Master Thesis
Management control and trust in inter-organizational settings.
‘The different purposes of formal control and
their effect on inter-organizational trust’
Name: Michel Kruithof
Address: Van Hamelstraat 5A,
9714 HH Groningen
Telephone: +31(0)610541785
Email: m.kruithof@student.rug.nl
Student number: 1795708
MSc Business Administration: Organizational & Management Control
University of Groningen
Faculty of Economics and Business
January 20
th, 2015
- 1 -
Abstract
This paper investigates how formal control is related to trust in inter-organizational settings, by taking into account the different purposes of formal control (safeguarding, coordination and adaptability). From the theoretical analysis, six propositions are formulated and incorporated into a conceptual model. A qualitative case study approach based on semi-structured interviews is used to test this model. The results indicate that each different purpose of formal control influences trust in a unique way. Control can have both negative and positive effects on trust, depending on the fit and formation of controls, cooperation, communication, information- and knowledge sharing, past performances and transparency.
Keywords: contracts; formal control; inter-organizational trust; inter-organizational
relationship; collaboration.
- 2 - Table of Contents Abstract ... - 1 - Table of Contents ... - 2 - 1. Introduction ... - 4 - 2. Literature Review ... - 6 - 2.1 A definition of trust ... - 6 -
2.1.1 Different levels of trust ... 8
-2.2 Formal control ... - 8 -
2.3 Different purposes of control ... - 10 -
2.3.1 Control as safeguarding mechanism. ... 11
2.3.2 Control as a coordination mechanism. ... 13
2.3.3 Contracts as adaptation mechanism. ... 16
-2.4 Conceptual model ... - 18 - 3. Methodology ... - 19 - 3.1 Qualitative research ... - 20 - 3.2 Case selection ... - 20 - 3.2.1 Case description. ... 21 -3.3 Data collection ... - 21 -
3.3.1 Primary data collection... 21
-3.4 Data analysis ... - 23 -
.3.5 Research criteria ... - 24 -
4. Results ... - 25 -
4.1 Control as safeguard ... - 25 -
4.2 Control as coordination mechanism ... - 27 -
4.2.1 The effect of control as coordination mechanism on communication, cooperation and effective dispute resolution. ... 27
4.2.2 The effect of communication, cooperation and effective dispute resolution on goodwill trust. ... 29
4.2.3 The effect of control as coordination mechanism on information and knowledge sharing. ... 31
4.2.4 The effect of information and knowledge sharing on capability trust. ... 32
-4.3 Control as adaptation mechanism ... - 34 -
4.3.1 The effect of control for adaptation on cooperation and communication. ... 34
4.3.1 The effect of control for adaptation on capability trust. ... 35
-5. Discussion ... - 36 -
5.1 Control as safeguarding mechanism ... - 36 -
5.1.1 Safeguarding and goodwill trust... 37
-- 3 --
5.2 Control as coordination mechanism ... - 38 -
5.2.1 Control as coordination mechanism and goodwill trust. ... 39
5.2.2 Control as coordination mechanism and capability trust. ... 40
-5.3 Control as adaptation mechanism ... - 40 -
5.3.1 Control as adaptation mechanism and goodwill trust. ... 41
5.3.2 Control as adaptation mechanism and capability trust. ... 41
-5.4 Revision of the conceptual model ... - 42 -
6. Conclusions ... - 43 -
6.1 Theoretical and practical implications ... - 44 -
6.2 Limitations ... - 44 -
6.3 Suggestions for further research ... - 45 -
7. References ... - 45 -
8. Appendix A: Interview questions ... - 50 -
9. Appendix B: Code list ... - 53 -
10. Appendix C: Mann-Whitney Test ... - 54 -
- 4 -
1. Introduction
The last few decades, organizational collaboration has emerged as an important business trend. The importance of strategic alliances, joint ventures, networks and industry consortia has increased. Prior research states that trust is a primary determinant of success in collaborations (Coletti, Sedatole & Towry, 2005). Due to the increase in organizational collaboration, trust-based relationships are becoming an important organization principle (McEvily, Perrone & Zaheer, 2003). Furthermore, such a collaborative environment comes with a managerial control challenge, as firms try to attempt optimal levels of control mechanisms (Coletti et. al., 2005). Trust is seen as a requisite for success in a collaboration. However, in current literature, there is an ongoing debate about the relationship between control and trust. There is no unanimity whether the two concepts are substitutive or complementary to each other.
Colleti et. al. (2005) for example, state that in collaborative settings, control can be used to positively affect trust. However, Malhotra and Murnighan (2002) showed that through contracts, control can impede the development of trust and eventually can reduce existing trust. It is assumed that the concepts interact with each other, to reach the common goal to reduce behavioral uncertainty and risks (Vosselman & Van der Meer-Kooistra, 2009). But where Vosselman & Van der Meer-Kooistra (2009) state that control produces trust and vice versa, Das & Teng (1998) for example, state that formal control mechanisms will undermine the level of trust. Another view is that of Bradach & Eccles (1989), who treat trust as a type of control. Their main argument to consider trust and control as complementary, is that both concepts are contributing to the total level of confidence in partner cooperation. However, other scholars assume that the more there is of trust, the less there is of control, and vice versa, which suggests a substitutive relationship (Bijlsma-Frankema & Costa, 2005).
- 5 - behavior, and relies on shared goals, values and norms. In such a situation, where it is hard to closely monitor the other party, cooperation is mainly based on trust. Implementing and maintaining such a clan control system is especially concerned with selection and recruitment of committed workers, displaying the underlying attitudes and values which are likely to lead to organizational success (Ouchi, 1979). Here, the use of formal control is more or less impossible, and therefore cannot be neither complementary to or a substitute for trust. Because this research wants to add value to the control-trust debate, it therefore focusses on formal control mechanisms.
When investigating the relationship between formal control mechanisms and inter-organizational trust, most research defines control as an instrument to create the conditions that motivate the partners in an inter-organizational relationship to achieve desirable or predetermined outcomes, or to act as a safeguard against opportunistic behavior (Dekker, 2004; Vosselman & Van der Meer-Kooistra, 2009). Those views are mainly based on the transaction cost economics (TCE) theory, which is restricted to efficiency and cost-minimization (Barringer & Harrison, 2000). But besides that, formal control can have other purposes as well. It may for example be used to facilitate adaptation or for the coordination of tasks between partners (Dekker, 2004; Schepker, Oh, Martynov & Poppo, 2014; Barringer & Harrison, 2000).
