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OMALE, ALEWO SUNDAY

PG/Ph.D/11/60335

INTER- ORGANIZATIONAL TRUST AND EFFECT ON VIRTUAL ORGANIZATIONS’ PERFORMANCE OF

SELECTED NIGERIAN SERVICE FIRMS

FACULTY OF BUSINESS ADMINISTRATION

DEPARTMENT OF MANAGEMENT

Paul Okeke

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OU = Innovation Centre

OMALE, ALEWO SUNDAY

ORGANIZATIONAL TRUST AND EFFECT ON VIRTUAL ORGANIZATIONS’ PERFORMANCE OF

SELECTED NIGERIAN SERVICE FIRMS


RTMENT OF MANAGEMENT

: Content manager’s Name

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INTER-ORGANIZATIONAL TRUST AND EFFECT ON VIRTUAL ORGANIZATIONS’ PERFORMANCE OF SELECTED NIGERIAN

SERVICE FIRMS

BY

OMALE, ALEWO SUNDAY

PG/Ph.D/11/60335



UNIVERSITY OF NIGERIA

ENUGU CAMPUS

2015

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INTER-ORGANIZATIONAL TRUST AND EFFECT ON VIRTUAL ORGANIZATIONS’ PERFORMANCE OF SELECTED NIGERIAN

SERVICE FIRMS

BY

OMALE, ALEWO SUNDAY

PG/Ph.D/11/60335

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF Ph.D DEGREE IN MANAGEMENT



UNIVERSITY OF NIGERIA

ENUGU CAMPUS

SUPERVISOR: PROF. U.J.F. EWURUM

2015

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DECLARATION

I hereby declare that this Ph.D thesis titled: Inter-Organizational trust and effect on Virtual Organizations’ Performance of selected Nigerian Service Firms is my own, unaided work. It is submitted in partial fulfillment of the requirements for the award of Ph.D Degree in management, faculty of business administration, university of Nigeria, Enugu Campus, Nigeria. It contains neither material previously published by another person, nor material which has been accepted for the award of any other Degree of any institution except where due acknowledgement has been made in the text.

--------------------------------------------- -----------------------------------

Sunday A. Omale Date

PG/Ph.D/11/60335

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APPROVAL

This thesis: Inter-Organizational trust and effect on Virtual Organizations’ Performance of selected Nigerian Service firms’ has been read, approved and accepted in partial fulfillment of the requirements for the award of Ph.D in management, university of Nigeria, Enugu Campus, Nigeria.

Prof. U. J. F. Ewurum -------------------- -------------------

SUPERVISOR SIGNATURE DATE

Dr. O. C. Ugbam -------------------- ------------------

HEAD of DEPARTMENT SIGNATURE DATE

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DEDICATION

This thesis is dedicated to God almighty for his grace, mercy and preservation upon my life to triumph to the end of this thesis.

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ACKNOWLEDGEMENTS

It is extremely difficult, if not impossible, for a thesis of this nature to go to print without the contributions, of useful ideas and encouragement from well meaning individuals. I must therefore not hesitate to use this unique opportunity to acknowledge all such contributors.

Firstly, let me register my profound appreciation and thanks to the Almighty God, the instructor of the foolish, and teacher of babes who has the repository of all forms of knowledge and truth for endowing me with this little knowledge to carry out this study. More importantly, I thank the Almighty God, the owner of the universe for preserving, caring and providing for me throughout the course of my study. I wish to express my inexplicable appreciation and gratitude to my able supervisor Prof. U.J.F. Ewurum who made it possible for me to produce this thesis through his conscientious series of supervision and guidance. My heart-felt-thanks and appreciation equally go to the head of Department Dr. O.C. Ugbam; Dr. V.A. Onodugo; Prof. J. Eluka; Dr. A.I. Ogbo; Dr. B.I. Chukwu; Dr. E. Nnadi; Dr. E.K. Agbaeze; Dr. I.N. Mbah; Dr. C.A. Ezenwakwelu; Rev. Fr. A.A. Igwe; Mrs. Nweke Angela; secretary to the head of department, Mrs. N.E. Ofordili and all lecturers in the department of management whose names are too many to mention, for their hard-to-forget moral support and immense encouragement.

Secondly, special thanks must go to my loving wife and children who suffer from my physical absence and other benefit as a result of my academic pursuit; to my loving parent’s Dr. Usman Omale and Mrs. Rebecca Omale who encouraged me to appreciate intellectual growth and professional recognition through education. Special thanks must also go to my brothers and sisters, in-laws and many others who spared their precious time with me for discussions. I must not however, fail to appreciate the special contributions of such individuals as Mr. Dan Idodo, lecturer Department of Business Administration Dorben Polytechnic, Abuja and Sylvanus Oribaborh. Equally worthy of mention is the role played by many of my colleagues, research institutes and computer typists for the success of this work.

I must definitely not fail before concluding this page to express my heart-felt thanks and appreciation to lecturers, friends and fellow scholars whose names are rather too numerous to mention who by their individual and collective meaningful advice, criticisms and suggestions spurred me up to produce this work.

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ABSTRACT

This investigation is based on inter-organizational trust and effect on virtual organizational performance of selected Nigerian service firms. Inter-organizational trust is the extent to which members of a firm hold a collective trust orientation towards another organization. Virtual organization brings together theories about the nature of work in the information age, the organization of social behaviour, and the role technology plays in the evolution of social structure. Inter-organizational trust in virtual organizations is difficult to manage, members work individually and there is hardly any control. In today’s knowledge-based competitive environment, a firm’s ability to establish inter-generational relationships in terms of strategic alliances and performance inside and outside a firm has become a critical fount of competitiveness. In inter-organizational relationships, the most common success factor, and possibly the most critical one is trust. Trust is widely acknowledged as being important for the efficient operation of inter-organizational business activities, the formation of trust remains challenging, the experience with trust despite increased interest and the acknowledged role of trust to a company’s competitiveness is that there has not yet been theoretically and empirically coherent attempts to measure trust in inter-organizational contexts to the best of my knowledge. Virtual organization is also a collection of geographically distributed, functionally and/or culturally diverse entities that are linked by electronic forms of communication and rely on lateral, dynamic relationships for coordination. Consequently lack of inter-organizational trust and reliability in virtual organizations as a result of perceived risks from privacy concerns and vulnerability to fraud may impede organizations’ performance. In carrying out this investigation, seven research objectives and seven research questions were formulated along side with seven research hypotheses. Relevant data were reviewed, this provide an understanding of previous work in an area of investigation thereby providing basis for the researchable problem at stake. The chief instrument for data collection was questionnaire, which was designed for low, middle and top level management staff. Thirty five (35) questionnaire items were administered to the respondents. The data was analyzed using a chi-square statistical technique and Z Test. The result of the study showed that inter-organizational trust influences virtual organizations commitment and performance and firm benefitted more from inter-organizational trust when the degree of interdependence between two organizations was higher. The result of the study also showed that conflict to a large extent is adversely related to lack of shared understanding between partners in virtual organizations. When we examine inter-organizational trust in virtual organizations from the perspective of network organizations, then we certainly conclude that inter-organizational trust in virtual organizations is a new type of network. Finally, it was recommended that, the formation of organizational process should be based on trust and not on the basis of power which will result in increase commitment, job-satisfaction, performance and growth of employees and the organizations in general.

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TABLE OF CONTENTS

Declaration - - - - - - - - iii

Approval - - - - - - - - iv

Dedication - - - - - - - - v

Acknowledgements - - - - - - - - vi

Abstract - - - - - - - - vii

List of Tables - - - - - - - - xii

List of figures - - - - - - - - xiv

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study - - - - - - - 1

1.2 Statement of the Problem - - - - - - - 5

1.3 Objectives of the Study - - - - - - - 7

1.4 Research Questions - - - - - - - 7

1.5 Research Hypotheses - - - - - - - 8

1.6 Significance of the Study - - - - - - - 9

1.7 Scope of the Study - - - - - - - 9

1.8 Limitations of the Study - - - - - - - 10

1.9 Profile of the Selected Service Organizations - - - - 10

1.10 Contextual Definition of Terms - - - - - - 20

References - - - - - - - - - 21

CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1 Introduction - - - - - - - - - 23

2.2 Conceptual Framework of Inter-Organizational Trust - - - 23

2.3 Theoretical Farmework - - - - - - - 27

2.3.1 The Concept of Organizational Trust - - - - - - 28

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2.3.2 The Process of Virtual Organization - - - - - - 31

2.4 Empirical Review - - - - - - - - 33

2.5 Development of Inter-Organizational Trust - - - - - 36

2.6 Factors Affecting Trust Worthiness Assessment During Alliance Formation 46

2.7 The Factors that Facilitate Organizational Trust - - - - 49

2.8 Organizational Trust in Public Service Organizations - - - 50

2.9 Role of Inter-Organizational Trust - - - - - - 51

2.10 Outcome of Inter-Ogrnaizational Trust - - - - - 56

2.11 Results of Organizational Trust for the Employers and the Employees- - 58

2.12 Mediated Availability - - - - - - - - 59

2.13 Perceptions in Virtual Organization - - - - - - 62

2.14 Expectations for Mediated Availability - - - - - 65

2.15 Virtual Organization Model - - - - - - - 67

2.16 Virtual Task - - - - - - - - - 68

2.17 Virtual Corporation - - - - - - - - 69

2.18 Virtual Team - - - - - - - - - 71

2.19 The Organizational Process - - - - - - - 73

2.20 Organizational Design - - - - - - - 74

2.21 Process of Organizational Design - - - - - - 76

2.22 Communciation and Information System in Virtual Organization - - 78

2.23 Inter-Organizational General System Theory - - - - 80

2.24 Rhetorical Process of Communication - - - - - 82

2.25 Transactional Dimensions of Communciation - - - - 85

2.26 Management and Organizational Process - - - - - 87

2.27 Managerial Roles Highlight - - - - - - 89

2.28 Inter-Organizational Process Teamwork - - - - - 90

2.29 Organizational Activities - - - - - - - 91

2.30 Summary of the Review - - - - - - - 92

References - - - - - - - - - 95

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CHATER THREE

RESEARCH METHODOLOGY

3.1 Introduction - - - - - - - - - 108

3.2 Research Design - - - - - - - - 108

3.3 Sources of Data - - - - - - - - 108

3.4 Population of the Study - - - - - - - 109

3.5 Sample Size Determination - - - - - - - 110

3.6 Sampling Techniques - - - - - - - - 113

3.7 Instrument for Data Collection - - - - - - 113

3.8 Validity of Instruments - - - - - - - 114

3.9 Relability of the Instruments - - - - - - - 114

3.10 Method of Data Analysis - - - - - - - 115

References - - - - - - - - 116

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

4.1 Introduction - - - - - - - - - 117

4.2 Data Presentation - - - - - - - - 117

4.3 Analysis of Data or Responses Rate - - - - - - 118

4.4 Testing of Hypothesis and Z Test - - - - - - 133

4.4.1 Testing of Hypotheses - - - - - - - 133

4.4.2 Z Test (Test of Hypotheses) - - - - - - - 136

4.5 Discussion of Results - - - - - - - 139

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1 Summary of Major Findings - - - - - - - 146

5.2 Conclusion - - - - - - - - - 147

5.3 Recommendations - - - - - - - - 148

5.4 Contribution to Knowledge - - - - - - - 148

5.5 Suggestion for Further Study - - - - - - - 150

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Bibliography - - - - - - - - - 151

Appendix I - - - - - - - - - 167

Appendix II - - - - - - - - - 168

Appendix III - - - - - - - - - 175

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LIST OF TABLES

Table 2.1 Managerial Roles According to Minzberg - - - - 89

Table 3.1 Staff Strength of the Selected Service Organzations- - - 110

Table 3.2 Sample Size Allocation - - - - - - 112

Table 4.1 Questionnaire Distribution and Collection Schedule - - 117

Table 4.2 Research Question - - - - - - - 118




















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ILLUSTRATION

Chi-Square - - - - - - - - - - 135

Z Test - - - - - - - - - - - 136

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LIST OF FIGURES

Figure 2.1 Framewotk of Trust Formation in Collaborative new Product Dvelopment- 42

Figure 2.2 Phases of Alliance Devleopment and the Evolution of Trust - - 44

Figure 2.3 Model of Trustworthnices Assessments During Allanice Formation- 47

Figure 2.4 Virtual Task/Switching Model- - - - - - 69

Figure 2.5 Virtual Corporation- - - - - - - - 70

Figure 2.6 Virtual Team- - - - - - - - - 72

Figure 2.7 Organizational Process- - - - - - - 74

Figure 2.8 Basic System Model - - - - - - - 81

Figure 2.9 Rhctorical Process Model of Communication - - - 82

Figure 2.10 Management Process Model - - - - - - 88

Figure 2.11 Teamwork Process Model - - - - - - 90

Figure 2.12 Organizational Activities System Model - - - - - 92

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INTRODUCTION

1.1 Background of the Study

While trust is widely acknowledged as being important for the efficient operation of

inter-organizational business arrangements, the formation of trust remains challenging.

Trust has several connotations. It refers to a situation attributed by one party (trustor)

willing to rely on the actions of another party (trustee); the situation is directed to the

future and the trustor forcefully or voluntarily abandons control over the actions

performed by the trustee. The trustor is uncertain about the outcome of the others actions;

he can only develop and evaluate expectations. The uncertainty involves the risk of

failure to the trustor if the trustee will not behave as desired. Trust can be attributed to

relationships between people. It can be demonstrated that humans have a natural

disposition to trust and to judge trustworthiness that can be traced to the activity of

human brain and neurobiological structure and can be altered.

It has become increasingly clear that inter-organizational trust is an important factor

affecting the actions and performance of organizations engaged in dyadic and network

relationships such as strategic alliances. Issues associated with organizational trust have

generated a great deal of broad scholarly interest in the field, as evidenced by the dozens

of articles and special issues of the leading journals that have been devoted to the theme

of trust. Yet, although there exists a significant amount of literature on trust in an

organizational context as well as research in related area such as alliances, social

networks, and interpersonal trust-scholarly work specifically dealing with inter-

organizational trust is a more limited area of research. A commonly used definition of

inter-organizational trust is the extent to which members of one organization hold a

collective trust orientation toward another organization (Zaheer, McEvily, and Perrone,

1998). Relatedly, Currall and Inkpen (2002) draw attention to the socially constructed

shared history within an organization toward another organization that constitutes a

collective orientation. In this vein, it is important to avoid anthropomorphizing the

organization by treating inter-organizational trust as equivalent to an individual trusting

another individual.

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The fact that trust is such a broad concept, complicated by its various connotations in

common usage, results in researchers parsing trust into a variety of finer-grained

dimensions, teasing out various aspects of trust. These dimensions often frame very

different descriptive views of trust; for instance, inter-organizational trust can be seen as

goodwill-based (Saparito, Chen, and Sapienza, 2004), or competence-based (Lui and

Ngo, 2004). Because trust has developed into a multidimensional construct, researchers

both conceive of and measure trust in various ways. A major, economics-derived stream

on trust views it as a dispositional characteristic of the trustor (Gambetta, 1988:19).

On the other hand, virtual organization exists in cyberspace. It is a new organization form

that facilitates technological demands. The virtual organization is information-intensive

and centres round the knowledge of workers linked by technology across space and time.

While a clear historical perspective remains forthcoming Kasper-Fuehrer and Ashkanasy

(2004) opine that, there is general consensus that the virtual organization is not a

hierarchical structure but rather a type of network organization. As such, it facilitates

open access to and exchange of information throughout the network and across

organization boundaries. The collapse of space and time in virtual organizations

highlights the need for a management approach that enable flexibility, coordinated

communication and adaptability to address emerging issues regarding a dispersed

workforce. Therefore, virtual operations require organizing efforts that move beyond

efficiency and control to those that emphasize the ability to identify or create

opportunities, and gather the needed players to harness these opportunities.

Definitions of the virtual organization are ambivalent and lack clarity due to conflicting

characterizations in the literature (Shekhar, 2006; Warner and Witzel, 2004). A primary

problem in the literature is that virtual organizations are approached as technology-

enabled extensions of traditional, structurally bounded organizations. Conceptualization

is based on the understanding of the term virtual, or degree of virtuality, where

definitions imply that the virtual organization is merely a binary concept which is either

virtual or not. This is evident in Bosch-Sijtsema (2002) who cites numerous historical

perspectives ranging from descriptions of the virtual organization as a team within a

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single organization, to a web company where different organization partners combine

resources and work through information technology. Divergent result from research

focused on different units of analysis when studying virtuality, such as the individual

unit, the group unit and the organizational unit (Shekhar, 2006:478). However, accurate

conceptualization relies on this distinction because the degree of virtuality differs for

each organization type that displays different characteristics. This implies that the

organization processes of each need to be managed differently.

Keinanen and Oinas-Kukkonen (2001) state that, virtual “organizing” focuses on the

importance of knowledge and intellect in creating value. As an intra-organizational form

the virtual organization is a collaboration of business units, such as cross-functional

teams, in an existing organization charged with completing a common task. These intra-

organizational designs do not substitute traditional structures; rather, they are integrated

into the extant design. As a result, intra-organizational boundaries are blurred and the

degree of virtuality is low. In contrast, from the inter-organizational perspective business

units of different organizations collaborate to establish a cooperative form of virtual

organization (Kasper-Fuehrer and Askhanasy, 2004).

The idea of virtual enterprise (VE)/ virtual organization (VO) was not “invented” by a

single researcher, rather it is a concept that has matured through a long evolutionary

process. Some of the early references first introducing the terms like virtual company,

virtual enterprise, or virtual corporation go back to the early 1990s, including the works

of Jan Hopland, Nagel and Dove, and Davidow and Malone (2003-2004). Since then a

large but disjoint body of literature has been produced mainly in two communities, the

Information and Communications Technology Community and the Management

Community.

However, concepts and definitions related to the VE/VO paradigm are still evolving, and

the terminology is not yet fixed. There is still not even a common definition for the

VE/VO that is agreed by the community of researchers in this area. Nevertheless, many

real examples of VE/VO are already available and functional in different regions of the

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world, which indicates the importance of this area and the need for stabilizing the

terminology and definition for this paradigm, as well as research in developing a model

of their life cycle, behavior, and evolution.

The area of VE/VO is particularly active in Europe, not only in terms of research and

development, but also in terms of the emergence of various forms of enterprise

networking at regional level. This “movement” is consistent with the process of European

integration, which represents a push towards a “culture of cooperation”, but also with the

very nature of the European business landscape that is mostly based on small and

medium size enterprises (SME) that need to join efforts in order to be competitive in

open and turbulent market scenarios.

The virtual organization is a cooperation of enterprises. Members of Virtual Organization

can be great trusts as well as small one person firms. It is imaginable that a self-employed

consultant becomes a member of virtual organization and of a multinational corporation

at the same time. This means that virtual organization will be decomposed when the

objective is accomplished. In most cases virtual organization will only exist for a short

time. If there are no other advantageous organizational alternatives to produce a special

out-put, virtual organization are also imaginable for a long-term period

(Bultje and Van-Wijkt, 2011:19).

The use of information and communication technologies is a constitutional feature of

virtual organizations (Gill, 2012:330). Sometimes IT is called an “enabler” of virtual

organizations (Franke, 2011:62). Such, inter-organizational arrangements will form and

reform as problems arise, so providing a flexibility of response to changing

circumstances of an organization’s needs.

The effect of inter-organizational trust on other aspects of organizational behavior, are

matters of some debate. Bagguley, (2010:6) for example, writes of such forms as

involving ‘more intricate, collaborative’ relationships in which ‘mutual responsibilities to

colleagues’ rather than to the larger organization itself become more prominent. In a

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similar vein, Casey (2012:109) argues that the new forms of teamwork in which people

share knowledge, skills and resources and work co-operatively in the manufacture of

their products’ will displace ‘identification with an occupation and its historical

repository of skills, knowledge and allegiances’ in favour of relationship to a product, to

team family members and to the company. Such team working, ‘less fettered by the

constraints of traditional hierarchies and spheres of responsibility, engenders a

heightened sense of empowerment, commitment and collective responsibility

(Casey, 2012:45).

There are others, who are less sanguine, that is, less cheerful and less confident about the

future views concerning the beneficent consequences of such organizational forms for

effecting transformations in skill, team working, identification and empowerment

(Hammer and Champy, 2012), and it is certainly too early to write the obituary of more

traditional hierarchical organizational forms. In any event, it is clear that many of the

claims involved in the debate are in need of somewhat closer empirical scrutiny.

It is against this background that the researcher seeks to examine inter-organizational

trust and effect on virtual organizations’ performance with particular reference to selected

Nigerian service firms (a study of selected service organizations’ in the federal capital

territory Abuja), with the objective of recommending ways by which the present practices

can be improved.

1.2 Statement of the Problem

The fact that virtual organization is something new which is not well known yet, will

keep many people and companies away from virtual work and structures. The employee

work is based almost entirely on self-motivation and responsibility. While this might

work with some people, we seriously doubt that a big organization can be built on such

an insecure base.

It is difficult to generate a feeling of belonging to a virtual team or organization if there

are no permanent structures and human contact is very limited. Naturally, there will not

21

be commitment to the organization. The employee’s self-motivation and willingness to

take responsibility for the company will be low-hardly the ideal situation in a virtual

organization.

Relationships within the virtual form are tenuous that is, so weak or uncertain. A key

implication of virtual organizing is that these forms are more reconfigurable, their

boundaries are considerably more blurred, that is, without a clear outline or shape, and

their relationships are more likely to be contractual than traditional forms. Cross-

organizational teams are still rare, and teams inside firm are becoming more

geographically distributed and cross-functional.

Purely virtual corporations are still rare, and the processes for developing trust in virtual

organizations and the eventual impacts of virtuality are still unknown. Proponents of

virtual organizing extol the benefits in terms of greater adaptability, faster response time,

and task specialization, while critics argue the potential downsides, including greater

conflict, decreased firm loyalty, and higher probability of catastrophic effect. Virtual

work is closely related to making an extra effort. Many people will not be willing to

make this effort simply because they do not get a personal advantage out of it. They are

in a comfortable situation and cannot understand why they should take more

responsibility without getting paid more.

Inter-organizational trust in virtual organizations appears difficult to manage; members

work individually and there is hardly any control. It is difficult to motivate its members;

members suffer from social loafing and absenteeism, it is unclear how such organizations

can reach a synergetic effect by cooperating with each other’s core competencies when

trust is inadequate, and firm also struggle with maintaining a coherent identity.

