Bridging Uncertainty in Management Consulting: The Mechanisms of Trust and Networked Reputation

Abstract

This article analyzes the market of management consulting and identifies institutional and transactional uncertainty as its principal features. Based on these uncertainties, we argue that competition in this market takes place on entirely different grounds than in other business sectors. We suggest that the main drivers of competitiveness are neither price nor measurable quality, but rather experience-based trust and a mechanism we label ‘networked reputation.’ An embeddedness perspective is employed to develop the concept of networked reputation as an intermediate mechanism that complements the duality of system versus personal trust and accounts for firm growth. We reinterpret secondary data on the German consulting market, illustrate the significance of these mechanisms, and demonstrate how management consulting is situated in structures of social relations.