The relationship between trust and the use of formal control mechanisms for task coordination is often neglected in literature (Dekker, 2004). Besides safeguarding, control for coordination and adaptability should be considered as well, to make research on interfirm relationships more relevant (Schepker et. al., 2014). Differentiate between the different purposes of control may advance the discussion whether formal controls substitute or complement trust (Dekker, 2004). Therefore, this paper aims to investigate the relationship between the different purposes of control and trust in inter-organizational cooperation, by investigating the following research question:
- How does the purpose of control influence the level of trust in inter-organizational
settings?
- 6 - could give a contribution to the existing literature because the relationship between the different purposes of control and their effect on trust is often neglected in the substitutive-complementary debate.
The remainder of this paper is structured as follows: the next section provides the relevant literature regarding trust, formal control and the purposes of formal control. This literature is used as a basis for the propositions, which are formulated to answer the main research question. In section three, the methodology used in this research will be described. In the fourth section, the results will be presented, followed by a discussion of the findings in section five. The paper ends with a general conclusion and suggestion for further research.
2. Literature Review
To get a deeper understanding about how the different purposes of control are related to trust, this section will highlight and explore the relevant literature regarding those issues. Firstly, the concept of trust will be explained at the hand of the existing literature. Secondly, control and its different functions and purposes will be examined. Subsequently, this theoretical framework is used to formulate propositions and a conceptual model.
2.1 A definition of trust
- 7 - Das & Teng (1998) define trust as ‘the degree to which the trustor holds a positive attitude towards the trustee’s goodwill and reliability in a risky exchange situation’ (p. 494). However, this definition assumes that trust always correlates with a certain risk. The presence of risk or a risky situation however, is not by definition a prerequisite for trust (Mayer et. al. (1995). It is important to distinguish between risk and trust. When holding a positive attitude towards a trustee, there is actually no risk taken yet. In other words, one does not need the presence of a ‘risk’ to trust another. The amount of trust in the other party however, will affect how much risk one is willing to take when cooperating with that party. This willingness to take risk in a relationship is an outcome of trust, but remains a separate concept (Mayer et. al., 1995). Other definitions of trust used in current literature are ‘the expectation that a partner will not engage in opportunistic behavior, even in the face of opportunities and incentives for opportunism, irrespective of the ability to monitor or control that party’(Klein Woolthuis, Hillebrand & Nooteboom, 2005, p. 816), ’one’s perception of another’s trustworthiness’ (Coletti et. al., 2005, p. 481) and ‘having confidence that one’s expectations will be realized’ (Vosselman & Van der Meer-Kooistra, 2006, p. 323). Mayer et. al. (1995) define trust as ‘the willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that party’ (p. 712). Because this definition is applicable in a relationship with another party, clearly distinguishes between trust and risk, and explicitly appoints that trust stands apart from the ability to monitor and control, this definition of trust will be used in the remaining of this research.
- 8 - abilities, or capability trust, and intentions, or goodwill trust, will be used in the remainder of this paper (Zaheer & Harris, 2005).
Furthermore, it is important to note that trust derives from learned, usually interactive experiences. Trust, therefore, should not be viewed as a ‘static’ variable, but as a dynamic process. In a relationship, both parties continually update their information and, subsequently, their amount of trust in the other party. Through repeated interaction between parties, the amount of trust may change during the relationship (Tomkins, 2001), and consequently, the willingness to take risk (Mayer et. al., 1995).
2.1.1 Different levels of trust. Organizations develop close bonds over time, and can
form a positive attitude regarding each other’s reliability. For a strategic alliance, a minimum level of interfirm trust is indispensable (Ring & Van de Ven, 1992). To investigate trust in inter-organizational settings, it is important to recognize the different levels of trust. Within an inter-organizational interaction, there are typically four distinct entities, namely: 1) organization A, 2) an individual representing organization A, 3) organization B, and 4) an individual who represents organization B (Ganesan & Hess, 1997). Trust between these entities can exist in various ways. Firstly, there is trust between individuals A and B, which is
called interpersonal trust. Secondly, the trust individual A has in organization B and
individual B has in organization A is called organizational trust. Thirdly, there is
intra-organizational trust, which is the trust one has in his own organization, so individual A in
organization A. Finally, trust can exist between organizations. This inter-organizational trust reflects an agglomeration of individual level trust that exists between multiple individuals and at multiple hierarchical levels across organization A and B (Ganesan & Hess, 1997). This study focuses on the effects of formal control on trust in organizational collaborations, and therefore the latter, inter-organizational trust is the most relevant. The main topic of interest therefore is the trust organization A has in organization B, or in other words, ‘the extent to which organizational members have a collectively-held trust orientation toward the partner firm’ (Zaheer, McEvily & Perrone, 1998: 143). Here, trust will be further divided into capability- and goodwill trust, as described above.
2.2 Formal control
- 9 - be both financial and non-financial data (Daft & Macintosh, 1984). In interfirm relationships, this will come in the form of a formal control device or incentive scheme, developed to satisfy coordination requirements and to safeguard the risk of appropriation. In practice, formal control mostly takes the form of a contract between the involved parties (Klein Woolthuis, Hillebrand & Nooteboom, 2005; Vlaar, Van den Bosch & Volberda, 2007; Malhotra & Murnighan, 2002). Through the establishment of standards, control makes the elements of a system more predictable, and control mechanisms are designed to determine and influence what organizations members will do (Das & Teng, 1998). The control process generally involves the following three steps: 1) establishing of standards, 2) measuring performance against these standards and 3) correcting deviations from standards (Merchant, 1982).
Control systems are mainly based on the monitoring and evaluation of the other party (Ouchi, 1977). Formal control is divided into outcome and behavioral control mechanisms. In an inter-organizational relationship, outcome control mechanisms could be used to specify outcomes to be realized by the relationship, and to monitor the performance of the inter-organizational relationship and the separate parties, in relation to the targets. Behavior control mechanisms are used to specify how partners should act and to monitor whether actual behavior complies with pre-specified behavior. Which control type is best applicable, depends on the ability to measure outputs and the knowledge of the transformation process (Ouchi, 1979).
Merchant (1982) distinguishes between three different objects of control, namely actions, results and personnel. Action control is there to ensure that individuals perform certain actions that are known to be desirable. Results control involves the responsibility of employees for certain results, and personnel control emphasizes on reliance on personnel to do what is best for the organization, and providing them with the necessary assistance.
