What’s trust got to do with the global economy?

May 2nd, 2008 - 3:21 pm ICT by admin  

Washington, May 2 (IANS) Name an element that is really critical to today’s booming economy. The surprise answer is “trust”, according to a new study. The study, which looked at 114 global joint ventures, found that trust was critical at three levels: between two collaborating firms, in each firm’s reliance on its own representatives, and, lastly, among the individuals assigned to a collaborative entity.

Trust at the collaborating firm level is called inter-organisational trust. It can be between two CEOs or among people at different firms who have worked together for a long time, said the study by researchers at the University of Missouri.

For example, the ongoing supply chain cooperation between the manufacturing firm Proctor & Gamble and the retail giant Wal-Mart reportedly was initiated because top management in the two firms trusted each other to cooperate and refine the collaboration over time.

The study also examined the effects of trust at three distinct organisational levels and found that business executives should strive to build and maintain trust to improve performance.

“Firms form collaborative entities to generate value and achieve objectives that would be difficult, if not impossible, to achieve independently,” said Lisa Scheer, who conducted the study.

“Collaborations often fail to reach those goals and the culprit may be poor relations and the lack of trust in joint ventures.”

On another level, people in collaborative entity must trust each other and be able to share critical information to achieve their objective. Trust must be established because sharing and coordination creates vulnerabilities that a partner might exploit.

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