Calculative Trust and Interfirm Contracts

Interfirm contracts are plagued by opportunism arising from exchange hazards that increase the seller’s gains from holdup in fixed price contracts. These exchange hazards are higher when the seller can engage in unverifiable deliberate obfuscation. Although cost-plus contracts reduce holdup losses, they suffer from cost inefficiency. Past research has underscored the importance of trust as a control instrument to mitigate losses from exchange hazards, especially social relational trust that develops from past experiences. However, trust can also be calculative when it develops from the expectation of future economic gains to the buyer-seller dyad. We identify two dyadic mechanisms that generate calculative trust and curtail the likelihood of cost-inefficient behavior in cost-plus contracts. These mechanisms include future potential and bilateral reputation capital for cost containment. Analysis using probit estimations on 149 information technology outsourcing contracts for the period 1998 to 2005 suggests that calculative trust increases the likelihood of cost-plus contracts. Thus, calculative trust can mitigate inefficiencies in interfirm contracts. This paper was accepted by Shiva Rajgopal, accounting.

How different strengths of ties impact project performance in megaprojects: the mediating role of trust

PurposeThis study aims to investigate the relationships between the different strengths of ties (strong ties and weak ties), types of trust and project performance in megaprojects.Design/methodology/approachA questionnaire survey was conducted with various experts and professionals involved in megaprojects, and 350 valid responses were received. Data was analyzed by means of structural equation modeling.FindingsThe results show that both strong ties and weak ties have positive impacts on trust in megaprojects, but weak ties have a more significant positive effect than do strong ties. Unexpectedly, the introduction of interorganizational trust significantly weakens the effect of the strength of ties on project performance. The indirect influence of the strength of ties on performance has different paths. Weak ties have an indirect effect via calculative trust and relational trust. However, in a strong ties network, inferior stakeholders lack the information necessary to complete a megaproject, and they believe that calculative trust will not promote project performance until the megaproject is successfully delivered. Thus, the effect of calculative trust on project performance is not significant.Research limitations/implicationsThese findings provide evidence in regard to strength of ties governance being a part of the effective strategy in improving megaprojects’ performance. It also demonstrates the mediating function of trust and advances the current understandings of the underlying mechanism of the strength of ties on project performance, thus providing implications for researchers and practitioners. However, this study has some limitations. For example, the strength of ties and trust between organizations are a dynamic process in megaprojects. This study does not conduct in-depth analysis of the evolution mechanism and investigate the different levels of trust at different stages of the megaproject. Future research can be guided by these directions.Originality/valueThe main contribution of this study is fourfold. First, this study enriches the literature on strength of ties by accentuating the roles of trust in megaproject context. Second, this study contributes to the theoretical development of a conceptual model for explaining the interrelationships among strength of ties, types of trust and project performance. Third, this study responds to the call “which dimension (i.e. strong ties or weak ties) is more influential” by exploring the direct and indirect effects of strength of ties on project performance. Finally, this study breaks through the limitation of traditional cognition that megaproject management can be met by relying on rigid contracts. In other words, trust can supplement the weakness of rigid contract by forming contract flexibility with different strength of ties. Meanwhile, the specific strategies to establish and maintain trust are given, such as building information model (BIM) collaboration platform and reputation management mechanism.

The Origins of Trust Asymmetry in International Relationships: An Institutional View

Trust is key to relationship marketing. Although trust is bilateral, studies on the dispersion of trust among exchange parties remain limited, leaving the antecedents and outcomes of trust asymmetry largely underexplored. To fill the gaps, this study empirically examines the effects of different types of trust asymmetry on exchange performance and then investigates the institutional origins of trust asymmetry in international interfirm exchanges. Drawing on a survey of 134 international buyer–supplier relationships in China, the study finds that both calculative trust asymmetry and relational trust asymmetry have negative influences on exchange performance. The study also finds that formal institutional distance constrains calculative trust asymmetry and informal institutional distance increases relational trust asymmetry. Moreover, prior interactions and expectations of continuity significantly moderate the effects of formal and informal institutional distance. This study advances trust studies in cross-border settings.

Trust and the intent to cooperate in energy performance contracting for public buildings in China

Purpose The purpose of this paper is to explore the key factors in generating trust, and the effects of trust on the intention to cooperate in energy performance contracting (EPC), from the perspective of energy saving companies (ESCOs). Design/methodology/approach A questionnaire survey was undertaken to collect the data from the experienced project managers in ESCOs. Structural equation modeling was used to test the hypotheses. Findings The results revealed that competence, integrity, communication, reciprocity and contract had positive effects on calculative trust and relational trust. Both calculative trust and relational trust, in turn, were found to have positive effects on the intention to cooperate. Research limitations/implications The conclusions are derived from the Chinese cultural background and may apply to a certain geographical scope. In addition, this study focused on the perspective of ESCOs but did not consider that of facility owners. Practical implications This research would supply guidance for facility owners or users to cultivate trust from ESCOs and achieve cooperation in EPC. Originality/value Most of the existing studies have focused on the perspective of facility owners while few have attempted to investigate the perspective of ESCOs. This study contributes to the knowledge body relating to EPC by investigating the relationship between trust and the intention to cooperate from the perspective of ESCOs. In addition, most EPC studies recognized trust as a condition for the successful execution of EPC projects but failed to consider the role of trust in setting up the cooperation relationship prior to project execution.

Boundary conditions for the emergence of relational trust among exporters and importers

Purpose This study looks to the answer of whether importers and exporters can develop relational trust and minimize the monitoring and control costs used to prevent opportunistic behavior in a trust relationship. Despite increasing scholarly interest in calculative and relational trust, the boundary conditions affecting the transformation of calculative trust into relational trust remain unaddressed. In response, this study aims to investigate the boundary conditions for the emergence of relational trust in inter-organizational relationships between Chinese exporters and Turkish importers. Design/methodology/approach Data were collected from Turkish SMEs that import from China. To measure trust between parties, semi-structured interviews with top managers and/or decision-making company owners were conducted. Interview questions covered three categories: antecedents of trust, ways of developing trust and outcomes of trust. Findings Results indicated that inter-organizational relationships between Chinese and Turkish firms lack relational-based trust. Most trade transactions between two parties are based on calculations of profit/loss, and Turkish firms use intermediary mechanisms to overcome lack of trust in this environment. The most important boundary conditions for the emergence of relational trust are behavioral uncertainty, the opportunistic behavior of Chinese suppliers and language and cultural barriers. Originality/value This study contributes to the existing literature by addressing the hitherto unaddressed question of what the boundary conditions are for the transformation of calculative trust into relational trust.

Introduction

This Introduction to the book does three things. First, it introduces the concept of trust and develops a definition of trust as the ‘expectation of no harm in contexts where betrayal is always a possibility’. Next, it identities two conceptions of trust that guide the book, ‘calculative trust’ and ‘trust as suspension’, which provide very different explanations for how actors form expectations that another will be trustworthy. It then shows how trust as suspension opens up a new theory of accurate signal interpretation and demonstrates how this theory is superior to costly signalling-based theories of accurate signal interpretation. The final section of the Introduction sets out the rationale for the case studies and the key assumptions.