TrustTalk - It's all about Trust

Interorganizational Trust

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Episode notes

As the ultimate expert on the role of trust between organizations, Professor Reinhard Bachmann talks about the importance of risk and vulnerability: you do not need to trust if you are not vulnerable, nor if you want to avoid any kind of risk. What role play competence and integrity?

He speaks about his research into the role of trust and power in two types of inter-organizational relationships, vertical relations (supply chain) and horizontal relations (M&A, joint venture, cooperations), the “system” or “institutional” trust in liberal capitalist countries (like in the UK) versus coordinated capitalist countries (like in Continental Europe).

In the case of acquisition transactions, two organizations need to be integrated, it is not uncommon that one side distrusts the other (job loss, uncertainty) and why is it that many M&A transactions or joint ventures fail, due to lack of trust? In organizational trust you need to see real persons who represent an organization: if it is an abstract organization and you would not associate any human face with it, it is very difficult to trust.

Too much trust is dangerous too: the global financial crisis of 2008 was for a part caused by too much trust in financial advisers (“blind trust”).

He reflects upon organizations that say they do not need trust because they can control and monitor operations more closely by technical means (surveillance, video, etc), wondering whether trust becomes obsolete (he thinks it is not).