Consequently the apparent lack of inter-organizational trust and reliability in Nigerian

virtual organizations as a result of perceived risks from privacy concerns and

vulnerability to fraud may impede on organizations’ performance. It is based on these

facts that the researcher seeks to examine the effect of inter-organizational trust on virtual

organizations’ performance with specific reference to Nigerian service firms.

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1.3 Objectives of the Study

The broad aim of this research is to study inter-organizational trust in virtual

organizations and it effect on organizational performance of selected Nigerian service

organizations, using selected service organizations in federal capital territory Abuja for

the study. Specifically, the research seeks to:

1. Determine the extent to which inter-organizational trust influences virtual

organizations’ commitment in Nigerian service organizations.

2. Identify the constraints to inter-organizational relationship in virtual organizations

that impede organizational effectiveness.

3. Ascertain how cultural norms and values affect inter-organizational relationship in

virtual organizations.

4. Ascertain the degree to which information and communication technology (ICT)

adoption influences the formation of trust within and between organizations in the

virtual and real space.

5. Determine the extent to which development of inter-organizational trust enhances

integration in virtual organizations.

6. Examine how conflict is related to lack of shared understanding between partners in


7. Ascertain the extent to which inter-organizational trust influences virtual

organizations’ profitability in service organizations.

1.4 Research Questions

The research question is one of the first methodological steps the investigator has to take

when undertaking research. The research questions must be accurately and clearly

defined. Choosing a research question is the central element of both quantitative and

qualitative research and in some cases it may precede construction of the conceptual

framework of the study. Therefore, the following research questions are presented for the

study.

1. To what extent does inter-organizational trust influence virtual

Organizations’ commitment in service organizations?

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2. To what extent are the constraints to inter-organizational relationship in virtual

organizations impede organizational performance in service organizations?

3. How do cultural norms and values affect inter-organizational relationship in

virtual organizations?

4. To what degree does ICT adoption influence the formation of trust within and

between organizations in the virtual and real space?

5. To what degree does development of inter-organizational trust enhance

integration in virtual organizations?

6. To what extent is conflict related to lack of shared understanding between

partners in virtual organizations?

7. To what extent does inter-organizational trust influence virtual organizations

profitability in service organizations?

1.5 Research Hypotheses

A hypothesis is a tentative statement about the relationship between two or more

variables. Hypothesis is a proposition made as a basis for reasoning without any

assumption of its truth. Therefore, the following hypotheses are presented for the study.

1. Inter-organizational trust impacts significantly and positively on virtual

organizations’ commitment in Nigerian service organizations.

2. Environmental uncertainty and fluctuating workforce of inter-organizational

relationship negatively affect virtual organizations’ performance in service

organizations.

3. Cultural norms and values impact negatively on inter-organizational relationsip in


4. ICT adoption impacts positively on the formation of trust within and between

organizations in the virtual and real space.

5. Development of inter-organizational trust impacts positively on the integration of


6. Conflict to a very high degree is adversely related to lack of shared understanding

between partners in virtual organizations.

7. Inter-organizational trust influences virtual organizations’ profitability in service

organizations.

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1.6 Significance of the Study

The ongoing process of companies’ specialization leads to a growing need of cooperation

in inter-organizational system. On the other hand, the formation of inter-organization

networks is driven by several partially overlapping objectives, such as, risk reduction,

technology exchanges, blocking competition, facilitating international expansion and

opening new global markets, vertical quasi-integration and achieving of synergy effects.

Inter-organizational business relationships as those present in virtual organizations have

been object of research in several scientific disciplines, because of its relevance and

heterogeneous nature of factors influencing the success of business networks. Increasing

attention has been paid to the role of trust as a crucial factor for the efficient operation of

networks.

It is hoped that the recommendations made in this study will facilitate trust and

cooperations among the geographically dispersed members in inter-organizational

system. This study is equally of immense importance to the selected service firms in the

federal capital territory Abuja as it will facilitate their operation. In other words it is

hoped to be beneficial to other service organizations, academic institutions, researchers,

government establishment and organizations that make use of ICT and intend to

collaborate with other organizations.

1.7 Scope of the Study

The topic of virtual organization is wide in scope and cannot easily be evaluated as a

result of changes in technology and demand of customer and collaborators. This thesis

therefore was intended to evaluate empirical research on inter-organizational trust,

particularly the theoretical approaches taken and how inter-organizational trust has been

measured, and studying inter-organizational trust, rather than interpersonal trust; real-

world rather than laboratory-based research; and using only work majorly published

between 1980 and 2013. The institutional and geographical domains investigated, were

basically top management staff, middle management staff and low management staff in

selected Nigerian service organizations in federal capital territory, Abuja. The researcher

resides within the federal capital territory, this forms the basis for the selection to

25

enhance easy access to information required. The period under investigation is 2008 till

2013.

1.8 Limitations of the Study

The limitations of the study are those characteristics of design or methodology that

impacted or influenced the application or interpretation of the results of the study.

Therefore, the limitations faced in the course of the research were lack of adequate

accessibility to relevant information, difficulty in accessing the target sample during

working hours due to the busy nature of their operations, inability to use a large sample

size due to time and resource constraints, and unwillingness of employees to give out

information that are considered secret for fear of victimization if found out.

1.9 Profile of the Selected Service Organizations

Etisalat

Etisalat Nigeria commenced commercial operations on 23 October 2008 with a promise

to deliver innovative and quality services in Nigeria. Since then, Nigeria has continued

to witness its innovative services.

Etisalat redefined speed with the roll-out of the unique 3.75G HSPA+ network and It

has continued to prove itself an innovative company keen to give its subscribers the

best possible experience at the most affordable price.

Its innovation has led to the growth of its active subscriber base to over 12 million.

Today, Etisalat has network coverage in all 36 states of the federation including Abuja,

the federal capital territory as it continues to build its network and expand to new

locations.

In March 2009, the National communications commission (NCC) adjudged Etisalat as

Nigeria’s best network based on quality of service indices measured by the regulatory

body; in 2011 after a similar assessment, Etisalat’s network was once again rated best.

To date, Etisalat Nigeria has won several industry awards for its innovation and quality

service delivery. Some of these include: Brand of the Year, Fast Growing GSM

Company of the Year, Best Marketing Company, Most Innovative Corporate Social

Responsibility Company, Friendliest Tariff Mobile Operator and Best Telecoms

26

Customer Service among others. The staff strength of its Abuja office at the time of this

investigation was put at 284.

Since coming on board the Nigerian Telecommunications market in 2008, Etisalat

Nigeria has made appreciable impact on the lives of Nigerians particularly in the areas

of;

Investments

The company has invested billions of dollars in Telecoms Equipment and infrastructure

providing sub stations, base stations and other amenities both in urban and rural areas

in Nigeria. With all these investments, Etisalat has made socio economic life a lot

easier for Nigerians.

Careers

That way it has created thousands of jobs directly and hundreds of thousands more

indirectly.

Products and Services

The company has numerous products and services which it offers the Nigerian public

and they include; various prepaid call plans like Easy Flex, 9ja Free Credit Promo, and

easy business among others. Also the company provides services such as; Internet

Browsing, eLife which is your combine offering of TV, Landline Telephone and

Broadband Internet services in one easy bundle offer.

Reach

Perhaps among all mobile phone networks in Nigeria, Etisalat is widely spread in terms

of coverage and availability.

Number of Subscribers

With over 12 million subscribers and counting, it is clearly one of the preferred

networks of choice among Nigerians.

Criticisms

It has not been smooth sailing for Etisalat; there are many grey areas that need to be

improved upon such as;

Over congestion of network

Many consumers complain about Etisalat services. There is the problem of over

congestion and poor network connection, although this has improved over the years.

27

High Tariffs

The company has been severely criticized for overcharging its subscribers.

Overall Assessment

Etisalat is a good company with a good management team, well run and productive.

Market leader with an almost insurmountable reach, it seems the best is yet to come.

Etisalat is committed to the principles of corporate social responsibility and is

partnering with many governments and non-government organizations to increase

access to education and health care via technology. Etisalat is also well-known for its

support of people with special needs. It is a shortlisted finalist in the 2011 Global

Mobile Awards for its visual contact centre service which uses 3G technology and sign

language to provide support to the hearing impaired. ( www.etisalat.ae, 2012).

Globacom

Globacom is the fastest growing GSM network in Africa, achieving a record one

million subscribers and covering over 87 towns in just nine months. The Company was

incorporated since August 29, 2003.The Company has been at the forefront of

revolutionary changes in the GSM sector in Nigeria, offering both Prepaid and Contract

packages along with a range of Value Added Services. The Company is not listed in the

Nigerian Stock Exchange.

Globacom was founded in 2003 by Dr. Mike Adenuga Jr., who is currently one of the

most successful businessmen in Africa. Adenuga rose from humble beginnings to

becoming a millionaire at the age of 26. He established successful enterprises such as

the Equitorial Trust Bank and Consolidated Oil Plc., which in 1991 became the first

indigenous oil drilling and marketing company to strike crude oil in Nigeria. Under the

Mike Adenuga Group, he decided to venture into the high risk telecommunications

industry in Nigeria, betting big on the telecoms sector which, was in its infancy after

privatization initiatives pursued by the Federal government. After multiple unsuccessful

attempts, Adenuga’s bets paid off as his newly formed company, Globacom, attained a

Second National Operator (or SNO) license, and became the fourth mobile carrier

licensed to operate digital mobile lines, fixed wireless lines as well as serve as an

international voice and data gateway.

28

In less than a decade, GLO has proven to be a juggernaut in a hotly contested mobile

telecoms market and has risen to the #2 spot just behind the colossal South African

based MTN, a pioneer in the market having the largest share of the Nigerian telecoms

market well ahead of Globacom’s entry. Globacom’s mobile network unit, Glo Mobile,

was able to rapidly grow its customer base and attain a 23% market share by offering

competitive tariff rates and data plans, as well as introducing consumer and commercial

offerings such Blackberry services, and the Glo Fleet Manager over its 3G network.

Globacom continues to gain steam, expanding operations outside of Nigeria and

launching additional business units including Glo Gateway (international voice and

data exchange), and Broad Access (business and consumer fibre optic connectivity). In

the fall of 2010, Globacom launched the third international submarine cable, Glo-1

spanning over 9,800 km from the UK to Lagos, Nigeria with 16 landing points in

Europe, North Africa and West Africa. As of January 2011, GLO boasts the first 4G-

LTE networks and is poised to take on greater market share in the Nigerian and sub-

Saharan marketplace, offering faster and more affordable data speeds, and enabling a

richer mobile consumer experience.

Ever since coming on board the Nigerian Telecommunications market in August 2003,

GLO Nigeria has made appreciable impact on the lives of Nigerians particularly in the

areas of;

Investments

The company has invested billions of dollars in Telecoms Equipment and infrastructure

providing sub stations, base stations and other amenities both in urban and rural areas

in Nigeria which has made socio economic life a lot easier for Nigerians.

Careers

GLO has created thousands of jobs directly and hundreds of thousands more indirectly.

GLO staff are among the best paid workers not only in the IT/Telecoms field but in the

entire country as a whole.


The company has numerous products and services which it offers the Nigerian public

and they include; various prepaid call plans like Glo Gista, Hi Flier, Glo Flexi, Glo talk

29

point others. Also the company provides services such as; Internet Browsing, Black

berry Services, International calls and Roaming (which allows Nigerian subscribers to

use their lines in selected countries when not in Nigeria), Enterprise Solutions and

Airtime services, and so on.

Reach

Perhaps among all mobile phone networks in Nigeria, GLO is among the most widely

spread in terms of coverage and availability.


With over 30 million subscribers and counting, it is clearly one of the preferred

networks of choice among Nigerians.

Criticisms

It has not been smooth sailing for GLO there are many grey areas that need to be



Consumers complain about GLO services. There is the problem of over congestion

wherein the network is jam packed with many cases of poor network connection and

drop calls, although this seem to has improved over the years.

High Tariffs

The company has been severely criticized for overcharging its subscribers. Till date, it

remains among the most expensive network in Nigeria.

Overall Assessment

GLO is a good company with a good management team, well run and productive.

Globacom Ltd. is privately owned and employs over 2,500 people worldwide and 320

staff in Abuja office. Mike Adenuga serves as Chairman with Mohammed Jameel as its

Chief Operating Officer.

MTN Nigeria

MTN Nigeria is the largest member of the MTN group, a South African company with

many subsidiaries spread across the world (21 countries in Africa and the Middle East).

In Nigeria, the company just marked 10 years of operations (August 2011) and has

expressed appreciation to all and for good reason too. With all the billions of dollars it

has made as profit over the last 10 years. It is the least they can do. The company’s vision

30

is to be the country’s leading provider of telecommunications services while their mission

is to provide 1st class network quality, customer service and value.

MTN Communications Ltd was one of 3 initial GSM companies licensed by the NCC to

provide telecoms services to the Nigerian public. It commenced operations in August

2001 and has ever since been the biggest Telecoms companies and one of the largest in

all of Nigeria.

Ever since coming on board the Nigerian Telecommunications market in 2001, MTN

Nigeria has made appreciable impact on the lives of Nigerians particularly in the areas of;

Investments

The company has invested billions of dollars in Telecoms Equipments and infrastructure

providing sub stations, base stations and other amenities both in urban and rural areas in

Nigeria. With all these investments, MTN has made socio economic life a lot easier for

Nigerians.

Careers

That way it has created thousands of jobs directly and hundreds of thousands more

indirectly. MTN’s staff are among the best paid workers not only in the IT/Telecoms

field but in the entire country as a whole.


The company has numerous products and services which it offers the Nigerian public and

they include; various prepaid call plans like MTN Funlink Reloaded, MTN Bundles, and

MTN happy Hour, MTN Family and Friends Expanded, MTN Super Saver among others.

Also the company provides services such as; Internet Browsing, International roaming

(which allows Nigerian subscribers to use their lines in selected countries when not in

Nigeria), Enterprise Solutions and Airtime services. But by far the most common among

its services is internet browsing from which we have the MTN Blackberry Service, Data

bundles, Data Usage, MTN Video Calling, MTN F@stlink, MTN GPRS, MTN Mobile

internet and so on.

Reach

Perhaps among all mobile phone networks in Nigeria, MTN is the most widely spread in

terms of coverage and availability.

31


With over 35 million subscribers and counting, it is clearly the preferred network of

choice among Nigerians.

Criticisms

It has not been smooth sailing for MTN as there are many grey areas that need to be



Many consumers complain about MTN’s services especially in terms of delivery of their

so called 1st class quality Telecoms services. There is the problem of over congestion

wherein the network is jam packed with many cases of poor network connection and drop

calls, although this has improved over the years.

High Tariffs

The company has been severely criticized for overcharging its subscribers. Till date, it

remains the most expensive network in Nigeria.

Illegal fees

MTN has been fined in the past by the National Communications Commission for

illegally charging its subscribers fees it was never supposed to have charged such as

migration fees for which they collected (N200) from consumers. They were ordered to

refund all such monies to the subscribers.

Overall Assessment

MTN is a good company with a good management team, well run and productive. Market

leader with an almost insurmountable reach, it seems the best is yet to come. The staff

strength of MTN Abuja office was 364 as at December 2012 (www.mtn online.com,

2012).

Access Bank Plc

Access Bank started operation in 1988 and was issued a banking license in December

1988. In February 8, 1989, Access Bank was incorporated as a privately owned

commercial bank, and commenced operations at its Burma Road, Apapa Head Office

may 11 1989.

Access Bank became a Public Limited Liability Company in March 24, 1998 and was

listed on the Nigeria Stock Exchange November 18, 1998.

32

In February 5, 2001, Access Bank obtained a Universal Banking License from the

Central Bank of Nigeria

The Rebirth

The Board of Directors appointed Aigboje Aig-Imoukhuede as MD/CEO and Herbert

Wigwe as Deputy Managing Director. The mandate was clear: “Reposition the bank to

one of Nigeria’s leading financial institutions within a five - year period (March 2002 –

March 2007)” This task was perceived by many as audacious, given the realities of the

Bank at the time. Also appointed to the Board was Mr. Gbenga Oyebode who brought

commendable board experience gathered from some of Nigeria’s leading companies,

such as MTN Nigeria, Okomu Oil Palm Plc. The new management then articulated a

transformation agenda for Access Bank Plc. This agenda represented a complete

departure from all that characterized the bank in the past and became the road map for the

transformation of the bank into a world class financial institution. The focus was to:

o Assemble a credible and high caliber management team

o Introduce a culture of excellence founded on professionalism and integrity

o Ensure Human Capital Development

o Enlarge Shareholder Base

o Introduce strong procedures and processes to drive day-to-day activities of the

Bank

o Instill a passion for customers in all members of staff

o Establish a low cost liability generation strategy

o Expand branch network to cover all clearing zones within Nigeria

o Create a world class Brand Image.

The impact of the transformation agenda was reflected in the first year. The bank grew its

balance sheet by 100% and posted an impressive N1 billion profit before tax. The profit

before tax figure was more than the cumulative profit made by the bank in the previous

12 years. This also marked the beginning of what would be a 6 year record triple digit

growth trend. Similarly, earnings per share had rebounded to 21 kobo from a negative 2

kobo position, leading to a declaration of a 5 kobo dividend to shareholders for the first

time in 3 years.

33

Access Bank Plc is a remarkable story of the transformation of a small obscure Nigerian

Bank into an African financial institution of note; with emerging footprints on the

international banking landscape. Access Bank today is one of the top 10 largest banks in

Nigeria in terms of asset base. A phenomenal accomplishment considering its

antecedents. The population size of the selected six (6) branches of access Bank within

Abuja metropolis as at the time of this investigation was 210.

Zenith Bank

Zenith Bank Plc. over the years, has through strategic deployment of its people,

information and communication technology (ICT) redefined customer service standards

and created diverse service delivery channels. The bank was incorporated as Zenith

International Bank Limited on 30 May 1990, a private limited liability company and

was licensed to carry on the business of banking In June 1990. The name of the bank

was changed to Zenith Bank Plc on 20 May 2004, to reflect its status as a public limited

liability company. The bank's shares were listed on the Nigerian Stock Exchange on 21

October 2004 following a highly successful Initial Public Offering (IPO). Nigerian

individuals and institutions numbering over 700,000' shareholders currently own the

bank.

Over the years the Zenith Bank has become synonymous with the use of Information

and Communication Technology (ICT) in banking and general innovation in the

Nigerian banking industry. The group's main service delivery channels remain its local

and foreign subsidiaries and its business offices (branches and cash offices), which

currently stand at over 315 while offering electronic banking services, such as Internet

banking, bills payment, and telephone banking services amongst others. These business

offices are located in prime business and commercial cities in each state of the

federation and they are easily accessible to all the Central Bank of Nigeria's clearing

zones all over Nigeria.

Within the first decade of commencing operations, the bank made its mark in

profitability and all other performance indices in Nigeria and has maintained this prime

position to date. Staff strength of the selected branches and cash office within the

central business area Abuja as at the time of this research is 261.

34

Group's businesses and affairs are conducted through the local branch networks and

subsidiaries which are categorized into local (mainly Non Banking Financial

Institutions) and Foreign (mainly banks in other countries). To date, the bank has a total

of Three Hundred (315) branches with about 200 off-site locations in its network,

strategically located in various commercial centers of the country. All the branches are

linked by our technologically advanced system, thereby aiding banking transactions

across the country. The key driving factors in Branch location decision are: "Over the

years the Zenith brand has become synonymous with the use of Information and

Communication Technology (ICT) in banking and general innovation in the Nigerian

banking industry. The group main service delivery channels remain its local and foreign

subsidiaries and its business offices (branches and cash offices), which currently stand

at over 315 while offering electronic banking services" 1. Extend dynamism in the

provision of banking services to that part of the country and bring our banking products

and services to potential customers in and around the environs 2. Generate Deposit

liabilities form potential non-borrowing high volume traders and businesses to fund

needing areas of the country 3. Enhance liaison and Improve financial transaction

between the various businesses and their contacts in other parts of Nigeria and beyond.

4. Take Banking closer to both existing and potential customers 5. Volume of

commercial activities. In line with its long-term plan of building Zenith Bank into an

international financial institution, the bank has taken concrete steps towards

establishing presence in major West African States and is currently expanding into the

other African Region as well as the European and Asian continents, while consolidating

its position as a leading financial services provider in Nigeria.

Skye Bank

Skye Bank, a merger of former Prudent Bank, EIB International Bank, Bond Bank,

Reliance Bank and Cooperative Bank commenced operations under the new identity in

January 2006 subsequent to the completion of the various legal and regulatory

processes required to conceptualization, According to the Consolidated - Audited

financial statement for the Year of 2010, total net operating revenues decreased with -

58.08%, from NGN 49,269,000 thousands to NGN 20,654,000 thousands. Operating

35

Results increased from NGN -925,000 thousands to NGN 12,732,000 thousands. The

ressummate a valid merger. As at January 1, 2006, Skye bank’s shareholder’s Fund

stood at over N34bn and this puts the bank amongst the first top five banks in Nigeria,

measured by level of Shareholder’s funds. With this level of ults of the period reached

NGN 10,432,000 thousands at the end of the period against NGN -1,893,000 thousands

last year. Return on equity (Net income/Total equity) went from -80.76% to 420.48%,

the Return On Asset (Net income / Total Asset) went from -0.30% to 1.48% and the

Net Profit Margin (Net Income/Net Sales) went from -3.84% to 50.51% when

compared to the same period of last year. The staff strength of the selected branches of

the bank within Abuja metropolis as at the time of this investigation is 200.

1.10 Contextual Definition of Terms

Organization: Is a social unit of people that is structured and managed to meet a need

or to pursure collective goals. An organization is a social entity that has collective

goal and is linked to an external environment.

Organization trust: Organizational trust is a positive expectations of an employee’s about

applications and policies of the organization even in risky situations and his support for

the organization.

Trust: Trust can be described as the reliable, fair and ethical behavior in interpersonal

relations.

Virtual: Virtual is the ability of the organization to acquire and maintain critical

competencies through its design of value-adding business process and organizational

structure.

Virtual organization: Virtual organization can best be described as organization existing

as a corporate or other wise productive entity that exist mainly through telecommunication

tools.

Virtual organiztaion management: Virtual organization management can be described as

a macro view of an entire organization from top to bottom and seeks to institute and

incorporate best practices, policies and procedures for working in any type of virtual

environment and for managing any specific virtual organization.

36

REFERENCES

Axelrod, R. (1984), The Evolution of Cooperation, New York: Basic Books.

