IDEAS home Printed from https://ideas.repec.org/a/inm/ororsc/v14y2003i1p45-56.html
   My bibliography  Save this article

Information Processing Moderators of the Effectiveness of Trust-Based Governance in Interfirm R&D Collaboration

Author

Listed:
  • Stephen J. Carson

    (Department of Marketing, University of Utah, 1645 East Campus Center Drive, Salt Lake City, Utah 84112)

  • Anoop Madhok

    (Department of Management, University of Utah, 1645 East Campus Center Drive, Salt Lake City, Utah 84112)

  • Rohit Varman

    (Indian Institute of Technology, Kanpur, India 208016)

  • George John

    (Marketing Department, Carlson School of Management, University of Minnesota, 321 19th Avenue South, Minneapolis, Minnesota 55455)

Abstract

It is generally assumed that improved outcomes accompany the use of trust as a governance mechanism in an interfirm relationship. Briefly, trust is a social lubricant that reduces the friction costs of existing trade and/or serves to increase the scope of trade. In contrast to this universalistic view, we posit that the performance of trust-based governance is contingent on the ability of trading partners to “read” each other and learn about counterpart behavior. These information-processing abilities allow firms to assess partner trustworthiness better, which reduces the risk of misplaced trust. The increased efficacy of communication and learning from one another also enables them to better capitalize from the adaptation and revision possibilities uncovered through trust-based governance during the task-execution phase. Given the central role of these cognitive requirements, we assess these contingent effects with data from a knowledge-intensive task setting. Using a sample of 129 firms that have engaged outside contractors on client-sponsored R&D projects, we find strong support for our thesis. Specifically, we find that trust-based governance has a larger positive impact on task performance when the client is more skilled at understanding the outsourced tasks at hand, the task itself requires skills that are relatively more readily taught (less tacit), and the task itself is organized in parallel with work being done at the contractor as well as the client. As a corollary, we also find that firms adopt trust-based governance to a greater extent as these information-processing abilities increase, as well as with the colocation of the contractor and client. Suggestions for engineering trust-based governance are offered.