- 10 -
2.3 Different purposes of control
As already stated in the above, the safeguarding of a parties’ interest might not be the only purpose of formal control (Barringer & Harrison, 2000; Dekker, 2004). Dekker (2004) for example, states that formal control can be very useful for task coordination as well, and this will positively influence the ability to learn between two parties. This relationship however, is often neglected in the literature. Schepker et. al. (2014) also mention that the TCE-perspective, based on safeguarding, dominates the empirical studies regarding contracts. In line with the statement of Dekker (2004), they state that additional perspectives of contracts are needed to gather a deeper understanding of this phenomenon. Therefore, they developed the ‘functional approach’ regarding contracts, which implies that scholars must focus on the specific functionality of a contract when investigating its impact. Besides a safeguarding mechanism or coordination mechanism, they add the adaptability mechanism as one of the purposes of contracts.
There are researchers who found that formal control, in the way of codified rules, goals, procedures and regulations could affect trust in a negative way (Das & Teng, 1998; Malhotra & Murnighan, 2002). Das & Teng (1998) for example, concluded that formal control systems, especially when poorly designed, could lead to distrust and suspicion. Malhotra and Murnighan (2002) agree on that, and state that contracts impede the development of trust, and diminish the existing trust. However, in both studies, the focus is on control purely as safeguarding mechanism.
- 11 - Therefore, this research makes a clear distinction between the different purposes of control, as suggested by Dekker (2004) and Schepker et. al. (2014), and investigates how they affect both goodwill- and capability trust in inter-organizational relationships. To start with, the following section will explain each different purpose of control in more detail.
2.3.1 Control as safeguarding mechanism. The TCE-theory plays a dominant role in
the literature on formal control and contracting (Dekker, 2004; Mayer & Argyres, 2004; Schepker et. al., 2014; Anderson, Christ, Dekker & Sedatole, 2014). According to TCE, contracts are considered as governance structures, used to manage the relationships between commercial parties (Mayer & Argyres, 2004). According to Schepker et. al. (2014), contracts are governance mechanisms designed to minimize transaction costs. Transaction costs include the costs of making a contract, maintaining the relationship and the costs incurred as a result of opportunistic behavior. When managing transactions through formal control mechanisms becomes more difficult and/or complex, transaction costs will increase. The effectiveness of contracts is dependent of transactional characteristics such as asset specificity, uncertainty, mutual dependence and complexity (Schepker et. al., 2014). Dependent on the transaction costs of the alternatives, a transaction can be governed by either market, hierarchy or hybrid governance mechanisms (Dekker, 2004). When transactions are relatively standardized and straightforward, market governance is the most efficient. But when the transaction requires idiosyncratic investments, investments that have low value in alternative uses, appropriation concerns arise, which makes hybrid governance or hierarchical mechanisms best applicable. Here, higher appropriation concerns will lead to increased use of hierarchical controls (Dekker, 2004; Mayer & Argyres, 2004).
- 12 - contractual hazard can emerge, and to deal with complexity in all relevant aspects. Because of this fact, contracts are unavoidably incomplete (Mayer & Argyres, 2004; Williamson, 1981). Furthermore, given the second assumption, even if ‘complete contracting’ was feasible, dishonesty can cause problems. Agents seeking self-interests can cause problems to contracting, per example through guile or false promises (Williamson, 1981).
However, TCE has received many critiques on its ability to explain governance structures in inter-organizational relationships (Larson, 1992; Dekker, 2004). Besides efficiency and transaction costs, reciprocity norms, personal relationships, reputation and trust are playing an important role in explaining the duration and stability of an inter-organizational relationship (Larson, 1992). According to Williamson (1999), the main case in organizing transactions in particular governance forms is to minimize transaction costs. However, this TCE approach does not consider the variety in forms and goals of inter-organizational relationships (Dekker, 2004). Often, firms engage in collaborations to share information and knowledge or to rapidly respond to market changes. Here, the main purpose of control is to achieve desirable or predetermined outcomes, and reduction of transaction cost is not the major goal (Dekker, 2004; Larson, 1992). Therefore, this paper deals with other purposes of control as well, which are discussed later.
Despite the critiques on the usefulness of TCE in explaining inter-organizational governance, control is used to mitigate relational risks, which are the risks related to ‘a partner’s inability to capture a fair share of the rents generated by an alliance and arises from behavioral uncertainty of the alliance partner, coupled with investments in alliance-specific assets and incomplete contracts’ (Anderson, Christ, Dekker & Sedatole, 2014, p. 5). In other words, control still fulfills a safeguarding function (Anderson et. al., 2014; Das & Teng, 2001). We are now interested in how this safeguarding function of control, isolated from the other purposes, relates to both forms of trust.
- 13 - reduce opportunism will reduce trust, because it creates suspicion. They have demonstrated empirically that formal control can generate trust, but only when it is used to coordinate activities. Malhotra and Murnighan (2002) have found out that binding contracts, which could be considered as a formal control mechanism, will both impede development of trust and diminish existing trust.
This may not only be the case for goodwill trust, but could be applicable to capability trust as well. The use of specific output measures or specified behaviors and processes implicates that parties cannot be trusted if things are done in their own way. This questions their competence, which is a signal of distrust. Further, it limits a party’s autonomy in designing their own behavior, which makes it more difficult to show their competence. Moreover, because partners are preoccupied with fixed measures, not much attention will be paid to the evidence of each other’s competence (Das & Teng, 2001).
As already stated, formal control mostly takes the form of a contract. Because current literature regarding formal control mostly focuses on contracts or written protocols or reports, this research will also focus on formal control mechanisms in the form of contracts (Schepker et. al., 2014; Brattström & Richtnér, 2014; Dekker, 2004; Larson, 1992; Williamson, 1981; Malhotra & Murnighan, 2002; Klein Woolthuis et. al., 2005). Besides safeguarding, such a contract can have other purposes as well. But based on the above, the part that focuses on reducing the risk of opportunistic behavior, is assumed to influence both goodwill and capability trust in a negative way, resulting in the following propositions:
- Proposition 1: Contractual agreements based on safeguarding will negatively
influence goodwill trust.
- Proposition 2: Contractual agreements based on safeguarding will negatively
influence capability trust.
