INSEAD Library

Includes bibliographical references

Digitized

Trust with Organizations of the New Economy A Cross-Industrial Study Table of Contents Table of Contents .......................................................................................................................... XIII List of Tables.................................................................................................................................. XIX List of Figures................................................................................................................................. XXI List of Abbreviations................................................................................................................... XXIII List of Variables........................................................................................................................... XXIII Glossary......................................................................................................................................... XXV 1 Objectives and Structure of the Argument...................................................................................... 1 1.1 Thesis Objectives..................................................................................................................... 4 1.2 Relevance of the Study............................................................................................................. 8 1.3 Division of Chapters................................................................................................................. 9 2 Trust from the Economic Perspective............................................................................................ 11 2.1 Trust and Monitoring............................................................................................................. 11 2.2 Cooperation and Trust........................................................................................................... 14 2.3 An Economic Defmition of Trust.......................................................................................... 17 2.4 Properties of Trust................................................................................................................. 19 2.4.1 Trust as a Three-Part Relation............................................................................... 19 2.4.2 Trust as an Expectation............................................................................................21 2.4.3 Behavioral Risk.......................................................................................................... 23 2.4.4 The Calculative Placement of Trust........................................................................... 25 2.5 Trust within Organizations..................................................................................................... 26 2.5.1 Trust and Transaction Costs................................................................................... 26 2.5.2 Trust as a Complement for Price and Authority........................................................ 28 2.5.3 Trust and the Corporate Contract.......................................................................... 33 2.5.4 Trust as a Motivational Element.................................................................................35 2.5.5 Trust as a Mechanism to Reduce Behavioral Risk..................................................... 38 2.5.6 Relation! Contracting as a Trust-Based Contract..................................................42 2.6 Trust and Organizational Performance.................................................................................. 45 2.6.1 Advantages of System-Trust....................................................................................... 45 2.6.2 Empirical Contributions to Performance Analysis.................................................... 49 2.6.3 Trust Investment Analysis......................................................................................... 51 2.7 Specific Functions of Trust.................................................................................................... 54 2.7.1 Solving Performance Ambiguity............................................................................... 54 2.7.2 Enforcement of Employee Commitment.....................................................................55 2.7.3 Information-Sharing and Knowledge Transfer..........................................................59 2.7.4 Reorganization Processes...................................................................................... 62 2.8 Conditions for Trust Development........................................................................................ 66 2.8.1 Mutual Interests and Incentive Structure................................................................... 66 2.8.2 Time, Interactions and Stability................................................................................. 68 2.8.3 Organizational Building-Trust Variables................................................................69 2.8.4 Maintenance of the Reputation System..................................................................... 72 2.8.5 Personal Variables................................................................................................ 74 2.9 Trust and Institutional Uncertainty........................................................................................ 76 2.9.1 General Concept of Trust and Uncertainty............................................................. 76 2.9.2 Trust and the Institutional Framework....................................................................78 2.9.3 Industry-Specific Institutional Frameworks.............................................................. 80 2.9.4 Effects of Uncertainty and Instability on Trust Development...................................83 3 The New Economy (NE)................................................................................................................ 89 3.1 Defmition............................................................................................................................... 89 3.1.1 Conceptual Origins................................................................................................ 90 3.1.2 Adopted Perspective.................................................................................................. 92 3.2 A Knowledge-Based Economy..............................................................................................94 3.2.1 Knowledge and the Production Function...................................................................94 3.2.2 The Evolutionary Economics Approach.................................................................... 97 3.2.3 Knowledge in the New Economy................................................................................98 3.2.4 Characteristics of Knowledge in the New Economy............................................. 100 3.3 Institutional 'novations....................................................................................................... 104 3.3.1 Institutional Changes........................................................................................... 104 3.3.2 The New Creative Destruction Process.................................................................. 105 3.3.3 Change in the Relative Prices.............................................................................. 108 3.4 New Economy and Old Economy...................................................................................... 111 3.5 Effects of New Economy Characteristics on Organizations.............................................. 121 3.5.1 A New Business Environment................................................................................. 123 3.5.2 Network-based Organizational Forms.................................................................126 3.5.3 A New Work Dynamics............................................................................................ 