Relational quality: Managing trust in corporate alliances

California Management Review

Volumn , Issue 1, 2001, Pages 109-131

  Ariño, Africa ^a   De La Torre, José ^a   Ring, Peter Smith ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0035732888     PISSN: 00081256     EISSN: None     Source Type: Journal    
DOI: 10.2307/41166113     Document Type: Article

References (81)

1. Booz-Allen & Hamilton has built a database of more than 20,000 such structures formed worldwide in 1995-1997 as reported in J.R. Harbison and P. Pekar, Jr., Smart Alliances: A Practical Guide to Repeatable Success (San Francisco, CA: Jossey-Bass, Inc., 1998). Accenture reports that alliances and partnerships will represent between $25 and $40 trillion in value by 2004 and that the average large company has now in excess of 30 alliances. Some companies such as Corning Glass are well known for their alliance strategies. Oracle is reported to have over 15,000 alliances, whereas IBM and AT&T have each more than $30 billion worth of alliances, most of them concluded in the late 1990s (Business Week, October 25, 1999, p. 72).
2. Booz-Allen & Hamilton has built a database of more than 20,000 such structures formed worldwide in 1995-1997 as reported in J.R. Harbison and P. Pekar, Jr., Smart Alliances: A Practical Guide to Repeatable Success (San Francisco, CA: Jossey-Bass, Inc., 1998). Accenture reports that alliances and partnerships will represent between $25 and $40 trillion in value by 2004 and that the average large company has now in excess of 30 alliances. Some companies such as Corning Glass are well known for their alliance strategies. Oracle is reported to have over 15,000 alliances, whereas IBM and AT&T have each more than $30 billion worth of alliances, most of them concluded in the late 1990s (Business Week, October 25, 1999, p. 72).
3. Accenture estimates that 61% of alliances are either struggling or considered failures. Of course, any such analysis is subject to survivor bias; and not all terminated alliances can be considered as having failed.
4. M.P. Koza and A.Y. Lewin, "The Co-Evolution of Strategic Alliances," Organization Science. 9 (1998): 255-264.
5. For a fuller treatment of all options, see M.Y. Yoshino and U.S. Rangan, Strategic Alliances: An Entrepreneurial Approach to Globalization (Boston, MA: Harvard Business School Press, 1995).
6. B.H. Sheppard and D.M. Sherman, "The Grammars of Trust: A Model and General Implications," Academy of Management Review, 23 (1998): 422-437.
7. P.S. Ring and A.H. van de Ven, "Structuring Cooperative Relationships between Organizations," Strategic Management Journal, 13 (1992): 483-498.
8. Koza and Lewin, op. cit.
9. On this issue, see, for example, L. Poppo and T. Zenger, "Substitutes or Complements? Exploring the Relationship between Relational Governance and Formal Contracts," working paper, Washington University, St. Louis, MO, 1999; A. Zaheer and N. Venkatraman, "Relational Governance as an Interorganizational Strategy: An Empirical Test of the Role of Trust in Economic Exchanges," Strategic Management Journal, 19 (1995): 373-392; R. Dore, "Goodwill and the Spirit of Capitalism," British Journal of Sociology, 34 (1983): 459-482.
10. On this issue, see, for example, L. Poppo and T. Zenger, "Substitutes or Complements? Exploring the Relationship between Relational Governance and Formal Contracts," working paper, Washington University, St. Louis, MO, 1999; A. Zaheer and N. Venkatraman, "Relational Governance as an Interorganizational Strategy: An Empirical Test of the Role of Trust in Economic Exchanges," Strategic Management Journal, 19 (1995): 373-392; R. Dore, "Goodwill and the Spirit of Capitalism," British Journal of Sociology, 34 (1983): 459-482.
11. On this issue, see, for example, L. Poppo and T. Zenger, "Substitutes or Complements? Exploring the Relationship between Relational Governance and Formal Contracts," working paper, Washington University, St. Louis, MO, 1999; A. Zaheer and N. Venkatraman, "Relational Governance as an Interorganizational Strategy: An Empirical Test of the Role of Trust in Economic Exchanges," Strategic Management Journal, 19 (1995): 373-392; R. Dore, "Goodwill and the Spirit of Capitalism," British Journal of Sociology, 34 (1983): 459-482.
12. There is evidence, for example, that interpersonal and inter-organizational trust are not comparable for reasons related to the focal object. See A. Zaheer, B. McEvily, and V. Perrone, "Does Trust Matter? Exploring the Effects of Interorganizational and Interpersonal Trust on Performance," Organization Science, 9 (1998): 141-159. Others argue, however, that the composition of trust is comparable across vantage points. See, for example, D.M. Rousseau, S.B. Sitkin, R.S. Burt, and C. Camerer, "Not So Different After All: A Cross-Discipline View of Trust," Academy of Management Review, 23 (1998): 393-404.
