in a rapidly
changing business environment, typical for a transitional economy such
as Tanzania, will provide an opportunity for a deeper understanding of
the importance of context in order to examine the impact of cognitive
and affective trust in SME business relationships, and thus, key di­
mensions of ‘dynamic relational capability’ that support strategic agility
(Shin et al., 2015)
4.2. Research design
While existing studies focus on achieving strategic agility in organi­
zations, the role of trust between individuals in the process of developing
strategic agility remains under-researched. The present study examines
the concept of strategic agility by focusing on the roles of cognitive and
affective trust during the initial phases of SME international business
relationships. We therefore chose a qualitative research design for our
8
Journal of World Business 56 (2021) 101175
investigation (Shin et al., 2015). This allows examination of complex
multifaceted phenomena such as cognitive and affective trust and allows
for exploration of socially related issues affecting strategic agility.
Moreover, developing a conceptual model that links emergent issues and
strategic agility can provide fresh theoretical foundation for buyer-seller
exchange relationships (Mäkelä et al., 2019). Our literature review was
thoroughly conducted with the aim of exploring meta-capability paths,
relational dimensions, their relationship and the role of trust in the
context of a transitional economy. The literature also indicates that there
are several data collection challenges that face quantitative research in
transitional economies (Matanda & Freeman, 2009). For example, un­
reliable information and incomplete databases about SMEs makes
quantitative sampling methods, such as random or structured sampling,
challenging to implement. Availability of data is another concern, as
transitional economies are often characterized by lack of or poor tech­
nology used by local firms to monitor information. Some useful data
may not be well-recorded for future reference, making it difficult to
access in quantitative research (Ghauri & Grønhaug, 2010). Thus, a
qualitative case study method was applied to give access to participants’
subjective viewpoints of their situations and understand how they ach­
ieve agility in their strategic decision-making (Eisenhardt, 1989).
This study applied a qualitative research approach to examine cur­
rent issues facing SMEs in their cross-national business relationships.
More specifically, the relationship between dynamic relational capa­
bility and strategic agility in SMEs in transitional economies has not
been sufficiently examined. This is an added reason why a qualitative
research approach is the appropriate methodology (Dowell et al., 2015).
The aim of our study was to build a consistent and robust research
approach to our investigation. This was achieved through the following
steps: (1) critical review of the literature in the area of cross-cultural
business relationships, particularly examining the impact of cognitive
and affective trust in the early phases of business relationship develop­
ment and that influence on strategic agility of the participating firms,
leading to a specific research question; (2) develop an interview protocol
for the purpose of the in-depth semi-structured interviews; (3) conduct a
pilot study to refine the interview protocol (interview with 1 manager
and 2 industry experts); (4) conduct the main data collection process
(see Table 1). In addition to firm managers (cases), (5) relevant industry
experts and government representatives were revisited for interviews
because they were deemed to have specific and detailed knowledge
about the relevant industry and business relationship issues; (6) conduct
semi-structured interviews, guided by the interview protocol; (7) follow
with a transcription process; (8) the researchers conduct cross-case
analysis; and (9) development, finally, of the conceptual model and
propositions from the research findings.
It is noted that political and geographical issues make it difficult to
recruit participants in transitional economies (Leonidou et al., 2017). In
this study, some participants declined or were reluctant to participate in
the research due to fear or suspicion that researchers were a government
informer, or they were not sure about the researchers’ motives in
selecting them. In this case, the key participants (owners/senior man­
agers, relevant industry experts and government representatives) who
had contacts were contacted multiple times for follow-ups and for
identification of potential respondents. The main purpose was for them
to recommend helpful individuals who met the selection criteria.
Purposive sampling was used for the selection of participants based
on their availability and willingness to take part in the study. To opti­
mize the benefits of this sampling technique, participants were given an
opportunity to discuss the topic in-depth and to provide useful insights
without diverting from the main focus of the study. The literature in­
dicates that not all SMEs have the same likelihood of engaging in in­
ternational business (Prange & Pinho, 2017). Involvement in
international business activities is not ubiquitous among SMEs in a
transitional economy, such as Tanzania. Ramadani et al. (2018) suggest
that SMEs generally begin by exporting/importing and that most fail,
but those that survive tend to be those that have gained experience in
F.C. Nyamrunda and S. Freeman Journal of World Business 56 (2021) 101175

Table 1
List of SMEs (cases) and informants interviewed in this study.
Firm Date of Industry Location International Company Position and the number of Countries Length of
establishment business size interviewees (26) interview
partnerships (approx.)

F1 1990 Agribusiness Tanzania Export Medium Managing Director Senior China, Australia, Indonesia, 60 min. 60
Manager, International Trade Europe min. 60 min.
Operations Export Manager
F2 2003 Agribusiness Tanzania Export and Import Medium Co-founder and Managing South Africa, Zambia, China, 58 min. 60
Director Canada, Australia, U.S.A. min.
F3 1993 Construction Tanzania Import Medium Owner Zambia, Botswana, Mauritius 60 min.
F4 2011 Petroleum Tanzania Export Small Owner and Managing Australia, U.S.A, Iran, Italy, 60 min. 60
Director U.A.E, Egypt, New Zealand, min.
South Africa, Pakistan,
Zambia
F5 2005 Information Tanzania Import Small Senior Manager Senior India, China 60 min. 60
Technology (IT) Manager min.
F6 1996 Technology Tanzania Export and Import Medium Owner and Managing India, South Africa, Japan 60 min.
Director
F7 1999 Retail Tanzania Import Small Owner and Managing Malaysia, Uganda, Indonesia 60 min. 60
Director Import Specialist min.
F8 2000 Horticulture Tanzania Export Small Senior Manager Director Vietnam, Cote d’Ivoire, the 60 min. 60
Philippines min.
F9 2000 Retail Tanzania Import and Export Medium Senior Manager (export) Mauritius, Mexico, Thailand 60 min. 60
Senior Manager, (import) min.
F10 2013 Information Tanzania Export Small Owner Senior Manager Switzerland, Oman 57 min. 60
Technology (IT) min.
F11 2010 Food Processing Tanzania Export Medium Owner and Managing Oman, Saudi Arabia 60 min.
Director
Assistant Director
F12 1995 Beverages Tanzania Import Medium Owner and Managing Belgium, Kenya, Rwanda, 60 min. 55
Director Import specialist Netherlands min.
F13 2001 Furniture Tanzania Import Small Co-founder and Managing Italy, France, Germany 60 min. 60
Retailing Director Senior Manager min.
F14 2003 Furniture Tanzania Export Medium Managing Director Senior China, Rwanda 60 min. 60
Retailing Manager min.
F15 2008 Mining Tanzania Export Medium Owner and Managing Australia, England, U.S.A., 60 min.
Director Japan

building partnerships. We were motivated to understand what is
happening in SME international business relationships in a transitional
economy from the key participants’ perspectives, specifically those who
are involved in the decision-making process (Leonidou et al., 2017).
These managers were asked to provide responses that best described
their involvement in the relationship development and strategic
decision-making process since inception. We asked them about their
previous experience and their intention of dealing with the present
trading partner. Building on the work of e Cunha et al. (2020), the re­
spondents were given descriptions of trusting and of opportunistic be­
haviors and asked to indicate which of the two elements was most
descriptive of themselves and their trading partners.
4.3. Development of concepts
We organized an open framework (i.e., the interview protocol) as a
topic guide to ensure the main points of interest (concepts) were dis­
cussed during the interview, while still providing an opportunity for the
participants to lead the discussion through their own understanding of
the environment (Shin et al., 2015). The interview questions were
organized into broad topics, which enhanced the quality of information
given and this allowed for the uninterrupted flow of the interview pro­
cess (Eisenhardt, 1989). Introductory questions were developed to
establish the themes of the study and then questions followed to obtain
more details from respondents (Saunders, Lewis, & Thornhill, 2003).
The respondents were asked first to describe their firm’s history and
growth and then the international activities of their firm. We also asked
each respondent to reflect on the situation of his/her company at that
earlier time. In order to understand the relationship between cognitive/
affective trust with their business partners and strategic agility, we
invited the participants to provide actual examples that best explained
the nature of their interactions with their counterparts based on the
questions such as - Can you describe the time and effort you put into
maintaining relationships with your business partners? Does the importance
of commitment change over the time during a business relationship with your
buyer/seller partner? Are there any critical events that affected your
perception of this relationship? On occasion, the informant was reminded
that we were searching for the strategic agility attributes of Tanzanian
firms. We used the definition of Brueller, Carmeli & Drori (2014, p. 14)
to capture strategic agility, by broadly describing the three capabilities,
namely, ‘knowledgeable sensemaking’, ‘nimble decision-making’, and
‘rapid resource deployment’ and then asking informants to provide ex­
amples of each, which we used as a form of pattern matching in our
subsequent analysis.
To reduce the risk of information overload, rather than focusing on
their entire range of business partners, we encouraged respondents to
recall the most relevant experiences they had with their most important
counterparts. Using this approach, we found that informants were better
able to provide the insights themselves regarding trust attributes and
strategic agility, and to offer details of the more in-depth nature of each
business exchange.
The protocol was first refined by conducting three interviews over
the phone during the pilot phase, first with an SME manager, then an
industry expert and finally with a government representative, all in
Tanzania. In addition, the protocol was cross-checked by other inter­
national business academicians in Australia before the final version of
the protocol was employed. Face-to-face interviews were the primary
sources of data, with most interviews including a guided walk around
the facilities, while subsequent telephone interviews were used with the
respondents to clarify some points and further explore emerging con­
cepts resulting from preliminary analysis. Each interview lasted on
average for approximately one hour.
To facilitate a quick response and clarity with the respondents, the
authors decided to translate the interview protocol into Swahili, the

9
F.C. Nyamrunda and S. Freeman Journal of World Business 56 (2021) 101175

native language of Tanzania. While English is the common business
language in Tanzania, the use of a Swahili version of the interview
questions was expected to ensure clear communication with respondents
(Saunders et al., 2003). A qualified, bilingual person translated the
interview questions directly into Swahili and one of the authors, fluent
in Swahili conducted the interviews. We initially arranged several
face-to-face meetings between the translator and one of the co-authors,
who is of Tanzanian origin, to discuss better terminologies and expres­
sions for each interview question.
The measurement and the interpretation of the study’s concepts were
based on prior research on the topics documented in the literature re­
view and data display section of the paper. The concepts and dimensions
were evaluated and revised in a series of workshops in Australia with
five senior academic researchers from the United States, United
Kingdom, Hong Kong and other experts specializing in areas of strategic
managements and international business. The conceptualization of
strategic agility and trust building were based on Brueller et al. (2014),
Bloemer, Pluymaekers, and Odekerken (2013), Doz (2020) and. Finally,
responsiveness was drawn from Dowell et al.’s (2015) conceptualiza­
tion. Each interview focused on the inception phase of a significant
buyer-seller trading relationship, drawing insights on each individual’s
responsiveness and their beliefs about the other party’s responsiveness.
4.4. Unit of analysis
The unit of analysis chosen for the present study is ‘the business
relationship’. A business relationship is able to capture most of the cen­
tral issues, arising in the SME business context, that emerge from their
initiation and early development (Prange & Pinho, 2017). Building and
maintaining lasting business relationships is a strategic focus for many
SMEs, as this leverages their unique core competencies in international
settings (Fiedler et al., 2017). The present study emphasizes
inter-personal trust (cognitive and affective) as it is regarded as the basis
for developing mutually compatible behavior, goals and interests be­
tween the involved business parties (Allen et al., 2018). While re­
searchers may argue that agility is how firms can sense and respond
effectively to business needs, the influence of a firm’s capability to
respond effectively to business needs is dependent upon the nature of
business relationships between business partners (Ahammad et al., 2020).
A more complete picture of the multi-faceted nature of how an agile
response is developed has been produced by comparing the insights
from managers of small firms.
Managers were asked to indicate if their initial concerns and
perception regarding their trading partner had changed after several
interactions. This is because they could accurately provide some insights
on whether they had kept to their original strategic motive or adjusted/
altered their decision-making (Doz, 2020; e Cunha et al., 2020).
relationships in Tanzania (see Table 1). Our interview list was drawn
from the Tanzanian national directory of importers and exporters, which
consists of a heterogeneous list located under the Tanzania Business
directory web-page, http://www.tanzanian-tanzania.com. Additional
firms were sourced from other similar business directories including htt
p://www.sido.go.tz, http://www.tccia.com and www.tanexa.com.
The sampling unit, which relates to the business relationship, con­
sists of the entire firm, though the founders/owners/senior managers are
targeted as the main informants. This is because of the nature of SMEs’
business, where the founders/owners and senior managers are respon­
sible for initiating and establishing a relationship with a foreign com­
pany (Costa et al., 2017).
We utilized primary data sources through in-depth, semi-structured
interviews and triangulated with interviews from industry experts (see
Table 2) to enhance the quality and rigor of the data.
4.6. Data analysis
The data were analyzed using an initial template containing themes
identified in the literature review. The recorded data files were tran­
scribed and then processed using the NVivo10 data analysis tool. We
now discuss how data were analyzed.
We used a thematic analysis method that provides a rich description
of the dataset by identifying implicit and explicit opinions within the
data, using coding. We adopted Miles and Huberman’s (1994) model
regarding the thematic analysis process involving three stages: data
reduction, data display and data conclusion-drawing (see Fig. 1).
4.6.1. Data reduction
Data reduction is the initial step in data analysis. The process in­
volves selecting, simplifying and transforming the raw data (Miles &
Huberman, 1994). For the data reduction stage, open coding was the
main procedure. Open coding may involve line-by-line analysis, or
phrase or sentence analysis by looking for ‘incidents’ within the data.
The researchers assigned conceptual labels to most lines/sentences in
the interview transcripts in order to capture the context/situations and
respondents’ words. These conceptual labels were constructed from the
respondents’ own words/statements (Creswell, 2007). Any irrelevant
information which was not related to the research questions was dis­
carded during this process. This initial process was done collaboratively
by the co-authors of this paper. Each of us first coded the same
Table 2
List of industry experts interviewed in this study.
Industry experts (9) Industry/sector Position Length of
interview
(approx.)

