How should we understand the role of trust in inter-organizational relationships? Trust refers to the ‘willingness of one party to be vulnerable to the actions of another party based on the expectations that the other will perform a particular action important to the trustor, irrespectively of the ability to monitor or control that other party’ (Mayer, Davis, & Schoorman, 1995: 712). The prevailing view in inter-organizational trust research is of trust as a mechanism, which entails a mutual willingness to accept vulnerability in the inter-organizational relationship (Mayer et al., 1995). Hence, inter-organizational trust research has suggested that trust makes partners willing to rely on each other, even though the other is potentially opportunistic, goals may be misaligned and the ability to monitor or control the other party is limited (Dyer & Singh, 1998; Zaheer & Venkatraman, 1995). In short, trust has been understood as a mechanism that eases concerns of opportunism and thereby enables cooperation.
Yet, within the broader stream of research on inter-organizational governance, it is increasingly acknowledged that cooperation is only one facet of inter-organizational collaboration (e.g. Faems, Janssens, Madhok, & Van Looy, 2008; Gulati, Wohlgezogen, & Zhelyazkov, 2012; Lumineau, 2015). In this research stream, scholars have emphasized that set aside cooperation – inter-organizational relationships can also fail, merely because partners are unable to effectively coordinate their joint activities (Gulati et al., 2012). Inter-organizational governance scholars therefore have started to make a conceptual distinction between cooperation concerns, stemming from misaligned incentives, and coordination concerns, stemming from misaligned activities, in inter-organizational relationships (e.g. Dekker, 2004; Faems et al., 2008; Gulati & Singh, 1998; Gulati et al., 2012; Lumineau, 2017; Malhotra & Lumineau, 2011). Because coordination can be challenging, independent of whether cooperation concerns are present or not (and vice versa), inter-organizational governance research increasingly sees cooperation and coordination as distinct facets of inter-organizational relationships, which are not necessarily related.
The conceptual distinction between cooperation and coordination has enabled a more complete understanding of inter-organizational governance. Gulati and Singh (1998), for example, relied on this distinction to theorize a more complete view of contracts, suggesting that contracts have both cooperative and coordinative clauses, each having distinct implications for inter-organizational governance. Lumineau and Verbeke (2016) even propose that inter-organizational governance theory has too much focused on cooperation and opportunism, suggesting that coordination should be assigned a more prominent role in theorizing inter-organizational relationships. Yet, inter-organizational trust research has tended to one-handedly see trust as a mechanism that facilitates cooperation, while not making explicit if and how trust can also play a coordinative role in inter-organizational relationships (see Zhong et al., 2017 for a meta-analysis and review). In other literature (e.g. Bachmann, 2001), the latter has been suggested to be fundamental in boundary-transcending relationships, but here cooperation is not systematically taken into account. In this chapter, we therefore unpack this conceptual distinction, with the purpose of developing a comprehensive and, at the same time, nuanced understanding of the role of trust in inter-organizational relationships.
In so doing, we discuss and compare four theoretical perspectives on inter-organizational trust: (1) rational choice theory, (2) transaction cost theory, (3) social exchange theory and (4) neo-institutional theory. We discuss how the role of trust for cooperation and coordination is explicitly or implicitly conceptualized within each of these perspectives. Building on these insights, we also discuss how the underlying assumptions of these different theoretical perspectives yield divergent perspectives on the role of trust in inter-organizational relationships. Finally, we rely on the distinction between coordination and cooperation to outline important questions for future research.
Inter-organizational relationships, or ‘repeated, contract-based transactions of idiosyncratic assets between the same organizations’ (Ring & van de Ven, 1992: 483) encompass diverse forms, ranging from joint ventures, alliances and buyer–supplier relationships to informal collaborations and R&D consortia. They allow an organization to focus on its core activities and develop its own, distinct resource base, while at the same time, relying on their partnering organizations to supplement or complement their own resources (Doz & Hamel, 1998).
