Trust as an Organizing Principle Bill McEvily

Although research on trust in an organizational context has advanced considerably in recent years, the literature has yet to produce a set of generalizable propositions that inform our understanding of the organization and coordination of work. We propose that conceptualizing trust as an organizing principle is a powerful way of integrating the diverse trust literature and distilling generalizable implications for how trust affects organizing. We develop the notion of trust as an organizing principle by specifying structuring and mobilizing as two sets of causal pathways through which trust influences several important properties of organizations. We further describe specific mechanisms within structuring and mobilizing that influence interaction patterns and organizational processes. The principal aim of the framework is to advance the literature by connecting the psychological and sociological micro-foundations of trust with the macro-bases of organizing. The paper concludes by demonstrating how the framework can be applied to yield novel insights into traditional views of organizations and to stimulate original and innovative avenues of organizational research that consider both the benefits and downsides of trust. (Trust; Organizing Principle; Structuring; Mobilizing) Introduction In the introduction to this special issue we observed that empirical research on trust was not keeping pace with theoretical developments in the field. We viewed this as a significant limitation and surmised that a special issue devoted to empirical research on trust would serve as a valuable vehicle for advancing the literature. In addition to the lack of empirical research, we would also make the observation that theories and evidence accumulating on trust in organizations is not well integrated and that the literature as a whole lacks coherence. At a general level, extant research provides “accumulating evidence that trust has a number of important benefits for organizations and their members” (Kramer 1999, p. 569). More specifically, Dirks and Ferrin’s (2001) review of the literature points to two distinct means through which trust generates these benefits. The dominant approach emphasizes the direct effects that trust has on important organizational phenomena such as: communication, conflict management, negotiation processes, satisfaction, and performance (both individual and unit). A second, less well studied, perspective points to the enabling effects of trust, whereby trust creates or enhances the conditions, such as positive interpretations of another’s behavior, that are conducive to obtaining organizational outcomes like cooperation and higher performance. The identification of these two perspectives provides a useful way of organizing the literature and generating insight into the mechanisms through which trust influences organizational outcomes. However, we are still left with a set of findings that have yet to be integrated on a theoretical level in a way that yields a set of generalizable propositions about the effects of trust on organizing. We believe this is due to the fact that research has, for the most part, embedded trust into existing theories. As a result, trust has been studied in a variety of different ways to address a wide range of organizational questions. This has yielded a diverse and eclectic body of knowledge about the relationship between trust and various organizational outcomes. At the same time, this approach has resulted in a somewhat fragmented view of the role of trust in an organizational context as a whole. In the remainder of this paper we begin to address the challenge of integrating the fragmented trust literature. While it is not feasible to develop a comprehensive framework that synthesizes the vast and diverse trust literature in a single paper, we draw together several key strands that relate to the organizational context. In particular, our paper aims to advance the literature by connecting the psychological and sociological microfoundations of trust with the macro-bases of organizing. BILL MCEVILY, VINCENZO PERRONE, AND AKBAR ZAHEER Trust as an Organizing Principle 92 ORGANIZATION SCIENCE/Vol. 14, No. 1, January–February 2003 Specifically, we propose that reconceptualizing trust as an organizing principle is a fruitful way of viewing the role of trust and comprehending how research on trust advances our understanding of the organization and coordination of economic activity. While it is our goal to generate a framework that coalesces our thinking about the processes through which trust, as an organizing principle, affects organizational life, we are not Pollyannish: trust indubitably has a down side, which has been little researched. We begin by elaborating on the notion of an organizing principle and then move on to conceptualize trust from this perspective. Next, we describe a set of generalizable causal pathways through which trust affects organizing. We then use that framework to identify some exemplars of possible research questions and to point to possible downsides of trust. Organizing Principles As Ouchi (1980) discusses, a fundamental purpose of organizations is to attain goals that require coordinated efforts. Interdependence and uncertainty make goal attainment more difficult and create the need for organizational solutions. The subdivision of work implies that actors must exchange information and rely on others to accomplish organizational goals without having complete control over, or being able to fully monitor, others’ behaviors. Coordinating actions is further complicated by the fact that actors cannot assume that their interests and goals are perfectly aligned. Consequently, relying on others is difficult when there is uncertainty about their intentions, motives, and competencies. Managing interdependence among individuals, units, and activities in the face of behavioral uncertainty constitutes a key organizational challenge. Organizing principles represent a way of solving the problem of interdependence and uncertainty. An organizing principle is the logic by which work is coordinated and information is gathered, disseminated, and processed within and between organizations (Zander and Kogut 1995). An organizing principle represents a heuristic for how actors interpret and represent information and how they select appropriate behaviors and routines for coordinating actions. Examples of organizing principles include: market, hierarchy, and clan (Ouchi 1980). Other have referred to these organizing principles as authority, price, and norms (Adler 2001, Bradach and Eccles 1989, Powell 1990). Each of these principles operates on the basis of distinct mechanisms that orient, enable, and constrain economic behavior. For instance, authority as an organizing principle solves the problem of coordinating action in the face of interdependence and uncertainty by reallocating decision-making rights (Simon 1957, Coleman 1990). Price-based organizing principles revolve around the idea of making coordination advantageous for each party involved by aligning incentives (Hayek 1948, Alchian and Demsetz 1972). Compliance to internalized norms and the resulting self-control of the clan form is another organizing principle that has been identified as a means of achieving coordinated action (Ouchi 1980). We propose that trust is also an organizing principle and that conceptualizing trust in this way provides a powerful means of integrating the disparate research on trust and distilling generalizable implications for how trust affects organizing. We view trust as most closely related to the clan organizing principle. By definition clans rely on trust (Ouchi 1980). However, trust can and does occur in organizational contexts outside of clans. For instance, there are a variety of organizational arrangements where cooperation in mixed-motive situations depends on trust, such as in repeated strategic alliances (Gulati 1995), buyer-supplier relationships (Dyer and Chu this issue), and temporary groups in organizations (Meyerson et al. 1996). More generally, we believe that trust frequently operates in conjunction with other organizing principles. For instance, Dirks (2000) found that while authority is important for behaviors that can be observed or controlled, trust is important when there exists performance ambiguity or behaviors that cannot be observed or controlled. Because most organizations have a combination of behaviors that can and cannot be observed or controlled, authority and trust co-occur. More generally, we believe that mixed or plural forms are the norm, consistent with Bradach and Eccles (1989). In some situations, however, trust may be the primary organizing principle, such as when monitoring and formal controls are difficult and costly to use. In these cases, trust represents an efficient choice. In other situations, trust may be relied upon due to social, rather than efficiency, considerations. For instance, achieving a sense of personal belonging within a collectivity (Podolny and Barron 1997) and the desire to develop and maintain rewarding social attachments (Granovetter 1985) may serve as the impetus for relying on trust as an organizing principle. Trust as an Organizing Principle At a general level trust is the willingness to accept vulnerability based on positive expectations about another’s intentions or behaviors (Mayer et al. 1995, Rousseau et al. 1998). Because trust represents a positive assumption BILL MCEVILY, VINCENZO PERRONE, AND AKBAR ZAHEER Trust as an Organizing Principle ORGANIZATION SCIENCE/Vol. 14, No. 1, January–February 2003 93 about the motives and intentions of another party, it allows people to economize on information processing and safeguarding behaviors. By representing an expectation that others will act in a way that serves, or at least is not inimical to, one’s interests (Gambetta 1988), trust as a heuristic is a frame of reference that al