Performance of Trust-based Governance

Journal of Organization Design, Forthcoming

39 Pages Posted: 7 May 2015 Last revised: 18 May 2020

See all articles by Bart Vanneste

Bart Vanneste

University College London

Onesun Steve Yoo

UCL School of Management, University College London

Date Written: May 1, 2020

Abstract

Trust is crucial for the success of interorganizational relationships, yet we lack a clear understanding of when trust-based governance is likely to succeed or fail. This paper explores that topic via a closed-form and a computational analysis of a formal model based on the well-known trust game. We say that trust-based governance performs better in situations where it results in a willingness to be vulnerable with trustworthy others and an unwillingness to be vulnerable with untrustworthy others.We find that trust-based governance performs better in situations in which (a) trustworthy and untrustworthy partners exhibit markedly different behavior (high behavioral risk) or (b) the organization is willing to be vulnerable despite doubts concerning the partner's trustworthiness (low trust threshold).

Keywords: Trust-based governance, trust game, interorganizational relationships

Suggested Citation

Vanneste, Bart and Yoo, Onesun Steve, Performance of Trust-based Governance (May 1, 2020). Journal of Organization Design, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2603624 or http://dx.doi.org/10.2139/ssrn.2603624

Bart Vanneste (Contact Author)

University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

Onesun Steve Yoo

UCL School of Management, University College London ( email )

1 Canada Square
London, E14 5AB
United Kingdom

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