128 3.6 The New Telecommunications Industry............................................................................ 131 3.6.1 Privatisation: 'Boom and Bust'............................................................................. 133 3.6.2 The Competitive Model..........................................................................................134 3.6.3 Network-Based Organizational Forms...................................................................137 3.7 Institutional Uncertainties.................................................................................................. 140 3.7.1 Sources of Uncertainties and lnstability................................................................. 140 3.7.2 Demand Uncertainty............................................................................................... 142 3.7.3 Technological Uncertainty..................................................................................... 144 3.7.4 Regulation Uncertainty........................................................................................... 146 3.7.5 The Stock Market Bubble Effects........................................................................... 149 3.8 The Work Conditions in the New Economy...................................................................... 150 3.9 The Brazilian Telecommunications Case Study................................................................ 155 3.9.1 Privatization Process.......................................................................................... 155 3.9.2 The "Painfid Modernization".................................................................................. 156 3.9.3 Employment Conditions......................................................................................... 156 4 Empirical Analysis: Hypotheses and Methods........................................................................... 161 4.1 Condensing Literature into a Basis for Empirical Research.............................................. 161 4.2 Main Hypothesis................................................................................................................. 163 4.3 Secondary Hypotheses........................................................................................................ 164 4.3.1 Employee Commitment............................................................................................ 165 4.3.2 Employee Turnover Rates....................................................................................... 167 4.4 The Organizations Used for the Study................................................................................ 169 4.4.1 Description of the Organizations Studied............................................................... 170 4.4.2 Criteria for Classification of the Organizations.................................................. 173 4.5 Validation of the Companies' Grouping.............................................................................. 179 4.5.1 Interviews with Experts........................................................................................... 180 4.5.2 General Profile of Organizations......................................................................... 181 4.5.3 Product Innovation-Diversification Profile.......................................................... 184 4.5.4 Planning Process Profile.................................................................................... 185 4.5.5 Human Resource Policy Profile.............................................................................. 187 4.5.6 Market Performance Data Comparison............................................................... 190 4.5. 7 Presentations of Survey Results to Participant Companies.................................... 195 4.6 The Questionnaire Survey................................................................................................... 196 4.6.1 Construction and Validation of the Questionnaire............................................... 196 4.6.2 Translation Process............................................................................................ 199 4.6.3 Pre-Tests for Questionnaire Validation................................................................ 199 4.6.4 Working Material.................................................................................................... 200 4.6.5 The Questionnaire Distribution and Collection Process......................................200 4.6.6 General Procedures Adopted................................................................................ 201 4.6.7 The Study Sample..................................................................................................... 202 4.6.8 Comment Sheet Analysis.......................................................................................... 204 4.6.9 Data Entry and Cleaning Procedures................................................................. 206 4.6.10 Demographic Distribution of Respondents........................................................... 206 5 Hypotheses Test and Analysis: Trust Thrives Where It is Least Needed................................... 213 5.1 Validity Checking of the Variable Relationsbips................................................................ 213 5.2 Hypotheses' Analytical Framework.....................................................................................216 5.2.1 Analysis of Main Hypothesis...................................................................................218 5.2.2 Analyses of Secondary Hypotheses.........................................................................220 5.3 Main Hypothesis Test...................................................................................................... 221 5.3.1 Levels of Trust - Mean Comparison....................................................................221 5.3.2 Confirming the Effects of Institutional Uncertainties on Trust Levels........... 224 5.3.3 Supportive Individual Characteristics Analyses................................................ 229 5.4 Secondary Hypotheses Test............................................................................................ 234 5.4.1 Test of the Relationship between Trust and Employee Commitment.............. 234 5.4.2 Levels of Employee Commitment........................................................................ 236 5.4.3 Employee Turnover Rates.................................................................................... 240 5.5 Main Theoretical Implications......................................................................................... 243 5.5.1 The Major Influence of Industry-Specific Institutional Frameworks.............. 243 5.5.2 New Economy and Old Economy: Singular Organizational Systems..............244 5.5.3 New Economy: Moving towards Transaction! Contracts..................................247 5.5.4 Validation of Game Theory Application.............................................................249 5.5.5 The Paradox...........................................................................................................249 5.5.6 Trust Properties and Dimensions........................................................................250 5.5. 7 Trust and Performance....................................................................................... 250 6 Conclusions and Outlook........................................................................................................... 253 6.1 Contributions to Management Studies............................................................................ 256 6.2 Managerial Usage.............................................................................................................. 258 List of References......................................................................................................................... 261 Appendix........................................................................................................................................ 287