Trust in corporate real estate management outsourcing relationships

Abstract

Corporate real estate management outsourcing relationships are characterised by intangible services, information asymmetries between principal and agent, bounded rationality, and imperfect contracts. In such relationships, trust may be an important complement to contracts and monitoring to reduce transaction costs. This study tests how economic, social, monitoring and corporate real estate management-specific variables affect two types of trust – calculative and relational – with data collected from US corporate real estate managers. An OLS analysis reveals that service provider expertise and efficient monitoring positively impact calculative trust. Additionally, perceived value, social interaction, communication, service provider dependency and efficient monitoring are positively associated with relational trust. The findings suggest service provider market knowledge is essential to gain a client’s trust in an outsourcing relationship. Proper handling of sensitive information, reliable communications, providing superior value and personal relationships contribute to relational trust that can lead to more stable, enduring relationships. Clients recognise that service provider dependency may contribute to their acting in a trustworthy manner. However, trust and effective monitoring are complements, not substitutes, in these relationships.