A common challenge in inter-organizational relationships is the difficulty of sustaining co operation when objectives are misaligned. Gulati et al. (2012: 3) define this challenge as cooperation concerns, referring to the ‘joint pursuit of agreed-on goal(s) in a manner corresponding to a shared understanding about contributions and payoffs’. To some extent, each firm in an inter-organizational relationship has its own, distinct objectives. Therefore, each party may also have incentives to maximize the own firm’s gains at the partner’s expense. Such misalignment of goals gives rise to cooperation concerns.
Consider, for example, an R&D alliance between two firms. In this type of inter-organizational relationships, each firm makes investments in knowledge and other intangible resources, which are difficult to measure, monitor and follow up. Consequently, there is a risk of opportunistic behaviour. This includes, for example, one party freeriding on the other. One firm may also decide to leak knowledge or in other ways use the R&D output that is created within the relationship for its own benefit outside the alliance. In short, cooperation concernsarise when there is a risk that one partner behaves in a way that benefits the own firm, but which is a disadvantage for the partner organization. Such misalignment of goals can lead to a gradual deterioration of engagement in the relationship. In an instructive case study, Doz (1996) shows that failure to align incentives triggers a vicious circle where learning and understanding are hampered and frustration increasing. This, consequently, increases the likelihood of inter-organizational failure.
Another challenge in inter-organizational relationships is the coordination of activities (e.g. Dekker, 2004; Faems et al., 2008; Gulati et al., 2012; Lumineau, 2017; Thompson, 1967). We refer to this challenge as coordination concerns, or the ‘deliberate and orderly alignment or adjustment of partners’ actions to achieve jointly determined goals’ (Gulati et al., 2012: 7). Different from cooperation concerns, coordination concerns do not arise because partners are opportunistic or unwilling to work together for the benefit of their own firms. Instead, coordination concerns arise because partners are unable to effectively align interdependent activities. Coordination concerns can therefore arise independently of whether cooperation concerns are present or not (and vice versa).
There are many reasons why coordination concerns arise in inter-organizational relationships. Collaborating partners may, for example, lack shared systems and routines, which makes coordination difficult. Or, the collaboration may involve multiple individuals at multiple hierarchical levels, which also makes coordination of inter-organizational more complex and difficult. As another example, consider an inter-organizational relationship that crosses cultural and institutional boundaries. This is a setting where partners – independent of whether incentives are aligned or not – can find it challenging to effectively coordinate work, especially when the collaborating firms operate under different cultural practices.
Both coordination concerns and cooperation concerns exist in inter-organizational relation ships, but they do not necessarily co-vary (Gulati et al., 2012). Cooperation concerns are resolved by aligning incentives and preventing stealing, knowledge leakage or lying, or in other ways sustaining commitment to the inter-organizational relationships. Coordination concern requires a different set of mechanisms, related to finding practices and routines for coordinating work tasks and transferring knowledge. Therefore, the resolving of cooperation concerns does not automatically mean that partners will also be able to coordinate their joint activities and interactions. Partners may be unable to align their activities; focus their efforts; or accomplish joint tasks, not because they do not intend to do so, but because they are unable to coordinate their (tacit) assumptions and behaviours (Gulati et al., 2012). In a similar vein, the resolving of coordination concerns does not necessarily mean that partners cannot be concerned about the possibility of opportunism and misaligned cooperation incentives. In a case study, Faems et al. (2008) demonstrate how a contract with strong coordinative clauses enabled the continuation of an inter-organizational relationship, even though partners did not have positive expectations about the other party’s intention to perform according to the agreement, i.e. to cooperate. In other words, they were able to coordinate their expectations, in spite of cooperation concerns being present. Thus we conclude that cooperation and coordination are two distinct facets of inter-organizational collaboration (Gulati et al., 2012).