Ancona, D.G., and Caldwell, D.F. (1992), “Bridging the Boundary, External Activity and Performance in Organizational Teams”, Adminstrative Science Quarterly Journal, 37 (3).

Barner, R. (1996), “The New Millennium Workplace”, Seven Changes that will

Challenge Managers and Workers, The Futurist journal of Scientific Research, 30 (4).

Baier, A. (1986), “Trust and Antitrust”, Ethics management review, 96 (2).

Blau, P.M.(1964), Exchange and power in social life, New York: Wiley.

Bleecker, S.E (1994), “The Virtual Organization”, The Futurist, March-April, 1994.

Burris, B.H (1993), Technocracy at Work, Albany, New York: State University New York Press.

Child, J. and Mollering, G. (2003), “Contextual Confidence and Active Trust

Development in the Chinese Business Environment”, Organization Science Journal, 14 (1).

Camevale D.G., B.A. Wechsler, (1992), “Trust in the Public Sector”, Administration and Society

Journal, 23 (2).

Doz, Y.L. (1996), “The evolution of Cooperation in Strategic Alliances”, InitialConditions or Learning Processes? Strategic Management Journal, 17.

Davidow, W.H, and Malone, M.S. (1992), The Virtual Corporation, Structuring and Revitalizing

the Corporation for the 21rst century, New York: Harper Collins Publishing.

Galbraith, J.R (1995), Designing Organizations, San Francisco: Jossey-Bass.

Heide, J.B. and John, G. (1992), ‘‘Do Norms Matter in Marketing Relationships?” Journal of Marketing, 56.

Milligan, P.K. ( 2003), “The Impact of Trust in Leadership on Officer Commitment and

Intention to Leave Military Services in the U.S Air force”, Capella University, Doctor of Philosophy, USA.

Mayer, R.C., Davis, J.H., and Schoorman, F.D. (1995), “ An integrative model of organizational

trust”, Academy of management review, 20 (3). Pierre, C. (2006), Virtual organization Network, New York: Gorge Allen and Unwin, Limited.

37

Ring, P.S and Van De Ven. A.H. (1994), “ Development Processes of Cooperative, Inter-

Organizational Relationships,” Academy of Management Review, 12.

Saparito, P. A., Chen, C.C. and Sapienza, H.J. (2004), “The Role of Relational Trust in Bank- Small Firm Relationships”, Academy of Management Journal, 47 (3).

Shockley-Zalabak P., Ellis K., and Winograd G. (2000), “Organizational Trust; What it Means, why it Matters” , Organization Development Journal,18 (4).

Sytse Douma and Hein Schreuder (2012), Economic Approaches to Organizations, Harlow:

Pearson Education. Umoh, S.M. (1996), Analysis of Management Principle and Practice, Enugu: J.T.C. Publishers.

Varol, S. E., and Tarcan A. (2001), “Gelisim Guvenden Yana”, Gazi University Journals of

FEAS, 2.

Yilmaz E. (2008), “Okullarda Orgutsel Guven Olceginin Gecerlik ve Guvenirlike Cahsmasi”, www.sosyalbil.selcuk.edu.tr/sosmak/makaleler%CYilmaz%20ERCAN%5CYILMAZ,%20 Ercan.pdf.

Zaheer, A., McEvily, B., and Perrone, V. (1998), Does Trust Matter ? “Exploring the Effects of

Inter-organizational trust on performance”, Organization Science Review, 9 (2).

38

CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1 Introduction

In today’s business climate, the process of companies’ specialization leads to a growing

need of trust and cooperation among members of virtual organizations. The process

constituting trust in a relationship increasingly becomes a managerial task, driven by the

nature of trust with the rising number of relationships. Conventionally, virtual

organizations means to build trust in between business partners and might prove to be

inefficient. The implementation of trustworthy mediators appears suitable for reducing

the complexity of intra-network relationships and the required trusting stances.

This chapter therefore reviews literature designed to identify related research and to set

the current research thesis within a conceptual framework on inter-organizational trust in

virtual organizations and its effect on organizational performance in the Nigerian service

firms, as a system of interrelated parts that help corporations to leverage trust.

2.2 Conceptual Framework of Inter-organizational Trust

In a competitive knowledge-based environment, a firm’s ability to establish inter-

generational relationships in terms of strategic alliances and performance inside and

outside a firm has become a critical fount of competitiveness. In inter-organizational

relationships, the most common success factor, and possibly the most critical one is trust.

Scholars from strategic management and organization theory to economics and marketing

have conceptually and empirically addressed the role that inter-organizational trust, as

well as trust in general, plays in virtual organizations’ behavior and performance.

As Zaheer, et al (1998:142) observe, inter-organizational trust is the extent to which

members of one organization hold a collective trust orientation toward another

organization. The experience with trust despite increased interest and the acknowledged

role of trust to a company’s competitiveness is that, there has not yet been theoretically

and empirically coherent attempts to measure trust in inter-organizational context. Thus,

“trust remains an under-theorized, under-researched, and therefore, poorly understood

phenomenon” (Child, 2001: 274).

39

Several perspectives can be brought to bear on the definition of trust. Erickson

(1963:110) thinks of trust as an element of life beginning with birth. The basic way of

getting to know the people for a new born human being is to decide if they are reliable or

not. Blas (1964: 34) posits trust as a necessary element for durable social relationship.

While McGregor defines trust as the most sensitive product of human affairs, Weber

states that exchange of goods is only possible within the relationships based on inter-

personal trust. Baier (1986) defines trust accepting the existence of others without

expecting any evil act (qtd. In; Yilmaz, 2004:5); while Carnevale and Wechsher (1992:

473-5) define it as a set of beliefs that the acts of an individual or a group are well-

intentioned, fair and constructive, based on ethical norms. Mayer et al (1995) explain this

concept as willingness to act sensitively depending on the expectation that the other

party’s acts can have important results. One of the original, forward-looking frameworks

commonly employed in thinking about trust was the game-theoretic view on the

evolution of cooperation proposed by Axelrod (1984:14), who show that expectations of

continued interaction change the behavior of relationship partners. Organizational

scholars have built upon this game-theoretic framework (Doz, 1996; Parkhe, 1993),

finding that organizational perceptions of the inter firm relationship continuing into the

future encourage cooperation between the organization involved (Heide and Miner,

1992:36).

Changes in working conditions, differences that are getting more and more apparent,

globalization, increasing importance of justice in workplace, international relations,

complicated partnerships, information technologies, replacement of traditional

organizations by hierarchic organizations, replacement of control mechanisms based on

authority by self management and control and also spread of decisions making to all

levels in organizations result in a dramatically increase in the importance of the concept

of trust in organizational life (Shockley-Zalabak et al 2000:35). This in turn necessitate

establishment of organizational processes not on the basis of power but on the basis of

trust. Trust enables clear and effective exchange of information in organizations,

decreases process costs concerning the work, and thus causes efficiency to increase

(Varol and Tarcan, 2001: 99).

40

Virtual organization brings together theories about the nature of work in the information

age, the organization of social behavior, and the role technology plays in the evolution of

social structure. Virtual organizations are seen as the emerging standard in business,

resulting from technological advances and changing expectations on the part of

consumers and collaborators. Is a collection of geographically distributed, functionally

and/or culturally diverse entities that are linked by electronic forms of communication

and rely on lateral, dynamic relationships for coordination. Despite its diffuse nature, a

common identity holds the organizations, or other constituents. The virtual organization

is often described as one that is replete with external ties (Coyle and Schnarr 1995: 29),

managed via teams that are assembled and disassemble according to need (Grenier and

Metes 1995 Lipnack and Stamps 1997), and consisting of employees who are physically

dispersed from one another (Clancy 1994, Barner 1996). The result is a “company

without walls” (Galbraith 1995: 36) that acts as a “collaborative network of people”

working together, regardless of location or who “owns” them (Bleeker 1994:11, Grenier

and metes 1995, Hedberg, Bahlgren, Hansson and Olve, 1997).

Locket and Holland (1996:46-9) describe Barclays as virtual global bank. This entity is a

new global network created by linking together extant networks of smaller, regional

banks. Customers of the regional banks now have the feeling of being a part of a large

global bank because electronic media bring them the worldwide services of Barclay,

though they remain members of the smaller, regional banking entity. In this way, tensions

between global and local are reconciled, and smaller groups or firms can exist within

larger entities and realize their advantages (Monge and Fulk, 1999:91).

Virtual organization requires a different way of perceiving the world by those who wish

to participate in it. There are four key characteristics of virtual organization as process.

First, virtual organization entails the development of relationships with a broad range of

potential partners, each having a particular competency that complements the others.

Secondly, virtual organization capitalizes on the mobility and responsiveness of

telecommunications to overcome problems of distance. Thirdly, timing is a key aspect of

41

relationships, with actors using responsiveness and availability to decide between

alternatives. Lastly, there must be trust between actors separated in space for virtual

organization to be effective.

Davidow and Malone (1992:7-8) describe the distinguishing characteristics of a virtual

corporation as a focus on change, being customer driven and managed, and the presence

of highly skilled workers working in a collaborative climate. Virtual corporations succeed

when they develop relationship with their clients that last three to four product

generations and include a broad variety of services related to a product. (Goldman;

Nagel; and Preiss 1995:87) agree with these characteristics and build on them, proposing

a structure defined by the alliance of distinct core competencies distributed among

discrete entities. To be successful, argue Goldman et al (1995) each firm must focus on

achieving world-class excellence in one area, its core competency.

Market success follows from opportunistic alliances with other firms to design,

manufacture and market a product in a given niche. By building a virtual web (Goldman

et al: 221) of relationships with other corporations, including competitors, suppliers, and

clients, a corporation enables itself to efficiently and effectively pull together the

resources needed to develop and deliver profitable solutions to client problems. By

holding a collective trust orientation, integrating their complementary core competencies,

virtual corporations can reap the benefits of inter-dependence-reduced overhead,

increased profits, greater commitment from members and customers, and increased array

of opportunities for future collaborations (Goldman et al; Davidow and Malone, 1992).

There is abundant justification for regarding management in Nigerian service

organizations as the most crucial activity of man because one who manages a concern is

saddled with the responsibility of not only establishing but also nourishing and

maintaining a type of internal environment in which people can work together in

cooperation efficiently in order that they may achieve some set corporate objectives. It

makes no difference whether or not these people are of the same sex, nationality,

religious creed, linguistic group, educational background or political affiliation, etc. To

42

be able to do this, the manager will need to study, understand and respond to the various

elements affecting his operational environment including trust. Such elements must also

include economic, social ethical, moral, political and technological ones (Umoh, 1996:2).

Development of inter-organizational trust is one of the objectives of virtual organizations

and for any project to succeed, people always work together co-operatively. Examples

can be seen in government, military operations and philanthropic organizations. It is

usually the ability of those in management capabilities that determine the effectiveness of

working co-operatively towards a set goal. If the management level or quality in virtual

organizations does not facilitate trust or permit effective coordination of the scarce

human resources then there would be no need for technical skills, engineering

capabilities, material resources or scientific knowledge (Umoh, 1996:4).

It is believed that a long human interaction has existed between the management and its

members that are geographically dispersed and their relationship has contributed to the

failure or success of organizational objectives. This is based on the understanding that

goals and objectives of virtual organizations could be achieved or not achieved through

human elements.

2.3 Theoretical Framework

The literature of management is bundled of new forms of organizations theories. Queerly,

these new forms stem from business practices which are dated since the beginning of

humanity. Recently the intensive use of information technology (IT) brings too many

challenges and changes within/through organizations that scholars write a great deal of

papers on new forms of organization generated by IT. These days, the real debate relating

to new forms of business is summed up to virtual organization.

In this section within the framework of theoretical basis of organizational trust the

concept of organizational trust and process of virtual organization will be discussed and

related works in local and foreign literature will be mentioned.

2.3.1 The Concept of Organizational Trust

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The concept of trust based on open and safe behavior of individual against each other is

examined from different aspects. These are basically interpersonal trust, the trust between

two individuals, two individuals’ trust in each other, inter-organizational trust, political

trust, social trust, trust between juniors and superiors and organizational trust. (Joseph

and Winston, 2005:7). In this sub-heading among these aspects, organizational trust is

discussed.

Organizational trust is described as good will-based or competence based and employees’

feeling of safety and support and it has been regarded as a relevant factor in improvement

of organizational performance and realization of individual and organizational objectives.

Existence of a climate of trust in an organization keeps the individuals together and

enables them to trust each other and act openly. The institution of trust atmosphere needs

a long time yet it takes just a second to destroy it (Gilberth and Tang, 1998:322; Mayer et

al, 1995:710). Organizational trust has four important impacts on the relationship

between the employees and the organization. These are:

i. Trust facilitates management,

ii. Trust facilitates chancing high risks,

iii. Trust facilitates effective use of resources,

iv. Trust affects all activities of the organization (Conn, 2004:43-44).

Axelrod (2004:21) defines organizational trust as reliability among the employees in

terms of each one’s discourses, acts and decisions. Gilbert and Tang, (1998:328) describe

it as the belief that everybody would act in line with the objectives of the organization

and they would be honest. According to Mayer, Davis and Schoorman (1995:715)

organizational trust is belief of the employee that the other employee would act to satisfy

his expectations without any controlling effect and in line with this belief his willingness

to act openly towards the other employee without any need for self defense. As this

definition clearly reveals, for institution of organizational trust, it is necessary for the

employee to believe that the other party is willing to act in a way that would not cause

any trouble or create any risks for him (Kamer, 2001:34; Wekselberg, 1996:333).

44

Organizational trust is positive expectations of an employee about the applications and

policies of the organization even in risky situations and his support for the organization.

The common points among the definitions of organizational trust are: belief in

management, assurance about the thoughts of the colleagues, honesty and positive

expectations. Whitener et al (1998), suggest a model concerning the relationship between

the manager and the employees which lists some basic behavior of the managers

necessary for institution of organizational trust. These are listed as;

i. Consistency in acts,

ii. Honesty in acts,

iii. Sharing and distributing the control,

iv. Correct and explanatory communication.

v. Showing interest and concern.

Smith (2005:521), on the other hand, has determined the basic behaviors of the

employees for institution of organizational trust. Some of them are always telling the

truth, always having positive thoughts about the colleagues, acting respectfully,

communicating effectively, informing about one’s acts beforehand, supporting the other

employees’ success and sharing the success of the organization.

Wekselberg (1996) analyzes organizational trust in terms of social climate within

business dimensions of organizational trust under calculated trust, trust of adequacy, trust

of commitment, and trust based on relationship.

In view of dimensions of emotional trust, trust based on friendship is considered as a

slowly forming type of trust where partners expect mutual openness and honesty; trust

based on personality is defined as the tendency of trust stemming from the past

environmental support to the individual while extended trust is defined as a type of trust

shared by all the members of a group where the general level of faith is so strong to

remove any doubts (Kamer, 2001; 38-39).

In view of cognitive trust dimensions, calculated trust is considered to stem from the

holder’s feeling of trust and based on the assumption that the other person would act in

45

his favor and in accordance with rational choices; trust based on proficiency is the case

where the individual has the feelings of respect and trust to another person due to his

knowledge and ability in doing a particular thing; trust of commitment is accounted for as

the belief that both parties will struggle to fulfill their duties towards each other due to a

business agreement and trust based on relationship is defined as the trust based on the

information and impressions gained by the individuals about each other throughout their

relationship (Long, 2002:6; Saparito, 2001:15; Ari, 2003:17; Kamer, 2001:40).

A more organizationally oriented view is that trust is reciprocal or relational in nature

(Hardin, 1991; Zaheer and Venkatraman, 1995). The term relational as it applies to trust

has at least two implications: relational as social, and relational as dyadic. First, relations-

as-social trust, in contrast to “calculative” trust or trust as quasirational choice, implies

the inclusion of relational elements or possessing a social orientation. Macneil (1980)

draws attention to relational contracting as a contrast to more explicit classical and

neoclassical contracting. Relational contracting includes social elements such as norms

and expectations as well as encompassing longtime horizons. Relations-as-dyadic trust

suggests trust relative to an identified other and favors a dynamic and reciprocal-rather

than dispositional-view of trust. In this way, a relational view of inter-organizational trust

implies that a specific organization is the object of trust (Zaheer et al, 1998). Yet this

does not preclude organizations from possessing or acquiring reputations for being

trustworthy; to that extent, inter-organizational trust is not exclusively dyadic or

relational but can be network-based as well. Reputations may be more easily spread when

the firm is embedded in a dense network of ties.

The relational issue in trust naturally raises the question of time horizons, as it implies

that one is prepared to defer reciprocation in some way. The reciprocal relationship

between trust and trust worthiness also brings up the issue of possible asymmetries in

trust between parties.

Larson’s (1992:80) inductive study indicates inter-organizational trust generally has

positive effects on the successful governance of firm networks. Gulati (1995:80) suggests

that repeat alliance partners are more likely to trust; and Lui and Ngo (2004:478 suggest

that competence-based trust can arise from reputation effects-results with important

46

ramification for network governance. McEvily and Zaheer (2004:201) explore the central

role an institutional “network facilitator” plays in creating trust in geographical industrial

networks. Overall, the nature of inter-organizational trust presents a number of open

questions for future research.

2.3.2 The Process of Virtual Organization

Virtual organization as process entails a focus on how relationships are perceived by the

individual actors whose communication behaviors constitute them. In effect, virtual

organization can only occur if the participants accept a mindset different from the

traditional perspective on the formality, proximity, and functions of relationships. There

are four key characteristics of virtual organization relevant to communication theory and

research. First, virtual organization entails the development of relationships with a broad

range of potential partners, each of which has a particular competency that complements

one’s own. The phenomena of interest are the fluid parterns of communication and

partnership that develop between social entities. Having multiple alternatives allows

corporations to quickly assemble the resources and expertise necessary to take advantage

of an emerging market. To keep these options open, partnerships are not static, but rather

continuously evolve to bring in new information and keep abreast of relevant changes in

a turbulent environment. Second, virtual organization capitalizes on the mobility and

responsiveness of the telecommunication infrastructure to transcend the obstacles of

space. This makes corporate and individual partners and clients from around the globe

available for inclusion in the virtual web. Physical proximity is no longer the defining

factor in what relationships develop and flourish, because distance is no barrier when

everyone can access everyone else wherever they might be.

These elements raise the importance of two factors in relationship success. Time becomes

the critical variable in a virtual web. Davidow and Malone (1992:23-24) describe virtual

corporations as time-based, responsiveness to clients as important as cost and quality.

The same is also true of their collaborative relationships with other corporations: rapid

response is required to take advantage of the market. With clients valuing responsiveness

and potential partners’ availability in deciding between alternatives, a corporation that is

slow to respond to its clients or to opportunities for partnerships will not be able to

47

compete with corporations that are quick to act. This expectation of responsiveness is

essential to the success of the participants, and highlights the need for trust between

partners and clients separated in space to facilitate the responsiveness of corporations to

opportunities. A violation of trust by any party will force the imposition of control

mechanisms that make flexible and quick responses impossible (Handy, 1995:46), and

the exile of the offender from the virtual web. Without trust, corporations will be unable

to quickly pull together the necessary resources to take advantage of an emerging market,

and clients who do not trust a corporation will simple go elsewhere to satisfy their needs.

Thus, participants in a virtual web must be able to trust each other’s competency and

responsiveness for virtual organization to succeed.

Virtual organization can posibily be distinguished from hierarchical and network forms

of organization because of it rejection of status boundaries and the lack of importance it

ascribes to proximity. Formal hierarchies may connect distant offices and plants in a flow

of information and material resources, but they enforce distinctions between departments

and material resources, but they enforce distinctions between department as part of a

system of command and control (Bush and Frohman, 2009:26) and rely on the proximity

of management and workers within departments and offices to develop the trust

necessary for a functional system (Handy, 1995:43). Network organization differs from

formal hierarchies in its emphasis on the informal patterns of communication that bring

more and richer information and expertise to bear on problems and opportunities (Bush

and Frohman, 1991; Miles and Snow, 1995; Hanssen-Bauer and Snow, 1996). However,

network organization does not require the mobility and freedom from place that are

defining features of virtual organization. The fundamental distinction is that neither

hierarchies nor network can approach the flexibility of the interdependent relationships

across space, time, and formal boundaries that characterize virtual organizations because

they rely on the physical proximity of their staff to maintain an effective structure.

Virtual organization is different because it capitalizes on telecommunications technology.

Hardison (2010) distinguishes between a classical use of a new technology, using it to do

better what was done before, and an expressive use, which takes advantage of the unique

aspects of the new technology to create new structures and processes. Virtual

organization occurs when actors use telecommunications technology expressively, under

48

network and hierarchy organization, the use is classical, supplementing proxemic factors.

As technology makes it unnecessary for staff members to encounter each other face to

face, this freedom is exploited to lower overhead costs, place agents in the field, and

improve accessibility to a variety of information resources. Thus, virtual organization

involves the development and maintenance of interdependent relationships between (1)

physically separated actors (e.g., different offices, difference countries), (2) temporally

separated actors (e.g., different time zones, different schedules), (3) actors with different

but complementary needs (e.g., employees and customers, markets and engineers), and

(4) actors and communication technologies (e.g., voice mail systems, the World-Wide

Web, email accounts). Through the processes of virtual organizations, the relationships

between organizational entities and their representatives such as Web pages, and voice

mail banks offices are developed and maintained regardless of the location and time

schedules of their participants.

2.4 Empirical Review

Krishnan et al (2006: 898) analyzed empirical relationship between inter-organizational

trust and alliance performance and success criteria by way of questionnaires. Survey data

were collected from 126 international strategic alliances operating in India. These

strategic alliances were “extended cooperative agreements intended to jointly develop,

manufacture, and/or distribute products”, alliance performance was measured as a

function of (1) how satisfied the local partner was with overall alliance performance, (2)

how satisfied the local partner thought the international partner was with overall alliance

performance, (3) satisfaction with respect to the attainment of goals, (4) the extent to

which the local partner was satisfied with financial performance, and (5) the extent to

which the local partner believed the international partner was satisfied with financial

performance. Inter-organizational trust was measured using a questionnaire reflecting

levels of fairness, reliability, and goodwill in the relationship. Interdependence was

measured as a function of strategic rationales for why the alliance was formed. Categories

of strategic alliances included pooled (limited coordination required), sequential

(intermediate levels of coordination), and reciprocal (extensive coordination) levels of

interdependence. Three degrees of competitive overlap were also assessed. Product-

market instability was used as an indicator of environmental instability and

49

unpredictability. Control variables included investment size, cultural distance, equity

alliance (equity versus no equity governance mode), alliance duration, quality of

information exchanged, position of respondent, local partner size, and type of industry.