2.3.2 Control as a coordination mechanism. Inter-organizational relationships are
- 14 - used. Thus, besides the TCE-view of safeguarding or managing appropriation concerns, another purpose of formal control in inter-organizational settings is to enhance coordination (Brattström & Richtnér, 2014; Dekker, 2004). In an uncertain and complex context per example, a contract can have a contingency planning role, thereby focusing on more intensive planning between both parties. Depending on the type of interdependency, different sets of coordination mechanisms could be used for effective and efficient coordination (Grandori, 1997).
Grandori (1997) states that the effectiveness and efficiency of a coordination mechanism depends on the type of transactional interdependence. The simplest case of interdependence is called sequential interdependence, where the output of activity A is the input of activity B. Here, cross-activity programming is the most appropriate coordination mechanism. When inter-firm interdependences are reciprocal, per example when the output of A can only be realized in cooperation with B, for which A’s output is an input, more formalized and extensive systems of rules and supervisory are needed for effective coordination. According to Grandori (1997), what is the most appropriate coordination mechanism depends on the configuration of the interdependence in terms of collective action versus transaction, the complexity of information and the structure of interest between the involved parties. Table 1 gives a clear overview of the different types of organizational interdependence and their associated effective coordination mechanisms.
Table 1: Types of interdependence and effective coordination mechanisms (Grandori, 1997)
Pooled:
- Communication and decision procedures
- Mutual monitoring or supervisory hierarchy
Intensive:
- Group decision making
- Mutual monitoring or property-rights sharing
Sequential:
- Programming
- Hierarchical decision making for inter-unit adjustment
Reciprocal:
- Integration and liaison roles
- Authority by exception and residual arbitration
- 15 - According to Schepker et. al. (2014), when tasks exceed organizational boundaries, high levels of coordination are required, due to the interface of activities and concerns regarding the division of labor. Contracts are used for this coordination, for example to define roles and responsibilities, to define provisions for monitoring the process and to assign a project manager (Schepker et. al., 2014; Klein Woolthuis, 2005; Mayer & Argyres, 2004). This functional focus of contracting is in line with the findings of Grandori (1997), as mentioned above. Where ‘agency contracts’ lay out the structure of the contract, collaborative contracts specify the process by which the relationship is managed. Such a contract could lead to an increase in trust, because the probability that partners behave undesirable will decrease (Krishnan, Miller & Sedatole, 2011).
Furthermore, contracts in which coordination is strongly emphasized will increase cooperation and the exchange of information, which will lead to more productive communication and collaboration. If conflicts arise, contracts focusing on coordination will lead to an interest-based approach in solving the dispute, which emphasizes collaboration and is a less costly way to resolve conflicts (Lumineau & Malhotra, 2011).
According to Mayer & Argyres (2004), through mutual understanding of roles and expectations, contracts can have a positive effect on trust. Velez et. al. (2008) state that for the coordination function of control, the negative effects of control as a safeguard do not occur. Control mechanisms for coordination are used to share information and to communicate, which are important determinants of trust (Velez et. al., 2008). In their research, they showed that a management control system used to coordinate tasks in an inter-organizational relationship created an atmosphere of commitment, assistance and respect, and an improvement of task coordination, joint results and satisfaction. Furthermore, the improved amount of available information and knowledge due to the coordination-based controls increased the expectation that parties will perform the assigned tasks correctly (Velez et. al., 2008).
- 16 - understanding of each other’s perspectives and approaches, and therefore is considered as another important way to build goodwill trust. Here, cooperation and communication again plays an important role (Lumineau & Malhotra, 2011; Langfield-Smith & Smith, 2003; Das & Teng, 2001). Capability trust can be the result of proactive information collection and sharing. As stated, control for coordination improves the available information and knowledge. When parties share this, or are convinced that the other party has at least the same amount of information and knowledge regarding the relevant tasks, this increases the perception that tasks are performed properly (Velez et. al., 2008; Langfield-Smith & Smith, 2003; Das & Teng, 2001). Therefore, the following propositions regarding the relationship between control as coordination mechanism and trust are made:
- Proposition 3a: Control as coordination mechanism will lead to increased
communication, cooperation and effective dispute resolution.
- Proposition 3b: Communication, cooperation and effective dispute resolution are
positively related to goodwill trust.
- Proposition 4a: Control as coordination mechanism will increase the available
information and knowledge.
- Proposition 4b: Available information and knowledge is positively related to
capability trust.
2.3.3 Contracts as adaptation mechanism. As already stated in the above, due to
bounded rationality it is impossible to capture every possible future contingency in a single contract. Therefore, the possibility of adaptation to problems and room for future opportunism by the other party remains (Dekker, 2004). During the relationship, both exogenous and endogenous changes may occur, per example a changing demand or learning from uncertain, complex projects, respectively. Parties may include tolerance zones to cope with unexpected events or identified changes, per example in the form of procedures or provisions on how to behave when it is necessary to adapt to environmental changes (Schepker et. al., 2014).
- 17 - reduce the threats as a result of uncertain environmental conditions. Therefore, the incorporation of contingency adaptabilities in inter-organizational agreements will increase when operating in an uncertain and/or volatile markets or environments (Luo, 2002; Schepker et. al., 2014; Dekker, Sakaguchi & Kawai, 2013). Contracts can be used more effectively when they facilitate adaptation to disturbances or contingencies. An example of such a facility is to include a clause about how to behave or act when a certain change or event occurs, such as different pricing policies dependent of end-customer demand (Mayer & Argyres, 2004).
The belief in one’s ability to generalize a sound solution to adaptation problems is considered to be positively related to cognitive-based trust (Jeffries & Reed, 2000). Cognitive-based trust reflects the trust in one’s technical competency and ability to perform, and relies on a rational evaluation of another’s ability to carry out his obligations, which is closely aligned with the definition of capability trust by Dekker (2004), as used in this paper (Jeffries & Reed, 2000). According to Dekker et. al. (2013) contracts that account for potential contingencies and associated actions to be taken, increase collaboration, interaction and communication between parties. Although contingency adaptability in contracts will have a positive effect on cooperation, overly flexible contracts can trigger opportunism, or at least have no positive influence on performance (Luo, 2002). When a contract contains too many contingencies and guidelines to deal with those contingencies, this will negatively influence a party’s motivation for cooperation and commitment, and can even decrease the building of trust (Luo, 2002: Al-Najjar, 1995).
- 18 - Figure 1: Relationship between contingency adaptation and goodwill trust
Based on this, the following propositions regarding contingency adaptation and goodwill- and capability trust are made:
- Proposition 5: Inter-organizational contracts accounting for contingency adaptation
relates to cooperation and communication in an inversed U-shape.