13. There is evidence, for example, that interpersonal and inter-organizational trust are not comparable for reasons related to the focal object. See A. Zaheer, B. McEvily, and V. Perrone, "Does Trust Matter? Exploring the Effects of Interorganizational and Interpersonal Trust on Performance," Organization Science, 9 (1998): 141-159. Others argue, however, that the composition of trust is comparable across vantage points. See, for example, D.M. Rousseau, S.B. Sitkin, R.S. Burt, and C. Camerer, "Not So Different After All: A Cross-Discipline View of Trust," Academy of Management Review, 23 (1998): 393-404.
14. Sheppard and Sherman, op. cit., p. 427.
15. For a similar treatment, see O.E. Williamson, "Calculativeness, Trust, and Economic Organization," Journal of Law & Economics, 35 (1993): 453-486. We believe that our approach differs from his in our emphasis on the role that relational quality plays in the willingness to rely on trust, as articulated more fully below.
16. I.R. Macneil, "The Many Futures of Contract," Southern California Law Review, 47 (1974): 688-816.
17. In Macneil's terms, these transactions are "sharp in-sharp out." They appear not to involve any reliance on trust. In reality, however, there may be an element of trust even in such transactions. For example, in some gas stations the customer may pump the gas without prepayment and bookstores often display their books on shelves not monitored by video cameras.
18. We owe this eloquent phrase to R. Axlerod, The Evolution of Cooperation (New York, NY: Basic Books, 1984).
19. A. Ariño and J. de la Torre, "Learning from Failure: Towards an Evolutionary Model of Collaborative Ventures," Organization Science, 9 (1998): 306-325. This is consistent with Rousseau et al.'s definition of trust, op. cit., p. 395: "Trust is a psychological state comprising the intention to accept vulnerability based upon positive expectations of the intentions or behavior of another."
20. A. Ariño and J. de la Torre, "Learning from Failure: Towards an Evolutionary Model of Collaborative Ventures," Organization Science, 9 (1998): 306-325. This is consistent with Rousseau et al.'s definition of trust, op. cit., p. 395: "Trust is a psychological state comprising the intention to accept vulnerability based upon positive expectations of the intentions or behavior of another."
21. For more on the importance of this distinction, see Zaheer et al. (1998), op. cit.
22. For a discussion of two kinds of trust - fragile and resilient - in our discussion of partner interactions and their outcomes, see P.S. Ring, "Fragile Trust and Resilient Trust and Their Roles in Cooperative Interorganizational Relationships," Business & Society, 35 (1996): 148-175.
23. R.J. Lewicki and B.B. Bunker, "Developing and Maintaining Trust in Work Relationships," in R. Kramer and T. Tyler, eds., Trust in Organizations: Frontiers of Theory and Research (Thousand Oaks, CA: Sage, 1996), pp. 133-173.
24. For an elaboration of these, see Rousseau et al., op. cit.
25. T.K. Das and B.S. Teng, "Between Trust and Control: Developing Confidence in Partner Cooperation in Alliances," Academy of Management Review, 23 (1998): 491-512.
26. T. Khanna, "The Scope of Alliances," Organization Science, 9 (1998): 340-355.
27. D. Meyerson, K.E. Weick, and R.M. Kramer, "Swift Trust and Temporary Groups," in Kramer and Tyler, op. cit., pp. 166-195.
28. For an interesting study of these kinds of conditions, see S.S. Cohen and G. Fields, "Social Capital and Capital Gains in Silicon Valley," California Management Review, 41/2 (Winter 1999): 108-130.
29. For this set of ideas, see L.G. Zucker, "Production of Trust: Institutional Sources of Economic Structure," in B.M. Staw and L.L. Cummings, eds., Research in Organizational Behavior, Volume 8 (Greenwich, CT: JAI Press, 1986).
30. This seems to imply an assumption that firms are unitary actors. Yet, specific subsidiaries, divisions, offices, and so forth may have reputations for trustworthiness that are quite different from those enjoyed by the parent firm as a whole. This would be particularly true in the case of highly diversified firms.
31. See F. Fukujama, Trust: The Social Virtues and the Creation of Prosperity (New York, NY: The Free Press, 1995); L.C. Huff, "Understanding Differences in the Formation of Trust: Individualistic vs. Collectivist Cultures," CIBER Working Paper No. 00-03, University of Hawaii, 2000; P.M. Doney, J.P. Cannon, and M.R. Müllen, "Understanding the Influence of National Culture on the Development of Trust," Academy of Management Review, 23/3 (July 1998): 601-620.
