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Trust in Alliances – A Difficult Transition from Thin to Thick
Trust
Do Good Controls Make Good Neighbors?
ANTOINETTE WEIBEL
University of Zurich
Institute for Research in Business Administration
Plattenstrasse 14
CH - 8032 Zürich
E-mail: aweibel@ifbf.unizh.ch
MARGIT OSTERLOH
University of Zurich
Institute for Research in Business Administration
Plattenstrasse 14
CH - 8032 Zürich
E-mail: osterloh@ifbf.unizh.ch
Paper submitted to EIASM, November 19, 2001.
Acknowledgement
We are very grateful to Sandra Rota, Jetta Frost for critical comments and to Marc von
Wartburg for lecturing and commenting this paper so quickly.
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Introduction
Strategic alliances are voluntary collaborations of legally independent firms in
order to gain competitive advantages. In the process of creating common value the
alliance firms are facing a social dilemma: Mutual cooperation, although
desirable, is not automatic as the selfish actions of each alliance firm may not
lead to socially desirable outcomes. The main question is: What can alliance
partners do to overcome social dilemmas?
An impressive body of theoretical research (Dawes, 1980; Ostrom, 1990; Ostrom
et al., 1999; Schroeder, 1995) and empirical studies (Fehr et al., 1999; Foddy,
1999; Ostrom et al., 1994) is addressing social dilemmas. Also there has been a
growing interest in applying the concept of social dilemma on alliance dynamics
(Gulati et al., 1994; Khanna et al., 1998; Parkhe, 1993). Specifically alliances are
shown to face an additional problem in solving social dilemmas: In the absence of
a higher authority to ensure compliance they can only rely on decentralized
governance devices. Typically two forms of decentralized governance devices are
discussed. From experimental research and game theory it is known that
deterrence based trust or thin trust i.e. trust, which is sustained by controls and the
threat of punishment and/or the alignment of interests, can solve the dilemma
under specific circumstances such as repeated interactions and possibilities to
sanction (Lewicki et al., 1995; Shapiro et al., 1992). In addition the relationship
between the different alliance partners can evolve and goodwill trust or thick trust
can develop i.e. trust which is sustained by a voluntarily accepted duty which is
more resilient than thin trust (Hosmer, 1995; Ring, 1996). However the research
typically stops short of discussing the transformation from thin trust to thick trust
i.e. the relationship of control and trust is hardly discussed. In this article we
propose that recent findings in the motivation literature (Deci et al., 1999; Frey,
1997; Osterloh et al., 2000a) can specify when the antecedents leading to thin
trust i.e. controls and sanctioning prevent the evolution of thick trust (Sitkin et al.,
1993). We thereby propose that the transformation from thin to thick trust can
only be managed if the dynamic relationship between thin trust and thick trust is
taken into consideration. Possible crowding effects i.e. counterproductive effects
of thin trust on thick trust have to be taken into account. The question we are
going to answer is how firms can manage the transition from thin trust to thick
trust smoothly more specifically: “when does control promote the evolution of
thick trust and when does it inhibit the transition to thick trust?”
We like to answer this question by turning to a social interaction perspective. In a
first section we show how the governance problem of alliances can be sharpened
by depicting alliances as social dilemmas. We then discuss in a second section
decentralized governance solutions to the social dilemma and thereby distinguish
two different forms of trust: thin trust and thick trust. A third section is dedicated
to conduct a more precise analysis of the process of trust-building. We show how
the actions and decisions of the trustor do not only influence the possibilities of
the trustee to give or to abuse trust but in the long run also influence the
motivation of the trustee (Tyler et al., 1996). Specifically if the trustor relies on
controls and sanctions he may crowd-out the intrinsic motivation of the trustee to
behave trustworthy (Bohnet et al., 2000; Osterloh et al., 2000a). This in turn
prevents the evolution of thick trust. Finally in the fourth section we specify the
conditions under which a crowding-out may take place (Deci et al., 1999; Deci et
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al., 2000). Only by preventing the crowding-out effect firms can hope to
eventually turn to thicker and thereby more resilient trust.