Krishnan et al (2006) found that inter-organizational trust was positively related to

alliance performance, and that alliance performance benefitted more from inter-

organizational trust when the degree of interdependence between two organizations was

higher, and when inter-partner competition was higher. In accordance with their

predictions, Krishnan et al, also found that when environmental instability was higher,

the relationship between trust and alliance performance was weaker. The same pattern

was seen for environmental unpredictability. The relationship between trust and alliance

performance became no significant at very high levels of environmental unpredictability.

Thus, although the relationship between trust and alliance performance is generally

assumed to be positive, if the degree of environmental instability and unpredictability are

high, this relationship may wane. As a whole, then this research shows that the

relationship between trust and alliance performance depends on the type of uncertainty

being considered-behavioral uncertainty increases the relationship, whereas

environmental uncertainty can weaken the relationship.

Another area explored by empirical research is the theorized influence of location and

national culture on the development of trust and its associated relational norms. Dyer and

Chu (2000:61) studied trust in buyer-supplier relationships in the automotive industry,

finding that the antecedents of trust differ depending on the national setting. For instance,

the length of time since the first interaction is found to influence inter-organizational trust

positively in Japan but not in the United States or Korea. In contrast, repeated exchange

is correlated with trust in Korea and the United States but not in Japan. Other researchers

have also investigated the variability of inter-organizational trust across different national

contexts (Husted, 1994; Lane, 1997; Lane and Bachmann, 1996), in particular finding

support for the notion that trust-producing mechanisms vary according to the cultural

context.

There are also indications that regional and cultural differences impact the effects and

consequences of inter-organizational trust. Sako (1998) examined the relationship

50

between inter-organizational trust and performance outcomes by surveying component

suppliers in the automotive industry across different countries. She finds that the cultural

context gives rise to differences in the effects of trust, a finding echoed by Dyer and Chu

(2003). Using a transaction-cost framework, Gulati and Singh (1998), study governance

structures of strategic alliances and find that trust behavior and its consequences differ

according to national or regional differences in alliance location.

Koeszegi (2004) discussed the importance of communication and trust, and how they

interact to define the relationship. Koeszegi argues that communication itself constantly

defines the relationship, both with the content of messages and the context which must be

used to interpret messages. A context of trust or distrust will fundamentally affect

communication and be affected in turn. This leads to another point made by Koeszegi;

that interactions are circular, and mutually reinforcing. In this way trust is resilient;

however, too much evidence against trust will tend to result in a spiral of distrust. The

findings for the study reveals that organizations that successfully apply information and

communication tool have tremendously reaped enormous benefits of inter-organizational

trust in network organizations. They are rated the best in terms of performance and

efficiency.

Panteli and Sockalingam (2005:599-617) analyzed the empirical relationship between

trust and conflict within virtual inter-organizational alliances. Data were collected by way

of questionnaires delivered by mail to 500 recipients in 24 different countries in African.

The research suggest that, conflict is something that can either increase or decrease inter-

organizational trust and productivity. If conflict is well managed, it can provide a

mechanism for idea transfer and trust building. On the other hand, if conflict is poorly

managed (or unduly avoided) this can stop or hinder the development of trust and/or

erode trust and increase rigidity, in turn decreasing productivity. Thus, the main view of

the authors was that knowledge sharing is positively related to inter-organizational

productivity as long as adequate and appropriate levels of trust are present and conflict

can be effectively managed.

Bruneel, Spithoven, and Maesen (2007), explored the influence of profit, cognitive and

social on inter-organizational trust levels among new technology firms (called young

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Technology-Based firms or YTBF and their partners. YTBFs were defined as “ventures

that are less than 12 years old which have their own R and D activities and develop and

commercialize new products of services based on a proprietary technology or skill”. An

interesting observation from within this world was that YTBF with limited resources

could strengthen their own positions by networking with other firms in order to develop

their knowledge and capabilities. Using about 127 young technology-based firms in

Belgium (identified by searching various high and medium technology data-based), data

was collected on 290 key partnerships during face-to-face interviews with the founder or

CEO from each company. Bruneel et al (2007) examined inter-organizational trust using

a four item, 7-point Likert scale from Zaheer, McEvily and perrone (1998; cited in

Bruneel et al, 2007). Profitability, cognitive and social proximity were also measured.

Results showed that inter-organizational trust was high in the relationship among the

target firms and their key partners (mean =5.09 on the 7-ponit scale). Moreover, inter-

organizational trust was significantly correlated with the three proximity variables,

namely profitability cognitive and social proximity. Specifically, cognitive proximity was

mildly and negatively related to trust. In other words, as the distance between a simple

YTBF and the complex partner increased, inter-organizational trust increased. Bruneel, et

al (2002), attributed this finding to the low resources of the YTBF increasing the need for

trust with their complex partner, presumably because having few resources would

heighten the need for inter-dependence to enhance it profitability.

2.5 Development of Inter-organizational Trust

A fundamental question that researchers have attempted to answer is how inter-

organizational trust is created and developed (e.g. Ring and Van de Ven, 1994). There are

several lines of inquiry into this question that occur throughout the literature, including

the costs of creating trust, the role of interpersonal trust in the development of inter-

organizational trust, particularly questions about the unit and level of analysis, and the

influence of institutional factors such as geographic region or culture in promoting or

hindering trust creation.

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Costs of creating trust. An examination of the costs of trust creation is an obvious

counterpoint and complement to an analysis of the benefits arising from trust. It is worth

noting that a focus on the beneficial effects of trust underlies the majority of scholarly

research on the topic, and this is precisely what makes an inquiry into the costs associated

with trust’s development so interesting.

Research largely treats trust creation costs as implicit rather than as quantifiable

expenditures, difficult trade-offs, or opportunity costs. In the exploratory inductive study

cited above involving network dyads of entrepreneurial firms, Larson (1992) shows that

the development of trust between organizations requires significant time and resources-in

other words, costs. Other research identifies specific organizational actions and behavior

leading to trust creation, such as flexibility and information exchange in the case of cross-

border partnerships (Aulakh et al, 1996), the provision of timely feedback in

entrepreneur-funder relations (Sapienza and Korsgaard, 1996), and co-location in the case

of interfirm research and development (R&D) collaboration (Caron et al, 2003). Sako

(1998) finds that customer-service efforts lead to trust creation between buyer and

supplier firms. These organizational actions all have economic costs associated with them

but are not explicitly treated as such.

An important consideration in analyzing the costs of trust creation is the notion that the

process of inter-organizational trust creation and commitment is likely to be a sequential

and gradual one, with each following the other to higher and higher levels, rather than the

creation of interpersonal trust itself (Blau, 1964). As Ring and Van de Ven (1994) argue,

the development of trust is a cyclical process of recurrent bargaining, commitment, and

execution events among the organizational parties. Das and Teng (1998:499) note that

“only if partner firms have a fairly high level of confidence in partner cooperation would

they be willing to enter into a JV,” which suggests that inter-organizational trust may

need to be in place before any formal commitments are made, a concept that is well

established with respect to interpersonal trust (e.g, Lewicki and Bunker, 1996).

This provides a good starting point for further theorizing about the mechanism for

creating inter-organizational trust. Because of the potentially reciprocal nature of trust,

there are several paths to trust creations, which may involve differential costs. At least

53

two approaches to trust creation may be identified in the literature. First, to demonstrate

that an organization trusts another, it may take a large and clearly costly (if not

reciprocated) gamble with a new or potential alliance partner-typically conceived of as a:

“unilateral commitment” (Gulati et al, 1994:65). By obviously placing itself in a position

of vulnerability (Mayer et al, 1995:720) the organization invites the alliance partner to

reciprocate its trust. In other words, such voluntary vulnerability may be predicated on

the hope that “trust begets trust.” A second path to establishing interfirm trust is to

demonstrate that one is trustworthy (rather than trusting): for example, an organization

might focus on scrupulously honoring commitments and making sure to commit to only

what is within the firm’s power to execute. It would be interesting to work through the

contingencies when one or the other path to trust creation is more “optimal,” although

clearly other routes to trust creation exist.

This consideration of different trust creation mechanisms brings us to another reason why

organizations may sometimes behave in more quasi-rational ways than individuals acting

alone when it comes to trusting another organization. The higher level of risk associated

with organizational commitment may make the costs of additional information collection

both necessary and worthwhile. The costs of conducting background checks, which could

be included in the overall cost of trust creation, are more easily amortized over the higher

volume and value of transactions between organizations in an alliance than they would be

in the simple case of lone individuals trusting each other. Again, such costs lend

themselves to quantification, and further research along these lines stands to greatly

enhance our understanding of inter-organizational trust.

Making judgments about the costs of building trust and assessing the value of trust can

also be envisioned as a question of “fit” between trust and other organizational attributes

such as the relationship’s interdependence (Wicks et al, 1999:111). The greater the

interdependence between two organizations, the greater the need for trust. Other scholars

make a “fit” argument between trust and trustworthiness (Perrone, Zaheer, & McEvily,

2003:430). Essentially, these scholars argue necessary by determining just how much

trust is “optimal” and whether creating an advance reservoir of trust is wise, and if so,

how to do it, and nontrivial issues both substantively and empirically.

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In addition, other researchers (Wicks and Berman, 2004:450) have begun to explore the

role that institutional context plays in the ability of firms to create trusting relationships

with other organizations; key elements of this context include formal institutions, socio-

cultural values, and industry norms which may all have a directs impact on the costs of

creating trust within that context. Ring (1996:61) suggests that the requirements and

therefore costs of creating inter-organizational trust actually depend upon whether the

type of trust being created is situation-specific (“fragile”) or more resilient for which

greater attention and resources may be required to create a lasting trust relationship. In

conclusion, the actions that lead to trust creation have associated costs, and these costs

will vary depending on the nature of the trust being created and the institutional context

for the inter firm relationship.

Role of interpersonal trust. There is a wealth of research in the areas of interpersonal

trust in organizational contexts (Becerra and Gupta, 2003; Dirks and Ferrin, 2001;

Kramer, 1999; Malhotra and Murnighan, 2002). Uncovering the precise relationship

between inter-organizational and interpersonal trust is an important line of inquiry

because, although the two forms of trust are shown to be related phenomena (Zaheer et

al, 1998: 149). They are clearly not the same thing. Studies show significant differences

between interpersonal trust and inter-organizational trust in predicting outcomes

(Hagen and Simons, 2003).

Nevertheless, interpersonal trust appears to be important in the development of inter-

organizational trust (Zaheer et al, 1998: 450). In other empirical studies, the influence of

interpersonal trust on inter-organizational trust is not directly analyzed but rather has

implied significance. In studying inter-organizational trust within the context of small

entrepreneurial firms, for example, inter firm trust appears to be tightly linked in trust

between individuals in those organizations (Howorth, Westhead, and Wright, 2004;

Larson, 1992; Sapienza and Korsgaard, 1996). Even in the context of relations between

larger organizations, stability of personnel appears to be an important factor in the

development of inter-organizational trust (Dyer and Chu, 2000: 261), suggesting the

importance of trust between boundary-spanners (Currall and Judeg, 1995:160). This idea

is likelihood of inter firm relationship dissolution (Seabright et al, 1992: 127). John

55

(1984:280) finds that boundary-spanner attitudes have a profound effect on norms of inter

firm opportunism or cooperation, suggesting the importance of interpersonal trust;

indeed, a multiplicity of interpersonal factors have been shown to heighten inter-

organizational trust (Moorman et al, 1993:99).

There are performance implications for the relationship between interpersonal and inter-

organizational trust. Jap and Anderson (2003:1688), find that interpersonal trust between

boundary-spanners has a positive effect on organizational performance measures, but this

effect diminishes as ex post opportunism rises. Some effects of interpersonal trust are less

clear, such as the inconclusive link between interpersonal trust and decreased

organizational conflict (Zaheer et al, 1998: 152). It does appear, however, that

interpersonal trust at different levels of the organization has different effects;

interpersonal trust among executive is a key factor in alliance formation and issue

resolution, whereas interpersonal trust among midlevel managers has a greater impact of

day-to-day efficiency of alliance operations (Zaheer, Lofstrom, and George, 2002).

Several studies attempt to gain more fine-grained insight into the nature of the tie

between interpersonal and inter-organizational trust. Lui and Ngo (2004:908) discover a

strong empirical distinction between two different dimensions of trust: goodwill trust and

competence-based trust, each with different outcomes, finding that goodwill trust arises

from interpersonal trust, whereas competence trust may derive from more general

reputation effects. Research has also found support for inter-organizational trust’s

mediating influence on the relationship between organizational characteristics and the

interpersonal trust between boundary-spanners (Perrone et al, 2003:430). Overall, the

relationship between interpersonal and inter-organizational trust has received abundant

research attention, but unanswered questions remain about the contingencies under which

it influences inter-organizational trust and its outcomes.

Institutional factors. Another area explored by empirical research is the theorized

influence of location and national culture (Fukuyama, 1995) on the development of trust

and its associated relational norms. Dyer and Chu (2000: 60-66) studied trust in buyer-

supplier relationships in the automotive industry, finding that the antecedents of trust

differ depending on the national setting. For example, the length of time since the first

56

interaction is found to influence inter-organizational trust positively in Japan but not in

the United States or Korea. In contrast, repeated exchange is correlated with trust in

Korea and the United States but not in Japan. Other researchers have also investigated the

variability of inter-organizational trust across different national contexts (Husted, 1994;

Lane, 1997; Lane and Bachmann, 1996), in particular finding support for the notion that

trust-producing mechanisms vary according to the cultural context.

There are also indications that regional and cultural differences impact the effects and

consequences of inter-organizational trust. Sako (1998) examine the relationship between

inter-organizational trust and performance outcomes by surveying component suppliers

in the automotive industry across different countries. She finds that the cultural context

gives rise to differences in the effects of trust, a findings echoed by Dyer and Chu

(2003:50). Using a transaction-cost framework, Gulati and Singh (1998) studied

governance structures of strategic alliances and find that trust behavior and its

consequences differ according to national or regional differences in alliance location,

consistent with findings in the alliance literature (Parkhe, 1993:310). In general, as

Kramer (1999) suggests, to what extent are such trusting actions also influenced by

social, institutional, and psychological norms? This stream of research indicates that

cultural, regional or institutional forces can have a powerful effect on the antecedents,

nature, and consequences of inter-organizational trust (Wicks and Berman, 2004:48).

Although the role of industry-level institutions in creating trust has been examined in a

case study (McEvily and Zaheer, 2004:189), the influence of institutional context has

been most extensively examined with respect to international settings and cultural

influences. If the exchange partners have dissimilar cultural or national origins, the whole

process of trust creation, the nature of trust itself, and the costs of trust creation are

markedly different (Child and Mollering, 2003:70, Dyer and Chu, 2003:64). Nationality

impacts how individuals perceive trustworthiness (Caldwell and Clapham, 2003:351).

Gulati (1995) finds that partners from the same country have fewer safeguards because

they trust each other more. On the other hand, certain collectivist societies, such as Japan,

display a strong in-group orientation (Huff and Kelley, 2003:84) and relate differently to

in-group and out-group members. Lincoln (1990:256) argues that the important task for

57

researcher is not merely to demonstrate that received theory applies differently in

different cultural contexts but also to extend theory by identifying new boundary

conditions within such contexts. For example, Lincoln observes that the assumptions of

TCE theory may have to be modified in the Japanese context due to institutional

pressures for long-term employment and supplier relationships, which suggest that trust,

might characterize relationships to a greater extent in Japan than elsewhere. More

broadly, “cross-cultural differences constitute empirical variance to be explained and thus

an opportunity for theory” (Lincoln, 1990:256).

One of the issues with developing trust in inter-organizational relationship is attaining the

necessary balance of trust and maintenance of proprietary interest; if this balance is not

maintained appropriately then the partnership is likely to fail. Trust is thought to be one

of the main mechanisms for making behavior predictable and for easing adaptation to the

unexpected. According to Bstieler (2006:57), “trust is usually defined as the willingness

to accept vulnerability based upon positive expectations of the intentions or behavior of

another within a particular context”. As such, trust is a useful tool for facilitating inter-

organizational relationships, as it promotes perceptions that one’s partner will fulfill their

obligations and do so in a way that is not detrimental to the other part’s interests.

Trust was conceptualized as an outcome of three factors that promote trust

(communication, shared problem-solving, and fairness) and two factors that diminish it

(conflicts and egoism), as shown in Figure 2.1

Communication Shared problem Solving + Fairness TRUST Partnership Efficacy

Conflicts - Project performance Egoism

Figure 2.1. Framework of Trust Formation in Collaborative New Product

Development

Source: Bstieler (2006), “Trust formation in collaborative new product Development” , The Journal of product innovation management, 23 (58).

58

Bstieler (2006) propose that timely, accurate, open, and adequate communication builds

trust through the development of a shared understanding. Shared problem-solving

facilitates communication, creates an experience of shared instruction and learning, and

gives concrete feedback about skills of the partner, all of which facilitate trust. Fairness is

the application of both procedural and distributive justice throughout the relationship. On

the other hand, conflicts can develop because of a lack of shared understanding and these

conflicts can increase tension. Egoism can undermine trust because it represents self-

interested behavior. Therefore, both conflicts and egoism were proposed to reduce levels

of trust. Bstieler argues that trust mediates the relationship between the antecedents of

trust and performance. That is, performance is not directly impacted by communication

and the other variables of interest: rather, these variables impact the level of trust, which

then affects performance.

Child et al (2005) also argue that trust and cooperative relations develop over time. The

development of trust and cooperation are mutually reinforcing, and development can stop

at any stage, advance, or regress. If trust is negatively affected, a partner can choose to

end the relationship. Predictability is likely an important factor; with increasing

interaction, if behavior is determined to be predictable (and positive) then trust is likely to

increase.

Trust is a social phenomenon which tends to be strengthened by cultural affinity between

people and can be supported by institutional norms and sanctions. There are a number of

social factors which impact cooperation and trust. As companies embrace technology,

cooperation (even at the global level) is often necessary. Cultural differences can add

increased complexity to trust within international strategic alliances. Cooperation may

generally be easier between people with the same cultural norms. Differences in language

and symbolism can cause a great deal of misunderstandings and make cooperation very

difficult.

In further highlighting the importance of trust in cooperative business alliances Child

discuss three stages of trust (calculation, understanding, and personal identification) that

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interact with the phases of alliance development (formation, implementation, and

evolution), as shown in figure 2.2.

Phase of alliance Development over Formation Implementation Evolution Time Key element in Calculation Mutual understanding Bonding Trust development Being prepared “Getting to “Coming to Work with you”, know about identify with you” you as a

person” Figure 2.2 Phases of Alliance Development and the Evolution of Trust. Source: Child J., Faulkner D. and Tallman S. (2005:61), “Contextual Confidence and

Active Trust Development in the Chinese Business Environment”, Organization Science Journal, 14 (1).

The components can be described as follows:

o Formation and calculation: Early in the alliance formation process, there is little

known about the potential ally therefore, trust is based on Calculation. The idea is

that a calculation is made that the risks of the alliance are likely to be beneficial

for the potential allies, and so the alliance is pursued. This allows an opportunity

for the alliance, and other forms of trust, to develop as more information is

gathered about the alliance partner.

o Implementation and understanding: in this stage of the alliance, the purpose of

the alliance starts to be realized, and information about competencies emerges. If

competencies are not adequate, then the cooperative venture founders and

generally will end. If competencies are adequate, further interaction will pave the

way for building an understanding such that the alliance partner’s reactions are

predictable. Cultural sensitivity is especially important at this stage.

o Evolution and personal identification: as the alliance progresses and becomes

successful, the alliance evolves into an independent entity with its own culture. A

stable, ongoing relationship may develop to the extent that the purpose of the

alliance allows ongoing collaboration.

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Child et al (2005) maintain that inter-organizational trust is essentially interpersonal trust,

and that trust between organizations comes down to the mutual trust between individuals

who interact within the cooperative alliance. If turnover among these individuals is high,

the capacity to develop trust within an alliance will also be limited.

Child et al (2005) describe several factors which they believe contribute to the

development of inter-organization trust. They include the following factors.

o A basis for mutual benefit

i. Commitments must be realistic

ii. Partners must be seen to be honoring their commitments

iii. The project must be viable

iv. Legal safeguards must be understood

v. An unambiguous (as much as possible) agreement must be made in

writing

o Predictability and conflict resolution

i. Mechanism for dispute resolution must be in place for both work-based

and personal disputes

ii. Roles and responsibilities must be agreed to

iii. Free sharing of information

o Mutual bonding

i. Friendly personal contact between alliance leaders is regularly maintained

ii. This friendly contact must be visible to those working under the leaders

iii. Personal relationships must be given a lot of time to develop

iv. Personnel should be working in relatively familiar environments (i.e., no

“ghettos” where personnel from different cultures are treated differently).

The development of trust within inter organization systems is dependent on progression

through the stages of trust. Emergence of trust in alliances involves risk and uncertainty,

the potential advantages between partners and their employees are considerable as they

“offer an opportunity to relieve (though not necessarily resolve) the dilemmas of control,

integration, and learning which are inherent in organizing alliances” (Child et al,

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2005:68). This suggests that serious understanding of the dynamics of trust within the

inter-organizational context will be critical to successful collaboration.

2.6 Factors Affecting Trust Worthiness Assessment During Alliance Formation

Daellenback and Davenport (2004) investigated factors which influence the formation of

organizational alliances based primarily on technology transfer and sharing of proprietary

knowledge. They argue that self-interest can often influence these alliances negatively

and developing relationships that improve knowledge-sharing, inter-organizational

alliances and joint ventures. They argue further that one of the ways to overcome

potential problems within this area is to help potential alliance partners to be more aware

of issues of trust and trustworthiness. To do this, they used a case study approach to

understand the formation of a technology-based alliance within the robotics industry.

This case study involved an initiative called “the shiny robot venture” an alliance formed

among a set of diverse organizations, and interviews were conducted with 4 members of

the initiative and a total of 15 individual members.

Daellenback and Davenport (2004) note that, except in cases where organizations had

previous alliances with one another, trust is initially undeveloped at the start of alliances.

In these cases, an initial assessment of trustworthiness of the prospective organization is

used. There are several factors which might influence this trustworthiness assessment

during alliance negotiations, but the boundary spanners who interact personally with

members of the other organization(s) play a very important ROLE in this process.