Industry Expert 1 Agriculture Director 60 min.

4.5. Selection of cases Industry Expert 2 IT technology Senior 60 min.
Manager
We deliberately chose multiple case studies (firms) from a varied Industry Expert 3 Furniture Retailing Assistant 60 min.
Director
range of key industries in Tanzania including agribusiness, construction,
Industry Expert 4 Petroleum and Chairman 60 min.
petroleum, information technology, retail, horticulture and mining. The Mining
reason for incorporating this range of industries was to address key gaps Industry Expert 5
Senior
within the strategic agility literature such as a lack of prior research on (Government Agriculture
Manager
60 min.
trust and strategic agility in the context (Cumming et al., 2020) of representative)
Industry Expert 6
transitional economies. Morton et al. (2018) argue that different in­ (Government
Petroleum and Senior
60 min.
dustries have completely different dynamics in their strategic agility. Mining executive
representative)
While there is much research on the information technology sectors and Industry Expert 7
Export and import Managing
MNEs (Chakravarty et al., 2013; Conboy, 2009; Liang et al., 2017; (Government
department Director
60 min.
representative)
Morton et al., 2018) there is limited research across a broader range of
Industry Expert 8
sectors with SMEs. Therefore, multiple cases in diverse industries (Government
Trade and Senior
60 min.
allowed us wider exploration of our topic with SMEs in transitional investment Manager
representative)
economies (Narooz & Child, 2017). Industry Expert 9
When selecting case firms for this study, the aim was to find SMEs (Government Foreign Affairs Manager 60 min.
representative)
that represented a wide range of experiences in cross-border buyer-seller

10
F.C. Nyamrunda and S. Freeman
Fig. 1. Thematic data analysis process.
interviews independently based on a generally agreed definition of each
category. We highlighted the transcripts separately by outlining the key
incidents described by interviewees in response to the interview ques­
tions. These incidents including issues occurring prior to and during the
negotiation/interactions process between the exchange parties, such as
potential concerns the respondents may have relative to the trustwor­
thiness of the individuals involved, the value of politically connected
firms or individuals and so on (see data coding examples in Table 3).
As stated earlier, recent research on micro foundations of organisa­
tional agility recognises the significance of human capital, particularly
individuals who contribute in generation of new ideas and who create
agile organization (e Cunha et al., 2020). In our analysis, we examined
those significant incidents on how the nature and content of actions and
interactions between individuals shape the development of such ex­
changes. For each interview, we then examined, discussed, revised and
agreed on the number of responses until we achieved compatibility
(Mäkelä et al., 2019). Tables 3 (data coding examples) and 4 (defini­
tions and interpretations) provide more detail on the coding scheme
followed in this study.
In the data reduction phase, the data were examined in order to
identify themes that were related to the role of cognitive and affective
trust in SME international business relationships in a transitional econ­
omy and how this might impact strategic agility. Every text extract that
required coding had to be carefully linked to correct categories in order
to highlight any significant patterns or themes. Similar to Miles and
Huberman (1994), general statements were generated which were
related to either cognitive or affective trust, and each statement was
revised in order to retain data consistency. After some back and forth,
the co-authors reviewed the research question to identify information
that related to similar key emerging concepts and themes on how rela­
tional dimensions embedded in micro-foundational activities impact
trust in small business cross-border buyer-seller relationships in transi­
tional economies. This allowed us to examine any differences, similar­
ities and interrelationships between the emerging themes of relational
dimensions (i.e., communication, social bonds, and knowledge) and
their impact on dynamic relational capability and on strategic agility.
Next, we sought to identify potential differences between managers
in terms of the aspects of relationship dynamics. For this, we used
number of instances in which our participants mentioned the relation­
ship that was most valuable to them, particularly their relatively newly
formed cross-border buyer-seller relationship in an international mar­
ket. We examined both the breadth and the depth of this evidence, based
on the three meta-capability paths (i.e., strategic sensitivity, resource
fluidity, collective commitment) (Doz, 2020; Mäkelä et al., 2019). In
terms of strategic sensitivity, we examined some of the key relational is­
sues (such as openness in communication) that influenced managers’
success during their initial partnership phase. For resource fluidity, we
examined how these SME managers were able to deploy and reallocate
their resources, particularly people, during the initial relationship phase
of the relationship. Collective commitment was determined based on the
ability of the senior managers or owners to understand and trust their
11
Journal of World Business 56 (2021) 101175
Table 3
Data coding examples.
Coding Examples
Interview excerpt Usually, it is an individual manager that attract us to
negotiating and, eventually to the relationship. You
know, at the end of the day you will be dealing with
those individuals, not firms. Therefore, the main issue
is to make up your mind whether you trust them or
not. If I trust someone, I feel so comfortable to
negotiate the deal hoping to reach a mutually
acceptable agreement. On other side, if I do not trust
someone, I will try to think more about my stake in
that partnership and keep questioning their motives
Recognized dynamic Strategically sensitive communication
relational capability
Interpretation Interviewee recognizes the role of role of individual
managers in developing relational trust (i.e. faith in
the norm of reciprocity)
Coded as One piece of evidence of “international experience
and knowledge of individual managers in trust
development”
Interview excerpt Having a good reputation plays an important part in
business. Many firms in Tanzania find that having
someone with a certain kind of reputation is
beneficial to the company. A director of the company
or a manager needs to have a good connection with
the government, and some sort of political influences
in order to smooth company operations. Potential
partners are more attracted to those people or firms
with political connections. Because to get certain
permits and approvals needed for partnership in a
business is a complicated chore in Tanzania
Recognized dynamic Knowledge and resource sharing
relational capability
Interpretation Interviewee recognize how individuals exert greater
influence over the strategic agility of their small firms
in terms of knowledge sharing
Coded as One piece of evidence of “Managers/owners’
reputation, responsiveness and adaptability, using
improvisation and creativity”
Interview excerpt I am almost 70 years old this year and I feel that my
skill set is no longer relevant in this changing business
environment. While this does not affect my
relationship with our existing and old clients, I have a
harder time attracting new business partners.
Nowadays, SME managers must keep their personal
credibility up to date which should be aligned with
global standards. Most potential business partners see
international exposure as a positive thing in a
partnership
Recognized dynamic Internal knowledge alignment
relational capability
Interpretation Interviewee recognizes the changing nature of
business in a global economy, and its impact on
internal and external competences
Coded as One piece of evidence of “the flexibility-agility”
association, with agility regarded as an externally
focused capability, while flexibility is an internally
focused competency
counterparts, as the trust between partners in inter-organizational re­
lationships was noted as a key factor affecting the quality of relation­
ships. Breadth was operationalized in terms of the initiation of a business
relationship, involving communication and interactions between
parties, while depth was operationalized as the nimbleness with which
individuals adjust their decisions to evolving situations, given the un­
certainty of the external conditions in a transitional economy. In our
preliminary qualitative analysis, we recognised that relying solely on the
most valuable relationships may induce bias, because individuals are
more likely to focus on their pleasant experiences than negative ones
when describing their trusting relationships and agility (Allen et al.,
2018). Due to the risk of information overload, we were not aiming to
explore their entire range of business partners but instead wanted in­
sights into the most important exchange types they engaged in
F.C. Nyamrunda and S. Freeman Journal of World Business 56 (2021) 101175

Table 4
Definitions and interpretations.
Concept Dimension Definition Interpretations

the perceptiveness, awareness and attention of an individual to

Strategically sensitive allows partners to practise trusting behaviors to address initial
develop the elements of communication into an ability or
communication expectations and gather impressions for future interactions.
competency.
managers must engage in continuous learning, re-evaluation,
is exploration of socially related issues through heightened and readjustment (exploration) with their cross-border partners
Social network learning
perception in interaction with other individuals that is an active relational competency in order to grow their
business (exploitation)
superior sensing, awareness and the processing of highly relevant
these ‘preferential relationships’ with providers of information
Knowledgeable information through close, deep and trusted engagement with
through their deep involvement in the ecosystem allow senior
sensemaking preferential relationships that provide such tacit knowledge
Dynamic managers to notice emergent trends and needs and address them
transfer
relational
knowledge transfer and sharing that take place among trading
capability Internal knowledge the effectiveness of strategic alignment between trading partners
partners and build strong social bonds which, in turn, enhance the
alignment relies on knowledge transfer and sharing between the parties
implementation of innovation decisions quickly
the process of transferring information and understanding
international HRM practices are regarded as especially critical as
Knowledge and between trading partners. It indicates the significant role of HRM
they influence motivations of individuals at the centre of
resource sharing processes in supporting knowledge sharing. Crucially, it
knowledge sharing activities in an international business context
contributes towards an ability to free-up resources
is the ability to operate with collective commitment and is likely assisting managers in creating a shared vision and increasing the
Collective commitment to build trust through strong social bonds needed for knowledge flexibility between involved trading partners, enabling them to
and social bonding development acting quickly in responding to changing confidently respond quickly to each other when dealing with
circumstances and new opportunities unexpected events