32. See F. Fukujama, Trust: The Social Virtues and the Creation of Prosperity (New York, NY: The Free Press, 1995); L.C. Huff, "Understanding Differences in the Formation of Trust: Individualistic vs. Collectivist Cultures," CIBER Working Paper No. 00-03, University of Hawaii, 2000; P.M. Doney, J.P. Cannon, and M.R. Müllen, "Understanding the Influence of National Culture on the Development of Trust," Academy of Management Review, 23/3 (July 1998): 601-620.
33. See F. Fukujama, Trust: The Social Virtues and the Creation of Prosperity (New York, NY: The Free Press, 1995); L.C. Huff, "Understanding Differences in the Formation of Trust: Individualistic vs. Collectivist Cultures," CIBER Working Paper No. 00-03, University of Hawaii, 2000; P.M. Doney, J.P. Cannon, and M.R. Müllen, "Understanding the Influence of National Culture on the Development of Trust," Academy of Management Review, 23/3 (July 1998): 601-620.
34. R.M. Kanter, "Collaborative Advantage: The Art of Alliances," Harvard Business Review, 72/4 (July/August 1994): 96-108.
35. See, for example, the cases cited in R. Reich and E.D. Menkin, "Joint Ventures with Japan Give Away Our Future," Harvard Business Review, 64/2 (March/April 1986): 78-86.
36. A. Ariño, J. Vilá, M. Abramov, I. Skorobogatykh, and I. Rykounina, "Partner Selection and Trust Building in Western European-Russian Joint Ventures: A Western Perspective," International Studies of Management and Organization, 27/1 (1997): 19-37.
37. M.L. Gerlach, Alliance Capitalism (Berkeley, CA: University of California Press, 1992).
38. A. Parkhe, "Partner Nationality and the Structure-Performance Relationship in Strategic Alliances," Organization Science, 4/2 (May 1993): 301-324.
39. M. Schweinsberg and F. Bidault, "Fiat and Peugeot's SEVELNORD Venture (A): Laying the Foundations for a Second Success," in J. de la Torre, Y. Doz, and T. Devinney, Managing the Global Corporation (New York, NY: McGraw-Hill, 2001), pp. 271-281.
40. G. Lorenzoni and C. Baden-Fuller, "Creating a Strategic Center to Manage a Web of Partners," California Management Review, 37/3 (Spring 1995): 146-163.
41. See, for example, Kanter, op. cit. Powell describes four generic types-networks of place, R&D networks, business groups, and strategic alliances and collaborative manufacturing arrangements-each with a "different path to cooperation." W.W. Powell, "Trust-Based Forms of Governance," in Kramer and Tyler (1996), op. cit.
42. See, for example, Kanter, op. cit. Powell describes four generic types-networks of place, R&D networks, business groups, and strategic alliances and collaborative manufacturing arrangements-each with a "different path to cooperation." W.W. Powell, "Trust-Based Forms of Governance," in Kramer and Tyler (1996), op. cit.
43. See W. Spencer and P. Grindley, "SEMATECH after Five Years: High-Technology Consortia and U.S. Competitiveness," California Management Review, 35/4 (Summer 1993): 9-32; W.G. Ouchi and M. Kremen Bolton, "The Logic of Joint Research and Development," California Management Review, 31/3 (Spring 1988): 9-33.
44. See W. Spencer and P. Grindley, "SEMATECH after Five Years: High-Technology Consortia and U.S. Competitiveness," California Management Review, 35/4 (Summer 1993): 9-32; W.G. Ouchi and M. Kremen Bolton, "The Logic of Joint Research and Development," California Management Review, 31/3 (Spring 1988): 9-33.
45. For a detailed discussion of negotiation processes and outcomes of sensemaking, see P.S. Ring and G. Rands, "Sensemaking, Understanding, and Committing: Emergent Transaction Processes in the Evolution of 3M's Microgravity Research Program," in A.H. Van de Ven, H. Angle, and M.S. Poole, eds., Research on the Management of Innovation: The Minnesota Studies (New York, NY: Ballinger/Harper Row, 1989), pp. 337-366.
46. S. Rangan, "The Problem of Search and Deliberation in Economic Action: When Social Networks Really Matter," Academy of Management Review, 25/4 (October 2000): 813-828.
47. This broad and active sensemaking is associated with a number of processes described in P.S. Ring "The Three T's of Alliance Creation: Task, Team and Time," European Management Journal, 18/2 (April 2000): 152-163.