- Proposition 6: Inter-organizational contracts accounting for contingencies are
positively related to capability trust.
2.4 Conceptual model
The assumed relationships are schematically shown in the conceptual model in figure 2. The numbers in the model indicate to which proposition the assumed relationship refers to.
- 19 -
+ 6
- 1
- 2
Figure 2: Conceptual model
3. Methodology
This chapter will explain how the research is conducted. Firstly, the reason to conduct qualitative research will be motivated. Secondly, the case selection process will be described, as well as the selected case. Thirdly, the data collection methods used to answer the research questions will be explained. Lastly, how this research concerns for controllability, reliability and validity will be discussed.
+ 4b
+ 3b
+/- 5
+4 a
+ 3 a
+ Purposes of control Control as coordination mechanism Control as safeguarding mechanism Control as adaptability mechanism Cooperation, Communication & effective dispute resolutionAvailable information & knowledge
- 20 -
3.1 Qualitative research
The literature regarding the different purposes of control and their effect on trust is still scattered, and deals with unresolved issues, as mentioned in the literature review. Because the main purpose of this research is to gather a more comprehensive understanding of the interaction between the purposes of formal control and trust, the case study approach fits well (Eisenhardt, 1989). Furthermore, most academic literature regarding those issues is still exploratory in nature. According to Van Aken, Berends & van der Bij (2012) the theory-development approach is the most appropriate to develop knowledge in such a situation. Moreover, because the effects of the different purposes of control on inter-organizational trust are a relatively unknown phenomena in the current literature, and there is a lack of empirical substantiation on this issue, as mentioned earlier in this paper, theory building from case studies is an appropriate research method for this type of research problem, according to Eisenhardt (1989). Because the main research question clearly is a ‘how-question’, this approach is in line with Saunders, Lewis & Thornhill (2009) who state that the case study strategy has considerable ability to generate answers to this type of question and is useful in exploratory research.
To answer the research question following this approach, first it is necessary to observe the phenomenon in practice (Van Aken et. al., 2012). This was mainly done through the use of semi-structured interviews, which yielded primary data. This part will be discussed in more detail in the remainder of this chapter.
3.2 Case selection
- 21 - paragraph (due to confidentiality issues, SP Trucks is a fictive name. The original company
name and the associated sources and references are known to the supervisor).
3.2.1 Case description. SP Trucks B.V. is a subsidiary of SP Trucks PLC., a leading
Swedish producer of high-quality trucks, buses, coaches and marine engines. SP Trucks is represented in over 100 countries worldwide, with over 35.000 employees. With circa 1.600 employees, SP Trucks B.V. accounts for 60% of the European production, and is the largest SP Trucks factory in the world.
SP Trucks is known for their unique ‘SP Trucks Production System’, which focuses on modularization, standardization of working methods and processes, improving efficiency and continuous improvement. SP Trucks B.V. only produces to order, and each truck is manufactured according to specific customer demands or requirements. This demand in trucks is highly fluctuating , which requires a high amount of flexibility from SP Trucks. Furthermore, due to factors such as resource scarcity, urbanization, legislation regarding climate and pollution, growth of emerging markets and economic cycles, SP Trucks operates in a turbulent environment. To adapt to environmental changes, flexibility is again an important success factor for SP Trucks. When planning for the longer term, different scenarios regarding the business and industry are taken into account.
The focus on standardization, efficiency and just-in-time production implicates both a need for strict rules and objectives as well as control for coordination. Furthermore, the above emphasizes a need for flexibility and adaptation to contingencies.
3.3 Data collection
As mentioned in the above, primary data is the main data source for this research. This part will describe the data collection methods in more detail.
3.3.1 Primary data collection. As already stated, primary data was collected by the
- 22 - provides the opportunity to add important insights as they arise during the course of the conversation (Myers, 2009).
All interviews were recorded, with permission of the interviewees. Main topics of interest were the degree of trust in the inter-organizational relationship, expectations about other parties behavior and the presence of formal control mechanisms for their different purposes and the attitudes towards them, especially in relation with trust. Table 2 gives an overview of the date, location and duration of the interviews, as well as the function of the interviewee. The interview protocol used in the semi-structured interviews is attached in appendix A, together with the couple of survey questions and the literature they relate to. The questions were classified regarding the propositions they are related to.
Table 2: Primary data collection
Respondent Date and Time Location Duration Function
Interviewee 1 5 Dec. 2014 11.00 Meeting room at
SP Trucks HQ
57 m. Site Manager CBU
Interviewee 2 5 Dec. 2014 14.30 Meeting room at
SP Trucks HQ
53 m. Manager Logistics Industrial
Engineering
Interviewee 3 9 Dec. 2014 12.00 Canteen at SP
Trucks HQ
43 m. Manager Facility Engineering
Interviewee 4 9 Dec. 2014 13.00 Canteen at SP
Trucks HQ
33 m. Manager Supply Chain
Interviewee 5 9 Dec. 2014 15.15 Office at SP
Trucks HQ
51 m. Senior Project leader
Interviewee 6 12 Dec. ’13 .00 Office at SP
Trucks HQ
44 m. Head Engineering SLN
Interviewee 7 15 Dec. ’14 11.00 Meppel, meeting
room at SP Trucks Meppel
52 m. Head Logistics & Engineering
Interviewee 8 17 Dec. ’14 12.30 Meeting room at
SP Trucks HQ
- 23 - Unit of analysis were inter-organizational relationships. With each interviewee, a different collaboration was discussed, varying from buyer-supplier relationships, or sequential interdependence, outsourcing relationships, to more extensive and reciprocal collaborations (Grandori, 1997). In each interview, the focus was on one single collaboration.
Besides the semi-structured interviews, interviewees were asked to fill in a short questionnaire. Because the use of multiple data collection methods could provide a fuller picture of the unit under study, which is desirable in this exploratory research, qualitative and quantitative data collection methods were combined (Fielding & Schreier, 2001). This questionnaire was used to let respondents classify their satisfaction with the relationship and the amount of trust in the other party, which yielded opinion data. So-called rating questions were used to collect this data (Saunders et. al., 2009).
