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: Dubai to curate next hot thing in 'Museum of the Future'

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 ...

Recommended for you

Bribery 'hits 1.6 billion people a year'

Feb 27, 2015

A total of 1.6 billion people worldwide – nearly a quarter of the global population – are forced to pay bribes to gain access to everyday public services, according to a new book by academics at the Universities of Birmingham ...

How music listening programmes can be easily fooled

Feb 26, 2015

For well over two decades, researchers have sought to build music listening software that can address the deluge of music growing faster than our Spotify-spoilt appetites. From software that can tell you ...

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.