48. Y. Doz, op. cit.
49. P.S. Ring, "Transacting in the State of Union: A Case Study of Exchange Governed by Convergent Interests," Journal of Management Studies, 34/1 (January 1997): 1-25 [at 14-15]. The first comment reflects trust in the partner's ethical behavior, whereas the second concerns its administrative capabilities.
50. A. Ariño and P.S. Ring, "Learning from Failed Negotiations," working paper, IESE, Barcelona, 2001.
51. Perhaps the standard a firm might use to evaluate the reasonableness of its partner's defection, and thus its tolerance of it, would be whether, if faced with similar circumstances, they would have acted in a similar manner. Williamson [op. cit.] would argue that giving and receiving credible commitments is the essence of calculative trust, and his view allows for tolerance of defection if it is in the partner's best interest to do so.
52. J Lewicki, D.J McAllister and R.J. Bies, "Trust and Distrust: New Relationships and Realities," Academy of Management, 23/3 (July 1998): 438-458.
53. See, for example, M. Sobrero and O. Toulan, "Alternative Forms of Fit in Supplier-Manufacturer Relationships in New Product Development," working paper, University of Bologna, 2001; G. Lorenzoni and A. Lipparini, "The 'Honda Effect', Part 3: Network-Specific Advantage in the Italian Motorcycle Industry," working paper, University of Bologna, 2001; B Uzzi, "Social Structure and Competition in Interfirm Networks: The Paradox of Embeddedness," Administrative Science Quarterly, 42/1 (March 1997): 35-67.
54. See, for example, M. Sobrero and O. Toulan, "Alternative Forms of Fit in Supplier-Manufacturer Relationships in New Product Development," working paper, University of Bologna, 2001; G. Lorenzoni and A. Lipparini, "The 'Honda Effect', Part 3: Network-Specific Advantage in the Italian Motorcycle Industry," working paper, University of Bologna, 2001; B Uzzi, "Social Structure and Competition in Interfirm Networks: The Paradox of Embeddedness," Administrative Science Quarterly, 42/1 (March 1997): 35-67.
55. See, for example, M. Sobrero and O. Toulan, "Alternative Forms of Fit in Supplier-Manufacturer Relationships in New Product Development," working paper, University of Bologna, 2001; G. Lorenzoni and A. Lipparini, "The 'Honda Effect', Part 3: Network-Specific Advantage in the Italian Motorcycle Industry," working paper, University of Bologna, 2001; B Uzzi, "Social Structure and Competition in Interfirm Networks: The Paradox of Embeddedness," Administrative Science Quarterly, 42/1 (March 1997): 35-67.
56. John Locke, An Essay Concerning Human Understanding, (first published in 1690), in R.M. Hutchins, ed., Great Books of the Western World (Chicago, IL: Encyclopedia Britannica, 1952), Vol. 35, pp. 83-395. Keeping one's word for fear of retribution is similar to the concept of deterrence-based trust summarized in Rousseau et al., op. cit., pp. 398-399.
57. John Locke, An Essay Concerning Human Understanding, (first published in 1690), in R.M. Hutchins, ed., Great Books of the Western World (Chicago, IL: Encyclopedia Britannica, 1952), Vol. 35, pp. 83-395. Keeping one's word for fear of retribution is similar to the concept of deterrence-based trust summarized in Rousseau et al., op. cit., pp. 398-399.
58. Powell argues that "trust is neither chosen nor embedded, but is instead learned and reinforced, hence a product of ongoing interaction and discussion." It should be noted also that both God's law and the State recognize the concept of force majeure as a justification for non-compliance of contractual agreements. W.W. Powell, "Trust-Based Forms of Governance," in Kramer and Tyler (1996), op. cit., p. 63
59. An exploratory study attempting to apportion variances in partner satisfaction to these various elements appeared to conclude that partner interaction was by far the most significant. See A. Ariño, J. de la Torre, and P.S. Ring, "Roles Played by Relational Trust in Strategic Alliances," IESE Research Paper No. 432, 2001.
60. This story is told in disguised form in Ariño and de la Torre (1998), op. cit.
61. Ring (1996), op. cit.
62. For evidence of this, see Ariño and de la Torre (1998), op. cit.; L.D. Browning, J.M. Beyer, and J.C. Shelter, "Building Cooperation in a Competitive Industry: SEMATECH and the Semiconductor Industry," Academy of Management Journal, 38/1 (February 1995): 113-151; E.J. Zajac and C.P. Olsen, "From Transaction Cost to Transaction Value Analysis: Implications for the Study of Interorganizational Strategies," Journal of Management Studies, 30/1 (January 1993): 131-145; B. Gray, Collaborating: Finding Common Ground for Multiparty Problems (San Francisco, CA: Jossey-Bass, 1989).
