Cycles of trust and distrust in joint-ventures

A joint-venture is one of a number of possible cooperative strategies that an organization may pursue and may be constrasted to competitive strategies that are more usually referred to in the literature on business and management. This article is based upon an international study of joint-ventures and develops the notion that trust presents a useful core concept for understanding the performance of joint-ventures. In order to do this, a quite formalized model is developed in which joint-venture performance is seen as an outcome of contextual variables with trust acting as an intermediate variable. Key variables are seen to be: the pattern of interdependencies between the parent companies and the joint-venture, the degree of competition endogenous to the joint-venture, and the ambiguity of the joint-venture's activities and objectives. The key aspect of trust that is developed concerns the extent to which an organizational form provides reliable knowledge about future outcomes with two dimensions of trust identified as of special significance. First, is personal trust which is based upon the perceived reliability of the individuals to fulfil expectations and is seen to be an outcome of the nature of social networks to which people belong. Second, is procedural or impersonal trust which is based upon the perceived reliability of formalized systems and computations for making reliable decisions, and is seen to be an outcome of the rules and industrial recipes that pertain in the joint-venture. This model is illustrated by means of two case studies, one involving a case of the decay of trust into distrust, the other involving the successful building up of trustworthy relations within the joint-venture.