(Biesenthal et al., 2019). In this case, all interviewees were asked also to
describe any other reason for cooperating with particular buyer/seller
and some critical incidents (Liu & Meyer, 2020). For this reason, we
adopted (Denzin, 2020) concept of interpretive interactionism. For each
interview, we took some key details of that relationships and its devel­
opment along with small labels denoting its trust-development and
strategic agility. With these labels as a basis, we next looked for simi­
larities of interactions and experiences between exchange parties.
4.6.2. Data display
Data display is the second step of the Miles and Huberman (1994).
This step goes beyond the data reduction step to provide an organized,
compressed assembly of information that permits conclusion drawing.
The main goals of data display include viewing the data more clearly,
avoiding overload of the data, and making sense of the collected data by
grouping related concepts from different interviews. The researchers
examined any differences, similarities and interrelationships between
the emerging themes by arranging the data into conceptual categories
(Jogulu & Pansiri, 2011), descriptively to understand concepts, and
collating items that reflected the research question, by providing rele­
vant examples (Miles & Huberman, 1994). Following data reduction
through open coding, the core categories or themes emerged from the
data and they were then placed into the next stage of coding, selective
coding. Specifically, our initial coding process (Miles & Huberman,
1994) involved making relatively simple retrieval of statements
regarding information about the background of a firm, its senior man­
agement and the existence of international activities and relationships.
Next, we made an extensive first cycle and second coding round (Miles &
Huberman, 1994) to condense the relational data into smaller and more
manageable, but accurate, text pieces for further analysis, for each
relationship. These text pieces comprise phrases, terms, or description
that were offered by participants (Liu & Meyer, 2020) around cognitive
trust, affective trust and strategy agility. We looked for codes across
interviews that could be collapsed into higher-level nodes, namely first
order categories (Liu & Meyer, 2020). During the analysis, we always
tried to retain the language used by respondents. The higher-level codes
were then refined through triangulation of multiple information sources
(in-depth interviews with owners/senior managers, relevant industry
experts and government representatives, and relevant documents were
also incorporated) to produce the first-order categories. Examples of first
order categories included, the role of communication in cognitive and
affective trust development, social networks and knowledge in
development of trust, cooperation between the business partners and the
role of individual managers in trust development. In this regard, the
strategic choices that managers/owners made were considered as
important and were particularly dependent on management’s conscious
decision and intent to become flexible (i.e. strategic sensitivity) (Shin
et al., 2015). This provided an indication of how the three
meta-capability paths can affect the three refined capability dimensions
(communication, knowledge sharing and social bonds) between the
exchange parties. Borrowing from Liu and Meyer (2020), we display our
data structure (Fig. 2). Information accumulated in our data structure
includes two main concepts, Cognitive Trust and Affective Trust and their
effects on dynamic relational capability and strategic agility in the early
phase of the relationship lifecycle.
4.6.3. Data drawing and conclusions
Data drawing and conclusions was an ongoing process that took
place throughout the data collection and analysis phases. In accordance
with Liu and Meyer (2020), we follow their suggestions on generating
meaning and conclusions from the data including: the notation of
themes and relevance, especially by looking to ascertain any similarities
or differences; developing categories that belong together; identifying
interrelationships among variables and developing conceptual coher­
ence and consistency. While Miles and Huberman’s (1994) guidance was
adopted, and is somewhat sequential or linear, the analysis process in
the present study was more iterative and recursive (Saunders et al.,
2003), such that the researchers worked back and forth between the data
and extant literature in the analysis process to ensure rich and specific
information related to the research question. This analytical phase fol­
lowed also the logic of a constant comparative approach used by both
Liu and Meyer (2020) and Mäkelä et al. (2019), with the coding out­
comes of this stage resulting in more dense and saturated core categories
(Creswell, 2007). While we were comparing one exchange with another,
the theoretical elements of trust, relational capability and strategy
agility started to emerge, and we were able to identify the behaviour of
the participants and their main concerns. During this iterative process,
as the categories emerged, we compared new analysed exchange in­
stances with the categories several times, to gain more insights into
potential explanations (Mäkelä et al., 2019).
The development of cross-cultural cross-border buyer-seller re­
lationships over time relied upon ongoing interactions between the ex­
change parties who not only exposed how the three meta-capability
paths (i.e., strategic sensitivity, resource fluidity, Leadership unity)

12
F.C. Nyamrunda and S. Freeman Journal of World Business 56 (2021) 101175

Fig. 2. Data structure.

(Doz, 2020) are used but also how they undertake relational actions and We determine our business partners to collaborate with based on the
why they make the decisions they do. The interaction patterns were level of responsiveness of the individual managers or business
influenced mainly by the quality of relationship between individuals (i. owners. I believe that if the managers and business owners are not
e., the senior managers or owners) involved directly in the relationship responsive, this makes it very difficult to maintain the relationship.
development process from the beginning. It is in this situation that As for us, I understand that the lack of responsiveness means that
relational dynamic capabilities (Fourné et al., 2014) assume signifi­ they are not interested, and the negative feelings spread widely
cance. These senior managers/owners had to choose the most appro­ throughout our partnership (Firm 9, Senior Manager [export])
priate strategy after evaluating the existing position and behaviours of
The presence of responsiveness draws the involved parties closer,
their respective business partners.
thus they are subsequently more likely to be satisfied with the quality of
the relationship. Responsiveness is defined as the ability of a business
5. Findings
partner to respond quickly to the other party’s needs and to changes in
the environment, such as unexpected changes in demand or market
5.1. Strategic responsiveness in a business relationship
conditions/policies. The development of resource fluidity by SMEs re­
quires managers to have a combination of skills and behaviors (Brueller
In developing dynamic capabilities and organizational agility in
et al., 2014). Resource fluidity embodies the idea that SME managers
cross border activities, rapid responsiveness and adaptation from both
must adapt their resource to the demands of the market and to their
parties to external changes is essential to ensure the survival of any
strategic focus in order to drive the agility of their small firms. In our
business relationship in order to realign the strategic direction given
study, the export manager was concerned about the interest and success
knowledge and understanding of external information. However, the
of the other party and the overall relationship. This explains why these
issue regarding the relative importance of cognitive trust versus affec­
small businesses differ from other domestic firms in Tanzania, as their
tive trust in driving responsiveness has remained unclear. Against this
managers were more adept during the early evolution of the relationship
background, findings of the present study suggest that cognitive trust
in terms of reallocating their resources, in this case individual managers
influences initial responsive behaviors because SME business partners
to new opportunities in their business development. Having individual
are initially engaging in a deliberate process involving cognitive reap­
contributions and engaging in honest, open and rich interactions sup­
praisal of the situation. More specifically, the study suggests that in SME
port dynamic relational capability and influence strategic agility. We
international business relationships, partners displaying more respon­
show how trusted business partners have the flexibility to respond
siveness during the inception phases will achieve affective trust earlier
quickly (i.e. strategic sensitivity) to each other with confidence to deal
and become more attached in the relationship. e Cunha et al.’s (2020)
with any unexpected events. While firms in every market context can
recent study on micro-foundational processes emphasizes the individual
benefit from relationship responsiveness, it is most critical in a transi­
level as a key element in strategy agility. Relational competency among
tional economy context, because these economies are characterized by
managers with their trading partners leads to greater ability to impro­
frequent, often rapid changes in laws, rules, and regulations which may
vise in order to make creative decisions. In the present study, senior
threaten a business relationship. As illustrated by Industry Expert 3,
managers were key influencers, meaning they were involved in the
responsiveness tends to be more critical during the initial interactions
strategy development process. They were able to create a broader
between business partners because the relationship is still fragile and
impact with their responsiveness which together with trust were seen as
both parties may experience many unexpected changes during this
key dimensions underpinning dynamic relational capability during the
period.
exchange, as illustrated:

13
F.C. Nyamrunda and S. Freeman Journal of World Business 56 (2021) 101175

Government regulations are important in any sane nation to make sure more quickly. Given the nature of SMEs in a transitional economy, this
that businesses and operations are acceptable within certain standards study found that not all SME managers adapt quickly to the unpredict­
and these regulations should protect the domestic industry and its stake­ able institutional pressures embodied in regulations, laws and political
holders. However, in this country [Tanzania], we have too many gov­ focus. The present study suggests that this is because, as well as the
ernment rules and regulations which are pointless and difficult to comply existing external challenges such as political/country risk including
with. All these things are actually happening because of politicians. Our corruption, SMEs in a transitional economy are still facing managerial
politicians are destroying our economy because they make some promises limitations due to a lack of skills, experience and knowledge about their
and regulations without first having critical thoughts. This situation is not exposure to international business. Thus, the role of cognitive and af­
only having a negative impact on economic growth, but it also becomes fective trust is particularly important in this context because managers
challenging in terms of keeping and maintaining business relationships. are not able to rely on institutional support which would help to manage
So, you will find that responsive relational partners usually understand the volatile business environment.
and care for each other’s situation and are able to be quick to think and
react to changes (Industry Expert 3). 5.2. The role of communication in trust development between business
partners
The above insights indicate that responsiveness is a key element of
competitive strategy for firms in the Tanzanian context and where
Allen et al. (2018) and Zimmerman et al. (2010) state that commu­
frequent responses to uncertainty are required. In a transitional econ­
nication enables the involved parties to understand better the behavioral
omy, which is often a rapidly changing marketplace with many different
characteristics of each other, which thereby fosters trustworthiness.
environmental factors impacting simultaneously, responsiveness can
However, they do not reveal how communication helps to build trust
quickly influence the quality of relationships between business trading
and relationship development in the initial phases of the relationship or
partners. Limited resources, competencies and expertise in international
in newly formed relationships when dealing in a transitional economy.
business and inability to build competitive advantage hinders the
Given the lack of shared understanding between SME managers from a
involvement of SMEs (Prange & Pinho, 2017; Xing et al., 2020).
transitional economy and their foreign counterparts, the findings sug­
In a transitional economy, we found that strong trust-based business
gest that the role of communication in trust and relationship develop­
relationships with cross-border trading partners increase SMEs’ expo­
ment in SME business relationships is a multidimensional construct that
sure to and confidence in managing and dealing with external factors.
depends on openness, efficiency and frequency of communication be­
This process is supported by the micro-foundational processes rooted in
tween the involved parties. The findings below indicate the links be­
individual actions and interactions (Boojihawon et al., 2020; Clauss
tween the relational dimensions and metal capability paths, which are
et al., 2019). Resource fluidity enhances speed of the responsive actions
critical to support micro-foundational processes and to understand the
that allow managers to capture new opportunities. It requires these firms
nature of strategic agility in cross-border buyer-seller relationships. As
to be able to implement rapid re-deployment of key people and other
an example of linkages; strategic sensitivity requires an open communi­
resources and be consistent in their efforts and decisions as they
cation process for strategy development. Knowledge sharing is a critical
encounter the imperative of major strategic redirections.
competency of individual managers to ensure resource fluidity, while
In an uncertain business environment, such as Tanzania, SMEs face
leadership unity between managers within their trading partnerships
significant pressure with regulatory systems and requirements which
underpins the development of social bonds and successful partnerships.
invariably impose more burden on their growth and strategic actions
The quality of strategically sensitive communication between
when dealing with their cross-border trading partner. We found that the
trading partners depends on the perceptiveness, awareness and atten­
managers of SMEs in a transitional economy tend to be poorly equipped
tion of an individual to develop these elements of communication into
to deal with the challenges arising from regulations and they lack gov­
an ability or competency. Effective communication is essential in re­
ernment support in their cross-border business relationships. In terms of
lationships as managers can signal their commitment and execute
responsiveness, the process of initiating and developing their cross-
effective strategic priorities and improve the ability to articulate their
border relationships is critically dependent on strategic sensitivity and
expectations, visions and goals. The top management or senior man­
resource fluidity. For example, in terms of strategic sensitivity, man­
agement team are directly responsible for the strategic direction and
agers must make fast strategic decisions to reconfigure their resources in
agility of the firm including communicating and negotiating with po­
order to take advantage of new opportunities during the inception
tential business partners in the initial phase of the relationship that in­
phases of their business relationships. This allows managers to antici­
volves rapid strategic decision cycles. The insights emerging from the
pate how the relationship is likely to affect their limited pool of re­
interviews reveal how individuals evaluate the trustworthiness of the
sources and competencies and build more cognitive and affective trust
other in the early phases of business development as key dimensions of
among trading partners. Resource fluidity is of importance in enhancing
relational capability.
the adaptability feature of strategic agility including how managers
allocate resources and adapt relationship-building activities with their
5.2.1. Openness in communication between business partners
trading partners.
Our findings indicate that openness in communication between the
In Tanzania, SMEs are operating in a dynamic and unpredictable
parties during their early interactions has a strong influence on trust.
marketplace, which makes many of these firms more cautious and
Openness in business relationships is an individual’s willingness to self-
determined to respond quickly to changes in government policy. The
disclose information about their firms and themselves as appropriate
Tanzanian context is unlike those that apply in existing research studies
(Allen et al., 2018). Our findings suggest that strategic sensitivity requires
on agility at the organizational level, where organizations can take a
an open communication process for strategy development between senior
holistic approach to their resources and capabilities towards the change
managers because an open communication demonstrated an in­
in the marketplace. This indicates that the managers of these SMEs rely
dividual’s positive intentions, which increases trust and reduces
on relational competencies around strategic sensitivity. For this ability,
complexity in the strategic decision-making process, particularly at
Doz (2020) argues that anticipation is one of the elements that enable
early stages (i.e. knowledge and resource sharing). Taking this into ac­
managers to prepare for external opportunities and risks. Small firms do
count, we identify the importance of openness in communication be­
not show the same externally focused capability (Shin et al., 2015) as
tween the parties and that this can support viability of the business
larger firms. The presence of relational competencies and their inte­
relationship by conditioning the way involved business parties interact
gration with the three meta-capability paths promote operational and
and communicate the strategic vision of the firm and partnership. We
strategic agility and allow managers to make better strategic decisions
observe that sharing important information is viewed as the key element

