From interpersonal to interorganisational trust: The role of indirect reciprocity

Abstract

How does interpersonal trust (i.e. between individuals) lead to interorganisational trust (i.e. between groups of individuals)? I build a bottom-up theory in which interorganisational trust arises from individuals and their dispositions, actions and observations. The theory is based on indirect reciprocity, whereby A helps B and then C helps A. Using a simulation model, I analyse (a) whether indirect reciprocity can lead to trust between two organisations even when many people are involved, when the extent of their indirect reciprocation differs, and when helping others is costly; and (b) how the presence of a boundary spanner affects this process. The main findings are that (a) indirect reciprocity can indeed create interorganisational trust under such conditions, and that, in fact, indirect may outperform direct reciprocity. Furthermore, (b) boundary spanners can decrease or increase interorganisational trust: they may decrease it by boosting their own trust at the expense of that of others, and they may increase it by enhancing indirect reciprocity for everyone through four mechanisms: contributing, discriminating, initiating and consolidating.