In this chapter, we aim to more carefully specify the coordinative and cooperative roles of trust in inter-organizational relationships. Extant research, in contrast, has tended to focus primarily on the role of trust to resolve cooperation concerns, but remains relatively silent on the role of trust with regard to the coordination of expectations in inter-organizational relations (Zhong et al., 2017). Within research on trust and control, for example, trust is seen as a mechanism that resolves cooperation concerns, whereas control is discussed both in cooperative and coordinative dimensions (e.g. Brattström & Richtnér, 2014; Dekker, 2004; Faems et al., 2008; Lumineau, 2017; Long & Sitkin, 2006; Malhotra & Lumineau, 2011). By distinguishing the coordinative dimension from the cooperative dimension of control, this literature has moved beyond a simplistic dichotomy being assumed between these two mechanisms (e.g. Faems et al., 2008). At the same time, this literature remained more silent on the role of trust for coordination.
In other literatures (e.g. Bachmann, 2001), the coordinative role of trust is much more explicit. Within this literature, trust is assumed to increase stability and predictability in inter-organizational relationships, thereby facilitating coordination of tasks. At the same time, this line of research remains more silent on the relationship between trust and cooperation.
In this chapter, we build on and extend prior research by discussing the extent to which trust can also be seen as a mechanism that resolves both cooperation and coordination in inter-organizational relationships. To fulfil this purpose, we scrutinize four fundamental theoretical perspectives that are often applied to theorize the role of trust in inter-organizational relationships: (1) rational choice theory, (2) transaction cost theory, (3) social exchange theory and (4) neo-institutional theory. In order to allow for comparison and to identify underlying assumptions, we first discuss how each of these theoretical perspectives conceptualizes trust and its development. Second, we discuss how scholars have relied on each theory to understand the role of trust for resolving cooperation and coordination concerns in inter-organizational relationships. Table 7.1 provides an overview of this analysis.
In this theoretical perspective it is assumed that the behaviour of actors (i.e. individuals or organizations) is best explained by reference to the idea that actors are calculative, opportunistic and profit-maximizing. Basically all economic theories, including transaction cost economics, build on this notion, but also in sociological theory this premise can be found. For example, Coleman (1990) is a prominent sociological scholar who represents the rational choice approach. Rational choice theory tends to see each actor in relative isolation. It can take environmental arrangements into consideration when social actors make their decisions, but this approach would only treat these as external variables rather than as constitutive parts of social processes and relationships within which social actors’ decisions are embedded. Such external factors are seen as having a very specific and clearly defined influence on actors’ calculations rather than just shaping the ideas that actors develop in specific environments. Rational choice would thus claim to be able to make predictions about social actors’ behaviour. Calculation, after all, is a formal process based on clearly defined principles. The fact that actors may deal with vague knowledge in an intuitive manner, as well as behaving differently across different cultural backgrounds, is not seen as a useful premise when the behaviour of social actors, let them be individuals or organizations, is to be explained.
Table 7.1 Trust, cooperation and coordination in inter-organizational settings
| Rational choice theory | Transaction cost economics | Social exchange theory | Neo-institutional theory | |
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| Conceptual background | Trust is seen as an outcome of rational calculations — actors trust when they consider it rational to do so. | In extended versions of the transaction cost framework, trust is seen as a ‘shift parameter’ that enables less formal governance, or a more flexible use of formal governance. | Trust is seen as a taken-for-granted outcome of favourable social exchange. | Trust is seen as a fact of life, present in all kinds of interaction. |
| Mechanisms through which trust resolves cooperation concerns in inter-organizational relationships | Trust enables risk taking in inter-organizational relationships since violation of trust would be irrational. | Trust eases concerns of opportunism since it enables risk taking as if opportunism was not a problem. | Trust eases concerns of opportunism since violations of trust would violate relation-specific norms that are established in the dyadic relationship. | The issue of cooperation failure is not seen as a key aspect of trust. |