Strategic Alliances as Source of Social Dilemmas
Firms enter strategic alliances in order to gain market access, to reduce market
uncertainty, to impose industry standards, to reap economies of scale and for a
variety of other reasons (Sydow, 1992). An increasingly important reason to
collaborate has been the completion of a firm’s capabilities i.e. to learn from each
other. Strategic alliances are seen as a vehicle to gain access to capabilities of
other firms which otherwise would have been very time-consuming to build
(Nooteboom, 1999). In this view strategic alliances are collaborations of legally
independent firms in order to gain competitive advantages. The main
characteristics of alliances are a) the existence of network specific public goods
i.e. the common value creation and b) the absence of a central authority as in
alliances decision and property rights are by definition diffused with no single
alliance firm holding the majority of them (Osterloh et al., 2000b). In the process
of creating common value (of producing the public good) the alliance firms are
facing a social dilemma, which cannot be solved by traditional means. Rather the
alliance partners have to create decentralized governance devices and enforce
these devices themselves either by a) reducing the possibilities for harmful selfinterested behavior i.e. thin trust or by b) decreasing the propensity for harmful
self-interested behavior i.e. thick trust.
Social dilemmas describe situations in which the actions of selfish individuals
may not lead to socially desirable outcomes. Dawes defines social dilemmas as
situations in which “… a) each individual receives a higher payoff for a socially
defecting choice (e.g. using all the energy available, polluting the environment)
than for a socially cooperative choice, no matter what the other individuals in
society do, but b) all individuals are better off if all cooperate than if all defect”
(Dawes 1980: 169). The classic example of such a dilemma is the “tragedy of the
commons” discussed by Garett Hardin (1968). The commons are community
pastures where herders were free to graze their cattle. Because there usually exists
free access it is rational for each individual herder to add more animals than the
social optimum would allow for. If all villagers act in this way, however, the
commons become overgrazed and eventually may be destroyed.
Social dilemmas are a pressing danger in so called learning alliances. On the one
hand if all firms cooperate in learning alliances they can create value that could
otherwise not be created by either firm independently (Zajac et al., 1993). On the
other hand if a firm attempt to use its partners know-how for private gains it can
appropriate value without having to contribute to the common value creation
(Khanna et al., 1998). Of course if all firms behave in this socially defecting way
none can appropriate value as there is no common value to be shared. This leads
to the situation that firms can never be sure whether their partners are out to get
them i.e. to freeride on the collective efforts or may be even to steal each others
competencies1 or whether their partners would like to initiate an
interorganizational learning process for the sake of common learning and gaining
expertise.
1
Hamel/Doz (1989) have introduced an especially nasty form of a social dilemma into the alliance
literature the so called “race to learn”. In a race to learn alliance partners have a hidden agenda to
not only freeride on the other’s efforts but to also steal the partner’s competencies.
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In the literature we find accounts of alliances where the situation of the social
dilemma led to a race to learn and the consequent dissolution of the alliance e.g.
the case of the joint-venture between the French Thompson and the Japanese JVC
(Doz et al., 1998). Entering the alliance seemed to be a win-win-situation for both
partners. JVC was granted to enter the European Market and saw the possibility to
define the industry standard and Thompson wanted to use the process know-how
of JVC. Yet Thompson entered the alliance with a hidden agenda. Its aim was to
match JVC’s competencies in a few years time. Whilst at first JVC did not
consider Thompson to be a threat and rather openly shared its knowledge in the
common production site they were soon to discover that Thompson had indeed
learned a lot and came fearingly close in filling the knowledge gap. By this time it
was already too late to alter the conditions because JVC had become rather
dependent on Thompson. Thompson was able to take much more out of the
alliance then JVC was prepared to give. However neither firm was able to profit
from the synergistic potential of the alliance once the hidden agenda of Thompson
was detected.
On the other hand examples of strategic alliances thriving despite the obvious
dilemma situation are also abound starting with Japanese supplier-producerrelationships (Dyer, 1997), multilateral learning alliances such as the collaboration
initiated by the airport corporation of Frankfurt, the FRA (Duschek, 1998) and
virtual or dynamic strategic alliances such as the Australian TCG (Miles et al.,
1994).
The airport corporation FRA is a very interesting example of how firms can strike
a balance between individual value appropriation and common value creation.