63. For evidence of this, see Ariño and de la Torre (1998), op. cit.; L.D. Browning, J.M. Beyer, and J.C. Shelter, "Building Cooperation in a Competitive Industry: SEMATECH and the Semiconductor Industry," Academy of Management Journal, 38/1 (February 1995): 113-151; E.J. Zajac and C.P. Olsen, "From Transaction Cost to Transaction Value Analysis: Implications for the Study of Interorganizational Strategies," Journal of Management Studies, 30/1 (January 1993): 131-145; B. Gray, Collaborating: Finding Common Ground for Multiparty Problems (San Francisco, CA: Jossey-Bass, 1989).
64. For evidence of this, see Ariño and de la Torre (1998), op. cit.; L.D. Browning, J.M. Beyer, and J.C. Shelter, "Building Cooperation in a Competitive Industry: SEMATECH and the Semiconductor Industry," Academy of Management Journal, 38/1 (February 1995): 113-151; E.J. Zajac and C.P. Olsen, "From Transaction Cost to Transaction Value Analysis: Implications for the Study of Interorganizational Strategies," Journal of Management Studies, 30/1 (January 1993): 131-145; B. Gray, Collaborating: Finding Common Ground for Multiparty Problems (San Francisco, CA: Jossey-Bass, 1989).
65. For evidence of this, see Ariño and de la Torre (1998), op. cit.; L.D. Browning, J.M. Beyer, and J.C. Shelter, "Building Cooperation in a Competitive Industry: SEMATECH and the Semiconductor Industry," Academy of Management Journal, 38/1 (February 1995): 113-151; E.J. Zajac and C.P. Olsen, "From Transaction Cost to Transaction Value Analysis: Implications for the Study of Interorganizational Strategies," Journal of Management Studies, 30/1 (January 1993): 131-145; B. Gray, Collaborating: Finding Common Ground for Multiparty Problems (San Francisco, CA: Jossey-Bass, 1989).
66. P. Coy, "The Alliance Manager: I'm OK, You're OK," Business Week, October 25, 1999, p. 77.
67. Aviation Week, Show News On Line, September 10, 1998.
68. A. Ariño and J. de la Torre, "Equity and Efficiency in Collaborative Processes: The NAMCO-Hexagon Joint Venture Case," CIBER Working Paper Series, The Anderson School at UCLA, no. 99-11, 1999.
69. "Partners' Partners," Business Week, October 25, 1999, p. 122.
70. See, for example, J.B. Heide and G. John, "Do Norms Matter in Marketing Relationships?" Journal of Marketing, 56/2 (April 1992): 32-44; Macneil, op. cit.
71. See, for example, J.B. Heide and G. John, "Do Norms Matter in Marketing Relationships?" Journal of Marketing, 56/2 (April 1992): 32-44; Macneil, op. cit.
72. R. Gulati, T. Khanna, and N. Nohria, "Unilateral Commitments and the Importance of Process in Alliances," Sloan Management Review, 35/3 (Spring 1994): 61-69.
73. A. Ariño and Y. Doz, "Rescuing Troubled Alliances . . . Before It's Too Late," European Management Journal, 18/2 (April 2000): 173-182. Alza was eventually acquired by Johnson & Johnson in March 2001.
74. Several studies of trust suggest that the willingness of the parties to share information with each other helps to build trust: R.M. Kanter, op. cit.; A. Larson, "Network Dyads in Entrepreneurial Settings: A Study of the Governance of Exchange Relationships," Administrative Science Quarterly, 37/1 (March 1992): 76-104.
75. Several studies of trust suggest that the willingness of the parties to share information with each other helps to build trust: R.M. Kanter, op. cit.; A. Larson, "Network Dyads in Entrepreneurial Settings: A Study of the Governance of Exchange Relationships," Administrative Science Quarterly, 37/1 (March 1992): 76-104.
76. F. Gee and Y. Doz, "General Electric and Snecma (C)," INSEAD case, 1996.
77. G. Jacobson and J. Hillkirk, Xerox: American Samurai (New York, NY: Macmillan, 1986).
78. K. Arrow, Information and Economic Behavior (Stockholm: Federation of Swedish Industries, 1973), p. 24.
79. Ring (1996), op. cit.
80. R. Gulati, "Does Familiarity Breed Trust? The Implications of Repeated Ties for Contractual Choice in Alliances," Academy of Management Journal, 38/1 (February 1995): 85-112.
81. Coy (1999), op. cit.