Grounding Trust in Inter-organizational Alliances: An Exploration of Trust Evolution

Abstract

This paper explores the role of trust in coordinating teams operating at the interface between multiple functions and organisations in strategic alliances. To understand the issues faced by these teams, we study cognitive & relational factors between partners and focus on the process of trust evolution and risk management in the complex interface between strategic partners. This research examined two coordinating teams. We explore how coordinating teams construed risks in context; the differences of the symbolic role between formal and extra-role behaviours of partners in engendering trust; and the distinct processes through which trust was negotiated between partners. We identify the implications of trust on the management of alliances and the impact of uncertainty by exploring the role of coordinating teams in as risk mitigators, examine perceptions of trust as a coordinating mechanism, antecedent for reducing risks or just another mechanism of control, and looked at changes in partner behaviours when trust was breached. Data for this study were collected on a longitudinal basis in two case studies. The first examined a coordinating team tasked to translate an award winning innovative design into a viable museum, while the second examined a team tasked to manage the provision of outsourced insurance services offered by a financial institution. Goffman's (1972) categories of situational, relational and interpersonal risk were used as a means of framing risk and trust between stakeholder organisations and of exploring self-perceptions about their risk mitigating roles by members of the coordinating team. Key words: Resource-based View, Relational View, Networks, Network Resources Introduction This paper examines the role of coordinating teams in framing and managing risks in strategic alliances. We argue that in effective alliances, high levels of trust evolve between inter-organisational members moving organisations away from highly bureaucratic, controlled-based structures towards cohesive, culturally-integrated interorganisational networks. Strategic alliances are inter-firm cooperative arrangements between two or more partners that aim to achieve the strategic objectives of involved partners (Das/Teng 1998). Strategic alliances form cooperative strategies aiming to control competitive forces (Gill/Butler 2003), and the uncertainties arising from them by being more effective and adaptable to changing market forces (Mitronet/Moller 2003). While expectations of strategic alliances run high, satisfaction from their performance, often measured by the satisfaction of goals of parent companies, is low (Das/Teng 2000; Kogut, 1989). In most cases, the managerial complexity of coordinating interorganisational relationships makes cooperative strategies difficult and frustrating (Cullen/Johnson/Sanako 2000). Uncertainty and, often, ambiguity with regard to shifting market conditions; changing expectations across time; and lack of control over partner behaviours increases the cooperation risks thus, making their management complex. Theory suggests that the effectiveness of strategic alliances is based not only on the strategic but also on the cultural alignment between organisations (Das/Teng 1998). Its effectiveness depends on partners' confidence in framing uncertainty and their ability to control it (Cullen/Johnson/Sanako 2000; Das/Teng 1998). According to Ouchi (1980), such contextual uncertainties would be better tackled by clan or network structures and work organisations. Unlike hierarchies and markets that use institutional rules and price mechanisms, respectively, to coordinate work, clans rely mostly on the exchange of mutual obligations, extra role behaviours and trust to mitigate and moderate environmental risks (ibid). This level of reciprocity can therefore mitigate the collaboration risks and facilitate the management of strategic alliances. Yet, a compounding concern revolves around who is responsible for the framing and management of uncertainty in these alliance structures. …