Daellenback and Davenport argue that most trustworthiness assessments are based on the

perceptions of these individuals. Information about trustworthiness is gathered during the

search for organizations with which to partner, the assessment of whether the partnership

should be pursued, and negotiations to create the partnership.

Two stages of alliance formation are identified as being particularly relevant, including

searching for a partner and conducting negotiations. At the stage of searching for an

alliance partner, three factors are posited to contribute to this partner’s perceived

trustworthiness, as shown in the top half of figure 2.3.

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PI

Partner search stage

P3b P2b

P3a P2c

P2a

Figure 2.3: Model of Trustworthiness Assessments During Alliance Formation.

Source: Daellenbach and Davenport (2004:192), “Establishing trust during the Formation of technology alliances”, Journal of Technology Transfer, 29. These include prior experience with the partner and the partner’s reputation within known

networks of trusted others. With prior experience (presumably only successful

experience), they argue that procedural norms would have been created, and that

knowledge-based trust would have developed. Reputation is also an influence on early

perceptions of trustworthiness. They argue that “a firm’s reputation for trustworthiness

acts as a proxy for shared collaborative history” (Daellenbach and Davenport 2004:192).

Conditional trust is also posited as an influence on perceived trustworthiness, and is

particularly important when other information is not influenced on perceived

trustworthiness, and is particularly important when other information is not available.

This trust is described as a presumptive form of trust for “a completely unknown but

Prior

Experience

With Partner

Conditional

Trust

Assessment of

Trustworthiness

After Partner

Search

Partner’s

Reputation

Amongst

Network of

Trusted others

Use of

Power

By Partner

Perception of

Distributive

Justice

Assessment of

Trustworthiness

After Negotiations Perceptions of

Procedural

Justice

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capable potential partner, that is, a favorable enough assessment for negotiation of the

potential alliance to take place” (Daellenbach and Davenport 2004:193). This stage of

trust, they argue, is based primary on perceptions of the partner’s ability, or the skill set

or competencies that the partner has in a particular area.

The negotiation stage is also relevant to the development of perceptions of

trustworthiness in one’s alliance partner. A part of the impact of reputation relates to

perceptions of distributive and procedural justice in the prospective alliance’s system.

Procedural justice has to do with assessing whether a process was fair; distributive justice

has to do with assessing whether an outcome was fair. Factors impacting at the

negotiation stage are shown in the bottom half of Figure 2.3. They argued that procedural

justice is another important part of the determination of the trustworthiness of a potential

alliance partner. In fact they proposed that procedural justice will have a major impact on

initial assessments of trustworthiness and therefore on the creation of new alliances.

Considerations about procedural justice shift the focus from competencies and skills to

integrity, benevolence and affect. Procedural justice has a strong influence on

commitment, trust, and social harmony, and has been found to be during the creation of

new organizations. Distributive justice was also posited to play a role, but a less critical

one, and they argue that distributive justice is primarily influenced by perceptions of

competence of the alliance partners.

The model also argues that the use of power during alliances can play a key role in

shaping perceptions of justice. By definition, they argue that power is a non-cooperative

activity. When working to define the terms of the alliance, it is clear that each member of

the alliance must push to ensure that their own interest are likely to be met (i.e., that they

ultimately have a sense of distributive justice). Using power in this context, then, is not

posited to adversely affect distributive justice. On the other hand, using power when

working to determine control procedures could damage the perceived legitimacy of the

relationship and lower levels of perceived procedural justice.

However, this work echoes the importance of the interpersonal aspects of inter-

organizational trust. They argue that using skilled negotiators who are sensitive to the

factors in the model would be critical. Interestingly, they also emphasize the

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“dispositional qualities of the potential partners” (Daellenbach and Davenport 2004:198)

as an important influence. However, they also note the difficulty of attempting to

transpose this construct to the organizational context. Although this model was not tested,

they argued that their unique contribution was the identification of the two stages during

which inter-organizational trust is developing and evolving. At the search stage, initial

assessments of the partner must occur. At the second stages, the negotiation experience

will drive how the relationshipk develops. Use of power and perceptions of justice will

influence perceptions of trustworthiness.

2.7 The Factors that Facilitate Organizational Trust

The factors that facilitate organizational trust can be divided into two groups as

organizational factors and individual factors.

Organizational Factors

Some of the factors in institution of organizational trust are human resources,

management practices, organizational culture and structure of the organization. The

factor of human resources determines the effectiveness of rewarding and evaluation of

performance; the factors of management practices and structure of the organization

determine the way to follow to reach organizational effectiveness, realization of

organizational commitment, increasing performance, success of communication and

including the employees in the decision making process; the factor of organizational

culture determines the structure of the relationships among the employees and their

managers and thus facilitates Institution of organizational trust (Musacco, 2000: 50-55).

For instance, in evaluation of success using the modern approaches that include

informing the employees, instead of a traditional one; having fair systems of rewarding;

supplying the employees with feedback regularly and on time increases the interaction

between the employees and the managers and results in trust of the employees in the

organization (Ari, 2003:66-67).

Individual Factors

In institution of organizational trust some individual factors such as the tendency for

reliance, state of mind and feelings, values and manners have impacts. The tendency for

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reliance explains how people are ready to rely on others since their birth; state of mind

and feelings explain how a person considers his feelings about someone and evaluates his

experience of reliance so far including his ideas about the other person’s credibility

before deciding to trust them or not; the values explain formation of inclinations that

cause trust and creation of reciprocally shared values; and the manners explain credibility

of the individuals (Kamer, 2001: 45-48).

2.8 Organizational Trust in Public Service Organizations

A human based approach should be seriously taken into consideration in order to achieve

efficient and productive public administration and services. Because the basis of most of

the problems faced in public organizations is the poor administration of the mentioned

organizations. Good administration is only possible with a good leader. In today’s society

where change is fast and society is increasingly conscious, it becomes an obligation for

the public institutions to have active and dynamic leaders who embody the synthesis of a

human-oriented, interactive and innovative understanding of administration in the

framework of a modern undemanding of administration (Tengilimoglu, 2005:2). Such

leaders increase the trust towards the leader thus the organization can realize the change

more rapidly. Because high level of organizational trust has an effect of decreasing the

resistance against organizational change and the climate of trust increase the motivation

and performance of the employees (Emanet, 2007:74).

Instituting the feeling of trust is an effective remedy for alleviating many problems faced

in public service organizations. Trust prevents the juniors from aiming merely to exist

and directs them to success and growth, and through developing their creativity it forms a

trust based organizational climate (Emanet, 2007: 75). The level of trust between the

management and the employees enables the employees to partake in the process of

decision making and ensures efficiency of intra-organizational communication. The

issues of coordination, commitment, trust and communication should be specially

addressed for making maximum benefit from the employees (Erstad, 1997: 325).

When the results of the researches on organizational trust in service organizations are

considered; according to Erstad (1997) in order to have effective public services the

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employees should be strengthened and to this end trust based relationships should be

established within the organizations. Gilbert and Tang (1998) conduct a study on

organizational trust covering 83 persons working in a federation government building in

the USA; in the study group a positive correlation was observed between marital status

and commitment to work group and organizational trust, concluding that married

employees value trust based relationships more than single employees and teamwork

enhances the trust relationships among the employees. Yilmaz (2004) study

organizational trust in school organizations and asserted that organizational trust is a key

factor in developing both group and interpersonal relationships. Moreover, it was also

found out that trust has an important role in developing school organization, realization of

learning at school, leadership, student success and improving the quality of school life.

Hoy et al affirms that managers are important factors in establishing the trust

environment in schools and teachers mostly trust their colleagues (Qtd. In; 2004: 10). In

the study by Erstad (2007) it has been declared that the employees should be reinforced

for efficient public services and thus trusts based relationship should be established in

organizations. Fryer, Antony and Douglas (2007) determine the critical success factors

that sustain the development of public sector. Honesty and trust based relationship among

the employees was included as one of these factors (Fryer et al, 2007:499).

According to Emanet (2007) organizational trust boosts the job satisfaction and

performance of public sector employees. When the factors of motivation for the

employees of the public sector are considered the most important one seems to be

creating an atmosphere that would encourage them to work productively. And give them

the opportunity to take responsebility, encourage them to solve the problems and reward

their success. Such a positive atmosphere is beneficial in terms of giving the opportunity

of developing the abilities and gaining new ones and improving the feeling of trust

(Ozturk and Dundar, 2003:57).

2.9 Role of Inter-Organizational Trust

Research suggests that trust plays a constitutive role in the structuring of alliance

relationships (Ring and Van de Ven, 1992). It is well founded that inter-organizational

trust arises from the need to compensate for the inherent incompleteness of contracts

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(e.g., Lane and Bachmann, 1998; Williamson, 1985) and implies the incorporation of

relational elements into contacting (Macneil, 1980). For example, Heide and John (1992)

study inter firm relationship governance structures, finding trust-related relational norms

to be highly influential on those structures.

In particular the relationship between trust and transaction-specific assets has been the

subject of considerable research, although the link is a complex one. Trust can easily be

viewed as a safeguard and a substitute for hierarchy-which would imply that trust and

asset specificity have a positive relationship because higher asset specificity have a

positive relationship because higher asset specificity requires higher safeguarding and

trust would complement asset specificity (Zaheer and Venkatraman, 1995). However,

trust may also serve other roles. One such role may be that of trust as a hostage, or signal

of commitment to the relationship, in which case trust may demonstrate a negative

relationship with asset specificity because it would serve as a substitute for it. The exact

nature of the relationship between trust and governance is the subject of mixed results;

whereas Anderson and Narus (1990:54) find support for cooperative action leading to

inter-organizational trust, other research indicates that trust acts as a mediator between

concrete financial costs and cooperative outcomes (Morgan and Hunt, 1994:27).

Several empirical studies examine the role trust plays in the formation of inter-

organizational structure. For instance, Gulati and Singh (1998:85-112) directly address

the impact of inter-organizational trust on organization structure, finding that trust

(measured via repeated ties) is related to hierarchical alliances. Zaheer and Venkatraman

(1995:373-392) find inter firm trust to be positively correlated to asset specificity,

suggesting that such investments are a signal of good faith in the relationship. Some

scholars find support for the idea that economic hostages lead to trust (Young-Ybarra and

Wiersema, 1999:439-59), whereas others find no support for such a connection (Dyer and

Chu, 2000). These findings illustrate the possibility that trust may play an important role

in how inter-organizational relationships are structured, although research in this area has

produced conflicting results.

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Other research focuses specifically on the impact of inter-organizational trust on the

nature of the relational contacts themselves, finding, a positive link between inter-

organizational trust and contact complexity (Poppo and Zenger, 2002:707-25). Although

some scholars have searched fruitlessly for a positive relationship between exchange

hazard levels and increased inter firm trust (Poppo et al, 2003), others have found

evidence of a more complex relationship. For example, Mellewigt et al, (2004) find a

moderating role of trust-that the effect of exchange hazard level on contract complexity is

weakened by inter-organizational trust, whereas trust boosts the effect of strategic

importance on contact complexity. On the other hand, because Dyer and Chu (2003) find

that inter-organizational trust increases dyadic information sharing in addition to

significantly lowering transaction costs, they argue that trust is a unique governance

mechanism in its ability to create value beyond transaction-cost minimization. This idea

is supported by their finding that trust worthiness correlates with several different

performance measures, building upon previous work that initially conceived of trust as a

self-reinforcing safeguard (Dyer, 1997:359). The impact of trust on contracting appears

to have effects far beyond simple minimization of contracting costs.

The discussion about trust and contracting leads to generalized questions regarding their

relationship in an attempt to determine whether formal relationship governance

mechanisms are complements to or substitutes for inter firms trust. Early theorizing

envisioned trust as a substitute for control, an argument that has in various settings

proven inconclusive (Van de Ven and walker, 1984), show mixed results (Sako, 1998),

and found strong empirical support (Dyer and Chu, 2004). On the other hand, some initial

trust research supporting a complementary view of trust and contracting (Zaheer and

Venkatraman, 1995) has been repeatedly reinforced (Fryxell, Dooley, and Vryza, 2002;

Luo, 2002; Mayer and Argyres, 2004; Poppo and Zenger, 2002). The question remains:

are inter firm trust and contracting mechanisms substitutes or complements?

One way researchers have begun to reconcile these conflicting views is through the use of

a contingency framework, as shown in recent empirical studies. This contingency view

indicates a more finely passed relationship between contract safeguards and inter-

organization trust than that of generalized concepts of substitutability or

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complementarily. One empirical study (Lui and Ngo, 2004) bifurcates inter firm trust into

its goodwill-and competence-based aspects, showing that these different types of trust

have different effects on the relationship between safeguards and performance,

suggesting that trust and contracts can serve as substitutes or complements, depending

upon other contingent factors.

More specifically, there are at least two contingencies on which the relationship between

trust and contracting might depend: the stage of the relationship and the complexity of the

contract. In the early stages of the relationship, for example, contracts may substitute for

trust and regulate behavior to the extent that such substitution is possible, given the

difficulty of writing completely contingent contracts. In later stages of an inter-

organizational relationship, as trust develops, contracts may merely serve to specify the

outer bounds of relational governance, complementing the trust that has since developed.

These potential effects of the dynamic nature of relationship formation and development

may also be influenced by contract complexity (Sampson, 2000:912). The greater the

contract complexity and the more the contract represents and reflects actual working

conditions, the greater the ability of the contract to substitute for trust. A consideration of

these contingencies, illuminating the potential substitutability of other governance

mechanisms for trust, leads us to a fully theoretical discussion of alternatives to inter-

organizational trust.

Alternatives to trust: One of the basic theoretical issues about the nature of trust is

whether calculativeness in fact plays a role in trust or if it is an alternative, substitute

mechanism. As such, a key part of TCE-oriented work in inter-organizational trust is the

scholarly debate regarding whether or not trust is calculative in nature (Craswell, 1993;

Williamson, 1993). Is trust subsumed by calculativeness or is sometimes closely related

but distinct idea? Recent empirical work by Saparito et al (2004:400-11) draws a clear

distinction between goodwill-oriented “relational trust” and calculative trust, finding that

relational trust mediates the relationship between supplier-firm customer service and

customer-firm loyalty, even after calculative assumptions are controlled for. Inter-

organizational trust, then, appears to be a powerful mechanism in inter-organizational

relationships even when it does not derive from calculative motivations; such trust can

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lead to a variety of desirable outcomes and have a significant influence on the very nature

and structure of the inter-organizational relationship.

This supports the argument that organizational trust is indeed distinct from

calculativeness (Bromiley and Harris, 2006:240). In this sense, teasing out

calculativeness from trust involves attending to the concept of opportunism itself; John

(1984) explores the antecedents of opportunism, and Wathne and Heide (2000:75-89)

examine its complexity, resulting in a more fine-grained parsing of the concept of

opportunism and its outcomes. Although it may be considered unrealistic to expect

organizations or the people in them to act against their own self-interest (Dasgupta, 1988;

Hardin, 1991). Research has begun to show clearly that trust explains a variety of inter-

organizational actions much more plausibly than calculative self-interest does.

There is also discussion in the literature about the role of routines in managing inter-

organizational relations and the degree to which such routines can serve as alternative

mechanisms to trust. The extent to which expectations, behaviors, actions, and outcomes

at the inter-organizational interface are influenced or determined by trust rather than

merely by inter-organizational routines is important both theoretically and empirically for

understanding the nature and role of inter-organizational trust. In essence, the question is

whether inter-organizational trust exists independent of inter-organizational routines and

if not, how the two are related. For example, theorists have raised important theoretical

questions about the relationship between trust and organizational routines, envisioning

trust as routines (Zollo et al, 2002:701-13).

Clearly, routines significantly influence inter-organizational workings, behaviors,

relations, and governance-and in fact in many cases are likely to be the very means by

which trust and trustworthiness are manifested. However, much like calculativeness, we

also view routines as being distinct from trust and believe that drawing out the

differences between them and clarifying their relationship is key. To begin with, inter-

organizational trust is an expectation in a partner organization’s reliability, predictability,

and fairness. Inter-organizational routines, on the other hand, are institutionalized,

regularized, formal or informal processes that govern interactions between the two

organizations. These routines can arise from trusting expectations, certainly, but may also

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arise from other behavioral expectations that have very little to do with trust or

trustworthiness. The existence of routines does not eliminate the fundamental need to

uncover and understand inter-organizational trust as a mechanism that potentially

influences those routines and vice versa. As such, we see several ways in which trust and

routines may be interrelated: routines as an antecedent to trust, routines as a consequence

of trust, and routines as a moderator of trust relationships.

Empirical work has only very slightly addressed the tie between trust and routines: Dyer

and Chu (2000) find that consistency and routines are highly correlated with inter-

organizational trust, and other research indicates that trust arises in part from norms of

procedural justice-which could be envisioned as routinized processes (Hagen and

Simons, 2003; Sapienza and Korsgaard, 1996). Trust and routines have been examined

together only in these few studies, leaving many unanswered questions about the

relationship between trust and routines.

Overall, the role that trust plays in governance of inter-organization relationships is

centrally tied to issues about the extent to which it serves as a substitute for or a

complement to elements such as asset specificity, contracts, calculativeness, and routines.

The many different roles that trust can play and the many conflicting findings in this area

create numerous avenues for theoretical and empirical resolution.

2.10 Outcome of Inter-organizational Trust

A great deal of research interest exists regarding whether inter-organizational trust leads

to desirable business outcomes, although in some instances evidence of a relationship

between inter-organizational trust and performance has proven inconclusive (e.g., Aulakh

et al, 1996), a variety of studies focus on this connection with interesting results.

Although some research emphasizes direct outcomes, other work examines more

complex, indirect effects. Most of the research, however, focuses on only the positive

outcomes of inter-organizational trust which include:

Direct Economic Outcomes: Inter-organizational trust has been shown to positively

influence a number of recognizable economic outcomes, such as lowered transaction

costs (Dyer and Chu, 2003). Increased sales (Mohr and Spekman, 1994), and increased

return on investment (Luo, 2002). In addition, inter firm trust has a positive effect on

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project management measures, such as task performance (Carson et al, 2003:42), and

operational measures, such as continuous improvement and just-in-time delivery (Sako,

1998). In general, this evidence indicates that inter-organizational trust can help achieve

advantageous economic performance outcomes.

Intermediate Relational Outcomes: Research on inter-organizational trust suggests that

it also leads to a variety of outcomes that are less directly economic but are nevertheless

desirable outcomes for the relationship. At one extreme, a loss of trust can lead to the

dissolution of the relationship entirely (Seabright et al, 1992:130); in fact, it appears that

undesirable performance outcomes and loss of trust can escalate into a self-reinforcing

downward spiral (Zaheer et al, 2002). On the other hand, increasing inter firm trust can

lead to increased strategic flexibility (Young-Ybarra and Wiersema, 1999:450), greater

information-sharing (Dyer and Chu, 2003:161), lowered perceptions of relational risk

(Nooteboom, Berger et al, 1997:310) heightened contingency adaptability (Luo,

2002:911), and improved knowledge transfer (Szulanski et al, 2004:605). Several studies

also indicate that trust strongly increases satisfaction with various aspects of the inter

firm relationship, including joint goal fulfillment (Hagen and Simons 2003, Zaheer et al,

1998), expectation of relationship continuation (Jap and Anderson, 2003), and positive

perceptions of exchange success (Mohr and Spekman 1994, Poppo and Zenger, 2002).

Several studies focus on the performance outcomes that are of particular importance to

buyer-supplier relationships, suggesting both that trust plays a key role in determining the

long-term orientation of both organizations (Ganesan, 1994:15) and also that trust in a

supplier greatly impacts the actual product utilization of the buyer (Moorman et al,

1992:320). In addition, Wathne and Heide (2004:75-6) find that inter firm flexibility-a

relational norm often associated with trust-has the potential to affect relational norms

beyond the dyad in other parts of the supply chain.

Indirect effects: In addition to these direct effects, scholars are starting to investigate

more complex relationships between inter-organizational trust and performance,

including interaction effects and mediation models. Fryxell et al, (2002:871-2), discover

that the presence of inter firm trust affects the influence of social-control mechanisms on

performance; in the presence of trust, social controls positively influence performance,

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but without trust, social controls have the opposite effect. High inter-organizational trust

tends to mitigate the detrimental effect of historical social contact on exchange

performance) Poppo et al, 2003), and different types of trust moderate the relationship

between contractual safeguards and performance in different ways (Lui and Ngo,

2004:481). Whereas Jap and Anderson (2003:1680) find that rising ex post opportunism

decreases the positive effects of inter-organizational trust on performance. Saparito et al,

(2004:425) discover that inter firm trust can help minimize the negative effects of

opportunism.

Overall, research on inter-organizational trust has revealed a wide range of positive

outcomes for inter firm relationships such as alliances and buyer-supplier relationships.

These include a variety of direct effects on performance, such as lowered transaction

costs and increased ROI, but also a large set of indirect benefits through the mediating or

moderating roles of inter-organizational trust.

2.11 Results of Organizational Trust for the Employers and the Employees

Within organizational environments, where human relations, interactions and cooperation

of all levels take place frequently, the rules, procedures and authority seem to be the basic

factors, usually the dynamics of human facts influence effectiveness of the formal

structure, organizational performance and other results. For example, in some

organizations, the reason for the problems of cooperation inability of the managers to find

support in several occasions, resistance by the members of the organization against all

kinds of change result from not only the structural and technical features of the

organization but also its human features (Erdem, 2003: 153-154).

According to Mishra and Morrisey (1990) organizational trust facilitates open

communicating in organizations, sharing information, participation of the employees in

decision making and thus increasing their productivity. Realization of the climate of trust

in organizations results in job satisfaction, organizational commitment, clarification of

roles and increase in performance (Laschinger, Finegan, 2005:7), positive development

of organizational climate, facilitating to reach organizational and individual aims

(Hubbell and Chory-Assad, 2005:5), decrease in risk of activities and elimination of

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negative effects of human factor (Ramo, 2004:762) and finally institution of an emotional

link between the employees and the managers (Stewart, 2004: 46).

According to Gamson (1978) the groups with high level of trust in organizations have

strong faith in the authority and they trust the managers, the groups with a low level of

trust on the other hand have negative feelings about the authority and they consider the

decisions made by the managers as a threat for themselves (Qtd. In; Driscoll, 1978: 45).

Chenhall and Smith (2003) in their study suggest that the relationships based on trust in

organizations facilitate reaching the goals either individual or organizational, developing

innovative strategies and sharing values, beliefs and knowledge and also causes effective

communication and participation in problems solving. Institution of the feeling of trust

among the employees increases their performance.