14
F.C. Nyamrunda and S. Freeman
of openness in communication between business partners in a transi­
tional economy, especially during the initial interactions. Individuals
sharing inner feelings and disclosing personal information, indicate
sincerity and honesty (i.e., strategic sensitivity). Rapid changes in the
business environment in terms of demand, regulations, technology and
market conditions have made it more important than ever for managers
to be able to respond and adapt quickly by sharing reliable and relevant
information with their cross-border counterparts. Openness in commu­
nication is imperative for building trust between the parties during the
early phases of business relationship development, enabling the man­
agers of the SMEs to implement agile ways of doing business in a more
volatile and uncertain environment, as illustrated (Confirmed by F1, F3,
F4, F13, F15 and IE 1).
Initially, we had a lot of communications; they were asking many ques­
tions about us. They were keen to know about our existing and previous
relationships. They were referring to many issues, including a few quite
sensitive issues. We were also able to ask them different questions, and we
were able to express our ideas without feeling threatened…we had very
good communications and we were more than satisfied with their open­
ness and transparency. Their openness was remarkable; …through those
initial communications, and looking at the way our partners introduced
and presented themselves, we started trusting them and understanding
them more (F2, MD).
In the context of a transitional economy, initial communications
relied more on clarity of communication between parties. Clarity of
communication underpins the development of strategic sensitivity, which
is essential for making the exchange partners more aware and alert
about the nature of the relationship, as well as for accurate information
transfer and deep knowledge sharing. Clarity of communication in­
fluences the firm’s sensitivity toward the exchange partner’s expecta­
tions and needs. Strategic sensitivity is highlighted by rich, honest, intense
and transparent communication which increases mutual understanding
between parties and enhances managers’ alertness to changes. Our
insight indicates the importance of clarity between the involved parties;
the importance of both parties communicating in an equally compre­
hensive manner to understand the background of each other and
considering each other’s interests and intentions.
This enables trading partners to sense and detect threats and identify
opportunities (i.e., strategic sensitivity). Despite the importance of clarity
in communication, this is often deficient in SME business relationships
in a transitional economy. Many factors can contribute to a lack of
clarity in communication between business partners including different
abilities, skills and ways to communicate or to understand each other.
Confirming Doz and Kosonen (2007), we found that clarity in commu­
nication between business partners during initial interactions provides a
critical element needed for strategic agility by enhancing speed and
stability. We add that this allows the decision makers to quickly prior­
itize their strategic choices.
Founders/owners and senior managers comprise the few key deci­
sion makers in SMEs. Collaborative communication capability enables
these key decision makers to be aware of the external issues that require
close monitoring and to respond to each issue in an efficient and flexible
manner. The traditional approach to organizational agility assumes that
managers can predict the future of their business relationship and a
firm’s wider context using a set of powerful analytic tools and thereby
make fast strategic decisions (Kale et al., 2019). However, this is not the
case for small firms in transitional economies, where their very exis­
tence/survival always remains uncertain. Thus, good internal and
external communications that build an environment of mutual trust
have a positive impact on successful collaboration. As stated previously,
communication is one of the key pillars of strategic sensitivity, which
provides managers with a broad view of insights by improving the
quality of relationships, and their rationality in strategic
decision-making processes. It also promotes a deep level of awareness in
15
Journal of World Business 56 (2021) 101175
terms of their relational competencies and the relationship and its
viability. The effectiveness of strategic alignment between trading
partners relies on knowledge alignment, transfer and sharing between
the parties. It results in a shared understanding of each other and of
business, therefore, it is a critical feature of strategic agility. Differences
in communication styles can also affect clarity perceptions between
parties (Leonidou et al., 2017). In a transitional economy, business
partners must rely on each other’s openness in communication in the
early phases of the relationship in order to develop trust.
Strategic sensitivity facilitates a more open process for communication
and understanding - a sense of shared strategic alertness and quality
interactions between senior managers, but this depends on the mutual
understanding of partners. SME managers indicate that dynamic rela­
tional capability requires effective and open communication as the way to
obtain key information about the exchange partners and it supports
knowledgeable sensemaking. Both parties were keen to know about
prior and existing relationships of their trading partner in order to make
informed and sensible decisions and choices. Through open communi­
cation, managers make relational assessment of the other’s party’s
behavior and benevolence (Debellis et al., 2020). We add that these early
evaluations support strategic sensitivity of the small firms by reducing
perceived risks and uncertainty and allowing managers to adjust their
expectations, resulting in increasing agility in SMEs. Communication
between the parties is a critical part of the development of trust in the
pre-relationship phase (Narooz & Child, 2017). We confirm that if there
is lack of trust between the parties in the first communications and in­
teractions, the next phase will be compromised. We add that evaluation
of the other party will begin with perceptions of the environment and
the firm. Previous studies (Allen et al., 2018; Dowell et al., 2015; Elle­
gaard & Medlin, 2018; Leonidou et al., 2017) provide a broad under­
standing of how communication can influence the development of trust;
however, they do not examine the specific attributes of communication,
such as openness in relation to cognitive/affective trust. The interna­
tional business literature has placed more focus on understanding the
relationship between trust and communication for larger firms in
established and in emerging economies; more readily available to
observe in these contexts than for SMEs in a transitional economy. We
address these research gaps.
SMEs often lack managerial expertise, skills and experience (Fischer
& Pascucci, 2017), and this may negatively affect the communication
process in their business relationships. We show why strategic sensitivity
requires a clear and transparent flow of information between the ex­
change parties enabling both sides to understand the risks and oppor­
tunities involved in the business environment and thus the importance
of strategic agility. We add that open and transparent communication
allows the exchange parties to clarify options and explore a possible
response to those pressures quickly during the initial phase of
relationship.
Communication can foster strategic sensitivity (Doz, 2020). We add
by showing this is achieved through greater perceptiveness, awareness
and attention to communication. As such, it is not just about having
knowledge, but being able to make strategic judgements with that
knowledge, and this will positively influence dynamic relational capa­
bility that supports strategic agility. The findings show that the presence
of clarity, with greater levels of openness between partners, provides a
more accurate understanding of each other’s interests, intentions and
competencies, which leads to trust development. The presence of un­
certainty in this phase indicates that the parties think differently, and
this may prompt behaviors directed towards self-preservation that
contributes to organizational resistance in the decision-making process
(Brueller et al., 2014). We show that higher degrees of openness in
communication can facilitate greater responsiveness, and this leads to
more rapid trust development. This indicates that responsiveness be­
tween parties is dependent on their degree of openness in communica­
tion with an important bearing on strategic agility of the firm.
F.C. Nyamrunda and S. Freeman
5.2.2. Efficiency of communications between the parties
Understanding the correct forms or types of communication is
especially important for SMEs because the way business partners
communicate can help to develop or break a business relationship (Allen
et al., 2018; Morgan & Hunt, 1994). To create and maintain strategic
agility, it is important for firms to develop the key human competencies
such as communication at the individual level that allow managers to
become more flexible in their decision-making. For many SMEs, agility
is considered an essential external capability, which allows managers of
these newly formed firms in the international business arena to learn
quickly and build relational competencies and a competitive edge. This
suggests that firms must communicate openly and frequently but if they
are not mutually receptive to these communications, then none of the
other aspects will matter. Resource sensitivity equips SME managers with
abilities to facilitate access to relevant information and to raise aware­
ness of business development issues at a very early stage. One of the
critical factors in their business relationships is mutual trust. A sense of
trust can be achieved through face-to-face communication, which then
allows knowledge and resource sharing and understanding of a partner’s
relationship needs. Face-to-face communications and interactions create
a different effect in the early phases of relationship development
compared to using other forms of communication such as email, as
illustrated (Confirmed by F2, F4, F6, IE1 and IE9).
During the initial stages of our relation, we were mainly communicating
via phones and emails. But I think our face-to-face interactions later on
fostered the development of our relationship. We were able to understand
who we were communicating with and even to get to know their personal
experiences. You know, via phones and emails you are not explicit enough
to understand the behavior or feelings of your counterpart or even to
communicate effectively and openly about the business deals. We nor­
mally like to have face-to-face meetings and communications on a regular
basis and this helps us to strengthen our relation and trust. Overall, I
would say that the right form of communication is really important, and
face-to-face communications in this respect allow both parties to build
trust quicker” (F3, MD).
Kirchmajer and Patterson (2004) suggest that communication is a
key driver of trust-building which facilitates the closeness between
business partners, but they do not examine the effectiveness of the
communication in the early phases of relationship development. Our
findings add insight by demonstrating that in a transitional economy,
face-to-face communications are especially important at the beginning
of the relationship development in order to nurture and develop close­
ness between the involved parties. This underlines the need for strategic
sensitivity competencies of SME managers. We demonstrate that it is
important to meet the person in their own context because context
clearly defines what is needed to support mutual understanding.
Face-to-face communication helps to keep the relationship developing
by allowing the involved parties to show their willingness to share their
information and knowledge, as illustrated (Confirmed by F3, F9, F11,
F15, IE 2 and IE 4).
Watering garden keeps the garden alive, but having rain really makes the
garden grow. I believe face-to-face communication is like rain. It actually
makes relationship thrive with its various forms of communication. Email
and phone communications focus only on the verbal information and
formal communication, which may keep relationships alive, but they do
not develop the relationships. In my experience, face-to-face communi­
cation remains more important and encourages informal networking and
knowledge sharing between individuals (IE 1).
We add to López-Navarro, Callarisa-Fiol, and Moliner-Tena’s (2013)
study of SMEs by showing how face-to-face interactions provide an
opportunity for both parties to understand each other better as there is
less likelihood for misunderstanding or misinterpretation. We add to
Boojihawon et al. (2020) by showing that strategic sensitivity signifies
16
Journal of World Business 56 (2021) 101175
the perception that a partner understands the value of the relationship
through a sense of shared responsibility to which all trading partners are
committed. We extend Brueller et al. (2014) by showing why effective
communication during the early stages of relationship development
produces more favorable attitudes and behaviors and creates cohesive
relationships, which minimizes organizational resistance in
decision-making, leading to greater satisfaction to support agility be­
tween the partners, as illustrated.
We were a very small company back then, with no technological knowl­
edge and awareness and lack of access to internet, therefore the only and
the most efficient mean of communication to start a business relation with
overseas parties was through face-to-face communications. Even though it
could be an expensive mean, but only through direct interactions we were
able to have long and quality discussions about the business and other
things apart from business. We got to know more about each other’s in­
terests and perceptions. This helped to create cohesive relationships from
those early phases.
We still have face-to-face interactions, but not as much as before…Later
on, when the relationship is stable enough, both parties just need instant
ways to communicate in order to solve a problem as soon as possible or to
make a quick decision about a transaction or anything (F4, MD).
The above insights support Liu and Vrontis’s (2017) study, adding
that efficient communication allows parties to feel comfortable with the
initial interactions and with their relationship development. Awareness,
attentiveness and openness in communication support strategic sensi­
tivity ability by allowing the exchange parties to be more aware of and
sensitive to their partners’ feelings, behavioral patterns and the sur­
rounding, and, thus, enhances cognitive and affective trust. Trust is
viewed as an essential component to enable agility from the beginning of
the relationship as both parties feel mutually accountable to each other,
and they are committed to shared purpose and mutual goals (i.e., col­
lective commitment). The level of comfort experienced by exchange
partners is viewed as the affective element of communication, defined as
a condition of the positive affect of ease and pleasantness when inter­
acting with each other. We add to Brueller et al. (2014) by showing how
comfort in communication supports being quick to act (nimble
decision-making) and being able to implement fast to capitalize on op­
portunities (rapid resource deployment).
5.2.3. The frequency of communication between the parties
Narooz and Child (2017) note that high levels of communication are
considered an important way to develop a business relationship and
trust. The frequency of communication and the quality of information
between involved parties in terms of openness and willingness to share
some sensitive information helps to build trust and develop the rela­
tionship for complex problem solving. One MD attributed his firm’s
partnership success and strong ties to the early phases of relationship
development namely, the frequency of communication and quality of
exchanged information to provide a solid grasp of each other’s position
(i.e., nimble decision-making). (Confirmed by F3, F5, F8, F12, F15 and