Frankfurt Airport (FRA) is the hub firm of a almost two decades lasting alliance
among several technology suppliers and airlines. For a long time this alliance has
been developing a number of innovative flight related services. For example they
developed a baggage reconciliation system together with Softlab, Lufthansa and
FRA’s Ground Handling which nowadays has become an international standard
(Duschek, 1998). As a result of this and several other services developed for
ground handling the minimum connecting time is only 45 minutes and 35 minutes
on request. FRA is one of the fastest major airports in the world (FRA, 2001).
This fast service can only be guaranteed because the FRA alliance manages to
solve the inherent social dilemma. From the single alliance partner’s point of view
it would very attractive to free ride as no firm can be excluded easily from the
value of being „one of the fastest airports in the world“. While at the same time
relaxing its own efforts e.g. let customers carry more then the agreed upon number
of baggages can lead to the quick advantage of having satisfied customers of their
own. Yet this seems not to have happened if we consider the established fast
connecting time.
What then is it that certain firms know how to solve the social dilemmas i.e. to
initiate a common value creation despite the uncertainty regarding the partner’s
behaviour? We will turn to this question in the next section.
Solutions to Social Dilemmas
The grim predictions evoked by the theoretical analysis of dilemma situations ran
counter to many everyday experiences and are also challenged by a considerable
amount of empirical evidence in the dilemma research (Ostrom, 1998). On a very
general level there are two routes to solve the problems of cooperation. The
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traditional solution is to establish an overarching authority, an outside force to
induce others to do things for the common benefits. This is what Hardin
(1978:314) recommended when he made the problem popular:
if ruin is to be avoided in a crowded world, people must be responsive to a
coercive force outside their individual psyches, a ‘Leviathan’ to use Hobbe’s
term.
However in alliances a “Leviathan” by definition is absent. Therefore we have to
turn to different solutions. Experiments and empirical studies have shown that
individuals or firms are capable of solving the dilemma situation by turning to
decentralized governance devices (Parkhe, 1993). On the one hand the alliance
partners can diminish the incentives to free-ride i.e. rely on thin trust. On the other
hand they can build up thick trust. Thereby the uncertainty regarding a partner’s
future behavior which lies at the heart of the matter of the social dilemma is
replaced by a conscious faith in the partners benevolent intentions.
We will now turn to a discussion of these two solutions.
Relying on Thin Trust
One way to solve the social dilemma is to rely on thin trust. The basic idea is that
even in the absence of any prior information or former contact new alliance
partners can in certain situations trust each other because there are limited
opportunities for selfish behavior. Thin trust is based on a rational decision made
under uncertainty i.e. on a rational calculus. Noorderhaven (1994) terms this form
of trust “situational trust” to stress that thin trust is contingent on the specific
circumstances of a deal rather than on the way in which alliance partners
characterize each other. Basically there are two aspects giving rise to thin trust.
Firstly from experimental game theory we know that alliance partners may
reshape the alliance structure themselves to create the conditions for robust
cooperation (Axelrod, 1984; Ostrom et al., 1994; Parkhe, 1993). Secondly alliance
partners may rely on safeguards both external and internal to facilitate thin trust as
discussed in trust literature (Lewicki et al., 1995; Shapiro et al., 1992) as well as
in the experimental game theory (Camerer et al., 2001; Fehr et al., 2000).
If we turn to the first approach to build thin trust we can see how alliance
literature has recently been inspired by game theory to discuss solutions to the
social dilemma. Pharke (1993:797) emphasises:
However, the dilemma’s relentless logic and the inherent instability
introduced into the relationship by each partner’s uncertainty regarding the
other’s next move may be responsive to deliberate strategies that do not
necessarily accept circumstances as given, but rather seek to reshape the
alliance structure to create the conditions for robust cooperation.
From a game theoretic point of view social dilemmas can be transformed into
different games that make cooperation more plausible. It is by now a well
established fact that a long shadow of the future makes cooperation more
probable. The alliance firms can themselves prolong the shadow by investing in
the relationship. High set-up costs for structuring the further relation e.g. creating
interorganizational information systems serve at once for lowering ongoing
transaction costs and creating a longer time horizon (Dyer, 1997).