According to Ferres, Connell and Travaglione (2005) organizational trust has positive

contribution to institution of commitment and organizational citizenship behavior and

improvement of social relationships and as for Arino et al, (2005) it contributes to the

success of strategically partnerships. Dolan, Tzafrir and Baruch (2005:80) state that

organizational trust has strong impact on the behavior of organizational citizenship and

institution of organizational justice.

Peery and Mankin (2007:171) state that organizational trust makes it easier for the

employees to get used to their job and to act openly and honestly towards their colleagues

and managers also it increases their job satisfaction.

2.12 Mediated Availability

Ultimately, virtual organization must be understood at the level of individual actors

making decisions about who to communicate with in a given situation. All cognitive

theories posit the existence of a sentient actor whose behavior is governed by the

meanings she gives to the environment and her own actions. Greene (1995, 1984) argues

that all communication ultimately rests on the cognitions of an individual, as relevant to

behavior production in a given situation. While it is easier to understand many

phenomena at higher levels of abstraction every human act is performed by an individual

who decides to enact a behavior based on her mental representation of events. Thus,

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cognitive theorists refute the validity of any model that denies the importance of the

actor’s mind to communication and require that any model of communication must be

framed at the individual level if it is to be generalizable to all levels (Greene, 1984:248).

That does not mean the actor is independent of her environment and other actors; the

content of the actor’s mental representations is a social construction, and her actions are

granted meaning by other independent of the original intent. An actor’s interactions with

the environment are moderated by mental operations performed on the actor’s cognitive

representations of the environment (Hewes, 1995). It is not the mental decision of the

actor that determines what other perceives, but the physical stimuli that other must

decode for meaning.

The actor’s cognitive representations and processes are driven by the interaction of what

Hewes (1995) calls actor and design goals. Actor goals are the conscious or unconscious

wishes of the actor, while design goals are the genetic legacy of evolution. This brings us

to the requirements for a cognitive theory. Greene (1984:251) names three: structure,

process, and content. Because goals differ in the importance they hold for actors,

structure is necessary to distinguish between them. The production of behavior is not

instantaneous of free of inputs, but is a process. Without content, the structure and

process of the mind would be empty and void of meaning. Thus, a theory of virtual

organization must provide the structure and the process necessary to explain the

interaction of goals and behavior in the context of virtual space.

The key question for virtual organization as experienced by an individual actor is how the

new alternative comes to be perceived as available for use in a given context. This

assumes accessibility, which entails the ability to make contact without the expectation

that both actors are free for interaction. In contracts, availability is a perceptual quality of

relationship marketing as it’s currently open for interaction. Giddens (1981) defines

presence availability as a situation where two actors are both physically present and not

engaged in any behavior that would preclude their interaction. However, virtual

organization requires more than presence availability, there are actors who are not

physically present but can be reached via mediated channels such as the telephone or

email. Thus, a new dimension needs to be added to Giddens’ (1981) example: location. If

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an actor is known to be available via mediated channels, she has mediated availability.

That is, the actor contemplating his alternatives in a given context has her as an

alternative. If the two actors have different schedules or live in different states,

availability will only exist if they think of each other as alternatives for some functions

despite the absence of the other’s physical presence.

Since availability is a perceptual aspect of a relationship, it requires actors to recognize

each other as options when the situation involves a problem or opportunity associated

with the other. This means that the relationship between them must tie their distinct goals

together in a complementary way in the absence of spatial and temporal proximity (see

Weick, 1995). To understand how relationships are activated and enacted between

dispersed actors, researchers must attend to the cognitive structures of actors, the social

processes that deliver content to the actor’s schema, and the interaction processes that

provide actors with an opportunity to evaluate the utility of their schema’s content. Such

an explanation will require theories drawn from cognitive and social perspectives and an

integration of their insights. If they are not grounded in cognitive theory, the processes by

which actors become aware of and select between alternatives will remain opaque to

researchers. Without attending to the social processes by which actors receive data and

theories for interpreting the world, researchers will be unable to answer questions about

how individual actors can understand the words and actions of others. Without

integrating social information and cognitive structures, researchers will be left with two

lenses for viewing the world that reveal different things while obscuring the connection

between them. The crucial point is that neither cognitive nor social models are enough to

explain mediated availability; the process of virtual organization models the bonds

between actors by making social information relevant to individual actors and placing the

actions of those individuals in the context of larger social processes.

The aspects of virtual organization need to be defined in terms of both sociological and

cognitive theories to connect them to individual actors. Giddens (1981:170) defines

structure as the rules and resources instantiated in social systems, or patterns of

relationships extending across space and time. The system when the topic in virtual

organization is the virtual web of partnerships and client services described by Goldman

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et al, (1995: 221). Structuration is the set of conditions governing the reproduction of a

system (Giddens, 1981: 172) and as such can be thought of as the larger set containing

the different forms of organization: virtual, network, and hierarchical. Structure exists

when a collection of individuals (1) hold memory-traces about the same event, process,

or person, (2) their standards of value and behavioral alternatives for reducing goal

discrepancies are shaped by those memory-traces, and (3) the value standards and

behavioral alternatives are complementary, thereby encouraging patterns of relationships.

Structures arise out of repeated interaction patterns, and the origin of these patterns

indicates their success in satisfying the basic, universal needs of individual actors. Just as

individuals develop patterns of behavior over time, so too do relationships develop their

own sequences of actions that allow progress towards their participants’ goals.

2.13 Perceptions in Virtual Organization

The act of perception involves a punctuation of the continuous flow of experience

(Weick, 1995). That is, perception does not make an actor aware of everything going on

in the current situation, but rather highlights some aspects as relevant and disregards

others as irrelevant. The human mind can only handle a certain amount of incoming

stimuli, and to do so it must filter the raw data. The filters applied are developed through

interaction with the environment, which often includes other actors with their own filters.

This suggests a problem: How do actors who share experience but not the same cognitive

representations of that experience effectively communicate? While experience can be

shared, the retrospective meanings developed by individual actors are not (Weick, 1995).

Explaining social content as the result of negotiation between the meanings of individual

actors suggests that actors must share some identical meanings in order to be able to

communicate at all. This requires the researcher to explain how every possible

misperception can be controlled by the actors involved in an impossible task. The

solution is to view the content of individual actors’ schema as the outcome of actors’

learning theories and data through social experience. Social structures are not rigid

entities but flexible pools of related symbols, what Giddens (1984) calls stocks of

knowledge, suggesting tangible resources neatly ordered in a cognitive library of

resources. The question is not whether identical meanings can be assumed, but whether

the exchange of symbols is seen as serving the discrepancy reduction goals of each

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participant. Precision and accuracy are helpful but not required: “’Tree’ or ‘stone’ is

enough to decide whether to use a saw or a hammer” (quoted in Weick, 1995: 42). As

long as understandings are good enough to suggest actions that will result in discrepancy

reduction, the interaction sequence will be actions that will result in discrepancy

reduction; the interaction sequence will be remembered as effective and the relationships

as valuable. The structuration processes of categorization and regionalization are

especially relevant for understanding how available relationships are constructed because

they focus attention on how actors recognize a set of alternatives as options for

discrepancy reduction.

Categorization (Turner, 1988) is the process of recognizing specific patterns of stimuli as

requiring a given category of response. Categories are the lens that actors take on the

world, lenses that highlight different aspects for each actor. This applies for both

organizations and actors; the culture of an organization determine what options its

members perceive as available in a given situation (Schein, 1992), just as an individual’s

schema encourage some options and obscure other (Fiske and Taylor, 1991). Actors

usually focus on the abstract level of program (e.g., negotiating a business plan; Carver

and Scheier, 1982) at the same time that they are involved in the component behaviors

whose aggregate impact is discrepancy reduction at the program level. When progress in

any of those action loops is impaired, the effects reverberate through the hierarchy to the

level of attention, forcing the actor to focus his attention on the lower levels in order to

resolve the problem. However, much of virtual organization involves perceiving

relationships that are usually enacted through mediated channels as available. The

problem is that some cues are missing (e.g., frowns and fidgeting indicating discomfort).

Using mediated channels for significant communications requires the development of cue

substitutes (Walther, 1992:60) to identify discrepancies. Cue substitutes are simply

alternative stimuli that alert the actor to discrepancies using different patterns of data.

Walther (1992:62) provides the examples of emotions such as, substituting for actual

smiles and acronyms like ROTFL. (For rolling on the floor laughing) substituting for

guffaws. When contact is made over mediated channels, cue substitutes can be negotiated

over time (Walther, 1994:68). The problem is that these substitutes require all parties to

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be paying attention and accessible via the selected channels for these cue substitutes to

have an effect.

If alternative cues at the same level of control require contact to be made before they can

be recognized, the cues that activate categories must be recognized at higher levels of the

hierarchy. Obstacles are perceived in calls not returned, delays in responses, and other

temporal aspects of interaction. To be a player in a system, actors must make themselves

available as well as accessible in new ways that require a reorganization of behavioral

patterns across different levels of the hierarchy of control. Under traditional forms of

organization, the important indicators of availability were physical: corporate owned

buildings, offices and phones assigned to individuals, and appearances in person at

various events in the local and professional community. To engage in virtual organization

is to reject the concept of possession. Places and objects are no longer owned by specific

entities, but are rented or loaned to businesses and people who use them as channels for

contact. Voice and electronic mail are stored in computers and allow for the time-shifting

of communication. Cellular phones and notebook computers allow people to go where

they need to go to work. Rented buildings with generic offices assigned on the basis of

need rather than status, lower overhead costs by permitting a more efficient use of space.

While the information storage is often centralized, this has consequences both for the

members of the organization and for those who wish to contact them in terms of the

meaning that is attached to space and the objects within it.

The cue substitutes that activate categories in virtual organization involve different

objects than the cues active in other organizational forms that assume proximity. In

essence, the new cue substitutes rearrange the meanings attached to common objects and

places. This is the domain of regionalization, the evaluation of objects, persons, and the

division of space in a physical context (e.g, an office) for their relevance to action

(Turner, 1988). Regionalization defines the actor’s interaction space, including (1) the

meaning of space, (2) the meaning of objects in space, (3) the meaning of organized

space (i.e., regions), and (4) the meaning of interpersonal demography (i.e., patterns of

people in a given place). Virtual organization changes the definition of regions and

objects within them. The telecommunications technologies that make virtual organization

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possible improve access to others and facilitate movement by actors. Thus, the location of

the media objects becomes as important as the presence and movement of actors in the

physical space. The meaning of media objects (e.g., the telephone, computers) in space is

increasingly defined by the ways in which they bring distant others into a virtual

interaction space without a common physical referent. In some virtual interaction spaces,

such as chat rooms, Web page conferences, conference calls on the telephone and email

list servers, the interpersonal demography can be similar to meetings where actors can

appear and comment freely. The persistent difference is the fact that “lurkers”-media

users who observe but do not participate in mediated communication-cannot be perceived

as present unless they speak up. Tapping into their ideas and recognizing them as

potential resources, partners, or clients requires some empirical pointer-a business card, a

Web site, or a signature file on ank email sent to a listserv. Lurkers leave few such

pointers in the virtual interaction space; the question is less what type of space it is than

how far a field actors range within it seeking the elusive pointers. To address the

movement of actors and the structures that develop to make them accessible and available

at all times, the focus must shift to the expectations that arise for when, where, and how

contact is made with other nodes in the system.

2.14 Expectations for Mediated Availability

The association between a particular discrepancy and the behaviors an actor can enact to

reduce it implies an association of particular stimuli with particular responses. The

expectation that a given behavior will resolve a specific discrepancy is based on the

actor’s memory of past experiences. This relationship will be extremely complex for

frequently enacted behaviors, with many exceptions and overrides based on prior

experiences in different contexts. If other actors with whom the original actor is in

frequent contact regularly face the same discrepancies, social processes should lead to the

development of similar and complementary behaviors across individuals. Schein (1992)

defines organizational culture as the development of similar assumptions, values, and

behaviors within a formal organizational setting, with actors applying similar lenses to

make sense of the world both inside and outside the organization’s formal structure.

Berscheid (1983) argues that personal relationships are defined by meshed event

sequences, elaborate idiosyncratic scripts that participants enact to achieve their social

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goals. Weick (1995) makes explicit what Schein and Berscheid imply: common

experiences encourage complementary behavior sequences between actors.

Complementary sets of behaviours are sequences that can be enacted by actors in an

order known to all parties and are expected to lead to a resolution of each actor’s

discrepancies. Social processes enter here to regulate the development and enactment of

complementary behaviours so all actors have similar expectations for how to respond in a

complementary way to cues from others.

Turner (1988) identifies two sets of expectations. First, the rights and duties of the

interactants, i.e., the requirements to develop a meshed event sequence, must be explicit

to all participants. In task-focused mediated communication, these are three highly salient

issues: (1) when to contact specific actors when working on a problem, (2) the acceptable

channels for making contact, and (3) how to determine the balance between what each

actor does and does not need to know. Second, the process of interpreting specific stimuli

requires attention to three issues: (1) what category does each contact fall into, (2) what is

the nature of the request being made, and (3) how much time and effort are required for

each contact? Actors in a mediated system must develop and continually adapt detailed

schema for the cue substitutes being used to reduce discrepancies and maintain

relationships. Normalization occurs as a pattern of cue substitutes are repeated and

become part of meshed requires all parties to accept the new forms that interactional

resources take.

If an actor does not have access to a medium such as electronic mail, all the resources,

partners, and clients who could be reached through that medium are not accessible.

Media channels were fixed in space unit the late 1980s when mobile technologies such as

cellular phones, voice mail, and electronic mail freed actors from having to check in at a

given place. Apart from public telephone booths, actors still had physical locations where

they would check their messages and mail, often in an office with their name on it and a

human gatekeeper. Any actor intends to take part in virtual organization must be sure to

make himself accessible, because the expectation of the other is that all potential partners

can be reached. Failing to make one self accessible will result in complete and total

absence from the virtual interaction space where relationships exist. Just as a lack of a

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mailing address suggested a fly-by-night firm, the lack of a voice mail number or email

account suggests that the non-accessible actor is not serious and therefore not reliable

enough to be worth the time to be sought out.

In learning the rights and duties of communication in the service of virtual organization,

actors need experience using these media to develop expectations about (1) how often

other actors check their email and voice mail, (2) when the actors are likely to be

available, and (3) what media are most appropriate for the specific type of contact.

Expectations for how long it should take to get a response are hard to judge when email

and voice mail are delivered in a matter of minutes. With slower communication media

and information processing capacities, excuses could be made about packages getting lost

in the mail and allowances made for lengthy processing times. But with the introduction

of near-instantaneous channels, both synchronous and asynchronous, the complementary

timing of the initiation and its reception is critical. The receiver of the message must

respond in time for the contact to have an impact, and the imitator must send it at a time

when the receiver will have an opportunity and an inclination to respond. Beyond being

accessible, actors must go out of their way to be responsive to contacts from others, an

attribute Markus (1990) describes as communication discipline. Without the

communication discipline to craft well-intended, relevant messages and respond to such

messages quickly, agents will be passed by.

2.15 Virtual Organization Model

A general model of VO should be able to determine which organization is virtual and

which is not, and to assess the breadth and depth of virtualization. The model should be

accompanied by clearly stated assumptions and definitions, and it should be suitable for

guiding research and explaining core aspects of any VO form.

The study of VO began with descriptions rather than models. Davidow and Malone

(1992) chart the concept space of “virtual corporation” by providing an inventory of

possible dimensions of VO: a temporary association, the goal of harnessing swiftly a

sudden market opportunity, delivery of a virtual product (instantaneous production and

customization), use of a sophisticate information network and computer-integrated

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production processes, changing and permeable boundaries that involve suppliers and

customers, amorphous structure, and a need ;for maintaining trust among constituent

members lacking physical contact. It is not clear whether these dimensions are

cumulative and how are they related. This inventory inspired many researchers. But they

typically focused selectively on parts of the concept. Consequently, almost any of the

dimensions could suffice for obtaining the VO legitimacy-a temporary inter-

organizational arrangement, moving operations to computer networks, and so on. The

arbitrary inclusion of particular VO dimensions was sometimes coupled with a deliberate

exclusion of other dimensions. Such is the case of the above cited elimination of the

technological condition.

2.16 Virtual Task

In spite of this primal ontological “sin”, the beginning was also marked by an attempt at

formal modeling of VO. Chesbrough (2012) provide a mathematical model of virtual task

that, in his view, explained VO. Based on a number of the author’s ensuing works this

model became known as the switching principle. Figure 2.4 depicts a possible graphical

representation of the virtual task/switching model. The model postulates that a VO meets

its production requirements by searching for alternative satisfiers-external production

requirements by searching for alternative satisfiers-external trading partners. The search

is dynamic and continuous, and its outcomes are determined by cost/benefit concerns that

are depicted as moderating variables in figure 2.4. The author maintains that the

switching model of VO applies to any social organization (virtual corporation and virtual

team alike) as well as to virtual objects in the technological domain.

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_

+

Figure 2.4 Virtual Task/Switching Model

Source: Chestbrough W.H and Teece D.J (2012:66), When is Virtual Virtuous? “Organising for Innovation”, Harvard Business Review, 74 (1).

The virtual task/switching model of VO explains the organization of work (business task

or process). Being applicable to this micro level, the model can be incorporated in other

macro organizational models.

2.17 Virtual Corporation

A number of researchers based the conceptualization of VO on processes and structures

of sourcing, outsourcing, and supply chain. This assumption is the foundation of virtual

corporation (Goldman et al, 1995; Kraut et al, 1998; Upton and McAfee, 1996;

Venkatraman and Henderson; 1998). Figure 2.5 presents main aspects of the virtual

corporation extrapolated from the literature. The aspect of organizational inputs that are

obtained via sourcing and outsourcing refers to both goods and production services.

Venkatraman and Henderson (1998:34) note that, virtual organizing involves “sourcing

tangible, physical assets in a complex network of relationships” and “effective

contracting for complementary capabilities through a network of suppliers and

subcontractors” Venkatraman and Henderson (1998:34). The former is materialized in

electronic supply chains (Upton and McAfee, 1996) and the latter in competence joins, as

exemplified by the well-known group of companies called AgileWeb (Goldman et al,

1995).

Cost Satisfier 1

Satisfier 2

Satisfier n

Benefit

Production

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Figure 2.5 virtual corporation Source: Goldman S.L, Nagel R.N and Preiss K. (1995:236), Agile Competitors

And Virtual Organizations, Strategies for Enriching the Customer, New York: Van Nostrland publishing.

Several assumptions accompany the modeling of virtual corporations. In keeping with the

original concept, boundaries of the virtual corporation are assumed to be flexible/porous

(note the dotted line in figure 2.5 which represents the organizational boundary of each

member company). This is primarily due to a freer flow of electronic data between

information systems of VO members. For example, the buyer organization reads and

writes data in production schedules of the seller organization, downloads the code to the

seller’s programmable machinery, etc. Next, transaction costs are added to the resource

sharing driver for the creation of virtual corporations (e.g Chesbrough 2012). Another

common assumption is that the involvement in an organizational network or a web is a

necessary condition for virtualizing (Goldman et al, 1995; Venkatraman virtualizing and

Henderson, 1998 Powers 2011). Finally, the concept of virtual corporation attributes a

dual meaning to the term “virtual” (Travica, 2005: 39). A virtual corporation consists of

members organizations, each of which is virtualizes to some extent. A virtualized part

can be a task or process that is moved largely or entirely in the cyberspace and performed

through collaboration with partners. The virtualized part renders the character of virtual

to the larger organization that it belongs to. Therefore, it can be said that this larger

organization is virtual in certain respect. Through interaction of these virtualized

Product/Service

Goal/Competence

Social Fit

trust, management,

Sourcing

Electronic

Virtual

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organizations, a new VO is created as a supra or meta-opposed to the physical constituent

members. Only this meta-organization can deliver a shared virtual product, which is the

ultimate purpose of VO. Generic modeling of VO should be able to capture this duality.

True to the letter of literature, the model of virtual corporation in Figure 2.5 does not

indicate relationships between dimensions as it is customary in quantitative modeling. An

instance of rare clarity in modeling was provided by Kraut and associates (1999). They

established a causal relationship between electronic networking and social networking, as

the antecedents on the one side, and outsourcing, as the consequence on the other side.

The extent found that the social dimension predicted outsourcing better than the

technological one.

The model of virtual corporation in Figure 2.5 can be extended to other VO designs and

concepts of verticalness. For example, an electronic marketplace can intermediate

between the buyer and supplier organizations engaged in a VO. Not only does an

electronic marketplace facilitate the creation of VOs between its client organizations, but

it also participates in virtualizing by simultaneously creating a number of VOs with its

clients (Travica, 2005:84). Another possible extension of the model in Figure 2.5

accounts for the virtual alliance. This VO implies collaboration for the sake of developing

a groundbreaking product or a long-term marketing strategy (Chesbrough 2012, Powers,

2011). Resource sharing is instrumental to these goals. However, in the case of virtual

libraries, resources sharing can be the strategic goal in its own right: members of a library

alliance interface their electronic catalogs via the internet and provide search and loan to

the users of each participating library (Travica, 1999). The concepts of virtual

corporation’s virtual product approximate these deliverables. Virtual alliances can be

found in various domains, including the tourist industry, high technology, and libraries.

However, the literature does not clearly determine the point when a classical alliance

becomes virtual.

2.18 Virtual Team

Virtual team was originally defined as the group whose members perform work across

time, space and organizational boundaries, while decisively relying on IT (Powers,

2011:71). Again, the initial conceptualization was not accompanied by formal modeling.

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Within the field of information systems, most of the ensuing, research has shared an

assumption that spatial dispersion, coupled with the use of information technology,

sufficiently defines the virtual team. Therefore, the requirement of inter-organizational

character was dropped (Powell et al, 2004). Modeling has been applied in individual

studies and is for the most part quantitative in character. However, a common set of

definitional dimensions of the virtual team cannot be discerned because there is a great

variation across the models. What appears in Figure 2.6 is a summary model with

relationships between most of the antecedents unspecified. For the purposes of this

discussion, the only dimension differentiating virtual team studies from research on

traditional teams-task-technology-structure fit-is represented in a separate box.

Otherwise, it is apparent that virtual teams are conceptualized predominantly in terms of

traditional teams, which include aspects of leadership, communication cohesiveness,

demographics, structure, culture, knowledge sharing IT use, conflict, decision making,

and the like.

