Trust and control in fixed duration alliances

Abstract

What happens to the development of trust in an alliance with a known end date? This study found that, even in such alliances, detailed and well known contracts, industry norms for appropriate behaviour and positive initial encounters can facilitate the development of trust. This trust can take two forms. One is the traditional personal trust resulting in learning and high performance. This trust replaces other forms of governance and therefore entails risks of opportunism. The other form of trust is inter-organisational, founded on the contract and industrial norms and initiated from favourable initial encounters. This form of trust allows smoother and faster processes throughout the cooperation exposing the firms to relatively low risks. We call it contractual trust. As the contract proceeds towards termination, the benefits of opportunism may be too tempting, resulting in mistrust.