Trust, Control, and Risk in Strategic Alliances: An Integrated Framework

Abstract

Trust and control are inextricably interlinked with risk in strategic alliances. Hence, to understand how partner firms can effectively reduce and manage this risk, we need to examine the inter-relationships between trust, control, and risk. In this article, we propose a comprehensive and integrated framework of the three constructs in the context of strategic alliances, contending that trust and control are the two principal antecedents of risk. First, we suggest that the three constructs are each comprised of certain key dimensions. Risk can be considered separately as relational risk and performance risk. The two dimensions of trust are identified as goodwill trust and competence trust, and control is differentiated in terms of the three modes of behaviour control, output control, and social control. Second, we discuss systematically the various linkages between the different types of trust, control, and risk in alliances. Third, we suggest several risk reduction approaches — minimizing relational risk through goodwill trust, behaviour control, and social control, while minimizing performance risk through competence trust, output control, and social control. Fourth, we discuss a number of trust-building techniques and control mechanisms to reduce risk in different types of strategic alliances. Finally, we develop propositions for empirical testing of the integrated framework and offer brief comments on future research directions and managerial implications