On the one hand a long perspective of cooperation and repeated interactions shift
the weight from short time interests to long time considerations. Alliance partners
are less likely to act distrustfully if future beneficial transactions are likely to be
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endangered by such a defective behaviour. On the other hand once there is the
potential for a long cooperation with no clear cut deadline strategies of reciprocity
are encouraged. The alliance partners can commit themselves to punish
noncooperators sufficiently such as in the famous “tit for tat” strategy posited by
Axelrod (1984).
The second approach to build thin trust goes hand in hand with the first approach.
Safeguards i.e. sanctioning potential make selfish or opportunistic behaviour even
more unattractive. The significance of sanctioning potential has only been recently
explored by experimental game theory. In a recent review on the experimental
game theory Camerer and Fehr (2001) showed evidence that the mere possibility
to punish other actors lead to higher cooperation even in unfortunate situations2.
Also in the literature on different forms of trust sanctioning potential is seen as an
important driver for thin trust. Lewicki/Bunker (1995) regard deterrence even as
the most important factor:
…the deterrent elements will be a more dominant “motivator” than the
benefit-seeking elements. Punishment for nonconsistency is more likely to
produce this type of trust than rewards/incentives derived from maintaining
the trust.
However to resolve social dilemmas solely by depending on thin trust is
somewhat problematic. On the one hand controls and punishments can only be
effective if deviations can be detected and the guilty party can be singled out. This
is a problem in a situation of information asymmetry (Miller, 1992). A problem
which is especially virulent in learning alliances where interorganizational
learning processes are often of tacit nature. Firstly the hub firms encounters
problems in choosing the right partner as they can easily hide their real value and
their “true” intention. Secondly even in an ongoing cooperation it is very difficult
to understand the partner competencies. Finally it is virtually impossible to judge
ex-post what the contributions of the single firms were to the alliance’s
performance. It is very difficult to untangle the influence of the general market
dynamics, luck and efforts of the firms on the alliance performance. As Alliance
cooperation may lead to leverage effects who is to tell the effect of a single
contribution to this special surplus?
On the other hand thin trust without the possibility to punish rests on shaky
grounds as the level of cooperation can, at least in theory, not be specified ex-ante.
In other words thin trust leaves plenty of room to free-ride although there will be
no complete free-riding any longer. This is because once the uncertainty of the
duration is introduced the number of possible equilibria explode (Abreau, 1988).
In other words there is no guarantee how much of the private interests will be
subjected to common interests. A higher degree of cooperation can only be
achieved if the alliance firms can credibly communicate their trustworthiness i.e.
their dedication to act in the common interest. A thicker form of trust than
promoted in game theoretic approaches is needed which is what Ring (1996)
expressed when he coined thin trust as “fragile trust”.
Whether a situation is unfortunate or not depends on the structure of the game. In the prisoner’s
dilemma game for example a clear deadline of the cooperation makes defection in the last
encounters of the actors very probable. In an experiment Fehr/Gächter (2000) showed, that even in
the last encounters cooperation in the prisoner’s dilemma with punishing possibilities was
significantly higher then without the possibility to punish.
2
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Building Thick Trust
Another way to deal with this social dilemma is to build up thick trust. Thereby
the uncertainty regarding a partner’s future behaviour is replaced by a conscious
faith in the partners benevolent intentions. In this sense to trust somebody means
to act as if there was no doubt of the other acting in our interest. A trustor allows
himself to be vulnerable toward the trustee because he believes that the trustee is
intrinsically motivated to reciprocate. We go along with Luhmann (1989) and
propose that people who are (thickly) trusting act as if there was no risk precisely
because the other person is seen as trustworthy. Mayer, Davis and Schoorman
(1995) have clarified thick trust as:
…the willingness of a party to be vulnerable to the action 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
other party.
The trustee is intrinsically motivated to cooperate because he either likes the
trustor and/or because he adheres to the norm of reciprocity in believing that this
is the right thing to do. Elster (1989:192) has coined this adherance as “everyday
Kantianism” which says “that one should cooperate if and only if universal
cooperation is better for everybody than universal defection”.
By choosing this definition we wish to highlight two important dimensions: firstly
thick trust is not understood as “rational decision under uncertainty”. It is very
important to separate thick trust from thin trust which is based on a rational
calculous. In thick trust a trustor does not rely on thin norms of reciprocity or
calculative norms as documented by the tit for tat strategy. Rather to trust means
to expect the partner to reciprocate in a more general sense i.e. to act in one’s
interest even if his interest is compromised and even if it eventually will not pay
fully out. It is the expectation that the other person too relies on these thicker
forms of reciprocity.