Context: Distributed membership

Figure 2.6 Virtual Team Source: Chestbrough W.H and Teece D.J (2012:94), When is Virtual Virtuous? “Organizing for Innovation”, Harvard Business Review, 74 (1). A representative study of virtual teams was conducted by powers and associates (2011).

Staffed by various experts from three organizations, this team had to produce a novel

engineering design. The team was supported by groupware-information and

communication systems specially built for team support. Measured by the monetary and

Traditional team variables

(leadership, communication,

cohesiveness, demographics.

Team

Performance

Task-Technology-

structure

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time objectives, the project was successfully completed. The authors found that the extent

of using the groupware was invariant of task uncertainty. Contrary to expectations, some

important functions of the groupware were never used. In contrast, the team structure

varied during the course of the project and early face-to-face meetings compensated for

initially weak professional and social bonds.

The virtua task/switching model contributes to explaining the organizations of work

(business task or process) in VO. Capturing the micro level of organization, the model

can be incorporated in macro models of VO that compensate for its lack of social aspects.

The model of virtual team addresses the mezzo level of analysis. It also emphasizes the

role of IT. However, it still needs to deliver conclusive evidence on this as well as to

justify the equalizing of distributed team with virtual designs and the departure from the

inter-organizational levels of analysis. Furthermore, the modeling of virtual corporation

illuminates the macro level of VO by focusing on the processes and structures of

sourcing, outsourcing, and sharing of competences and resources. Research on virtual

corporation also contributes to understanding a dual character of the virtual. However,

more light still needs to be shed on the role of information and communication systems

and on the process of actualizing virtual capabilities. All the models share some sort of

reductionism in conceptualizing VO.

2.19 The Organizational Process

Organizing, like planning, must be a carefully worked out and applied process. This

process involves determining what work is needed to accomplish the goal, assigning

those tasks to individuals, and arranging those individuals in a decision-making

framework (organizational structure). The end result of the organizing process is an

organization — a whole consisting of unified parts acting in harmony to execute tasks to

achieve goals, both effectively and efficiently.

A properly implemented organizing process should result in a work environment where

all team members are aware of their responsibilities. If the organizing process is not

conducted well, the results may yield confusion, frustration, loss of efficiency, and

limited effectiveness.

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In general, the organizational process consists of five steps (a flowchart of these steps is

shown in Figure 2.7.

Figure 2.7 Organizational Process Source: Chester B. (2012:4), Analysis of Organizational process, New Jessey: Harlow Pearson press.

1 Review plans and objectives.

Objectives are the specific activities that must be completed to achieve goals. Plans shape

the activities needed to reach those goals. Managers must examine plans initially and

continue to do so as plans change and new goals are developed.

2 Determine the work activities necessary to accomplish objectives.

Although this task may seem overwhelming to some managers, it doesn't need to be.

Managers simply list and analyze all the tasks that need to be accomplished in order to

reach organizational goals.

3 Classify and group the necessary work activities into manageable units.

A manager can group activities based on four models of departmentalization: functional,

geographical, product, and customer.

4 Assign activities and delegate authority.

Managers assign the defined work activities to specific individuals. Also, they give each

individual the authority (right) to carry out the assigned tasks.

5 Design a hierarchy of relationships.

A manager should determine the vertical (decision-making) and horizontal (coordinating)

relationships of the organization as a whole. Next, using the organizational chart, a

manager should diagram the relationships.

2.20 Organizational Design

Specifically, Organization Design is a formal, guided process for integrating the people,

information and technology of an organization. It is used to match the form of the

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organization as closely as possible to the purpose(s) the organization seeks to achieve.

Through the design process, organizations act to improve the probability that the

collective efforts of members will be successful. Typically, design is approached as an

internal change under the guidance of an external facilitator. Managers and members

work together to define the needs of the organization then create systems to meet those

needs most effectively. The facilitator assures that a systematic process is followed and

encourages creative thinking.

Hierarchical Systems of western organizations have been heavily influenced by the

command and control structure of ancient military organizations, and by the turn of the

century introduction of Scientific Management. Most organizations today are designed as

a bureaucracy in whom authority and responsibility are arranged in a hierarchy. Within

the hierarchy rules, policies, and procedures are uniformly and impersonally applied to

exert control over member behaviors. Activity is organized within sub-units (bureaus, or

departments) in which people perform specialized functions such as manufacturing, sales,

or accounting. People who perform similar tasks are clustered together (Chester,

2012:34).

The same basic organizational form is assumed to be appropriate for any organization, be

it a government, school, business, church, or fraternity. It is familiar, predictable, and

rational. It is what comes immediately to mind when we discover that ...we really have to

get organized!

As familiar and rational as the functional hierarchy may be, there are distinct

disadvantages to blindly applying the same form of organization to all purposeful groups.

To understand the problem, begin by observing that different groups wish to achieve

different outcomes. Second, observe that different groups have different members, and

that each group possesses a different culture. These differences in desired outcomes, and

in people, should alert us to the danger of assuming there is any single best way of

organizing. To be complete, however, also observe that different groups will likely

choose different methods through which they will achieve their purpose. Service groups

will choose different methods than manufacturing groups, and both will choose different

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methods than groups whose purpose is primarily social. One structure cannot possibly fit

all.

The purpose for which a group exists should be the foundation for everything its

members do — including the choice of an appropriate way to organize. The idea is to

create a way of organizing that best suits the purpose to be accomplished, regardless of

the way in which other, dissimilar groups are organized.

Only when there are close similarities in desired outcomes, culture, and methods should

the basic form of one organization is applied to another. And even then, only with careful

fine tuning. The danger is that the patterns of activity that help one group to be successful

may be dysfunctional for another group, and actually inhibit group effectiveness. To

optimize effectiveness, the form of organization must be matched to the purpose it seeks

to achieve.

2.21 Process of Organizational Design

Organization design begins with the creation of a strategy — a set of decision guidelines

by which members will choose appropriate actions. The strategy is derived from clear,

concise statements of purpose, and vision, and from the organization’s basic philosophy.

Strategy unifies the intent of the organization and focuses members toward actions

designed to accomplish desired outcomes. The strategy encourages actions that support

the purpose and discourages those that do not.

Creating a strategy is planning, not organizing. To organize we must connect people with

each other in meaningful and purposeful ways. Further, we must connect people with the

information and technology necessary for them to be successful. Organization structure

defines the formal relationships among people and specifies both their roles and their

responsibilities. Administrative systems govern the organization through guidelines,

procedures and policies. Information and technology define the process (as) through

which members achieve outcomes. Each element must support each of the others and

together they must support the organization’s purpose.

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Organizations are an invention of man. They are contrived social systems through which

groups seek to exert influence or achieve a stated purpose. People choose to organize

when they recognize that by acting alone they are limited in their ability to achieve. We

sense that by acting in concert we may overcome our individual limitations.

When we organize we seek to direct, or pattern, the activities of a group of people toward

a common outcome. How this pattern is designed and implemented greatly influences

effectiveness. Patterns of activity that are complementary and independent are more

likely to result in the achievement of intended outcomes. In contrast, activity patterns that

are unrelated and independent are more likely to produce unpredictable and often

unintended results.

The process of organization design matches people, information, and technology to the

purpose, vision, and strategy of the organization. Structure is designed to enhance

communication and information flow among people. Systems are designed to encourage

individual responsibility and decision making. Technology is used to enhance human

capabilities to accomplish meaningful work. The end product is an integrated system of

people and resources, tailored to the specific direction of the organization (Chester,

2012:41).

Organizing is the function of management which follows planning. It is a function in

which the synchronization and combination of human, physical and financial resources

takes place. All the three resources are important to get results. Therefore, organizational

function helps in achievement of results which in fact is important for the functioning of

a concern. According to Chester (2012:18) “Organizing is a function by which the

concern is able to define the role positions, the jobs related and the coordination

between authority and responsibility. Hence, a manager always has to organize in order

to get results. A manager performs organizing function with the help of following steps:-

1. Identification of activities - All the activities which have to be performed in a

concern have to be identified first. For example, preparation of accounts, making

sales, record keeping, quality control, inventory control, etc. All these activities have

to be grouped and classified into units.

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2. Departmentally organizing the activities - In this step, the manager tries to

combine and group similar and related activities into units or departments. This

organization of dividing the whole concern into independent units and departments is

called departmentation.

3. Classifying the authority - Once the departments are made, the manager likes to

classify the powers and its extent to the managers. This activity of giving a rank in

order to the managerial positions is called hierarchy. The top management is into

formulation of policies, the middle level management into departmental supervision

and lower level management into supervision of foremen. The clarification of

authority helps in bringing efficiency in the running of a concern (Chester, 2012:12).

This helps in achieving efficiency in the running of a concern. This helps in avoiding

wastage of time, money, effort, in avoidance of duplication or overlapping of efforts

and this helps in bringing smoothness in a concern’s working.

4. Co-ordination between authority and responsibility - Relationships are established

among various groups to enable smooth interaction toward the achievement of the

organizational goal. Each individual is made aware of his authority and he/she knows

whom they have to take orders from and to whom they are accountable and to whom

they have to report. A clear organizational structure is drawn and all the employees

are made aware of it.

2.22 Communication and Information System in Virtual Organization

Communication is fundamental to any form of organizing, but it is preeminent in virtual

organizations. Without communication, the boundary-spanning among virtual entities

would not be possible. Electronic communication enables parties to link across distance,

time, culture, departments, and organization.

Electronic communication loosens constraints of proximity and structure on

communication, making it possible for spatially or organizationally distant parties to

exchange messages with one another (Feldman, 1987:98). Electronic communication

provides an opportunity to signal interest in forming connections that otherwise would be

difficult or impossible to maintain (Fulk et al, 1996:67). In this way, communication is

not only the trigger for virtual relationships but also can be the outgrowth of them

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(DeSanctis, Staudenmayer and Wong in press). New exchanges between parties, or new

relationships, can occur as a result of established connections among distributed entities

(Monge et al. 1998). Indeed, one of the hopes for virtual organizations is that new

connections among entities will result from lateral boundary spanning and blending of

expertise (Davidow and Malone 1992:10). According to this view, the real power of the

virtual form is realized when relationships among electronically connected people or

firms produce new and/or qualitatively different communication that yields product or

process innovation (Ring and Van de Ven 1994).

Communication in the virtual form is expected to be rapid and customized in response to

customer demands (Davidow and Malone 1992:14). This implies that communication

content and direction are likely to be more temporary, as links between organizational

entities are formed and dissolved over time (Monge and Contractor in press). To the

extent the lateral relationships in the virtual form substitute for hierarchical channels,

greater volume of communication should occur, as two-way exchanges among a greater

number of people are more likely. To the extent that communication volume is greater,

there may be pressure to make some communication more formal or programmed in

order to gain efficiencies and bring routine to otherwise customized work.

Simultaneously, some communication is likely to become more relationship-based.

Parties may seek a relational basis for transactions so that intimacy can be created in the

face of distance, and trust can be established and maintained. Personal relationships and

informal contacts are known to be more powerful than formal structures or reward system

in lateral organization designs (Joyce et al, 1997). Consequently, a likely tension in the

virtual form will be simultaneous needs for more and richer communication, on the one

hand, and pressures for greater transaction efficiencies, on the other.

The extract nature of communication processes in virtual forms, their antecedents and

consequences are, of course, unknown as of yet. However, it is possible to glean some

insight from the rich body of literature on synchronous electronic organizational

communication. Communication in the virtual organization certainly will become more

electronically mediated than in the past, and the vast set of empirical findings regarding

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mediated communication can foreshadow how communication will change as firms “go

virtual”.

Theorists continue to look at communication either as a strategy for an organization or as

a lower-level skill. Grates (1995, 42-46) encourage communication as a means of

creating and to leveraging information as a way to achieve long-term growth. Grates

(1996: 12-15) also consider integrating communication into corporate strategy as a way

to create momentum need for growth. Argenti (1994, 28) advocates such a

communication strategy throughout a corporation, from employees to shareholders to

customers. Ackley (1997, 32-33) believes that unless communication is strategic full

time, the organization and its communication is dysfunctional.

Guignon (1992:163) asserts that “language is not just a tool on hand for humans to use in

referring to things or communicating their thoughts. On the contrary, Heidegger tells us

that it is in language that we first become humans capable of discovering things or using

signs”. Taylor (1995:22) considers an organization not as a physical structure (people or

computers joined by channels) but a “construction made out of conversation”, more

recently, Reger (2001:233) sees paradigm change coming from the information age,

which re-examines management theory and practice. “Threatening accepted notions of

organizations as entities, industry competition, inter-organizational relationships,

corporate governance, and the role of top managers in knowledge-intensive

organizations”.

2.23 Inter-Organizational General System Theory

General system theory has introduced terms into our common vocabulary-terms such as

inputs, outputs, and feedback; as a result, more than a theory, systems has become a way

of thinking (Chess and Norlin, 1988: 39). According to Chapman (1992:10), “A system is

broadly defined as any process or product that accepts inputs and delivers outputs”. This

general description applies to all organizations; small or large, Public or private, profit-

motivated or non-profit. Organizations involve people who integrate inputs with various

processes to produce a product or service as output. In Figure 2.8, the flow of the system

moves left to right, from input through integration, to output; from the output, feedback

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flows back into the system, both as part of integration and as new input. Systems thinking

give organizational communication a framework for discussion.

Feedback

Figure 2.8 Basic System Model Source: Beck C. E. (1999:4), Managerial Communication, Bridging

Theory and Practice, Upper Saddle River, New Jessey: Prentice Hall.

While this general description most frequently applies to mechanical processes, it also

applies to human processes like communication and management functions with

organizations. Open-systems mentality locates human communication within living

human contexts (Klein, 1992: 229). Input in the systems model includes many factors:

the language and abilities; the structure of the organization: the organization’s raw

materials and equipment; and the norms and laws of the society. Integration blends

people, organization structure, technology, and communication patterns. At the basic

level, integration concerns the selection of words as well as the structure and sequence of

these elements. At the organizational level, integration includes the type, size,

complexity, technological level of its equipment, and expertise of its members. The

output phase of this system includes words, ideas, goods, services, and cognitive products

such as knowledge and information. Although the physical product is tangible and

quantifiable, of greatest significance is the cognitive or interpretative product. Feedback

is central to the systems perspective. Feedback may be instantaneous or long term.

Conversational feedback occurs immediately, whereas feedback on a written product

comes later.

INTEGRATION

INPUT

OUTPUT

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2.24 Rhetorical Process of Communication

The Rhetorical System Model expands the Basic Systems Model. In portraying the

human context, we take the system model and divide it horizontally into two components,

objective and subjective. The central integration area also expands to encompass more of

the human processes. This division doubles the inputs and outputs, and expands the

central integration portion of the model into four distinct elements. Figure 2.9 presents

this Rhetorical Systems Model.

Figure 2.9 Rhetorical Process Model of Communication Source: Beck C. E. (1999:42), Managerial Communication, Bridging


The Rhetorical Systems Model of Communication divides horizontally along objective

and subjective domains. These comparative terms help clarify how human

communication differs from the mechanical aspect of traditional systems theory. The

terms also clarify how modern communication theory differs from classical theory. For

most of its history, rhetoric focused on the objective level of this rhetorical dimension.

The speaker appears within a particular status (age, background, and experience) and the

specific circumstance. The communicator engages in a preparatory process for a specific

Interpertation

Product

Assumption

Status

Method

Purpose

Embodiment

Intention

Process Genre

Audience

Subjective

Subjective

Feedback

Feedback

INPUT OUPUT

INTEGRATION

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occasion, determines the genre of presentation, and produces an output product (speech,

written document).

Objective-Subjective Split. In this largely objective sequence, we can verify demographic

information about the speaker and circumstance of the speech. With the communication’s

help or with close analysis we can reconstruct the actual process that occurred. The genre

concerns observable patterns in speaking, writing, or visualizing. The output is also

objective, whether a written document or the spoken word. In the document, we can see

what words appear on the page or computer screen; for spoken communication, we

reconstruct from memory, unless we have an audio or video tape to verify the exact

utterance. The subjective part of the process remains more elusive, Regardless of the

actual inputs to a communication; the participants bring their own set of assumptions to

the encounter, including likes-dislikes, positive-negative judgments, sense of accurate

assessment vs prejudice. The intentions may be realistic or unrealistic, overt or covert,

legal or illegal .The intended audience may be accurately assessed or misread entirely.

And finally, the interpretation of the resulting product may be accurate or inaccurate.

Although physically present, the listener may be so preoccupied as not to have heard

what was said; or the reader may become so distracted that the eyes have scanned a

complete page with no information entering consciousness.

Inputs. Along with the subjective-objective split, the new model still follows the basic

systems process. In the professional literature, status consistently forms a basis of

academic study, including gender, race, and marginalized groups (Orbe, 1998; Wilie and

Gulls 2001; Ng and van Dyne, 2001). Status also concerns the individuals’ role in an

organization, as well as the qualifications that lend credibility to a speaker (Stein, 2001).

The Assumptions are more problematic in the literature. Assumptions include the

unquestioned “lifeworld” of every person (Fairlough, 1990: Orbe, 1998), or the

unquestioned culture (Russell, 2001, Taylor, 2001). Assumptions also include intuition,

which may lead to projections of one’s own beliefs and go against rational thinking

(Gross and Brodt, 2001:101). Assumptions serve as significant inputs to any human

process, regardless of whether or not they reflect the “real world.”

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Integration-Purpose. The central integration of the model begins with purpose, since

human behavior functions as a purposive system. Intentions belong in the subjective

realm not only because they may be multiple (Greene et al., l993:81) and mixed

((Morgan and Tindale, 200l: 19) but that people may even be unaware of their own

intentions (Taylor, 1995). Organizations are usually more open with their own intentions

(Black, 2001:4); however, organizations may contain disagreements, depending on

whether one is a subject expert or a policy maker (Rykiel, 2001:310) intentions involve

more than just what the speaker wants to do: it also includes the intended audience. In

essence the effective communicator tries to get into the reader’s head (Wylie, 2001:24)

obviously such an approach is highly subjective — sometimes accurate and sometimes

not. The process becomes further complicated if potential audiences bring cultural

differences (Beamer, 1995; Verkiens, 2001). Individual companies seeking to meet needs

will more likely succeed by recognizing what the audience wants (Schmutte, 2001:69)

furthermore, companies that ignore public opinion create added hurdles in their desire to

reach their objectives (Nicolazzo, 2001:44).

Integration-Method. Moving from the subjective to the objective, the integration focuses

on method, consisting of genre and process. Genre includes the form of communication,

from conversation and phone to written documents to oral presentation, live or electronic.

Most of the professional literature gives guidelines for specific genres (Brandt 2001;

Bernstel 2001; Frownfelter-Lohrke and Fulkerson, 2001; Williams, 2001; Wright, 2001).

Other professionals focus on the distinction between face-to-face communication and the

new electronic media, or the need for multiple genres (Cohen, 2001; Crowther and

Goldhaber, 2001). The process of communication focuses on the types of words to use

(Birkner and McIntyre, 2001; Chisolm, 2001; Danziger, 2001), the steps to follow

(Schmeidling 2001), the use of empathy and nonverbals (Carter, 2001; Fracaro. 2001), as

well as collaborative efforts at communicating (Lunsford and Bertram, 2001).

Embodiment. The center of the Rhetorical Model, the embodiment, reflects the synergy

of the four integration elements. The process remains dynamic and interactive, as

individuals rethink purpose and method while engaging in the process. Even the

technology used to create the communicational realities changes the process itself

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(Nordberg 2001: 28). People tend to choose the form of the message, adapting to goals

and situations; yet even the advances in technology do not replace the importance of face-

to-face communication (Te’eni, 2001:271). Computer-supported efforts to build expert

systems grapple with the interrelationship between these basic elements (Hoc, 2001:521).

Outputs and Feedback. The output in the human system is the communication event

itself: the phone call, conversation, written document, electronic document, conference,

meeting, video tape, or press conference. Interpretations of these objective products,

however, reflect the differences among people. The process is complex (Abel, l994:415)

resulting in a “plurality of interpretation” (Bruns 1993:743). Interpretations differ by

specialty (Weber and Word, 2001:490) gender (Fiona, 1993) and by virtual media

(Kasper-Fuehrer and Ashkanasy, 2001:238). The process becomes more complicated by

the 1990s focus on spin (Kemper, 2001:8). But output of a system is incomplete without

feedback, seen as a measured science (Birkner and Birkner. 2001; Grensing-Pophal,

2001; McMannis, 2001). The Rhetorical Process Model in Figure 2.9 visualizes these

integrated elements and dimensions of human communication.

2.25 Transactional Dimensions of Communication

Transaction represents the exchange nature of the process that ensures effective

communication. This transaction occurs across the model by way of feedback, as well as

within the various elements of the model.

Transaction across the model. Feedback provides the mechanism of change in a system,

in contrast to the relative permanence of status input. As a communication encounter

happens, individuals react constantly and immediately to words, ideas. Impressions,

visual cues, tone of voice, setting. Feedback from a printed page may bring a smile of

recognition, a frown of annoyance, or a sigh of reflective contentment. Feedback in a

spoken conversation may bring a restatement of ideas (first word choice didn’t seem to

get through), an emphatic presentation of a controversial viewpoint, an interrupting with

“Yes but,” reconsideration with a stated or implied “I hadn’t thought of that,” or a

response to a hook “Tell me more.”

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Regardless of the actual objective status of the speaker and other participants in the

communication encounter, assumptions, more than the actual status, impact the nature of

the communication encounter. In contrast to status, assumptions can change more easily

depending on the individual. Although some people will rarely change, most can

eventually recognize their inaccurate assumptions. After an extended conversation with a

seldom seen acquaintance, a person may stop as a new impression sinks in: “I didn’t

realize she held such a progressive view.” The new impression now replaces the initial

assumptions about the individual. In this instance, not only was feedback immediate to

the encounter, it was far reaching, making the participant replace the initial assumptions

that started the encounter.

Transaction within the model. Beyond feedback, the transactional nature of

communication also appears within each element of the model because the model works

on three levels, that of the individual, the organization, and the wider society. All

communication occurs at the level of an individual person. Individuals speak, write,

gesture and interpret these signs and symbols. How an individual engages in the process

of communication changes depending on the circumstances and the other involved in the

process: a lone individual, an individual with an equal or confidant, an individual with a

superior or subordinate, a member of a large group in an organization, an individual at a

large societal gathering. Each individual simultaneously belongs to many organizations,

and both the type of organization and the person’s role within it will affect

communication. To a lesser extent, the broader society affects the process through new

law, economic changes, new technology, and computer software or hardware upgrades.