| Mechanisms through which trust resolves coordination concerns in inter-organizational relationships | The issue of coordination failure is not seen as a key aspect of trust. | Trust allows for a more flexible application of formal governance and resolving of conflict, thus facilitating coordination. | Indirectly, trust facilitates coordination by enabling a more flexible coordination of tasks. | Institutionalized trust induces stability and predictability in relationships and thereby facilitates coordination. |
| Representative references | Coleman (1990) | Gulati and Nickerson (2008) | Das & Teng (2002) | Zucker (1986) |
| Buskens (2002) | Williamson (1991) | Blau (1968) | Bachmann (2001) | |
| Hardin (2002) | Williamson (1993) | McEvily et al. (2003) | Bachmann and Inkpen (2011) | |
| Vanneste et al. (2014) | Lioukas & Reuer (2015) | |||
From a rational choice perspective, a potential trustor considers what it can possibly gain from investing trust in a social relationship (Hardin 2002). An organization that has decided to trust another organization has done this because members within that organization believe that the risk of being betrayed by the partner does not weigh as much as what they can benefit if the trustee reciprocates the favours. For example, if a powerful buyer firm helps out a temporarily struggling supplier with a short-term loan, the favour that this firm might get back in the future from the trusted supplier in an equally difficult situation is expected to count more than the risk that the trustee will never return anything. Coleman (1990) suggests viewing a trustor like someone who places a bet. If a trusting organization decides whether or not it will risk losing money, reputation, social contacts etc. or refrain from so doing, the behaviour of that organization will follow a simple mathematical equation: p/1-p is greater, smaller or equal to L/G. In this formula, p is probability that the trusting organization’s engagement will turn out to be worthwhile; L is the potential loss if it is disappointed by the trustee; and G is the potential gain if the trusted partner organization behaves trustworthily.
Rational choice theorists are interested in cooperation and not so much in the coordination of activities. The view is that acting organizations will in most cases have conflicting interests as each of them seeks to maximize organizational profits. Often the latter will only be achieved at the expense of the other. Each acting organization is assumed to have significant incentives to cheat. However, and as game theory – a stream of literature derived from rational choice premises – argues, there can be situations where actors need to cooperate in order to collectively reap potential gains, which might otherwise not be accessible for anyone without accepting unreasonable amounts of risk (Axelrod, 1984). Many alliances in the corporate world are perfect examples for this. The coordination aspect of trust plays no great role in this theoretical perspective as the ‘common good’ is indeed difficult to conceptualize if only rational and self-interested individual and collective actors are assumed (Hardin, 2002).
At its central premise, transaction cost economics assumes that firms will choose the governance structure – make, ally or buy – which minimizes costs of transactions (e.g. Williamson, 1979; 1985; 1991). Transaction cost economics predicts that firms will vertically integrate trans actions (make), rather than rely on the market (buy), when exchange hazard is high and trans actions occur frequently. In other words, when contracting, negotiation or administration of a task is costly, then it is more efficient to do the task in-house than, for example, outsource to a third party or buy a product ‘off-the-shelf’. Conversely, when exchange hazard and costs of transactions are low, then it is more efficient to outsource the task, rather than doing it within the firm. Inter-organizational relationships (‘ally’ in Williamson’s parlance) lie in-between these two extreme forms of governance (Williamson, 1991). Hence, the formation of inter-organizational relationships, in Williamson’s framework, is determined by the costs of transaction.
Trust does not play a major a role in the transaction cost framework. Quite the contrary, Williamson (1993) firmly makes the case that trust is an absent, or even impossible, aspect of economic exchange. Instead, Williamson assumes that economic agents are always opportunistic and calculative (Williamson, 1993). Trust cannot be formed in the presence of calculativeness, and calculativeness also devalues pre-existing trust. Trust, therefore, is ‘reserved for very special relations between family, friends, and lovers. Such trust is also the stuff of which tragedy is made. It goes to the essence of the human condition’ (Williamson, 1993: 484).