Secondly thick trust takes time to build. It is never “just there” to act as “lubricant
of transactions” (Arrow, 1974). We do believe that it is on the contrary very
important to understand the process of building thick trust which is messy and
uncertain to say the least. Thick trust rests on some kind of intimacy which
usually takes time to evolve.
Building on the work of several authors (Lewicki et al., 1995; Ring, 1996;
Shapiro et al., 1992) we can name several antecedents of thick trust. Firstly
regular communication can enhance the ability to understand each other. Secondly
in an effort to get to know the other party thoroughly some kind of “courtship”
will be applied. Courtship has something to do with consciously getting to know
the other party by interviewing and by experiencing the other in a variety of
situations and emotional states. Ring (1996) refers to this kind of process as
connected knowing which is based on personalized exchanges, on direct and
personal experience. It permits actors to become “connected” to the others values
and intentions. Finally thick trust rests on thin trust as in the early phases of a
relationship. The possibility to limit the risk of the common encounters allows a
party to experiment with the trustworthiness of the other party and thereby to
slowly build up thick trust.
Yet the transition from thin to thick trust i.e. from deterrence to intimacy has not
been spelled out clearly so far. While most authors regard thin trust as an
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antecedent to thick trust (Deutsch, 1960; Lewicki et al., 1995; McAllister, 1995;
Shapiro et al., 1992) it seems clear that controls and punishment which are the
very essence of thin trust also have the potential to encourage a spiral of distrust
(Das et al., 1998; Osterloh et al., 2000b; Sitkin et al., 1993). However the
research typically stops short of discussing the transformation from thin to thick
trust in regard to this more than problematic intertwining of control (monitoring
and punishment) and thick trust. In this article we propose that recent findings in
the motivation literature (Deci et al., 1999; Frey, 1997; Osterloh et al., 2000a) can
serve to specify when the antecedents leading to thin trust i.e. monitoring and
sanctioning prevent the evolution of thick trust (Sitkin et al., 1993) instead of
building the first stepstone to thick trust.
Managing the Transition from Thin to Thick Trust
Let us first consider the creation of trust in strategic alliances. As has been made
clear the development of trust cannot be taken for granted in a social dilemma
situation where self-interest and temptations to act opportunistically exist. Also
there is no way to distinguish trustworthy partners from others ex-ante due to the
shown information asymmetries. In such a situation trust can only gradually
evolve in the alliance.
Trust Building and Trust Transition in Strategic Alliances
From what we know from empirical studies of the evolution of strategic alliances
(Doz et al., 2000; Larson, 1992; Ring et al., 1994; Zajac et al., 1993) we can
sketch a very simple model of trust building. Trust evolves only gradually in a
trial and error process. Information of how the alliance partners perform and
cooperate are fed back and serve to re-evaluate the trustworthiness of the partners
in every phase (Mayer et al., 1995). Especially in these early phases emotional
ties are weak and intimacy is absent. Therefore monitoring not only protects the
alliance partners but also uncovers valuable information (Lewicki et al., 1995). In
this way intimacy as a basis for thick trust can gradually evolve.
In this situation firms have to be specially cautious because monitoring does have
the potential to further trust but it has also the potential to destroy trust and to
hamper the transition from thin to thick trust. Firms have to consider the
conditions of when such a crowding-out effect will take place. We therefore
introduce the crowding-out theory to carefully delineate these conditions (Frey,
1997; Osterloh et al., 2000a).
Analysis of the Crowding Effect
There exists overwhelming theoretical and empirical evidence that intrinsic and
extrinsic motivation are easily combinable. Alliance partners are extrinsically
motivated to honor the contract and meet promises if they are able to satisfy their
needs indirectly either by avoiding controls and subsequent punishments or by
being able to speculate on future gains of the cooperation. In this case the alliance
rests on thin trust. Alliance partners are intrinsically motivated to act trustworthy
if this deed is valued for its own sake. In this case the alliance is built on thick
trust.
The problem is that thin and thick trust or extrinsic and intrinsic motivation are
not additive, rather there is a systematic dynamic relationship between the two.