3.4 Data analysis
The recorded interviews were transcribed into written documents by the researcher himself. These documents were used as a basis for a within-case analysis, to generate insights about the data, and to look for patterns (Eisenhardt, 1989). Hereby, the software program Atlas.ti was used to encode the transcripts, to move from raw text to research concerns step by step (Auerbach & Silverstein, 2003). Similar data segments were categorized according to fitting codes (Friese, 2014). This was an interactive process, which allowed the researcher to recognize important themes, patterns and relationships between the different variables. This process of encoding or categorizing of data gave the possibility to group data. The codes were both derived from the theoretical framework and emerged from the transcribed data. The codified data was used to indicate linkages between several concepts and to interpret the data (Saunders, 2009).
- 24 - ‘satisfaction with cooperation and goodwill trust and ‘satisfaction with information- and knowledge sharing’ and capability trust, SPSS Statistics was used as well.
.3.5 Research criteria
Because the current literature regarding the constructs this research deals with, is still scattered, aim is to reach inter-subjective agreement, or consensus on the impact of formal control mechanisms. According to Yin (1994), to reach such an inter-subjective agreement, research must fulfill the requirements of controllability, reliability and validity.
Regarding controllability, a detailed description of the research methods is added in the appendices of this paper, containing the questions used in the semi-structured interviews, the rating questions (appendix A) and the codes used in Atlas.ti (appendix B). Furthermore, memos were written during the research process, to anticipate for a detailed description of the research methods. This enables others to replicate the research, and gives them the possibility to verify or falsify the results (Van Aken et. al., 2012).
To enhance the reliability of this research, a case study protocol and database were made. This protocol contained a set of questions addressed to the researcher during data collection, and served as a mental framework for the researcher. This was especially used to restrict the researcher bias (Yin, 1994). Regarding the instrument bias, data triangulation was used, by relying on multiple sources of data. As already mentioned above, both interviews and a short questionnaire were used. By the use of data triangulation, both the validity and reliability of this research was improved (Yin, 1994; Van Aken et. al., 2012). Moreover, during the interviews, multiple questions related to the same topic of interest were used. To control for the respondents bias, the interviews were conducted with people from different positions in the organization, who all have to cope with inter-organizational control and trust. Finally, the circumstances bias was controlled mainly due to the research design, because interviews were conducted at different times, with different people on different locations (Van Aken et. al., 2012).
- 25 - al., 2012; Yin, 2003). A possible advantage of the scattered literature on this issue, was the possibility to view the phenomenon from different theoretical angles. This theoretical triangulation enhances internal validity, provides a broader and deeper analysis of the findings, and may be used to test various theories by analyzing information from the same data set. Because this research aims to investigate the relationships of three different purposes of control, each with its own theoretical foundations and implications, this can be beneficial (Thurmond, 2004).
4. Results
4.1 Control as safeguard
The safeguarding function of control was measured with questions such as ‘what are possible
behaviors of the other party that could harm your organization?’ and ‘how is the contract or control mechanism used to safeguard against such behaviors?’. The answers to these kind of
questions revealed that the most important formal controls used in contracts to safeguard against opportunism and risks or harms caused by the other party are agreements based on reliability, delivery, costs or price, quality and other key performance indicators, each party’s rights and duties in the relationship, agreements regarding how and when monitoring occurs and protocols if one party fails to comply on the agreements. Moreover, agreements regarding transparency and openness of each other’s businesses were often included to reduce possible risks and harms.
In the literature review it is stated that the use of formal controls, especially strict rules and objectives, reduces a party’s perception of autonomy. Therefore, the respondents were asked if they perceived the rules or objectives to which they have to comply as a limitation on their autonomy or independency. Striking result is that 7 out of 8 respondents mentioned that they do not perceive such 'hard’ formal controls as a limitation of their autonomy. Some examples are quoted below:
- Interviewee 8: I think they (the rules and objectives) are more guidelines to help you.
Instead of handcuffs you are wearing.
- Interviewee 5: No, I see them as a clarification, and definitely not as a limitation.
- 26 - Furthermore, the presence of strict rules and objectives are neither perceived as a signal of doubt regarding one’s goodwill, or as a source of mistrust, as the answer on the question ‘do
you perceive those specific rules and/or objectives as mistrust by the other party?’ Only one
interviewee answered this question affirmative.
Proposition 1 was tested with the interview question ‘does this safeguarding function
influences your opinion of the other party’s intentions to behave desirable? And could you please explain why (not)?’ Analysis of the answers on this question showed widely varying
results, as can be seen in table 3.
Table 3: The influence of control as safeguard on goodwill trust.
Respondent: Effect of
Safeguarding on Goodwill trust:
Quote:
Interviewee 1 No effect It is particularly important to make the mutual expectations clear and transparent. I know them, and I know our relation and how we (both parties) work, and I don’t think contractual agreements will influence that. If the relation is good, a contract, in whatsoever form, won’t change my perception.
Interviewee 2 Negative We are always very alert regarding the small prints. It is important to recognize and know why they are formulated the way they are, otherwise you can get screwed.
Interviewee 3 No effect No, I think openness and transparency determine such trust, and not the elimination of risks.
Interviewee 4 Positive It is important to invest and maintain in sustainable long-term relationships, and the elimination of risks will absolutely contribute to this.
Interviewee 5 No effect I don’t know if it (strict rules and controls) has advantages or not. I think it (the optimum) will be somewhere in the middle.
Interviewee 6 Strongly negative Trying to capture all the ‘ifs and buts’ in a contract signals a lack of confidence in my opinion. When trying to make everything ‘watertight’, you really undermine the collaboration.
Interviewee 7 Positive effect Such agreements are there just to make sure you can trust each other.
Interviewee 8 Moderately positive Monitoring and controlling the other party can be a source of confidence, when the goals are achieved. I don’t think rules and guidelines will affect that confidence a lot.
When looking at the answers to the question ‘does this safeguarding function influences your
- 27 - proposition, except for respondent 7, all interviewees indicated that contractual agreements based on safeguarding will have a positive influence on capability trust.
- Interviewer: So in your opinion, the trust in the partner’s capabilities could be
enlarged by more control to eliminate risks?
Interviewee 5: Yes. Through tighter controls and targets, and by defining more things contractually.
In sum, the results regarding the relationship between control as safeguard and goodwill trust are widely varying, and therefore proposition 1 is only partially accepted as true. The results regarding control as safeguard and the effects on capability trust are conflicting with what was stated in proposition 2, which makes proposition 2 false.
4.2 Control as coordination mechanism
The use and effects of control as coordination mechanism are related to proposition 3a, 3b, 4a and 4b. The following section will discuss the results regarding control as coordination mechanism, according to the order of those propositions.