Williamson’s claim against trust has been heavily debated, questioned and criticized (e.g. Bachmann & Zaheer, 2008; Cohen, 2014; James, 2014; McEvily, 2011; Möllering, 2014; Nooteboom, Berger, & Noorderhaven, 1997). One of the most common critiques targets Williamson’s separation between trust and calculativeness (Möllering, 2014). McEvily (2011: 1266) envisages that trust is to be conceptualized as a ‘family of hybrid form concepts’, where trust and risk co-occur and overlap. Cohen (2014) proposes that one can trust genuinely – but for calculative reasons – in so far as trust is based on the understanding of risk and reward. With this conceptualization, genuine trust can both exist and play an important role in inter-organizational collaborations. James (2014) proposes a slightly different argument, namely that trust is calculative for as long as risk can be estimated, but that trust cannot be calculative under genuine uncertainty (cf. Knight, 1916).
Even though trust is not part of the transaction cost framework, several scholars (e.g. Chiles & McMackin, 1996; Gulati & Nickerson, 2008; Poppo, Zhou, & Li, 2015; Vanneste, Puranam, & Kretschmer, 2014) have sought to extend the transaction cost framework to theorize the role of trust in inter-organizational relationships. Within these theoretical extensions, the assumption of opportunism is relaxed and trust is conceptualized as a ‘shift parameter’ (Gulati & Nickerson, 2008), enabling collaborating partners to use less extensive safeguards. Trust, in these extensions of the transaction cost framework, has both a cooperative and coordinative role to play.
Assigning trust a cooperative role, Gulati and Nickerson (2008) propose that in a situation where exchange hazard is high, trust can enable a less formal mode of governance (ally) instead of a more formal one (buy). This is because, when trust is present, transacting partners are assumed to be less concerned with opportunism stemming from misaligned goals. Whereas Williamson (1993) would reject the notion that trust, within the realms of economic transactions, can ever be strong-enough to enable such a substitution effect, Gulati and Nickerson (2008) do find empirical support for their argument. By surveying exchange relationships geared to sourcing components in the U. S. auto industry, they find that relationships with a high degree of trust are more likely to rely on less formal governance modes. In other words, they propose that there is a substitutive effect between prior trust and formal governance.
In addition to resolving cooperation concerns, Gulati and Nickerson (2008) also assign trust a coordinative role, arguing that trust enables a more flexible division of tasks – hence better coordination. Trust enables collaborating organizations to resolve conflicts more effectively, without having to seek explicit agreements or involve third parties (Gulati & Nickerson, 2008). Moreover, because trust enables commitment of resources, such as information exchange and joint systems for planning and coordination, trust also allows more flexible interaction, which in turn puts collaborators in a better position to adapt to unforeseen events. Viewing trust as a coordinative mechanism, trust is assumed to have a complementary effect on formal governance during the course of inter-organizational relationships (Gulati & Nickerson, 2008). Subsequent studies (e.g. Poppo et al., 2016; Vanneste et al., 2014) have continued to build on this insight, finding that these substitutive and complementary effects are stronger for relational trust than for calculative trust.
Social exchange theory (e.g. Blau, 1964; Homans, 1958; Thibaut & Kelley, 1959) explains how series of interactions between social actors (e.g. individuals, groups, organizations) generate commitments (Emerson, 1976). Social exchange refers to ‘voluntary actions of individuals that are motivated by the returns they are expected to bring and typically in fact bring from others’ (Blau, 1964: 6). Social exchange creates norms of reciprocity (Gouldner, 1960), meaning that exchange partners feel morally obliged to behave in a manner that is considered fair among those involved (Cropanzano & Mitchell, 2005). Hence, one of the basic principles of this theory is that relationships, under certain conditions, develop over time into feelings of personal obligation and gratitude (Cropanzano & Mitchell, 2005). Social exchange theorists do not explicitly define trust, but rather take it for granted (Möllering, 2007) and see it as an outcome of favourable social exchange (Cropanzano & Mitchell, 2005). Even so, inter-organizational trust scholars often rely on social exchange theory and assume that trust exists in repeated exchange relationships between organizations (e.g. Das & Teng, 2002; Elfenbein & Zenger, 2014; Gulati, 1995; Gulati & Singh, 1998; Lioukas & Reuer, 2015; Zaheer et al., 1998).