IE 5).
We use different methods to communication such as Skype, telephone,
mobile phones and emails. I try to call my partners at least twice a month
just to follow up on different things. We are very open and honest with
each other; if there is any problem regarding our business, we would
communicate it as soon as possible. I find that communicating frequently
allows both parties to be on the same page and it increases the amount of
the quality exchange information. Sometime we call each other and talk
about our families and our hobbies rather than business. So, I think having
a good relationship helps us to be very open with each other and to have a
good discussion. You would not believe it, but through our non-business
catch-ups, we usually come out with good ideas and thoughts for our
business relationships (F1, MD).
F.C. Nyamrunda and S. Freeman
Cohen and Levinthal (1989) and Kale et al. (2019) suggest that
absorptive capacity is a dynamic ability associated with information and
knowledge that enables firms to better understand the internal and
external business environments. We found that the frequency of
communication and quality of exchanged information can generate
strategic capabilities that support a firm’s absorptive capacity. This al­
lows parties to better assess the benevolence, intentions and likely future
actions early in the relationship to support dynamic relational capability
that drives strategic agility in their SMEs. Thus, it is important for firms
to develop the capability of managing the paradox of exploring (new
opportunities) and exploiting (existing external knowledge). This helps
to support a mutual knowledge base/vision between managers and to
learn more about each firm’s capabilities. Timely and frequent
communication allows both parties to overcome misunderstandings and
conflicts and minimize organizational resistance, which in turn helps to
build trust, necessary for developing a strong relationship to support
flexibility between partners, as illustrated (Confirmed by F7, F9, F11,
F13, F15 and IE1, IE6).
Having feeling that there is someone you can talk to at any time builds
trust in any relationship. One way to avoid misunderstandings and con­
flicts in business relationships is to practice timely and frequent commu­
nication. I believe that regularly keeping folks in the loop reduces the level
of stress and conflict, and it increases productivity between partners in a
relationship. I would encourage any firms to build trust through good
communication as it pays good returns in long run (F5, SM).
5.3. The role of social networks and knowledge in the development of trust
We find that in a transitional economy, social networks are a means
of facilitating new business relationships and affecting business part­
ners’ strategic choices, and thus agility. Aligned with the accelerated
change in the international business environment, SMEs have to change
their internationalization approach to remain competitive. Social net­
works together with social capital, such as cooperative relationships,
allow small firms to become agile by gaining new knowledge and re­
sources, to share risks and to move more quickly into new markets.
However, as discussed previously, the most difficult to manage is joint
decisions required for collective commitment in these cooperative re­
lationships. While social networks are vital in the initial development of
business relationships, they are not always readily available to SMEs in
an international business context. One Owner/MD (F6) recalls that the
personal contacts they had established with their existing business
partners in several Asian countries did not provide the support needed
for their business relationship development in other Asian countries.
5.3.1. The role of social networks for experienced managers
Firms with rich experience in international business relationships
were more confident and capable of starting a new business relationship,
without depending on their social networks. We contribute to the
literature on dynamic capabilities and strategic agility literature, by
documenting internal relational competencies that rely on social
network learning and coordinated effort by exchanges parties, which
shapes patterns of behavior and the level of interaction and communi­
cation among members as the relationship evolves. The motivation to
utilize and depend on social networks in order to obtain information and
knowledge regarding their prospective partners was low. Given limited
resources of SMEs, knowledge sharing is a critical factor in ensuring
resource fluidity particularly in terms of the ability of these firms to re-
deploy their resources, especially human resources, in responding to
the prospective partners’ needs and their own needs in the partnership.
From the beginning, one Owner/MD had a clear understanding of in­
ternational business relationships based on their own knowledge and
experience.
17
Journal of World Business 56 (2021) 101175
Initially, we used to rely much on our personal networks when we were
finding a business partner. But nowadays, we are more confident and we
do not enter or start a business relationship without a clear set of our own
strategies, intentions and so on. We make decisions to choose someone for
a partnership based on our feelings and experience. You have to make
choices yourself which will result in positive outcomes for your company.
In order to get the best results out of any business relationship, you need to
have your own benchmark to your needs (F6, Owner and MD).
Individuals become more independent from their social networks
over time and with experience. Although, initially there is limited
knowledge about how to develop and maintain business relationships,
this changes once some international exposure is achieved (Confirmed
by F1, F2, F5, F9, F1, IE2 and IE8). Liu and Meyer (2020) indicate that
organizations engaging in any business exchange depends on key in­
dividuals and their behaviors with others at critical incidents in the
organization. Building on their study, we found that the managerial
competencies that relate to relational capability, avoids conflicts and
misunderstandings with trading partners through strong social bonds.
Social bonds seem to be a desired strategic goal for these small firms as
they have to manage the entire cross-border exchange relationship with
only a few resources and expertise.
5.3.2. The role of social networks for inexperienced managers
Social networks are most relevant and critical to those SMEs with less
experience in starting and developing business relationships in cross-
cultural settings. The role of social networks for these inexperienced
SMEs is defined in terms of the resources needed in the early stages of
their relationship development. Ellis (2011) categorizes resources into
financial, human, foreign business networks, foreign market informa­
tion and knowledge. In a transitional economy, social networks fulfil
important economic and social roles that, in more established contexts,
are filled by market mechanisms or governments and institutions. SMEs
begin their international experience cautiously by using a similar
approach, relying on their social network to build cognitive trust. One
Owner/MD (F7) had limited prior experience in international business
relationships and so relied on the information learned from his experi­
enced business partner with whom they had a long business relation­
ship. He pointed out that he did not have any other personal contacts or
know of anyone else who could help him with relevant market infor­
mation and business knowledge at the start-up phase. Ellis (2011) notes
that social networks influence the flow of information between network
members, with members being able to access information not available
to non-members. We add additional insight below by highlighting the
role of resource fluidity for SMEs, particularly how social bonds support
the ability of managers to combine and use acquired knowledge and
know-how to free-up their few resources and re-deploy them quickly to
new opportunities.
When we were looking to expand our business into new markets, our first
thought was to ask our existing business partners, because we were very
close to each other, we could share anything. They were experienced in
international markets and they had very strong social and business net­
works everywhere. We were able to get information we needed on po­
tential business partners and the market environment (F7, GM).
Social networks influence the behavior and expectations of their
members towards other potential business partners. The key question of
how social networks impact the development of trust in the early phases
of business relationships, and how social networks influence individual
parties’ behaviors and expectations in such relationships remains un­
explored. SMEs in Tanzania and in other transitional African nations are
increasingly going global, but facing ongoing challenges to attract
foreign trading partners and to compete in the global market, with many
challenges related to their inexperience and lack of resources. Prior
studies (e.g., Fourné et al., 2014; Xing et al., 2020) suggest that experi­
enced small businesses can utilize their HRM capabilities to develop
F.C. Nyamrunda and S. Freeman
relational capabilities to create the flexibility needed to deal with un­
certainties in their internationalization process. However, we need
better understanding of how inexperienced SMEs can acquire such critical
capabilities to achieve agility in the earliest days of their international
experience. Adapting with speed and flexibility requires owners/senior
managers to master the ability to spot the opportunity and make quick
strategic decisions, regardless of their initial level of investment and
capacity. For SMEs, when seeking new strategic directions and inter­
national opportunities, strategic sensitivity between managers with their
trading partnerships seems to be a critical force in developing
buyer-seller relationships. Also, the influence of leadership in terms of
defining and implementing strategic choices and managing operations is
valuable because one of the benefits of strong leadership unity between
management teams is that senior managers can create a unified culture,
collective commitment and social bonds.
The findings suggest that the social networks between the parties do
impact decisions on whether to trust their potential partners. This
highlights social bonds as a critical social network factor, which is likely
to have considerable impact on the development of trust in business
relationships. Not previously addressed (Brueller et al., 2014; Fischer &
Pascucci, 2017; Wilson, 1995) in the context of SMEs in a transitional
economy, we build on these studies by showing why social bonds refer to
the degree of relational connections and liking shared between the
partners. SMEs intentionally nurture social bonds through interpersonal
networks in order to gather more reliable information regarding a
partner’s trustworthiness and to establish a business relationship, more
quickly than would otherwise be possible. These ‘preferential relation­
ships’ with providers of information through their deep involvement in
the ecosystem allow the agile firm to notice emergent trends and needs
and address them (i.e. knowledgeable sensemaking) as illustrated
(Confirmed by F8, F10, F12, F14, IE 3 and IE 7).
We met our Chinese partners through our Malaysian partners. It was not
too difficult process to initiate our relationship with Chinese, because we
had a good reputation with our Malaysian partners. I can say our
connection and a strong bond with the Malaysian company helped us to
initiate a business link with our Chinese counterparts (F1, MD).
In the context of business relationships in China, Ellis (2011) high­
lights that the social bonds between business partners and their close­
ness influence how the partners deal with the relationship. The
development of the positive social bonds and interaction between
trading partners is necessary for supporting a cohesive partnership and
individual trusting behavior (strategic sensitivity). We extend prior
studies (Dowell et al., 2015; Ellis, 2011) by demonstrating that a similar
situation exists in SME business relationships in transitional economies.
However, we find that absence of social bonds is more likely connected
to a lack of trust between the parties. The experience of one MD with
another business partner demonstrates that their social bonds were
uneasy, indicating an unstable relationship in which they were unable to
cooperate or support each other and thus unable to develop agility
through preferential relationships (Confirmed by F8, F10, F14, IE 3 and
IE 4).
We could ask our Singaporean partners to introduce us to the Chinese
market, because they had good networks in there (China). But we did not
have a good relation with them and we actually did not trust their prac­
tices so much. Honestly, our social relations with them were not stable
over time, so we did not expect any support from them. We would just do
business and close the deals. We wouldn’t talk much apart from our
business activities. I would say that we would not be able to ask any help
or assistance from them (F1, MD).
According to Fischer and Pascucci (2017), firms establish social
bonds in business relationships in order to create a relationship atmo­
sphere, a more cooperative one, where both parties make substantial
contributions for the benefit of each other. Doz (2020) suggests that
18
Journal of World Business 56 (2021) 101175
leadership unity is needed to make collective decisions and to work
together toward a common goal, rather than interacting through con­
stant tensions and rivalries that can negatively impact the relationship.
However, we show that the mutual interdependence between the part­
ners arising from sharing of information was not evident; the relation­
ship became more transactional due to a lack of trust. This influenced
how the MD perceived and reacted to his business partner. This transi­
tional economy perspective demonstrates that a lack of social bonds
between business partners not only distorts the relationship atmosphere
but may also condition the way both parties’ involvement unfolds and
how they behave. This creates organizational resistance between part­
ners that reduces their nimble decision-making and agility. In a transi­
tional market, social bonding is directly associated with value creation
in a business relationship and this directly increases the likelihood of
further interactions, which in turn decreases uncertainty and perceived
risk, compared to other established contexts where social bonds are
emphasized later in the fulfilment of the relationship functions.
Achieving strategic agility is thus context sensitive. We highlight that
a transitional economy is different from established economies in terms
of the role of trust in business relationships. Business practices are more
personally and socially orientated in the sense that business relation­
ships originate from the individual and are more inter-personal in na­
ture. Social bonds appear to have a deterministic role for trust building
in the transitional context compared to other contexts. In the transitional
context, social interaction between the involved parties is more clearly
and specifically expressed through emotional responses (strategic sensi­
tivity). This elevates the individual level of micro-foundational HRM ca­
pabilities in SMEs as critical elements in directly influencing their
capacity to make knowledgeable, nimble, rapid strategic moves with
high precision and responsiveness to create and support strategic agility
through a dynamic relational capability.
6. Conceptual model development
6.1. Strategic responsiveness in a business relationship
What is known from the international business literature is that SMEs
are hesitant to initiate business relationships due to a lack of resources,
capabilities and expertise in international business (Prange & Pinho,
2017). Drawing on and extending the strategic agility literature (Clauss
et al., 2019; Cumming et al., 2020; Fourné et al., 2014) and integrating
our findings, we demonstrate that business success in heterogenous,
environmentally turbulent and volatile transitional economies, such as