4.2.1 The effect of control as coordination mechanism on communication, cooperation and effective dispute resolution. The interviewees were asked how the contract
- 28 - Table 4: Degree of coordination agreements compared with communication and
cooperation
Respondent: Degree of coordination agreements Satisfaction with communication (1-7) Satisfaction with cooperation (1-7) Interviewee 1 Low 7 6 Interviewee 2 High 6 7 Interviewee 3 High 6 7 Interviewee 4 Moderate 5 5 Interviewee 5 Low/Moderate 2 3 Interviewee 6 High 5 5 Interviewee 7 High 7 7 Interviewee 8 Moderate 5 6
Although the group of interviewees who indicated to use a high degree of control for coordination scored an average of 6 (6+6+5+7/4) on their satisfaction with the communication, against a 4.75 for the low/moderate control for coordination-group, the Mann-Whitney test showed that the satisfaction with communication is not systematically higher for the high-coordination group (α = 0.05; p = 0.214; see appendix C).
Regarding ‘satisfaction with cooperation’, the high control for coordination-group has an average of 6.5, against a 5 for the low/moderate group. However, the Mann-Whitney test again shows us that the differences between the two groups are not significant for α = 0.05 (p = 0.057; see appendix C).
Furthermore, during the interview the interviewees were asked how control for coordination relates to cooperation and communication with the other party. The results indicate that control for coordination will lead to better and more productive communication and cooperation between parties.
- Interviewee 6: Coordination makes the expectations clear, and ensures that you keep
- 29 - Another proposed result of control for coordination was more effective dispute resolution. Several interviewees confirmed that in coordination-agreements could lead to more effective resolution of conflicts.
- Interviewee 2: We have an escalation-model, a protocol with rules about
communication, meetings, plans for improvements etc. Because this protocol is created in advance, everyone immediately knows what to do when problems arise.
- Interviewee 3: This (agreements about coordination, tasks and responsibilities) will
rule out discussions about who is guilty and who is responsible.
But in most cases, communication, transparency and ‘fair business’ are mentioned as the main conditions for effective conflict resolution, as is shown by the following quotes.
- Interviewee 1: We give hundred percent openness about what’s going on, to get a
clear picture about what is the actual problem, and which activities are necessary to solve the problem. If you don’t give such transparency and openness, parties will remain rigid and stubborn and will persist the other party is the owner of the problem.
- Interviewee 3: If you speak and discuss with each other every day, week and month, it
is almost impossible to get a conflict.
- Interviewee 4: We use the ‘fair business-principle’, so the one who causes deviations
is automatically the one who takes care of them and is responsible for the consequences.
- Interviewee 5: Unknown, unloved! If you don’t know each other, and do not speak to
each other on a regular basis, a conflict situation will be much more difficult.
Those results reveal that effective dispute resolution is both a result of the increased communication and cooperation as a result of control for coordination and a direct outcome of control for coordination, as was stated in proposition 3a. Furthermore, transparency and fairness between partners will lead to more effective resolution of disputes.
4.2.2 The effect of communication, cooperation and effective dispute resolution on goodwill trust. As stated in the literature review, cooperation and communication are
- 30 - other party to behave in the interest of the relationship, or goodwill trust. The results are shown in table 5.
Table 5: Communication, cooperation and goodwill trust.
Respondent: Satisfaction with communication (1-7) Satisfaction with cooperation (1-7) Goodwill trust (1-7) Interviewee 1 7 6 6 Interviewee 2 6 7 6 Interviewee 3 6 7 6 Interviewee 4 5 5 6 Interviewee 5 2 3 4 Interviewee 6 5 5 6 Interviewee 7 7 7 7 Interviewee 8 5 6 6
Analysis of this results by means of the Spearman rank correlation shows that there is a significant, positive correlation between ‘satisfaction with communication’ and goodwill trust and ‘satisfaction with cooperation’ and goodwill trust. For the satisfaction with communication and goodwill trust, the correlation coefficient is 0.74, and for the satisfaction with cooperation and goodwill trust the correlation coefficient is 0.68. Both correlations are significant at α = 0.05 (see appendix D for correlation tables). Those relatively strong correlations indicate that the respondents who were satisfied (dissatisfied) with communication and cooperation had a high (low) amount of trust in the other party’s goodwill.
The answers on the interview questions ‘does communication and cooperation enhances your
perception about one’s intentions to do what is best for the relationship?’ and ‘does communication and cooperation on a regular basis influences your trust in the intentions of the other party?’ showed similar results.
- Interviewee 6: We always want to know the intentions and expectations of our
- 31 - - Interviewee 8: When you have regular and close contact with someone,
communication gets a lot easier. Moreover, it is way easier to cooperate when you know each other. And if you know someone, and have good contact with him, you are automatically more honest to him, in my opinion. And on people you know, you don’t play dirty tricks.
All respondents answered that communication and cooperation, if in a satisfactory way, will increase their trust in the intentions of the other party. Besides those two factors, transparency and openness are seen as other factors leading to goodwill trust.
- Interviewee 3: Transparency, open communication and the lack of blaming are
essential to build such (goodwill) trust.
The questions regarding the relationship between effective dispute resolution and the perception of the other party’s intentions or goodwill trust yielded widely varying answers. Were some respondents indicated that effective dispute resolution will result in an increase in goodwill trust, others answered that they think capability trust will be affected the most. Moreover, when asked how effective dispute resolution affects goodwill trust, respondents answered that especially transparency and openness, as mentioned above, will lead to an increase in the other party’s intentions. The results were too ambiguous to state that effective dispute resolution is positively related to goodwill trust, as stated in proposition 3b.
To summarize, control as coordination mechanism will lead to an increase in both communication and cooperation, which in turn leads to an increase in goodwill trust. However, this is not directly the case with effective dispute resolution, and therefore proposition 3a and 3b are found to be partly true.
4.2.3 The effect of control as coordination mechanism on information- and knowledge sharing. In table 6, the degree of coordination agreements used by the
interviewees are linked to their answer on the survey question ‘how satisfied are you with the
- 32 - Table 6: Degree of coordination agreements and information- and knowledge sharing.
Respondent: Degree of coordination agreements Satisfaction with information- and knowledge sharing (1-7) Interviewee 1 Low 5 Interviewee 2 High 6 Interviewee 3 High 6 Interviewee 4 Moderate 6 Interviewee 5 Low/Moderate 3 Interviewee 6 High 6 Interviewee 7 High 6 Interviewee 8 Moderate 6
Here, the average satisfaction for the high control for coordination group is 6, and the low/moderate group has an average of 5. However, the results of the Mann-Whitney test showed that the results are not significant (α = 0.05; p = 0.214; see appendix C), which means that it cannot be stated that satisfaction with information- and knowledge sharing is systematically higher when the degree of coordination agreements is high (compared to low/moderate).