Within social exchange theory, trust is primarily understood as an outcome of repeated interaction, while the role of trust in inter-organizational relationships is not directly addressed. Yet, in a broader sense, social exchange theory has been used to argue that trust enables the resolving of cooperation concerns in inter-organizational relationships (e.g. Cropanzano & Mitchell, 2005; Das & Teng, 2002). When norms of reciprocity and feelings of friendship are established, partners become confident that the other side will not behave opportunistically, since such behaviour would violate the established norms of reciprocity, feelings of friendship and emotional attachment (e.g. Das & Teng, 2002).
Scholars have relied on social exchange theory to suggest that trust can, indirectly, also have a coordinative role. McEvily, Perrone and Zaheer (2003) argue that trust enables serial equity in repeated exchanges, which in turn facilitates the coordination of mutual expectations. Serial equity enables the coordination of tasks to be extended over time and ‘through a variety of different currencies, e.g. exchange in kind (Ouchi, 1980)’ (McEvily et al., 2003: 96). Hence, when trust is present, organizations can maintain a higher degree of flexibility in the coordination of tasks, without re-negotiating or changing basic structures. Such flexibility can be valuable when organizations need to coordinate independent and joint activities in response to unforeseen events (McEvily et al., 2003). In a similar vein, Liu, Luo and Liu (2009) build on social exchange theory, arguing that after partners have established norms of trust through repeated exchange they are more able to articulate and understand one another’s expectations. This facilitates adaptation and problem solving in inter-organizational relationships. Trust, they argue, also induces stability and predictability in inter-organizational relationships. This motivates partners to make relationship-specific investments, such as promoting one another’s production technology or investing in joint activities. Nooteboom et al. (1997) also rely on social exchange theory, when suggesting that on the basis of repeated exchanges the establishment of trust becomes perceived as valuable in itself. Trust, thereby, can function as a superordinate goal, which resolves conflict and helps align subordinate objectives. Also in this perspective, trust is given both a cooperative and coordinative role to play in inter-organizational relationships.
This theoretical approach is based on the idea that the behaviour of social actors (e.g. individuals, groups or organizations) is oriented towards certain patterns and rules that exist in the environment in which they interact. Actors are conceived of as social rather than rational or even calculative. It is not ruled out that actors behave according to explicit and rational reasoning but this is not the norm in everyday conduct where actors semi-consciously follow more or less successful routines (Powell & DiMaggio, 1991; Scott, 1995).
The established patterns, rules and norms of social behaviour constitute the institutional framework, which this approach sees as fundamental in explaining the actual behaviour of actors. This is not a deterministic one-way process where behaviour is a direct outcome of the institutional arrangements. Rather, it is assumed that (1) institutions shape or channel the behaviour of actors instead of determining it, and that (2) institutions would not exist if they were not continuously reproduced by actors’ affirmative behaviour. The latter also means that actors can change the meaning, importance and legitimacy of social rules and norms. This, however, is more the exception, whereas in general, a stable and reliable order is assumed to guide actors’ behaviour. Some critics of the neo-institutional approach have pointed out that this theoretical framework focuses more on the influences of institutions than on the creative potential of action. In this context it has been noticed that the process of creating and reproducing institutions is placed emphasis on by structuration theory (Giddens, 1984), which can thus be seen as a useful complement to neo-institutional theory (Barley & Tolbert, 1997; Kroeger, 2012).
The neo-institutionalist approach does not normally see actors as calculative and profit-maximizing; in their usual day-to-day practice actors are assumed to follow rules in a semiconscious way. Trust is thus simply seen as a deep-seated characteristic of human behaviour, present in all kinds of interaction. Strong institutional frameworks can facilitate trust, i.e. ‘institutional-based trust’ among actors (Zucker, 1986; Lane & Bachmann, 1996); trust itself can be institutionalized (Kroeger, 2012; Schilke & Cook, 2013); and trust – like power, meaning or legitimacy – can be seen as an element of the structuration process in which institutions and actions are embedded (Sydow, 1998).