Tanzania, can be linked to the small firm’s ability to understand external
contextual factors, globally and locally, and to leverage insights through
strong trust-based business relationships with cross-border trading
partners. Our point of difference is to show how these trust-based re­
lationships build social bonds that promote trust between managers
giving them the confidence to commit to swift resource re-deployments.
Their leadership unity supports collective commitment to realize
mutually beneficial synergies with the flexibility of quickly offering
products and services that cater to and are aligned with local market
demands. We demonstrate the importance of the micro-foundational
processes embedded in HRM capabilities that are dynamic, but need
to be context-specific, so that they can be effective in building
competitive advantages among trading partners in small firms. Enabling
strategic agility is a constant challenge for many SMEs, which hampers
their responsiveness and growth in terms of how these firms mobilize
and deploy physical resources rapidly and efficiently. Building on prior
literature (Brueller et al., 2014), we show how resource fluidity, the
ability to implement rapid re-deployment of key people and other re­
sources, enables a speed of response that ensures small firms will be able
to capture new opportunities and seize the value that enables future
financial success. We show why it is fundamentally dependent upon
micro-foundational processes in a transitional economy.
Dowell et al. (2015) and Fiedler et al. (2017) suggest that cognitive
F.C. Nyamrunda and S. Freeman
and affective trust development enables senior managers to be more
responsive and flexible during initial interactions. They do not show
how the strategic sensitivity of business partners influences trust
development. The present study provides a nuanced understanding by
distinguishing the relative importance of cognitive and affective trust in
driving responsiveness in resource fluidity of trading partners in a
transitional economy. We demonstrate new insights into how cognitive
trust influences initial responsive behavior, because business partners
become more willing to invest in the relationship. Strategic sensitivity
supports cognitive trust by reducing the initial levels of suspicion and
uncertainty between the involved parties. The present study also con­
tributes by demonstrating that in SME international business relation­
ships, partners that display more strategic sensitivity and resource
fluidity, represent heightened responsiveness to their cross-border
trading partner. We emphasize why this is especially valuable among
trading partners in the freeing up and re-deployment of resources,
quickly, to take advantage of new opportunities during the inception
phases of their business relationships. The combination of these rela­
tional competencies and forces, will build more cognitive and affective
trust among trading partners. This will help to achieve affective trust
earlier and enable trading partners to become more attached (bonded)
in a relationship through leadership unity displayed as collective
commitment to acting quickly in responding to changing circumstances
and new opportunities. We show why both cognitive and affective trust
are important contextual dimensions because they help to build opera­
tional and strategic agility in both trading partners. Our contribution is
to demonstrate why collective commitment of senior managers increases
the flexibility between involved parties in SMEs, enabling them to
confidently respond quickly to each other when dealing with unex­
pected events in hypercompetitive transitional economies.
P1: In developing capabilities that support operational and strategic
agility, a firm’s strategic responsiveness to external changes needs to align
with its relational competencies and the specifics of the three meta-
capability paths. SMEs in hypercompetitive transitional economies rely
directly on their micro-foundational relational competencies to develop
‘dynamic relational capability’ that supports trust and thus strategic
agility.
6.2. The role of communication in trust development between business
partners
We demonstrate that the quality of communication during the early
interaction phase of relationship development with a trading partner in
a transitional economy is determined by the presence of strategic
sensitivity in the following elements of communication between the
involved parties: openness, efficiency, and frequency. Using psycho­
logical trust theory (Deutsch, 1958) and drawing on our findings, the
quality of strategically sensitive communication in a relationship is the
perceptiveness, awareness and attention of an individual to develop
these elements of communication into an ability or competency.
Achieving this relational competency will have a positive influence on
trust-building between the involved parties. The perception of individ­
ual ability and competency in strategic sensitivity in communication
style is related to cognitive trust that aims to reduce perceived risks and
uncertainty during the initial interactions between exchange partners
(Allen et al., 2018). We capture the relationship between trust (cognitive
and affective trust) and strategically sensitive communication in SME
business relationships and how they individually and jointly build
leadership unity. Thus, collective commitment to one’s cross-border
trading partners through greater perceptiveness, awareness and atten­
tion to communication will positively influence ‘dynamic relational
capability’ that supports strategic agility in the context of a transitional
economy, a context not previously addressed. We demonstrate that
emphasis on such behavioral elements will support greater openness in
19
Journal of World Business 56 (2021) 101175
communication between parties and influence affective trust by creating
mutually satisfying interactions and a shared understanding. Building
on the communication literature (Allen et al., 2018; Dowell et al., 2015)
and in strategic agility research (Clauss et al., 2019; Cumming et al.,
2020; Doz, 2020), we show how strategically sensitive communication
allows partners to practise trusting behaviors to address initial expec­
tations and gather impressions for future interactions.
‘Dynamic relational capability’ supports knowledgeable sense­
making which enables superior sensing and the processing of highly
relevant information through close, deep and trusted engagement with
preferential relationships that provide such tacit knowledge transfer. We
build on prior studies (Brueller et al., 2014) to demonstrate how
perceptiveness and attention build this superior dynamic relational
capability that allows the small agile firm to be one of the first to notice
emerging trends and address them quickly. Drawing from cognitive
psychology, strategic agility, HRM, international business and entre­
preneurship literatures and using a micro-foundational approach to our
findings, we develop and present our theoretically grounded conceptual
model and propositions (see Fig. 3). Psychological trust theory is based
on perceptions and incorporates interpersonal ‘states’ such as a trading
partner’s expectations and dispositions in the early phases of relation­
ship development. Our contribution is to explain that without a clear
understanding of the level (micro-foundational), nature (context) and
style of communication (strategically sensitive and collectively
committed to one’s partner) required, it is difficult to support positive
cognitive and affective trust development between individual managers
in cross-border partnerships with SMEs in transitional economies in
order to create the required flexibility (internally focused competency)
to support strategic agility in their SMEs.
P2: Awareness, attentiveness, openness and frequency of communication
support strategic sensitivity competency by reducing perceived risks and
uncertainty in the initial phases of relationship development between
buyers-sellers when one party is operating in a transitional economy. Thus
allowing the gathering of reliable impressions around strategic situations
that quickly lead to superior knowledgeable sensemaking. The combina­
tion of these micro-foundational relational elements directly influences
future flexibility in communication interactions by promoting ‘dynamic
relational capability’ that drives strategic agility in SMEs.
Building on the above, we demonstrate that openness, awareness and
attentiveness in communication between the parties in their early in­
teractions strongly influences affective trust. Previous research is un­
clear whether potential business partners are willing to be open and
honest in sharing their motives and intentions, particularly in an un­
certain and volatile environment such as in a transitional economy. We
show how openness in communication allows exchange parties to
engage in relationships that avoid ‘win lose’ outcomes because of their
collective commitment. In addition, heightened perception then enables
satisfied parties to comfortably communicate their concerns with the
expectation that they will receive honest responses. We highlight that if
there is a lack of trust, particularly cognitive trust, between the parties in
the early communications and interactions, the next phase will be
compromised. Our study builds on international business, marketing
communication and context based research where the “experiences of
users and receivers take precedence over intended product, service, or
practice characteristics” (Mäkelä et al., 2019, p. 335) by highlighting the
importance of deep contextual insight (Cumming et al., 2020) and
sensitivity to the experiences of others. We extend this research to early
cross-border relationship development among buyer-seller managers
doing business in transitional economies.
Given the presence of uncertainty during the initial phases of rela­
tionship development, we reveal why the parties think differently
because of cultural experiences and this may prompt behaviors directed
towards self-preservation, confirming the assumptions of psychological
trust theory. Our point of difference is to show why collective
F.C. Nyamrunda and S. Freeman
Fig. 3. A Micro-foundational model of trust, dynamic relational capability and strategic agility in SMEs in transitional economies.
commitment between managers is fundamental in early trust develop­
ment to avoid ‘win-lose’ outcomes and opportunistic behavior that is
self-serving. Distinguishing our findings from Leonidou et al. (2017)
who argue that openness in communication is possible only in estab­
lished business relationships, we contribute by demonstrating that open,
attentive communication very early in development of a new relation­
ship can heighten perception between parties, allowing one to assess the
level of benevolence of another. That is, we show why strategic sensi­
tivity supports clearer understanding of the intentions and motives for
the partner’s actions and behaviors at the beginning of a relationship. In
addition, we build on other studies by highlighting the greater need for
collective commitment (leadership unity) (Doz, 2020) with cross-border
trading partners in transitional economies in order to build trust through
strategic sensitivity to minimize organizational resistance in
decision-making processes. Our contribution is to build on prior studies
(Brueller et al., 2014) to show that doing so early in relationship
development promotes resource fluidity that supports nimble
decision-making. We extend this research in strategic agility to
micro-foundational processes, showing that leadership unity and
resource fluidity are enhanced through strategic sensitivity among
managers in early development of buyer-seller relationships with part­
ners. The two meta-capability paths (strategic sensitivity and resource
fluidity) together become a trust-related competency to free-up re­
sources and enable SME trading partners in transitional economies to be
strategically agile making and then to quickly implementing innovative
decisions to secure new opportunities for growth (Doz & Kosonen, 2007,
2008b).
P3: Uncertainty during the initial phases of relationship development and
the different cultural experiences between buyers-sellers in cross-border
activities, can prompt behaviors directed towards self-preservation.
Such resistant opportunistic behavior impedes resource fluidity and is
mitigated by leadership unity and strategic sensitivity that promotes trust
and open, supportive communication. This allows parties to better assess
the benevolence, intentions and likely future actions early in the rela­
tionship to support ‘dynamic relational capability’ that drives strategic
agility in their SMEs.
In addition to openness in communication, we reveal the significance
of appropriate forms of communication. Previous research has shown
that the role of face-to-face communication is largely irrelevant in
established economies where managers are experienced with advanced
technologies and have reliable sources of information about a potential
partner’s firm and individuals within those firms (Allen et al., 2018). In
established economies, the availability of secondary information is
useful for determining the motives and intentions of the potential
partner (Kreye, 2018).
The current study challenges this view, showing why, in a transi­
tional economy context face-to-face communication is regarded as a
necessary interactive process and practised to foster strategically
20
Journal of World Business 56 (2021) 101175
sensitive communication by SMEs in the development of cognitive and
affective trust. We use psychological trust theory to explain that in
transitional economies, face-to-face communication allows business
partners to capture more nuanced understanding of cognitive charac­
teristics of each party in order to better understand the intentions and
motives of the other (i.e. cognitive trust). We build on prior research,
showing how strategically sensitive communication supports trust
development and resource fluidity by enhancing the relational compe­
tency of senior managers. We use a micro-foundational lens to identify
in our findings that relational competency among managers with their
trading partners leads to greater ability to improvise to make creative (e
Cunha et al., 2020), knowledgeable, nimble and rapid strategic moves
with high precision. This leads to greater satisfaction (affective trust)
between parties because of their strategic sensitivity as each party ex­
pects to engage in a relationship with individuals who have favorable
attitudes and behaviors.
P4: Face-to-face communication and heightened perception in
interaction during the initial phase of the relationship supports and
allows partners to understand cognitive characteristics of intentions
and motives (cognitive trust). Thus, strategically sensitive commu­
nication leads to greater satisfaction (affective trust) between cross-
border buyers-sellers engaged in business activities in transitional
economies. This enables the development of ‘dynamic relational
capability’ that supports effective sensemaking, nimble decision-
making and rapid resource deployment (resource fluidity), that
drive strategic agility in their SMEs.
6.3. The role of social networks and knowledge in the development of trust
Our study builds on social network literature (Ashnai, Henneberg,
Naudé, & Francescucci, 2016) to show how managers form social bonds
with trading partners in order to gain knowledge and useful information
about potential markets and sources of further business opportunities.
However, extending prior studies (Liu & Meyer, 2020), ultimately,
knowledge sharing depends on the actions of key individuals and their
interactions with others at critical interfaces in the organization. Our
study of managers in small firms in Tanzania explores a context where
trust-based relationships and related relational activities are particularly
important for organizational objectives, but potentially subject to sig­
nificant challenges, obstacles, and difficulties. Managers of SMEs in
transitional economies are individuals who possess particular abilities
and characteristics suited to building strong social bonds with their
trading partners. Managers who are collectively committed to building
