Corporate governance and evolution of trust in entrepreneurial networks

Abstract

PurposeConcerning that limited explanation exists examining the function of corporate governance in trust processing within entrepreneurial network development, the purpose of this paper is to explore trust evolution and the role of corporate governance in an entrepreneurial network.Design/methodology/approachThis paper makes an innovative exploration based on the case study of NVC Lighting Holding Limited.FindingsIt proposes that in the initial period of network relationship which is based on entrepreneur’s individual social network and embodies sole social network embeddness, entrepreneurial network relies more on affective trust than contractual trust. When stepping into extending period of network relationship which reflects separate embeddedness of social and market network, however, entrepreneurial network has an equal reliance on both affective trust and contractual trust. With further development, when ushering in the phase of maturity which undergoes superimposing embeddedness of both social and market network, entrepreneur network inclines to rely more heavily on affective trust than contractual trust. During the whole process, it can be found that the reliance of entrepreneurial network on trust has the tendency to transfer from affective trust to contractual trust. Furthermore, decreasing of equity ratio of founders and strengthening of controlling right heterogeneity in the corporate governance have facilitated the transfer process and the entrepreneurs’ authority has restraining effect on the evolution of the process.Originality/valueThrough case study, this paper presents the trust evolution process in different stages of entrepreneurial network. Another important theoretic contribution of this paper is that it reveals the function of corporate governance in trust processing within entrepreneurial network development.