Similar to social exchange theory, neo-institutional theory also emphasizes that social interaction occurs in a relatively stable social framework in which trustees are assumed to benefit from being trustworthy. The two perspectives, however, are different in how they theorize the origin of that social framework. Social exchange theory emphasizes the repeated exchange occurring between the same actors and the establishment of cooperative norms that follow from such repeated exchange. Social exchange theory, thereby, provides insights about the development of trust over time in a specific relationship. Neo-institutional theory, in contrast, acknowledges the role of systemic structures that exist outside the specific boundaries of a relationship. In complement to social exchange theory, neo-institutional theory provides insights into how initial trust is established in an inter-organizational relationship. Thus, the two theoretical perspectives are seen to be combinable in a useful way.
Because neo-institutionalist theory views actors as more driven by routines than by calculation, the coordination aspect of trust is deemed most important (Bachmann & Inkpen, 2011). Bachmann (2001) suggests that trust leads to predictability and stability in inter-organizational exchange. Stable inter-organizational interaction, in turn, enables the establishment of standardized and shared rules, norms and routines, which have a positive influence on the coordination of actors’ expectations (see also Bachmann & Inkpen, 2011; Jones, Hesterly, & Borgatti, 1997). The issue of cooperation is not assumed to be the key aspect of trust. If an individual or organization turns out to be untrustworthy, this may well be of interest for those individuals or organizations involved in a specific situation, but the reproduction of the social order is not put in question through such events. As human actors have a free will, there will always be some actors who will prefer to cheat to maximize their interests. Generally, however, a social actor’s behaviour is channelled into a certain direction by way of the institutional environment in which the actor’s interaction with others is placed. This alone is enough to reduce the risk of betrayal and to encourage individual and organizations to invest trust in many relationships.
There can never be any guarantees that actors will behave trustworthily. However, neo-institutionalists tend to see a reliable institutional order as enabling coordination by reducing the inherent risk of trust. On the whole, neo-institutionalists do not believe that the cooperation concerns are irrelevant, but they emphasize the alignment of interests through effective coordination processes. Only where this is achieved in the first place, can conflicting interests and potential cooperation be meaningfully articulated.
In the previous section, we have discussed how the role of trust for aligning goals (cooperation) and for aligning tasks (coordination) in inter-organizational relationships is conceptualized with in four fundamental theoretical perspectives: rational choice theory, transaction cost theory, social exchange theory and neo-institutional theory. Against that backdrop, we outline below three important areas for future research.
As our review illuminates, inter-organizational trust research in general has remained much more explicit about the role for trust in resolving cooperation concerns, but more implicit about the role of trust for coordination purposes. We therefore see promise in further investigating the coordinative role of trust. In particular, we encourage longitudinal studies in how coordinative processes and trust development co-evolve in inter-organizational exchanges. Too much of the existing literature has taken a static view on trust and coordination. As discussed, social exchange theory (e.g. McEvily et al., 2003) and transaction cost theory (e.g. Gulati & Nickerson, 2008) have been applied to frame coordination as a favourable outcome of inter-organizational trust. A process perspective, by contrast, would focus more on how coordination and trust building co-evolve during the life-cycle of an inter-organizational relationship. This type of process-oriented research could help uncover novel mechanisms underlying trust and the coordination of mutual expectations, thereby providing insights into how trust facilitates coordination, how effective coordination contributes to building trust, and to what extent the process of inter-organizational trust development and the process of coordinating expectations and interaction are independent on one another.
We expect a processual perspective to be particularly relevant in contexts where coordination issues are challenging. This could include contexts characterized by high uncertainty, unpredictability and volatility, such as in innovative or entrepreneurial settings. This could also include contexts where the concept of coordination becomes particularly complex, for example when inter-organizational collaboration spans multiple sites, task domains or partners. In these types of contexts, coordination mechanisms can hardly be specified ex ante. Instead, a processual perspective that focuses on the sequence and pace at which trust and coordination emerge over time could contribute to a realistic and useful theory about the role of trust in inter-organizational relationships.