strong social bonds possess the ability to improvise, make decisions and
then exchange information and tacit knowledge quickly with their
trading partner’s organizations. They have the ability to understand the
external environment because they engage in strategically sensitive
communication in their cross-cultural buyer-seller relationships. The
F.C. Nyamrunda and S. Freeman
more they hone their attention to strategic situations in their in­
teractions with trading partners, in ways that demonstrate collective
commitment to common goals the more they learn about new
opportunities.
Our point of difference is to show how more experienced managers
rely on social bonds to avoid clashes with trading partners in transitional
economies. We build on studies on larger MNEs (Liu & Meyer, 2020), to
show that individuals in SMEs require not only distinct relational abil­
ities but need to be highly motivated to free-up their few resources and
re-deploy them quickly to new opportunities. They must build on these
two abilities (strategic sensitivity and resource fluidity) by developing a
further ability (leadership unity) to make and then carry out creative,
improvised and innovative decisions quickly. The ability of managers to
manage challenging leadership interactions with their trading partners
that support international connections has a significant impact on SME
business opportunities for growth. From a transitional economy
perspective, managers with rich experience in international partnerships
are less dependent on their local social ties when initiating new business
partnerships. They are more confident and knowledgeable about po­
tential markets and individuals with whom they intend to associate and
build social bonds to support superior knowledgeable sensemaking that
drives strategic agility. We build on this prior research (Brueller et al.,
2014; e Cunha et al., 2020), however, by providing a SME perspective,
by showing why experienced managers of SMEs will continue to utilize
their social ties when they are in high-risk situations in transitional
economies. We also reveal how individuals become independent from
their social networks over time and with experience. Using a
micro-foundational lens, we explain why affective trust plays an
important role and is more relevant for experienced than for inexperi­
enced managers, due to their overall relational competencies that
nurture their ability to improvise and creatively follow their instincts or
feelings.
Inexperienced managers in SMEs, however, begin their international
experience cautiously by relying solely on their social ties because of
their inferior resources and management capabilities. Using psycho­
logical trust theory and linking in a micro-foundational approach, we
show the relevance of perception and awareness (strategic sensitivity) in
social networks and the nature of affective trust in relationship devel­
opment among individual managers. However, the theory does not
explain the micro-foundational processes and activities underpinning
how social networks impact the development of affective trust in the
early phases of business relationships. Nor how social networks influence
individual parties’ behaviors and expectations in such relationships
which requires more nuanced understanding of the ability of managers
to make and then implement creative decisions quickly (leadership
unity).
This study contributes in several ways by building on recent and
earlier studies (Al-Atwi, Amankwak-Amoah & Khan, in press; Brueller
et al., 2014; Boojihawon et al., 2020; Bouguerra et al., 2019; Clauss
et al., 2019; Cumming et al., 2020; Debellis et al., 2020; Doz, 2020; e
Cunha et al., 2020; Liu & Meyer, 2020; Pereira, Budhwar, Temouri,
Malik, & Tarba, 2020; Shin et al., 2015; Zimmerman et al., 2010), first,
to show how the presence of strong social bonds in the market can
profoundly influence individual trusting behavior (strategic sensitivity).
Second, how in turn such behavior impacts superior decision-making
unity with managers of trading partners (leadership unity). This is
because both meta-capability paths working together provide inexpe­
rienced managers with initial contacts, mutual expectations and referral
sources. Third, over time, the integration of their paths through a bal­
ance of micro-foundation process and activities supports the rapid
deployment of resources (resource fluidity) that drives the agility of
their small firms. Fourth, we highlight that managers in small firms in
contexts such as those in transitional economies can learn to use their
social connections to form strong bonds with trading partners and share
information that supports internal knowledge alignment. By doing so
managers can improve relational competencies around knowledge and
21
Journal of World Business 56 (2021) 101175
resource sharing and collective commitment (leadership unity) to new
opportunities for cross-border growth. Social bonds can be honed with
heightened perception, awareness and attention to these strategic situ­
ations (strategic sensitivity) to evaluate the potential benefits and costs
of partnerships. By integrating contextual and relational dimensions
with meta-capability paths, over time, managers in small firms can
refine an internal competency to a dynamic relational capability to
manage the dual tensions of leadership and organization capabilities
within firms doing business in transitional economies.
P5: The presence of strong social bonds leads to trusting behavior that
supports collective commitment to new opportunities for growth for
managers doing business with small firms in transitional economies.
Experience in interacting with trading partners assists managers with new
contacts, mutual expectations (strategic sensitivity) and referral sources
to avoid win-lose outcomes (leadership unity). Quickly evaluating the
potential of cross-border trading partnerships is a relational competency.
Strategically sensitive behavior by managers positively influences flexi­
bility that increases the willingness of trading partners to quickly free-up
resources for another activity (resource fluidity). ‘Dynamic relational
capability’ underpins superior decision-making among cross-border
managers in transitional economies to promptly recognize and swiftly
take advantage of opportunities through strategic agility.
The act of choosing a business partner is not just a phase that occurs
at a particular time in a sequence of physical activities. Some activities
occur before the decision of engaging in any relationship is made,
whereas others occur later. We build on psychological trust theory by
showing why individual managers practise trusting behavior because of
the influence of social connections in transitional economies. Due to a
lack of accumulated experience and international exposure, managers
may not engage in business exchanges before obtaining some evidence
of the other party’s trustworthiness from their social networks. For a
manager this involves a psychological method of decision-making by
using familiar decision-making processes based on the influence of so­
cial connections. This suggests the need to reconsider the role of social
bonds and our study demonstrates how this relational process helps to
minimize organizational resistance in decision-making to take advan­
tage of growth opportunities in transitional economies.
We build on trust literature (Dowell et al., 2015) to show how
trustworthiness and reliability of potential partners constitute critical
relational competencies associated with cognitive trust. This suggests
that the greater the bonds and social connections, the easier it is for
managers of small firms to take the initiative in finding potential mar­
kets and trusted business partners to swiftly take advantage of oppor­
tunities in transitional economies. When managers are in a trusted
partnership, they are able to resolve differences quickly because of their
shared understanding of the expectations and motives of their partners.
Drawing from strategic agility literature (Brueller et al., 2014; Doz,
2020) and using a micro-foundational lens, we explain how this enables
managers to reassess the relative emphasis to be put on each of these
relational competencies and meta paths. Our study shows, that by doing
so, managers can regenerate their competitive advantage over time
through ‘dynamic relational capability’ that assists them to remain
strategically agile in their small organizations.
P6: The greater the bonds and social connections between SME cross-
border buyers-sellers in transitional economies, the easier it is to locate
potential markets and trusted business partners and to minimize organi­
zational resistance in the decision-making process. The greater the rela­
tional abilities of the more they can leverage the three meta-capability
paths to build trust and master the ‘dynamic relational capability’ that
drives strategic agility.
F.C. Nyamrunda and S. Freeman
7. Discussion and implications
7.1. Implications for theoretical development
First, our research question explores the development of cognitive
and affective trust during the initial phases of the business relationship in
a transitional economy, further conceptualizing key factors such as so­
cial networks. Social networks facilitate business relationships by of­
fering initial contacts (Costa et al., 2017). We confirm this by
demonstrating how social networks that enable social bonds are vital in
the initial development of business relationships but are not always
readily available to managers of SMEs in a transitional economy. We
identify two new types of roles that social networks play in this context,
namely for experienced and inexperienced managers in international
business relationships. We explain why social networks are most rele­
vant as dimensions of dynamic relational capability and critical to
mangers in SMEs with less experience in starting and developing busi­
ness relationships in complex settings. This is a fundamental issue
because of their lack of resources.
Specifically, human resource management, is a key capability that
enables strategic agility (Doz, 2020) that was demonstrated by our
managers as a fundamental driver in order to mobilize and re-deploy
physical resources rapidly and efficiently. Physical deployment relies
on the human resource function. Our study builds on prior research
(Doz, 2020; Fourné et al., 2014) by highlighting the fundamental nature
and function of individual relationships deemed important enablers on
the one hand, but also primary support for the other meta-capabilities in
driving strategic agility. Due to the complexity, environmental turbu­
lence, volatility and heterogeneity of transitional economies, our man­
agers reveal the considerable knowledge sensemaking needed in the early
phases of their relationship development to complement leadership and
organizational design capabilities among their small firms. A second
order ‘dynamic relational capability’ is required to support the devel­
opment of cross-cultural competencies needed to drive strategic agility
in SMEs in such a context.
Second, we reveal that building a mutual understanding between ex­
change parties in a transitional economy requires a level of trust that can
provide the basis for determining predictability in the relationship
moving forward. This key finding emphasizes the role of communication
including the following new factors: ‘openness in communication’, ‘ef­
ficiency of communication’, and ‘frequency of communication’ between
the involved parties. These are key driving factors behind cognitive and
affective trust development in a transitional economy that support ‘dy­
namic relational capability’. However, for these shared exchanges to
become effective forces that drive strategic agility, strategic sensitivity
must be developed and enhanced over time. Providing enough time to
allow personal interactions to take place is fundamental to the role of
communication. We show why personal interactions by parties in small
firms around the various decisions in international business activities
require deep insights into the contextual situation. This is obtained through
frequent and varied styles of dialogue (face-to-face, email, phone, and
other social media) that helps to overcome misunderstandings and
organizational resistance, especially salient in early relationship
development.
Strategic sensitivity requires great attention to the language used in
dialogues. Extending strategic agility and cross-culture literature (Doz,
2020; Wang et al., 2017), we show why our managers demonstrate
strong awareness with great effort made to develop a sense of common
ground, and at times having to reconsider their position by ‘stepping
back’ from the conversational exchange, to try to gather deeper insights
and identify recurring patterns in the conversation to assess what is
important and what is not, as the relationship develops. The initial un­
derstanding and position of both partners is a critical phase of the new
relationship and is easily damaged through cross-cultural misunder­
standing, leading to non-trusting outcomes, even opportunism, when
interdependency through mutual co-creation with innovative solutions
22
Journal of World Business 56 (2021) 101175
is the key priority. Using a micro-foundational approach, we identify
how strategically sensitive communication helps individual managers to
reframe their interests and redefine what is important to them, leading to
the development of greater common ground. This requires both partners
to be more aware of language as a contextually grounded interchange in
order to capture the nuances in situ; often very subtle when the transi­
tional economy context is unfamiliar, and the relationships are new.
Effort too, to understand the contextual structures and processes that
operate at the institutional level, and how the firm is embedded in this
context(s), helps managers to effectively embed language and dialogue
in context in order to better understand the communication exchange.
In a transitional economy, this will require a degree of abstraction
and capability to develop an earthy sense of reality and contextual
practicality. Managers who develop successful relationships over time
are able to take account of contextual differences because they can un­
derstand or at least allow for and expect nuances that are not superfi­
cially observable. They note that there is not only ‘their own way of
doing things’, but ‘other ways’ that may lead to expected or unexpected
but none-the-less fruitful outcomes, through different meta-capability
paths or routes or vectors. Taking time to reach decisions, suspending
judgement, and not being too hasty overall, are demonstrated by our
managers as important dimensions of strategic sensitivity, that drive
strategic agility in combination with the other two meta-capabilities
(leadership unity and resource fluidity) (Doz, 2020). The level of
mutuality needed to nurture ‘relational dynamic capability’ to drive
strategic agility suggests a high level of commitment to co-creation
(through shared vision and acknowledgement of different leadership
approaches) and a respectful and healthy co-dependency between
business partners.
Third, we illustrate that while psychological trust theory (Deutsch,
1958) offers some important theoretical insights, future research could
usefully consider additional theoretical perspectives to explain the role
of trust in SME business relationships in a transitional economy in
building strategic agility. To address this issue, we suggest several
theoretical approaches, especially relevant to further refine ‘dynamic
relational capability’ and the complementarity of leadership and orga­
nizational design capabilities (Biesenthal et al., 2019), and how dynamic
capabilities (Clauss et al., 2019; Cumming et al., 2020; Doz, 2020) can
modify them. The three capabilities provide synergistic outcomes that
support strategic agility of SMEs that confront the uncertainty, risks and
chaotic changes in transitional economies. We extend these studies by
showing the importance of dynamic relational capability in a specific
context and firm size. Theoretically, we suggest a combination of ap­
proaches to advance the literature in international business, HRM, in­
ternational entrepreneurship, transitional economies, dynamic