Suggested Citation

  • Stephen J. Carson & Anoop Madhok & Rohit Varman & George John, 2003. "Information Processing Moderators of the Effectiveness of Trust-Based Governance in Interfirm R&D Collaboration," Organization Science, INFORMS, vol. 14(1), pages 45-56, February.
    • Handle: RePEc:inm:ororsc:v:14:y:2003:i:1:p:45-56
    DOI: 10.1287/orsc.14.1.45.12811
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/orsc.14.1.45.12811
    Download Restriction: no
    File URL: https://libkey.io/10.1287/orsc.14.1.45.12811?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1251-1288.
    2. Bruce Kogut & Udo Zander, 1993. "Knowledge of the Firm and the Evolutionary Theory of the Multinational Corporation," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 24(4), pages 625-645, December.
    3. Deborah Gladstein Ancona & David F. Caldwell, 1992. "Demography and Design: Predictors of New Product Team Performance," Organization Science, INFORMS, vol. 3(3), pages 321-341, August.
    4. Armstrong, J. Scott & Overton, Terry S., 1977. "Estimating Nonresponse Bias in Mail Surveys," MPRA Paper 81694, University Library of Munich, Germany.
    5. Abhijit V. Banerjee & Esther Duflo, 2000. "Reputation Effects and the Limits of Contracting: A Study of the Indian Software Industry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(3), pages 989-1017.
    6. Akbar Zaheer & Bill McEvily & Vincenzo Perrone, 1998. "Does Trust Matter? Exploring the Effects of Interorganizational and Interpersonal Trust on Performance," Organization Science, INFORMS, vol. 9(2), pages 141-159, April.
    7. Williamson, Oliver E, 1993. "Calculativeness, Trust, and Economic Organization," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 453-486, April.
    8. George P. Huber, 1991. "Organizational Learning: The Contributing Processes and the Literatures," Organization Science, INFORMS, vol. 2(1), pages 88-115, February.
    9. Williamson, Oliver E, 1991. "Economic Institutions: Spontaneous and Intentional Governance," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 159-187, Special I.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wang, Chun-Ju & Wu, Lei-Yu, 2012. "Team member commitments and start-up competitiveness," Journal of Business Research, Elsevier, vol. 65(5), pages 708-715.
    2. Delbufalo, Emanuela, 2015. "Subjective trust and perceived risk influences on exchange performance in supplier–manufacturer relationships," Scandinavian Journal of Management, Elsevier, vol. 31(1), pages 84-101.
    3. Pak, Yong Suhk & Ra, Wonchan & Park, Young-Ryeol, 2009. "Understanding IJV performance in a learning and conflict mediated context," International Business Review, Elsevier, vol. 18(5), pages 470-480, October.
    4. Bönte, Werner, 2008. "Inter-firm trust in buyer-supplier relations: Are knowledge spillovers and geographical proximity relevant?," Journal of Economic Behavior & Organization, Elsevier, vol. 67(3-4), pages 855-870, September.
    5. Yong Suhk Pak & Jong Min Lee, 2023. "Organizational learning platforms for knowledge creation in international joint ventures: the mediating role of formal and informal communication," Asian Business & Management, Palgrave Macmillan, vol. 22(5), pages 2135-2163, November.
    6. Liu, C.-L.E., 2012. "An investigation of relationship learning in cross-border buyer–supplier relationships: The role of trust," International Business Review, Elsevier, vol. 21(3), pages 311-327.
    7. Liu, Chia-Ling (Eunice) & Ghauri, Pervez N. & Sinkovics, Rudolf R., 2010. "Understanding the impact of relational capital and organizational learning on alliance outcomes," Journal of World Business, Elsevier, vol. 45(3), pages 237-249, July.
    8. Hongxin Zhao, 2015. "Are Social Ties Always Valuable to Knowledge Search? Contextualizing Knowledge Search by Foreign Subsidiary Executives in an Emerging Economy," Management International Review, Springer, vol. 55(4), pages 511-538, August.
    9. George Hendrikse & Patrick Hippmann & Josef Windsperger, 2015. "Trust, transaction costs and contractual incompleteness in franchising," Small Business Economics, Springer, vol. 44(4), pages 867-888, April.
    10. Zahoor, Nadia & Adomako, Samuel, 2023. "Be open to failure: Open innovation failure in dynamic environments," Technological Forecasting and Social Change, Elsevier, vol. 193(C).
    11. Jain, Rekha, 2016. "Measuring the Perceived Impact of Internet on Individuals in Rural India," IIMA Working Papers WP2016-03-61, Indian Institute of Management Ahmedabad, Research and Publication Department.
    12. Lei–Yu Wu & Chun–Ju Wang & Cheng–Ping Chen & Lee–Yun Pan, 2008. "Internal Resources, External Network, and Competitiveness during the Growth Stage: A Study of Taiwanese High–Tech Ventures1," Entrepreneurship Theory and Practice, , vol. 32(3), pages 529-549, May.
    13. Vanesa Solís-Rodríguez & Manuel González-Díaz, 2019. "Prior interactions and contractual completeness in Spanish franchising," Small Business Economics, Springer, vol. 53(3), pages 795-812, October.
    14. Mike, Károly & Kiss, Gábor, 2017. "Hitelesek-e a vállalkozások ígéretei Magyarországon? [Do Hungarian entrepreneurs make credible promises?]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1285-1315.
    15. Pao, Huei-Wen & Wu, Hsueh-Liang & Lee, Cheng-Yu, 2020. "Project interface choice and knowledge creation: Evidence of international science cooperation in Taiwan," Technovation, Elsevier, vol. 89(C).
    16. Arturo Galindo & Alberto Chong & César Calderón, 2001. "Structure and Development of Financial Institutions and Links with Trust: Cross-Country Evidence," Research Department Publications 4251, Inter-American Development Bank, Research Department.
    17. Jens Hagendorff & Sonya Lim & Duc Duy Nguyen, 2023. "Lender Trust and Bank Loan Contracts," Management Science, INFORMS, vol. 69(3), pages 1758-1779, March.
    18. Belhadi, Amine & Kamble, Sachin S. & Mani, Venkatesh & Venkatesh, V.G. & Shi, Yangyan, 2021. "Behavioral mechanisms influencing sustainable supply chain governance decision-making from a dyadic buyer-supplier perspective," International Journal of Production Economics, Elsevier, vol. 236(C).
    19. Sirén, Charlotta & Kohtamäki, Marko, 2016. "Stretching strategic learning to the limit: The interaction between strategic planning and learning," Journal of Business Research, Elsevier, vol. 69(2), pages 653-663.
    20. Mohammadi, Ali & Broström, Anders & Franzoni, Chiara, 2015. "Work Force Composition and Innovation: How Diversity in Employees’ Ethnical and Disciplinary Backgrounds Facilitates Knowledge Re-combination," Working Paper Series in Economics and Institutions of Innovation 413, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ororsc:v:14:y:2003:i:1:p:45-56. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.