The results of the interview were in line with proposition 4a, which is shown by the following quote:
- Interviewee 7: I think this (the exchange of information and knowledge) is essential to
keep a collaboration up and running. And agreements about coordination are a prerequisite for this.
This quote confirms the importance of the exchange of information and knowledge, and can be seen as evidence for the positive relationship between control for coordination and information- and knowledge exchange.
4.2.4 The effect of information- and knowledge sharing on capability trust.
Proposition 4b states that the exchange of information and knowledge is positively related to capability trust. This proposition was translated into the question ‘how does the exchange of
- 33 -
is the best for the relationship?’. All interviewees mentioned the importance of information
and knowledge sharing, and unanimously agreed that this information and knowledge exchange between partners increases the trust in the others capabilities.
- Interviewee 6: If you don’t share information, you still may have the capacity. But if
you don’t get fuelled with relevant information, those capacity will be useless.
I always tell my partners which plans we have for the following months and years, so they can think along and anticipate. If I don’t do that, the chances that they can fulfill my future needs are much smaller.
In table 7, the answers on question 33 and 36 are given. Analysis of the results revealed a Spearman’s ρ of 0.30, indicating a positive correlation between satisfaction with information- and knowledge sharing and capability trust. However, this result was not significant at α = 0.05 (see appendix D for correlation table). Therefore, based on this results, it can neither be confirmed nor rejected that a high satisfaction with information- and knowledge sharing corresponds with high capability trust or vice versa.
Table 7: Information- and knowledge sharing and capability trust.
Respondent: Satisfaction with information- and knowledge sharing (1-7)
Capability trust (1-7) Interviewee 1 5 6 Interviewee 2 6 5 Interviewee 3 6 6 Interviewee 4 6 6 Interviewee 5 3 4 Interviewee 6 6 4 Interviewee 7 6 6 Interviewee 8 6 6
- 34 - between party’s is positively related to capability trust. Therefore, both proposition 4a and 4b are true.
4.3 Control as adaptation mechanism
Proposition 5 and 6 are related to control for adaptability. The degree the interviewees made use of contingency planning in their contracts is shown in table 8. As can be seen, this differs widely. The results regarding control as adaptation mechanism will be discussed below.
4.3.1 The effect of control for adaptation on cooperation and communication.
Based on proposition 5, the respondents were asked if the accounting for potential contingencies affects the cooperation and communication. Seven out of eight respondents reported that the cooperation and communication will be influenced in a positive way by planning for contingencies.
When asked how this control for contingency adaptation is related to goodwill trust, open communication and transparency were reported as the most influential factors. Respondents believe it is important to communicate, and to be aware of the partner’s situation, also when dealing with unexpected events. This result is in line with previous results about the relation of communication, cooperation, transparency and goodwill trust. However, several disadvantages of control for adaptation were reported as well, which is showed by the following quotes:
- Interviewer: What could be negative consequences of planning for contingencies? - Interviewee 6: Laziness, and just leaning back. It decreases initiatives and creativity.
When unforeseen things happen, it is important to stay alert and keep thinking about what is the best to do. Too much planning will lead to less communication and less effective solutions.
- Interviewee 4: We try to forecast as good as possible. But I don’t think that more
contractual fixing would add something. This only gives your partner the possibility to say: I can’t do this. This isn’t what we have agreed on.
- Interviewee 8: I can imagine that too many requirements regarding fluctuations and
- 35 - So although control for adaptation to a certain degree positively influences goodwill trust through cooperation and communication, it can have a negative impact as well. As showed by the above quotes, too many control for contingency adaptation will have a negative impact on cooperation and communication. This implicates a maximum desirable amount of control for adaptation, which is in line with proposition 5.
4.3.1 The effect of control for adaptation on capability trust. To investigate the
effect of control for adaptation on capability trust, the interviewees were asked how planning for contingencies or unexpected future events influences their trust in the other party’s capacities. The results are shown in table 8, together with the degree the interviewees made use of contingency planning in their contracts. As can be seen, the perceived effects on capability trust are ambiguous.
Table 8: Degree of contingency adaptation and the effect on capability trust
Respondent: Degree of contingency
adaptation in contracts
Effect on capability trust
Interviewee 1 Low Positive
Interviewee 2 Moderate Positive
Interviewee 3 Low No effect
Interviewee 4 Moderate Negative
Interviewee 5 Moderate Positive
Interviewee 6 High Positive
Interviewee 7 Low No effect
Interviewee 8 High Positive
Both respondents with a high degree of contingency planning stated that this had a positive effect on capability trust. Furthermore, the importance of flexibility was emphasized by all interviewees.
- Interviewee 1: We are a very flexible organization. Therefore, we can cope with
fluctuations in a good and efficient way.
- Interviewee 6: The dynamics in our environment are so strong, it is impossible to
- 36 - But instead of contingency planning, transparency, communication and information about the others’ capabilities were seen as the most important factors to maintain flexibility, as well as the main source of trust in the other party’s capabilities.
- Interviewee 7: In proper consultation, everything is possible.
- Interviewee 6: A situation will always be different than how you imagined it
beforehand. Therefore, every situation needs communication about how to deal with it, because it always comes with aspects or issues differently than predicted.
Moreover, the respondents indicated that instead of detailed agreements about what to do when certain events occur, they prefer protocols and agreements about when to renegotiate. Mostly, certain margins or ranges were contractually agreed, with the clause that if, for whatever reason, these are exceeded, renegotiation will take place.
The results regarding control as adaptation mechanism showed that contingency adaptation relates to communication and cooperation in an inversed U-shape, and therefore proposition 5 is true. The perceived effects of control as adaptation mechanisms on capability trust however, are widely varying. Although positive effects were perceived, this was not always the case. Moreover, transparency, information and communication are more influential factors in deciding the trust in a partner’s capabilities regarding flexibility and coping with unforeseen events. Therefore, proposition 6 is only partly true.
5. Discussion
This study was conducted to investigate how the different purposes of control relate to trust in inter-organizational settings. As mentioned before, little is known about this relationship. In this chapter, the results of the study are compared with the existing literature.
5.1 Control as safeguarding mechanism