Firms increasingly engage in cooperative relationships with competitors (e.g. Gnyawali & Park, 2011). This is especially relevant in industries characterized by rapid technological change, shortened product life-cycles or requirements for heavy investments into research and development (Ritala et al., 2009). Not least in such contexts, research on trust, cooperation and coordination processes is pivotal in understanding the dynamics and the factors contributing to the success of inter-organizational relationships.
However, as our analysis shows, there is a considerable scarcity of research that can explain inter-organizational trust development on the basis of cooperation and coordination processes. Within a rational choice perspective, coordination is not recognized as an issue, while within the transaction cost and social exchange frameworks, coordination is identified as relevant, but primarily seen as an indirect outcome of favourable cooperation. In a neo-institutionalist view, by contrast, coordination has been the primary focus of analysis, while cooperation is conceptualized as a secondary phenomenon, derived from the successful coordination of expectations.
Given the nascent state of theory development on trust, coordination and cooperation, we encourage future research to look into processes of trust development, cooperation and coordination through inductive and longitudinal empirical analyses, without making a priori assumptions about the causality or temporal order between these processes. We expect such an effort to generate novel insights, not only into the role of trust, but also more generally related to collaborative processes in inter-organizational relationships. Important research questions could include if/how successful cooperation enhances coordination processes and vice versa, or if/how trust mediates or moderates the relationship between cooperation and coordination in inter-organizational relationships.
Theoretical advances occur when concepts are refined; while being specified, they can be applied across a variety of contextual settings (Chimezie & Osigweh, 1989). By specifying the role of trust in resolving coordination and cooperation issues separately, our review illuminates important boundary conditions of the four theories we discuss. We show, for instance, how neo-institutional theory is not very useful for theorizing cooperation in inter-organizational relationships, but may be very suitable for understanding how collaborating firms overcome the challenge of coordination. The rational choice approach, on the other hand, provides one possible explanation for how firms come to accept their vulnerability in an inter-organizational collaboration. At the same time, we have also identified the limits of the rational choice approach, specifically where the question of how collaborating parties achieve successful coordination processes is concerned.
By drawing attention to boundary conditions, our review also points to promising complementarities between the different theoretical perspectives that we have discussed. We encourage future research to explore under which conditions a neo-institutional approach can be combined with other theoretical perspectives to understand trust, cooperation and coordination in inter-organizational relationships. We also suggest future research to more carefully differentiate trust from alternative outcomes of inter-organizational interaction. Lioukas & Reuer (2015) set a promising example by disentangling trust from learning outcomes of social exchange processes. Following this line of inquiry, it should be possible to distinguish cooperative from coordinative outcomes of calculative, rational, social or institutional processes.
Another approach to digging deeper into the issues related to trust, cooperation and coordination could build on a more careful distinction of the unit of analysis. Inter-organizational relationships are multi-level phenomena, where trust simultaneously exists on the individual, organizational and institutional levels of analysis. We therefore find it important to investigate if/how trust ‘in institutions’ brings about cooperative and coordinative processes which are different from ‘trust in individuals’ or ‘trust in organizations’. It would also be useful to know the mechanisms that connect trust, cooperation and coordination across levels of analysis. Taken together, we encourage inter-organizational trust research to build on a multi-level approach. This would include research that focuses on how trust, coordination and cooperation are simultaneously manifested at the inter-personal, inter-organizational and institutional levels of inter-organizational relationships.
In this chapter, we have discussed four theories that are commonly applied to conceptualize the role of trust in inter-organizational relationships. In so doing, we have drawn attention to the cooperative and coordinative facets of inter-organizational relationships and we have discussed how different theoretical perspectives are more or less apt for understanding the role of trust in inter-organizational relationships. We also hope that our chapter can persuade trust scholars to study the role of inter-organizational trust through multiple theoretical lenses, letting different theoretical perspectives complement one another and, thus, provide a more comprehensive view of trust in inter-organizational relationships.
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