This dependence has been shown to exist in a large number of careful experiments
undertaken by Deci and his group (Deci, 1985; Deci et al., 1999). These
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relationships between intrinsic and extrinsic motivation are called crowding
effects (Frey, 1997). These effects make both kinds of motivation endogeneous
variables. The crowding-out-effect posits a negative relationship between intrinsic
and extrinsic motivation. When external incentives - rewards or controls – are
perceived to be controlling by the member firm affected, intrinsic motivation
tends to be undermined. Applied on the transition from thin to thick trust the
crowding-out theory states that thin trust i.e. monitoring and punishment may
crowd out the intrinsic trustworthiness of an actor and thereby destroy the basis
on which thick trust is built on.
Theoretically the crowding effect is based on cognitive evaluation theory (Deci,
1985) , on psychological contract theory (Rousseau, 1995) and on the theory of
organizational justice (Lind et al., 1988). Taken together they specify the
conditions under which intrinsic motivation (to act trustworthy) is decreased or
increased by monitoring and sanctioning i.e. thin trust.
According to cognitive evaluation theory intrinsic motivation depends on the
perceived locus of control which shifts if the drive to act is attributed to an
external influence (Deci et al., 2000). The actor considers the person undertaking
the outside intervention to be responsible. The important finding is that the shift in
the locus of control does not always take place. Each internal intervention has two
aspects: (1) the controlling aspect strengthens the perceived external control and
the feeling of being directed from the outside. (2) The informing aspect adds to
one’s perceived competence and thereby strengthens the feeling of internal
control. When external incentives – e.g. sanctions – are perceived to be
controlling intrinsic motivation tends to be undermined. The overall effect
depends on which influence is perceived to be stronger.
Organizational justice literature characterizes the conditions when such a shift of
the locus of control is more likely to take place. It emphasizes that it is especially
important how extrinsic factors are applied if negative effects are to be avoided. In
the context of trust building procedural justice has been proven to be very
important (Korsgaard et al., 1995; Kumar, 1996; Tyler, 1994). People place
importance not only on what they get but also on how their share was specified
and distributed. Empirically procedural justice is shown to be especially important
if the extrinsic benefits are not considered equitable. In such a case fair procedures
enhance the satisfaction with the negative results (Lind et al., 1988) Also
procedural justice has a great impact on the acceptance of existing authorities.
Whether or not rules, controls, and sanctions designed to solve the social dilemma
are accepted is dependent on the legitimacy of the conducting party. Tyler and
Degoey (1996:493) have shown that views of the legitimacy of an authority are
almost only influenced by the procedural fairness administered by that authority.
Finally there is a growing body of empirical studies that directly show the
influence of fair processes such as a fair system of control on trust (Alexander et
al., 1987; Koorsgard et al., 1995).
Psychological contract theory adds to our understanding of the dynamics of
crowding effects or more directly of the dynamics of trust and distrust evolution.
Social psychologists (Rousseau and McLean Parks 1993, Schein 1965) suggest
that contracts may involve strong emotional ties and loyalties. These socioemotional relations establish an implicit, relational contract that goes beyond
transactional exchanges but include a reciprocal appreciation of intrinsic
motivation. If such a contract is breached, the reciprocal good faith is put into
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question. This breach of the individual beliefs about the terms and conditions of a
reciprocal exchange i.e. the breach of the psychological contract can lead to a loss
of trust (Robinson, 1996). Robinson (1996:578) has established empirically that a
breach of a psychological contract “undermines two conditions leading to trust –
judgment of integrity and beliefs in benevolence ”. As a consequence the
individuals contributions will be reduced and the relations are reduced to a purely
transactional exchange i.e. to an exchange based solely on thin trust (extrinsically
motivated). However, Robinson (1996: 590) also established that higher trust at
the outset lead to a less dramatic decline in trust following the psychological
contract breach. Trusting individuals are less likely to perceive breach. In such a
way trust begets trust not only by influencing the trusting behavior but also by
influencing each other’s perceptions.
Against this theoretical background we propose in the next section how the
transition from thin to thick trust can be managed smoothly.
Balancing Thin and Thick trust
As a consequence the management of the transition process from thin to thick
trust has to take the possible crowding effects of thin trust into account. From
what we can tell by the theoretical analysis four aspects should be taken into
consideration to further the intrinsic obligation to behave trustworthy and to avoid
crowding-out (Osterloh et al., 2000a).