capabilities and strategic agility, and particularly noting a
micro-foundational approach, at the organizational and individual
levels of analysis.
We suggest that psychological trust theory (Deutsch, 1958) could be
supported with sociological trust theory (Morgan & Hunt, 1994) and a
process perspective (Huemer, 2014), which could offer further
comprehensive conceptual understanding of the many factors that in­
fluence cognitive and affective trust development in transitional econ­
omies. Presently, literature on sociological and psychological trust
dominates our understanding of the trust function in relationships.
However, future studies could adopt a process perspective of trust
(Huemer, 2014). The theory may provide enhanced understanding of
relationship development by recognizing the dynamics between cogni­
tive and affective trust and how they change over time. We reveal how
trusting behavior can help individuals to learn about each other’s in­
tentions through interactions and observations, and thereby make
judgements about whether or not to trust the other party; an important
element in building dynamic relational capability. We observe that the
process of relationship development in a transitional economy is often
characterized by suspicion and hesitation between business partners,
largely driven by a lack of familiarity. By showing how a partner feels
F.C. Nyamrunda and S. Freeman
when their counterpart is engaging in dishonest behavior, we reveal why
this may negatively impact the partner’s expectations, reactions in
initial interactions, and subsequent behaviors. Further research that
increases understanding of the ability of the process perspective to
explain the trust development process by integrating the psychological
and sociological literature that shows how learning continues to occur as
the relationship develops, will contribute to new ways of building
strategic agility in small firms. This will be especially significant in
transitional economies as this is where expected dramatic growth is
likely to continue, far exceeding the projected growth in established and
emerging economies in the next two decades.
These existing theories of trust can potentially be theoretically
refined by examining the development of cognitive and affective trust in
depth and at different phases of SME business relationship development
by investigating the significance of each concept (cognitive/affective
trust) in different transitional economies, given their lack of homoge­
neity. Our research focus in international business provides an ideal
setting for exploring a founder/entrepreneur’s ability to engage in
effective business relationships, highlighting the significance of the
HRM focus, despite the lack of resources and small size of SMEs, to
develop dynamic relational capability to drive the strategic agility of their
organizations.
We now summarize the implications for our theoretical development
and explain theoretical contributions to psychological trust theory
(Deutsch, 1958). First, by exploring internal psychological processes and
dispositions that guide an individual’s strategic decisions in relationship
development (Dowell et al., 2015). We show how using a
micro-foundational approach and this theory can be used to explain how
cognitive factors influence trust building during the initial phases of
relationship development. We found, that for SMEs to be agile they must
be able to foster a sense of mutual trust with their trading partners as
early as possible. With trust, the trading partners can move quickly and
decisively, increasing transparency and therefore developing the
essence of operational and strategic agility.
Second, we reveal how the theory and a micro-foundational lens
provides a guideline to understanding interpersonal relationships and
trust development between individual partners based on the level and
nature of communication between the parties and the influence of social
networks. In a fast-changing business environment, such as Tanzania,
managers of SMEs operate through the turbulence that forces them to
rely on their combined HRM capabilities (i.e. dynamic relational capa­
bility) for business growth and survival. While knowledgeable sense­
making, nimble decision-making and rapid resource re-deployment
allow firms to be agile (Brueller et al., 2014; Clauss et al., 2019) by
spotting an opportunity and seizing it; this is dependent upon the level
and nature of communication and the influence of social bonds between
the trading partners.
Third, using psychology theory emphasizes the qualities and indi­
vidual characteristics that determine an appropriate level of communi­
cation and hence trust building between parties, important for the
strategic agility of firms in transitional economies. However, the theory
neglects the level and nature of communication needed by both parties
at the most critical phase, the beginning of their relationship develop­
ment and does not explain how communication leads to the develop­
ment of two types of trust – cognitive and affective trust.
Fourth, in addressing these limitations, we build on this theory by
using a micro-foundational approach to explore the process of commu­
nication between business partners. We examine a number of cognitive
elements (i.e. efficiency of communication and the frequency of
communication between the involved parties) and affective elements (i.
e. openness in communication) to provide nuanced understanding of
their influence on the role of cognitive and affective trust and how they
impact strategic agility of SMEs.
Finally, the present study responds to calls (Dowell et al., 2015) for
greater research focus on the nature of trust during the initial phases of
relationship development in a relevant and unique context – transitional
23
Journal of World Business 56 (2021) 101175
economies, at different levels of analysis – the firm and with a
micro-foundational approach (entrepreneur/founder). This enables us
to provide a more nuanced understanding of how strategic agility is
influenced directly by dynamic relational capability by integrating
organizational and leadership capabilities through fundamentally
focusing on micro-foundational processes and activities. Managers of
small firms that develop dynamic relational capability within their firms
will be better able to take advantage of the opportunities for growth in
transitional economies with their cross-border trading partners. In doing
so, they will be able to build strategic agility in their small firms by
focusing on micro-foundational process and activities with their
cross-border trading partners in this context. The context of transitional
economies is noted as being an especially limited area of research in
strategic agility, HRM and communication, trust, international business
and micro-foundational approaches.
7.2. Methodological contribution
Scholars have suggested a need for more in-depth analysis of di­
mensions of relational capability (Mäkelä et al., 2019; Shin et al., 2015),
as past studies provide only limited insight into the complex relationship
between a new dynamic relational capability and strategic agility. Our
study deepens understanding of the three meta-capability paths and
their interactive influence on the three relational dimensions by
demonstrating potential positive effects of trust and hence strategic
agility, which is an important underpinning of micro-foundations pro­
cesses and activities (Liu & Meyer, 2020). This is particularly important
given the turbulent business environments (Cumming et al., 2020)
associated with transitional economies. We contribute methodologically
by exploring the relational dimensions in depth by using multiple case
studies (Liu & Meyer, 2020). The qualitative research design was
appropriate to explore cognitive and affective trust in the context where
the influence of government policy and other institutions on SME in­
ternational business relationships is crucial, despite the perception that
they are considered relatively dysfunctional.
Individual contribution in the decision-making process remains a key
responsibility in agile settings (Doz & Kosonen, 2007). The use of mul­
tiple purposive sampling techniques enhanced this study, aided in
overcoming these data collection challenges, and enhanced the reli­
ability and validity of the study. In this study, three purposive sampling
techniques were used (i.e., intensity sampling, criterion sampling, and
snowball sampling) in combination with one another, resulting in the
selection of information-rich respondents (i.e., the key-decision makers).
Using randomization techniques or a dynamic conversion mixed method
(Mäkelä et al., 2019) is problematic and often not feasible in the context
of transitional economies due to a lack of adequate research infra­
structure and resources available to fully comprehend the environment.
Therefore, purposive samples allowed for the capture of explanatory
information from knowledgeable and reliable respondents that may not
have been possible with a random approach. We integrated the
micro-foundational perspective (Doz & Kosonen, 2007; e Cunha et al.,
2020) and provided important insights into how SMEs balance the
exploitation and exploration paradox to support and sustain their
competitive position in contexts where formal institutions are evolving
and weak (Andriopoulos & Lewis, 2009; Lewis et al., 2014).
7.3. Managerial implications
The stated purpose of our paper was to assist managers to understand
how to develop successful relationships with companies doing business in
transitional economies. Our findings provide significant practical contri­
butions for practitioners. The findings explain the relationship between
trust and strategic agility in the SME business context showing that trust-
building during the initial phases of business development has a direct
influence on strategic agility, which helps SMEs to respond quickly and
effectively to any external pressures and unforeseen changes despite
F.C. Nyamrunda and S. Freeman
their limited resources, by employing agility to spot and exploit further
opportunities. First, the findings explore factors influencing cognitive
and affective trust in SME business relationships in a transitional econ­
omy, such as the role of communication, the role of social networks for
experienced and inexperienced individual managers in trust develop­
ment of SMEs, cooperation, commitment, the role of cross-culture
communication and role played by government institutions. For
example, SME owners/founders and managers should carefully review
the communication patterns in their business relationships with trading
partners. Initial interactions and experiences are important as they
provide first-hand impressions about each other and the surrounding
business context, which is crucial for assessing the likely trustworthiness
of the relationship (Rousseau et al., 1998) and the development of dy­
namic relational capability.
While this study extends and enriches the international business,
strategy, entrepreneurship, communication, trust and HRM literatures,
it has several limitations that must be considered. First, the scope of the
research is limited to exploring trust development and its initial impact
in SME business relationships between cross-border trading partners.
The investigation of the potential darker side of cognitive and affective
trust in a transitional economy is needed. This is the dysfunctional role
of trust with a negative impact on business relationships (Zahra, Yavuz,
& Ucbasaran, 2006). Our findings contribute to this steam of research by
revealing some of the elements of the darker side of trust, including
opportunism (Bello, Chelariu, & Zhang, 2003).
For example, we observe that acts of opportunism are more likely in a
transitional economy because of the presence of a weak regulatory
system. Thus, theoretically, the role of cognitive and affective trust may
depend on the extent to which the darker side of trust is present in
business relationships (Guo, Huy, & Xiao, 2017). This stream of research
would provide insights for managers into ways to enhance strategic
agility given the high failure rate of SMEs in transitional markets, why
successful and unsuccessful entrepreneurs may have different view­
points, and how they prioritize various business failure factors (Arasti
et al., 2014; Robson et al., 2019). Concurrent examination of both trust
and its darker side could offer SMEs a more complete picture of the
impact of cognitive and affective trust in international business re­
lationships. Our focus is on the role of cognitive and affective trust in
transitional economies, rather than explicitly incorporating the inclu­
sion of their darker sides in developing relational capability. This is an
important insight for managers and a direction for further research.
8. Conclusion
We draw from the micro-foundational approach and psychological
trust theory to highlight the activities that are undertaken by individuals
as three meta-capability paths (strategic sensitivity, resource fluidity
and collective commitment). Our research shows that in contexts
exposed to rapid changes, turbulence, disruptions and unpredictability
such as those in transitional economies, individual managers will need
highly developed abilities for improvisation and creativity to work with
their cross-cultural partners in initial relationship development to drive
successful strategic agility in SMEs.
Managers, entrepreneurs and founders of SMEs around the globe are
currently experiencing similar contextual upheavals, driven by the
challenges and opportunities brought by the external shock caused by
Covid-19. It is conceivable that its effects will be long lasting and very
likely to affect fundamentally the range of capabilities that organiza­
tions will need, to adapt and innovate in order to respond to avoid the
worst effects and capture new opportunities as a new normal unfolds.
Given this external shock, agility in firms, conceived as an externally
focused capability, will need to be accompanied by very high levels of
flexibility through its individuals, an internally focused competency,
more so than ever. This highlights the relevance of the findings of our
study, in a theoretical and contextual sense, not only to transitional
economies but to also other economies experiencing environmental
24
Journal of World Business 56 (2021) 101175
turbulence. Our study suggests that dynamic relational capability, if
leveraged towards value creation, could be fundamental to firms’
competitive advantage, independent of environmental changes. Future
studies that adopt this line of inquiry will potentially motivate future
research to question and expand the boundary conditions of dynamic
capability theory beyond the current predominant contingency view.
While, the context of our study relates to transitional economies, the
pandemic is now impacting a wider global context, where all economies
are experiencing a similar sense of disruption and uncertainty. Not all
are experiencing the hyper-competitiveness, rapid growth, corruption
and political and economic inconsistency of transitional economies, but
there is increasing evidence that uncertainty, risk, declining economic
growth, political and social upheavals and new regional trading align­
ments are occurring in emerging and established economies. This
contextual scenario suggests great theoretical relevance of our study,
outside the transitional economy context, to other economies experi­
encing external shocks of social and economic significance, not experi­
enced in contemporary history. We suggest this would be a very useful
area for further research and to build theory by investigating the
applicability of dynamic relational capability and how strategic sensi­
tivity, resource fluidity and collective commitment impact managers in
other economies using a micro-foundational approach. The after-shocks
of the current pandemic to the economy, domestically, regionally and
globally are likely to be long term and will increasingly require from
managers flexibility as an internally focused competency to manage
non-contractual, trust-based dynamic relational capability with business
partners, underpinned by strategic sensitivity, resource fluidity and
collective commitment to decision-making with trading partners.
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