Academic journal article Management International Review

Revisiting the Trust-Performance Link in Strategic Alliances

Academic journal article Management International Review

Revisiting the Trust-Performance Link in Strategic Alliances

Article excerpt

Abstract:

* We extend research on the trust-performance link in strategic alliances (SAs) by arguing that the traditional focus of research on the influence of trust on performance of SAs needs to be complemented with a more explicit acknowledgment and analysis of the role that SA performance plays in the development of trust.

* Drawing on existing theoretical arguments and empirical findings related to the consequences and determinants of trust we argue for the existence of a bidirectional causal relationship between trust and performance in SAs. We empirically test this bilateral relationship using 3-stage least square regression models on data from 110 strategic alliances.

* Our results support the positive effect of SA performance on trust, but not the commonly stressed positive effect of trust on SA performance. We discuss the relevance of this finding for the theory of inter-firm collaboration. We conclude by discussing the implications of our findings for practitioners and scholars interested in SAs.

Keywords: Strategic alliances * Trust * Performance

Introduction

Trust, defined as "one party's confidence that the other party in the exchange relationship will not exploit its vulnerabilities" (2003, p. 58), has become a key variable in research on inter-organisational relationships and scholars draw on theoretical concepts such as transaction costs, relational governance, and transaction value (e.g., Krishnan et al. 2006; McEvily and Zaheer 2006; Zaheer et al. 1998) to explain the positive effects of trust on the success of strategic alliances (SAs). Existing research highlights the multi-faceted nature of trust and stress integrity, competence and benevolence as its key dimensions (e.g., Davis et al. 2000; Mayer et al. 1995; Sako 1998), reflecting the fact that trust comprises both calculative and non-calculative elements (McEvily et al. 2003; Rousseau et al. 1998). Summarizing the existing theoretical and empirical research on trust in alliances, Krishnan et al. (2006, p. 895) state that "[..] all else being equal, trust improves alliance performance" and Kale and Singh (2009, p. 51) suggest that "[d]eveloping trust during the postformation phase of an alliance is critical to its success in many ways." Yet, current theoretical and empirical research provides good reasons to believe that a positive influence of performance on trust is as likely as a positive influence of trust on performance. For example, Boersma et al. (2003), study four case studies and show that trust is as much an input to IJV processes as it is an output of these processes. The likely influence of performance on the development of trust also follows from research that investigates the effect of the history of inter-firm interactions on the development of trust (e.g., Gulati and Sytch 2008; Jones and George 1998) and is stressed by authors who see trust as part of various feedback loops characterising the evolutionary processes taking place in alliances. Despite these strong indications for a relationship between trust and performance that is more complex that is usually assumed, there has been little empirical research into this issue. We suggest that the possibility of a reverse influence of performance on trust needs to be investigated to clarify our understanding of the role of trust in SAs and the associated recommendations with regard to the development of trust in SAs. We aim to extend research on trust in strategic alliances by complementing the commonly presented uni-directional influence from trust to performance with a theoretical analysis of, and empirical evidence for a more complex relationship between trust and performance in SAs. To reach this objective, we draw on the various theoretical streams and concepts used by prior research in this field, including transaction cost economics (e.g., Boersma et al. 2003; Buckley and Casson 1988; Zaheer et al. 1998), relational governance (e. …

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