Foundations of Organizational Trust: What Matters to Different Stakeholders?

43 Pages Posted: 21 Jul 2010 Last revised: 5 Feb 2014

See all articles by Michael Pirson

Michael Pirson

Fordham University - Graduate School of Business Administration; Harvard University; Humanistic Management Network

Deepak K. Malhotra

Harvard Business School - Negotiation, Organizations & Markets Unit

Abstract

Trust, defined as the willingness to be vulnerable to the discretionary actions of another party, has been widely recognized as a key enabler of organizational success (Davis et al. 2000). This paper examines whether and how the basis of trust in organizations differs across different types of stakeholders. As conceptualized here, stakeholder trust in an organization entails a willingness on the part of the individual stakeholder (e.g., a customer, employee, etc.) to accept vulnerability to the actions of the organization (Zaheer et al. 1998). To examine the contingent nature of stakeholder trust (Zey 1998), we focus on the type of the stakeholder relationship (see Friedman and Miles 2002; Wicks et al. 1999). Drawing on stakeholder theory, which suggests that stakeholders differ greatly in their expectations and interests (Donaldson and Preston 1995; Schneper and Guillen 2004), we posit that different stakeholders will also look for different signals regarding the trustworthiness of the organizations with whom they interact.

While prior research has identified a host of dimensions - e.g., competence, benevolence, integrity, transparency, etc.- which are potentially relevant across a variety of relationships, there has been relatively little effort to integrate this important body of work. As a result, little is known regarding which of these dimensions are most critical in building and sustaining stakeholder trust, and whether the relevance of the various dimensions is contingent upon the nature of the stakeholder relationship (Bigley and Pierce 1998). Furthermore, as we discuss below, this lack of integration has made it difficult to identify the precise nature of organizational trust as it is built (or undermined) across stakeholders.

This paper seeks to bring remedy in three ways. First, we bridge organizational trust theory and organizational stakeholder theory to create a contingency framework that identifies which dimensions of trustworthiness are most relevant for which types of organizational stakeholders. Second, we leverage a large, original survey of 1,298 stakeholders from four different stakeholder groups across four differently structured organizations in order to test the absolute relevance and the relative importance of a comprehensive set of trustworthiness dimensions. Third, whereas previous analyses have largely focused on within-stakeholder comparisons ( e.g.Davis et al. 2000; Lusch et al. 2003; Mayer and Davis 1999; Mayer and Gavin 2005), we evaluate how the relevance of trustworthiness dimensions differs across stakeholder types.

We begin by defining trust, and then characterize trust as it pertains to an organization’s stakeholder relationships. Next, we identify those dimensions of trustworthiness which are likely to play a role in stakeholder relationships. We then develop a framework that identifies two dimensions along which different stakeholders might be categorized and use this framework to develop and test hypotheses regarding stakeholder-specific foundations of organizational trust.

Keywords: Trust, Stakeholder, Organizational Trust, Identification, Benevolence, Ability, Integrity, Transparency

Suggested Citation

Pirson, Michael and Malhotra, Deepak K., Foundations of Organizational Trust: What Matters to Different Stakeholders?. Organization Science, Forthcoming; Fordham University Schools of Business Research Paper No. 2010-004. Available at SSRN: https://ssrn.com/abstract=1646375

Michael Pirson (Contact Author)

Fordham University - Graduate School of Business Administration ( email )

1790 Broadway 1147
New York, NY New York 10019
United States

Harvard University

1875 Cambridge Street
Cambridge, MA 02138
United States

Humanistic Management Network ( email )

St. Gallen
Switzerland

Deepak K. Malhotra

Harvard Business School - Negotiation, Organizations & Markets Unit ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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