In a global economy, trust is a critical commodity

May 01, 2008

In the global economy, corporate collaboration is becoming a necessity, making trust critical to the success of joint business ventures. A University of Missouri study examined the effects of trust at three distinct organizational levels and found that business executives should strive to build and maintain trust to improve performance. Building that trust may include consideration of staffing, special compensation and adjusted management processes.

“Firms form collaborative entities to generate value and achieve objectives that would be difficult, if not impossible, to achieve independently,” said Lisa Scheer, the Emma S. Hibbs Distinguished Professor at MU’s Robert J. Trulaske, Sr. College of Business. “Collaborations often fail to reach those goals and the culprit may be poor relations and the lack of trust in joint ventures.”

Researchers studied 114 international joint business ventures (JBVs) and found that trust was a key component at three levels: 1.) between the two collaborating firms; 2.) in each firm’s reliance on its own representatives; and, 3.) among the individuals assigned to a collaborative entity, which is a group with representatives from both firms formed to facilitate the joint venture.

Trust occurring at the collaborating firm level is called inter-organizational trust. This can be trust between two CEOs or it can be institutionalized trust among people at different firms who have worked together for a long time. For example, the ongoing supply chain cooperation between the manufacturing firm Proctor & Gamble and the retail giant Wal-Mart reportedly was initiated because top management in the two firms trusted each other to cooperate and refine the collaboration over time.

According to Scheer, two firms can collaborate and yet remain more distinct. In many cases, management assigns specific people in each firm to form a collaborative group, or entity. The entity may be formed for different reasons, such as to develop new products, strengthen supply chains, reduce operational costs, reach new markets, devise industry standards or serve specific customers. At this trust level, the parent organization must trust the people in this group.

On another level, the people in the collaborative entity must trust each other and be able to share critical information to achieve their objective. Trust must be established because sharing and coordination creates vulnerabilities that a partner might exploit.

“Any collaborative entity will have unique problems. But collaborative entities also share similar challenges arising from the mixed loyalties and conflicting objectives the individual collaborators face,” Scheer said. “If the collaborators continually place their respective parent firm's goals first, the collaboration is likely to fail. Actions that benefit only the entity, however, may undermine the parent firm's short-term interests.”

Source: University of Missouri-Columbia

Explore further: Anti-apartheid hero, ex-Norway PM awarded 'Asian Nobel' prizes

add to favorites email to friend print save as pdf

Related Stories

Studies: Cyberspying targeted SKorea, US military

Jul 08, 2013

The hackers who knocked out tens of thousands of South Korean computers simultaneously this year are out to do far more than erase hard drives, cybersecurity firms say: They also are trying to steal South ...

Georgia Tech releases cyber threats forecast for 2012

Oct 11, 2011

The year ahead will feature new and increasingly sophisticated means to capture and exploit user data, as well as escalating battles over the control of online information that threatens to compromise content and erode public ...

How do you manage US oceans? Look at local successes

Apr 18, 2011

Policymakers are very familiar with land-use planning. But what is the best approach for planning uses of America's coastal waters and oceans? That question has gained importance since President Obama formed ...

Recommended for you

Ig Nobel winner: Using pork to stop nosebleeds

8 hours ago

There's some truth to the effectiveness of folk remedies and old wives' tales when it comes to serious medical issues, according to findings by a team from Detroit Medical Center.

History books spark latest Texas classroom battle

Sep 16, 2014

As Texas mulls new history textbooks for its 5-plus million public school students, some academics are decrying lessons they say exaggerate the influence of Christian values on America's Founding Fathers.

Flatow, 'Science Friday' settle claims over grant

Sep 16, 2014

Federal prosecutors say radio host Ira Flatow and his "Science Friday" show that airs on many National Public Radio stations have settled civil claims that they misused money from a nearly $1 million federal ...

User comments : 0