In a global economy, trust is a critical commodity

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.”

Media Contact

Bryan E. Jones EurekAlert!

More Information:

http://www.missouri.edu

All latest news from the category: Business and Finance

This area provides up-to-date and interesting developments from the world of business, economics and finance.

A wealth of information is available on topics ranging from stock markets, consumer climate, labor market policies, bond markets, foreign trade and interest rate trends to stock exchange news and economic forecasts.

Back to home

Comments (0)

Write a comment

Newest articles

Lighting up the future

New multidisciplinary research from the University of St Andrews could lead to more efficient televisions, computer screens and lighting. Researchers at the Organic Semiconductor Centre in the School of Physics and…

Researchers crack sugarcane’s complex genetic code

Sweet success: Scientists created a highly accurate reference genome for one of the most important modern crops and found a rare example of how genes confer disease resistance in plants….

Evolution of the most powerful ocean current on Earth

The Antarctic Circumpolar Current plays an important part in global overturning circulation, the exchange of heat and CO2 between the ocean and atmosphere, and the stability of Antarctica’s ice sheets….

Partners & Sponsors