(1) Participation is a key feature in avoiding crowding effects. Put differently
unilateral commands may trigger a vicious circle i.e. they diminish selfinitiatives and produce the kind of conduct which they were meant to avoid
(McGregor, 1960). Contrary to that participation firstly avoids the shift of the
locus of control as it raises the perceived self-determination of the alliance
firms and thereby strengthens intrinsic motivation to behave trustworthy.
Secondly participation is a very important criterion of fair procedures. By now
it has been well established that procedures giving members a voice in the
decision-making process tend to enhance the acceptance of even unfavourable
decisions (Greenberg, 1987). Thirdly the common design of governance
mechanisms i.e. participation in creating a design structure increases the
likelihood of shared perceptions in the underlying psychological contracts.
(2) Self-organizing principles based on communication and consent enable the
willingness to obligate social norms for their own sake. In this sense, they can
foster the coordination of divergent interests of different alliance members
(Ostrom, 1990).
(3) Personal relationships and communication is a precondition for establishing
and maintaining psychological contracts of relational nature. As experimental
evidence shows, personal relationships strongly raise the intrinsic motivation
to cooperate (Dawes et al., 1988; Frey et al., 1995). In alliances personal
relationships are furthered by interorganizational working groups, transfer of
personnel and substantial information sharing which are seeds to relational
exchanges (Dyer, 1997; Sako, 1992). Communication too is closely related to
minimize possible incongruences between the perception of different agents
thereby reducing the likelihood of a perceived breach (Morrison et al., 1997).
We have already discussed how regular communication and courtship may
help to establish intimacy and to facilitate thick trust.
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(4) Fair procedures add legitimacy to a alliances authorities, may even curb
dissatisfaction with unequitable extrinsic rewards (or unfair sanctions) and
directly influences trust in each others. Procedures are understood to be fair if
they rely on accurate information, provide consistency over time and persons,
are correctable and represent the concerns of all recipients (Greenberg, 1990).
In an empirical study Kumar (1996) evaluated the procedural fairness imposed
in successful manufacturer-retailer relationships. He found that systems which
were understood as being procedurally fair were based on six principles:
bilateral communication, impartiality, refutability, explanation, familiarity and
courtesy. It proved to be very important for the trusting base of relationships
whether sanctions were refutable i.e. there were means to ask for a second
opinion, whether the reasoning for punishments were clearly explained and
whether the party commanding sanctions was familiar with the specific
conditions of the party charged guilty.
Taking these crowding effect into account secures that governance devices act
additively to combat the social dilemma i.e. that thin trust serves as a stepstone to
thick trust. They spell out how control has to be designed and conducted in order
to promote thick trust.
Disscussions, Implications, and Future Research Directions
To a large degree alliance literature has been dominated by two dominant
paradigms: transaction cost theory and knowledge-based theories. Both have
contributed valuable insights into the questions why alliances exist and what their
scale and scope is. Yet transactions cost theory as well as the knowledge-based
theories rely on a very simplistic sketch on human nature.
Transaction cost theory assumes opportunistic behaviour and it is therefore
presumed that social dilemmas can be solved through an appropriate design of
monitoring and sanctioning arrangements (Williamson 1985: 205) i.e. by relying
solely on thin trust. Yet the assumption of opportunism comes at a high price in
that it may firstly make firms overinvest in safeguards (Madhok, 2000). Also
secondly if information asymmetries between the alliance partners are
considerable and the incentives to freeride in relation to the incentives to
cooperate are too big, alliances must ultimately fail as the necessary bilateral (or
multilateral) consent takes time and is ripe for misunderstandings (Williamson,
1996). Yet in reality alliances do exist in situations of high information
asymmetry and with difficult incentives structures, a fact not easily accounted for
in traditional transaction cost theory (Holmström et al., 1998). There must be
some “magic way” to lower transaction costs e.g. there must be thick trust (Jarillo,
1988). However thick trust cannot be accounted for in transaction cost theory
because it is built on the absence of opportunism and on faith in the good
intentions of the other party.
On the contrary knowledge-based theory usually assumes that alliance partners
behave non-opportunistically and (thickly) trust each other (Ghoshal et al., 1996).
Alliance firms engage voluntarily in a course of collective action and contribute to
the collective learning process. Therefore, non-self-interested alliance specific
commitment to cooperate is taken for granted while incentive issues do not matter
really (Langlois et al., 1997). Again with this view a lot of empirical data cannot
be explained e.g. why in alliances firms do invest heavily in monitoring and
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sanctioning systems. Also this runs counter to the findings of trust literature where
thin trust very often acts as a first stepstone to thick trust.
It therefore seems imperative to turn to a more realistic approach, a theory to
include mixed-motive relations such as those discussed in the social dilemma
approach. Alliance partners are neither purely opportunistic players which are out
to get the other partners. Nor are they purely altruistic actors which only seek to
further the common interest of the alliance. Only in a dynamic interplay, a trialand-error learning the partners can find out whether they can rely on each other to
further the common interest. In this way they can slowly progress from thin trust
to thick trust to put the alliance on secure grounds. However the social dilemma
literature and the trust research stops short from discussion this transition process.
That is why we introduced the motivation literature which can close the gap.
Together these research directions can tell how to build trust in alliances and how
to manage the difficult transition from thin trust (control) to thick trust.
Research Contributions
By turning to a theory to include mixed-motive relations such as those discussed
in the social dilemma approach we were able to introduce two solutions to a tricky
alliance problem. On the one hand the alliance partners can diminish the
incentives to free-ride in social dilemmas i.e. rely on thin trust. Thin trust depends
on setting the right incentives such as promoting a long perspective of cooperation
and repeated interactions which shift the weight from short time interests to long
time considerations. It also rests on safeguards i.e. sanctioning potential which
make selfish or opportunistic behavior even more unattractive. On the other hand
alliance partners are able to build up thick trust. Thereby the uncertainty regarding
a partner’s future behaviour is slowly replaced by a conscious faith in the partners
benevolent intentions. In this sense to trust somebody means to act as if there was
no doubt of the other acting in our interest. A trustor allows himself to be
vulnerable toward the trustee because he believes that the trustee is intrinsically
motivated to reciprocate. Thick trust gradually evolves on the grounds of thin
trust, regular communication and courtship.
However to understand the transformation from thin trust to thick trust in regard
to the more than problematic intertwining of control (monitoring and punishment)
and thick trust we have to take their dynamic interplay into account. In this article
we have shown which recent findings in the motivation literature (Deci et al.,
1999; Frey, 1997; Osterloh et al., 2000a) can serve to specify when the
antecedents leading to thin trust prevent the evolution of thick trust (Sitkin et al.,
1993).
Limitations and Avenues for Future Research
Future research could extend this framework both theoretically and empirically.
A major shortcoming of the theoretical framework is that it does not account for
even more “thicker” forms of trust. In the trust literature relational trust is
considered to be the most resilient form of trust (Rousseau et al., 1998).
Relational trust rests on both an affective component (McAllister, 1995) and on
some kind of common value transformation or identification (Lewicki et al.,
1995). It rests on the assumption that both parties to a transaction will further the
common interest because there is nothing besides this common interest. Former
transactions have created a psychological identity or a so-called communal
relationship of the alliance partners (Clark et al., 1979). The alliance partners
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share a collectively developed outlook of the world and themselves. Thick trust is
transformed to some kind of almost blind faith.
Again we have to ask what role control plays in the transition form thick to
relational trust. Does control or some specific forms of control hinder this
transition? From what we know at the moment we are left with speculations. It
may have no influence at all as it is the main characteristic of relational trust that
controls become almost invalid. Lewicki and Bunker (1995:230) explain this fact
with an example:
We all know people who appear to sustain trust in someone with whom they
closely identify – a spouse, a child, or a hero figure – in the face of massive
evidence (to others) that the individual’s devious or despicable conduct no
longer warrants trust.
It might even support the transition to relational trust because monitoring can
enable to take on a partner’s problems as its own, to develop a tacit awareness of
the partner’s needs and to learn how to respond appropriately (McAllister, 1995).
Finally controls may hinder the transition to relational trust.
The relationship between control and relational trust remains largely unexplored
and calls for future research. Future research has to develop a consistent
framework to understand the dynamics of control and relational trust. Further it
will also be an empirical challenge to test possible hypotheses.
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