The transactional nature of communication works within these multiple levels, and this

type of transaction has particular implications for managers. For instance organizational

“assumptions” may be that of taking a market initiative, while the individual employee

may consider the assumptions erroneous. Individual intentions may be “give the customer

enough time for a relaxed decision” while the supervisor may intend “spend the least

amount of time so you can see as many customers as possible.” In genre, the industry

standard may become a specific computer program, but our company has not purchased

it. In process, I may prefer to work alone and have my ideas reviewed, whereas the

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supervisor prefers group brainstorming meetings. The transactional nature of

communication thus recognizes feedback both across the dominant systems process and

through extensive interaction within the various elements.

2.26 Management and Organizational Process

Management cannot be effective without first of all understanding the nature of the

organizations. The theory and analysis of organizations precede the development of

management theory. Progress in management study can only be made by first of all

understanding the perspective position of business organizations and then we can focus

our attention on the functions of management from that perspective.

Management theory traditionally identifies five common functions of management.

Rather than a mere list of functions, these five functions parallel the central elements of

the Rhetorical Systems Model. Beyond the systems parallel, however, communication

serves as a necessary condition for the management functions, Even Minzberg’s radical

attempt to replace the traditional functions serves to identify the manager’s

communication roles as Interpersonal, Informational, and Decisional (1975, reprinted in

HBR 1990). The organization in which managers functions operate as a system which

takes inputs, completes internal processes, and produces output products. Managers guide

these integrating processes, enabling companies to produce their goods and services.

Following systems theory, the management processes parallel the communication process

outlined in the Rhetorical Systems Model. Figure 2.10 visualizes this interrelationship.

The managerial functions of planning and motivation parallel the rhetorical element of

purpose, consisting of intention and audience. Organizing and directing parallel rhetorical

method, consisting of genre and process. The control function of management fulfills the

feedback function in systems and rhetorical theory. All of These processes occur through

the embodying of communication at the center of the process; without communication,

the overall system’s flow would grind to an abrupt halt.

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Figure 2.10 Management Process Model Source: Beck C. E. (1999:173), Managerial Communication, Bridging


Paralleling the intentions portion of the model, planning involves setting long-term goals,

short- term objectives, and the strategy to meet both goals and objectives. It inherently

contains subjective elements representing the manager’s best guess of the path to take

among the future unknowns. Planning defines objectives and sets the organizational

process in motion. Motivating focuses on the manager’s audience, the individual people

who make the organization work. Motivating differs from the other functions because it

remains internal, within the employees themselves. Managers certainly can impact the

motivation process, but its effect lies beyond their control.

By combining human and physical resources, the organizing function of management

structures these resources both through physical location and through sets of

interrelationships. Organizing addresses the elements of staffing, physical space,

equipment and hardware, workflow relationships, and supervisory relationships. While

planning and organizing establish the structure of an organization, directing moves to the

level of day-to-day operations. Operating hours, work schedules, and output deadlines

fall under managerial directing. As a management function, directing concerns how the

Interpretation

Product

Service

Culture

Assumption

Climate

People

Material

Equipment

Method

Purpose

Embodiment

Planning

Directing Organizing

Motivating

SUBJECTIVE

SUBJECTIVE

Control

(Feedback)

Control

Feedback

INPUT OUPUT

Analysis

INTEGRATION

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process will occur: strict supervision vs high autonomy, exacting details vs flexibility.

Directing also involves last-minute changes to an original plan.

Controlling occurs after the organization’s process is in place, thus representing the

feedback loop in the Rhetorical Systems Model. Results exceeding the target may

indicate exceptional motivation, too conservative a goal, inexact understanding of the

process, or underestimating the initiative of employees. Failing to meet a target may

result from overly optimistic goal-setting, poor organizational structure, incomplete

training or insufficient effort. When the results fail, managers must analyze the results to

determine a new course of action, whether new directing or a new overall plan. Overall

Management functions follow the Rhetorical Process Model.

2.27 Managerial Roles Highlight

Henry Minzberg took a radical view of management in his classic article. “The

Manager’s job: Folklore and Fact” (1975, reprinted in HBR 1990). Originally, Minzberg

presumed his management roles to replace the traditional management functions. The

formal position of the manager inherently involves three dominant roles; interpersonal,

informational, and decisional. Table 2.1 illustrates these managerial roles.

General Roles Interpersonal Informational Decisional

Specific Illustrations Figurehead Monitor Entrepreneur

Leader Disseminator Disturbance Handler

Liaison Spokesperson Resource allocation Negotiator

TABLE 2.1 Managerial Roles According to Minzberg Source: Minzberg (1990), “Retrospective Commentary”, www. Wikipedia. org. Retrieved on 2012-11-13. In his “Retrospective Commentary” on the reprint of his classic (1990), Minzberg

mellowed somewhat; rather than presenting a new view of management, he really was

presenting “another face of it.” A close examination of these “other faces” reveals that

these alternatives actually describe the how of management and that they do so primarily

in terms of communication roles. The figurehead represents nonverbal communication;

the leader and the liaison exist only through communication; and the informational roles

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entirely involve communication. Except perhaps for the intentional role of entrepreneur,

all of the decisional roles involve communication. Consequently, Minzberg’s alternate

roles for managers reframe the functions through a series of diverse communication roles.

2.28 Inter-Organization Process Teamwork

Organizations are increasingly moving toward use of teams in daily operations, including

ad hoc problem-solving teams, multi-function integrated teams, and self-directing teams.

The Teamwork Process model appears in Figure 2.11.

The teamwork model begins with the slams elements of formal or informal. For the status

element, while a pick-up basketball game during lunch functions as an informal team,

most organizations use formal teams to help them complete tasks. The subjective

assumptions, however, are critical to team success: the expectations based on past

experience with teams or with the organization, and the sense of self-confidence in

“holding one’s own” on a team.

Figure 2.11 Teamwork Process Model Source: Beck C. E. (1999:255), Managerial Communication, Bridging


Personal Satisfaction

Project Effectiveness

Task Completion

Team Cohesion

Self-Confidence

Expectations

Formal or

Informal

Method

Shared

Product

& Team

Colloquial

Respect

Difference

Information

Exchange

(Tools/

Network)

Concern for

Member

SUBJECTIVE

SUBJECTIVE

Accountability

Accountability

INPUT OUPUT

INTEGRATION

Purpose

Teamwork

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Within the purpose of teams, the intentions element highlights the dual nature of

teamwork: concern for the task and concern for the team. Although the audience for a

business is the ultimate customer, for teams the audience focus of the team is concern for

the members. The genre of teamwork is communication, using whatever technology

helps along the way (phone, fax, e-mail) along with personal contact. The availability of

technology has created the reality of virtual teams operating around the world. The

process of teamwork, critical to success is the sense of collegiality (‘we’re in this

together”) and respect for differences. Team effectiveness increases as teams use diverse

talents of the individual members.

The team output has a dual product as well: completing the task and cohesion as a team.

Interpretation of the process depends on the effectiveness of the project itself and the

satisfaction of the team members. Feedback for teams comes through institutional

accountability.

2.29 Organizational Activities

The design of organizations usually includes activities that follow the basic rhetorical

process, as shown in Figure 12.

The status inputs for any organization are the demographics (size, location), finances, and

overall assets of the organization. The assumptions for businesses are the market analysis

and the industry trends as projected by experts.

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Figure 2.12 Organizational Activities System Model Source: Beck C. E. (1999:174), Managerial Communication, Bridging


The centers of the model are the purpose elements of planning and product design, along

with the audience element of market analysis. The genre is the organizational structure:

tall or flat, department or divisions, geographic or product. The key to the organization

process include the CEO, chief of operations, and chief of maintenance. This model

places the CEO within the process rather than above it, recognizing this element of the

internal processing and the reality that the CEO achieves little without the rest of the

system.

The outputs are the products and services produced by the organization, and the

interpretation includes inspections of completed products or testing of proposed new

products. The accounting and quality control functions provide the feedback for the

activities system.

2.30 Summary of the Review

Issues around the development of inter-organizational trust present numerous

opportunities for scholarly inquiry. The benefits of trust have been extensively studied,

Inspection (old product)

Testing (New product)

Product

Service

Market analysis

Industry trends

Demographics

Financial condition

Assets

Network

Planning

Product

design

CEO

Operations

Maintenance

Organizing

Marketing

SUBJECTIVE

SUBJECTIVE

Accounting

Quality control

Accounting

Quality control

INPUT OUPUT

Purpose

Work-Flow

Communicating

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corresponding interest in the costs of trust creation, both transaction costs and actual

costs, has been lacking. The prospects for research into the relationship between inter-

organizational and interpersonal trust are also vast as they span questions of construct

validity and levels of analysis, in addition to the influence of the one on the other, as well

as the contingent role of inter-personal trust in affecting the outcomes of inter-

organizational trust.

Individual workers, teams, departments, units or firms that make up a virtual organization

are geographically distributed, functionally or culturally diverse, electronically linked,

and connected via lateral relationships. These attributes enable the organization to

dynamically modify business processes to meet market demands to coordinate via formal

and informal contracts, to define the boundaries of the firm differently over time or for

different customers or constituencies, and to re-arrange relationships among components

as needed.

The communication process underlies common aspects of organizational behavior,

ranging from management and leadership to teamwork and organizational design. This

gives us insights into the dynamics of interactions within organizations, and the difficulty

in mediating or negotiating impasses in inter-organizational system.

The high point of this review is that, virtual organization was being viewed in the

technology lens what had shadowed the complexity of the subject. We have seen in the

review that information technology is an intermediate platform between the actors of the

network, and this intermediary must be completed with other traditional Medias in order

to establish trust and control in virtual environment. Virtual organization mainly is an

organizing process where economic exploitation is twined with an exploration

perspective in order to remain flexible due to changes in market environment.

The most critical limitation of the trust literature summarized in this review involves the

quantity and quality of the literature relevant to issues of inter-organizational trust. The

goal of this thesis was to compile and review literature and models of inter-organizational

trust, particularly those relevant to the Nigerian context. Unfortunately, the literature

related to models of inter-organizational trust seems particularly underdeveloped.

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Although we employed as exhaustive a search strategy as possible, there were relatively

few models that emerged from our search. Although several models of inter-

organizational trust were found, there is a lack of extensive empirical testing of any of

these proposed models. The models that did emerge have not been subjected to more than

a single validation effort. This makes it impossible to compare across multiple studies

and to determine whether a finding is replicable.

On the other hand, evidence of a relationship between inter-organizational trust and

performance has proven inconclusive although some researchers emphasize direct

outcome, other work examines more complex, indirect effects. Most of the researchers

however, focus on only the positive outcomes of inter-organizational trust.

110

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CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

A methodology is usually a guideline for solving a problem, with specific components

such as methods, techniques, research design and tools.

Franklin (2012) describes it as a highly intellectual human activity used in the

investigation of nature and matter and deals specifically with the manner in which data is

collected, analyzed and interpreted. This chapter therefore specifies how the study was

carried out to investigate inter-organizational trust and effect on virtual organizations’

performance of selected Nigerian service firms with specific reference to selected service

organizations in FCT Abuja.

3.2 Research Design

The research design refers to the overall strategy that you choose to integrate the different

components of the study in a coherent and logical way thereby, ensuring you will

effectively address the research problem; it constitutes the blueprint for the collection,

measurement, and analysis of data. The nature of the problems and hypothesis to be

tested determines the type of design you can use in a particular study.

The research design adopted in this study was a survey because is a very valuable tool for

assessing opinions and trends; it can be very accurate and it allows you to be selective

about whom you ask questions and you can explain anything that they do not understand.

Therefore the survey design adopted in this study is aims at finding out inter-

organizational trust and effect on virtual organizations performance in the selected

Nigerian service organizations in federal capital territory Abuja.

3.3 Sources of Data

The main sources of data adopted in this research study were basically primary and

secondary sources of data.

Primary data: They are the first hand information generated by the researcher for the

purpose of the study. It is a source of information that has originated directly as a result of

a particular problem under investigation (MC Daniel and Gates 2001:25). Primary data is

original data that have never been published before and is obtained through means of

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surveys, observation or experimentation and research. There are raw information before

the processing is done that mainly consists of numerical collections of raw information to

be analyzed and evaluated.

Secondary data: A secondary data involves the gathering and/or use of existing data for

purposes other than those for which they were originally collected. These secondary data

may be obtained from many sources, including literature, compilations from

computerized databases and information systems.

Saunders, Lewis and Thorhill, (1997:38-42), recommended that during the secondary

data collection process, the foundation of the study should be built on a critical literature

review. Perry (1998) recommends that most PhD studies should follow a deductive

approach, because in this approach the literature is used to help the researcher identify

Theories and ideas to be tested through the use of data. In this way a theoretical

framework can be developed. An extensive literature review has been conducted in the

previous chapter where previous research findings published in books, journals, articles

and relevant sources on the internet have been analyzed.

3.4 Population of the Study

A research population is generally a large collection of individuals or objects that is the

main focus of scientific research. The population of this study therefore consisted of top

level management, middle level management and low level management in the selected

service organizations in federal capital territory Abuja, Nigeria. There were two hundred

and eleven (211) top management staff, eight hundred and seventy nine (879) middle

management staff and five hundred and forty nine (549) staff at the low level

management, making a total of one thousand six hundred and thirty nine (1639)

employees. These formed the target population for the study. The breakdown of the

population of selected service organizations are shown in table 3.1 below:

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Table 3.1 Staff Strength of the Selected Service Organizations.

S/N Service

organizations

Top level

management

Middle level

management

Low level

management

Total

1. Etisala Nigeria

Wuse II Abuja

28 132 124 284

2. Global com

Nigeria Abuja

34 166 120 320

3. MTN Nigeria

Wuse zone 6

Abuja

41 182 141 364

4. Access bank plc

central business

area Abuja

36 121 53 210

5. Zenith bank plc

central business

area Abuja

42 167 52 261

6. Skye bank plc

central business

area Abuja

30 111 59 200

Total 211 879 549 1639

Source: Researcher Field Survey 2012.

3.5 Sample Size Determination

A sample is simply a subset of population. The concept of sample arises from the

inability of the researcher to test all the individuals in a given population. The sample

must be representative of the population from which it was drawn and it must have good

size to warrant statistical analysis. There are several different ways to draw a sample

from a given population. The most common way and the one adopted in this research is

the probability method. Here, each member or item of the population at hand is assigned

a unique number and each element is chosen at random. The population members that are

assigned that number are then included in the sample. The researcher make use of

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probability method because it describe accurately the characteristics of a sample in order

to estimate population parameters and also the most appropriate for analytical studies

which invove testing of hypotheses.

Lind, Marchal and Mason (2002), proposed a simple equation for the computation of a

representative sample size as showned below.

s = zd 2 E

Where s = The required sample size

z = The standard normal value corresponding to the desired

level of confidence.

d = An estimation of the population standard deviation.

E = The maximum allowable error.

The breakdown of the sample size of selected service organizations are showned in table 3.2

below:

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Table 3.2 Table For Determining Sample Size (± 5% Margin of Error)

Service organizations

Top level management

Middle level management

Low level management

Sample Size

Skye bank plc

central business

area Abuja

24 86 33 143

Access bank plc

central business

area Abuja

30 98 37 165

Etisala Nigeria

Wuse II Abuja

24 89 74 187

Zenith bank plc

central business

area Abuja

34 121 35 190

Global com

Nigeria Abuja

30 110 71 211

MTN Nigeria

Wuse zone 6

Abuja

36 132 101 269

Total 178 636 351 1165

Note:

a) The table is 95% confidence level

b) The sample size increases to take into consideration potential non response

c) A 5% margin of error indicates willingness to accept an estimate within ±5 of the

given value

Therefore the sample size of one thousand one hundred and sixty five (1165) was then

arrived at, after taking into consideration the extent of variability in the population, time

constraints and frame-work within which the study was to be completed.

Source: Researcher Field Survey 2012

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3.6 Sampling Technique

Simple random sampling method was adopted to select a subset of the population. It is a

subset of statistical population in which each member of the subset has an equal

probability of being chosen. Here, each member or item of the population at hand is

assigned a unique number. The numbers are then thoroughly mixed, like if you put them

in a bow or jar and shook it. Then without looking, the respondents select n numbers

each. The population members that are assigned that number are then included in the

sample in order to avoid unbiased representation of the group. A simple random sample

is meant to be an unbiased representation of a group.

In this technique, Joseph (2009), maintain that, each member of the population has an

equal chance of been selected as subject. The entire process of sampling is done in a

simple step with each subject selected independently of other members of the population.

This is also considered as a fair way of selecting a sample from a given population since

every member is given equal opportunities of being selected (Joseph, 2009).

An unbiased random selection and a representative sample is important in drawing

conclusion from the results of a study, since one of the goals of research is to be able to

make conclusions pertaining to the population from the results obtained from a sample.

Due to the representations of a sample obtained by simple random sampling, it is

reasonable to make generalization from the results of the sample back to the population.

3.7 Instrument for Data Collection

Instrument for data collection refers to the device used to collect data, such as a paper

questionnaire or computer assisted interviewing system (Statistical Quality Standards,

U.S. Census Bureau, 2012).

The main instrument for data collection was the questionnaire and interview guide. One

type of questionnaire was designed for all the staff at the various levels of management.

This was done to crosscheck the views of the respondents. The questionnaire was based

on a modified 5-point Likert Scale with the options, strongly agree, agreed, strongly

disagreed, disagreed, No ideas, while interview was designed for key top management

staff.

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3.8 Validity of Instruments

Validity is one of the statistical properties used to evaluate the quality of research

instruments (Ahuja, 2002, 84). It is important that assessment techniques possesses both

validity and reliability.

Validity in relation to research is a judgment regarding the degree to which the

components of the research reflect the theory, concept, or variable under study (Streiner

and Norman, 1996: 39). The validity of the instrument used and validity of the research

design as a whole are important criteria in evaluating the worth of the results conducted.

Test-re-test was determined using correlation coefficient in testing the validity alongside

reliability of instrument under 3.9.

3.9 Reliability of Instruments

Reliability is the consistency of measurement over time, where it provides the same

results on repeated trails. It is defined as a characteristic of an instrument that reflects the

degree to which the instrument provokes consistent responses.

In this study questionnaire was given to three experts from Department of Business

Administration Nasarawa State University Lafia for validation, using test-re-test method.

Test-retest method is used to test stability of the tool, which contains thirty (35)

questionnaire items distributed to the three experts in Nasarawa State University Lafia.

Consequently same instrument is given to the same individuals on two occasions within

relatively short duration of time. The researcher attached a note explaining the purpose of

the research questions and the hypotheses for the validators to assess the appropriateness

of the instrument.

A correlation coefficient is calculated to determine how closely the particulars responses

on the second occasion matched their responses on the first occasion. The outcome of the

test-re-test was determined using correlation coefficient in testing the reliability of the

test instrument. Thus the coefficient is an abstract measure of the relationship between

variables based on a scale ranging between +1 and -1. Whether r is positive or negative

depends on the nature of the relationship between X and Y. If the sign of b in the

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regression equation is +, as X increases so does Y, and we have positive correlation. On

the other hand, if the sign of b is negative, you will find that as X increases the value of Y

decrease and we have negative correlation. The outcome of the test-re-test was given by

correlation coefficient which is 0.93, this indicate that the reliability of the test instrument

was very reliable and valid (see Appendix for detailed result).

The questionnaire was then acceptable to have tested what it proposed to test. All the

corrections and recommendations were reflected in the questionnaire before they were

sent out to the respondents.

3.10 Method of Data Analysis

The data through which responses were given in the questionnaire was analyzed and

interpreted with the use of percentages, Z test and chi-square (x2) statistical techniques.

The use of percentages enabled the researcher to assign any given percentage weighted to

each alternative in order to make good comparative analysis and to choose the alternative

with the highest percentage. The test of hypotheses was carried out, using the chi-square

(x2) statistical method in testing a particular hypothesis one on one. This is to convey

information at a glance to make for easy understanding and draw conclusion based on the

result of the analysis.

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Berg, B. L. (2009), Qualitative Research Methods for the Social sciences, (7th ed), Boston: Pearson Education Inc.

Census Burean, (2010), Statistical Quality Standards, U.S. Census Bureau, 2010, Hyperlink:

http:www.census. Gov/quality/standards/ glossary, html.

Franklin M. (2012), Understanding Research, Coping with the Quantitative-Qualitative Divide, New York: Routledge.

Hair, J.F., Bush, R.P. and Ortinau, D.J. (2000), Marketing Research, A Practical Approach for

the New Millennium, Boston: McGraw-Hill International.

Irny, S.I. and Rose A.A. (2005), “Designing a Strategies Information SystemsPlanning Methodology for Malaysian Institutes of Higher Learning” (Isp-ipta), Issues in Information System, 11 (1).

Joseph J.C. (2009), Random Sampling, Retrieved 30 Nov. 2012 from Explorable, http://

explorable. Com/simple-random-sampling. Html. Lind, D.A., Marchal, W.G. and Mason, R.D. (2002), Statistical Techniques in business and Economics (11th ed), Boston: McGraw-Hill/lrwin. McDaniel, C. and Gates, R. (2001), Marketing Research Essentials, (3rd ed), Cincinatti: South-

Western College.

Perry, C. (1998), “A Structured Approach for Presenting Theses”, Australasian Marketing Journal, 6 (1).

Saunders, M., Lewis, P. and Thornhill, A. (1997), Research Methods for Business Students,

London: Financial Times Publishing.

Streiner, D. and Norman, G. (1996), PDQ Epidemiology (2nd ed), St. Louis: Mosbey.

Tull, D.S, and Hawkins, D.I (1993), Marketing Research, Measurement and method, (6th ed). New York: Maxwell MacMillan international.

Welman, J.C. and Kruger, S.J. (2002), Research Methodology, (2nd ed), Cape Town: Oxford

Southern Africa.

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CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

4.1 Introduction

The best of experiments and logical arguments still need to rely upon effective presentation of data, usually in the form of figures or tables. It is putting across collected information in a clear and concise manner. Presentation of data requires excellent arrangement of data and good communication skills and understanding of the target audience.

Therefore, data collected for the purpose of answering research questions and testing of hypotheses pose in the study are presented and analyzed in this chapter, using frequency distribution (fixed percentage) as the main element of data analysis.

4.2 Data Presentation Data is presented in tabular form and briefly discussed accordingly. A well-structured questionnaire was designed and distributed to the sampled staff of the selected service organizations in FCT-Abuja.

For the purpose of testing the hypotheses, the chi-square statistical technique is employed. One thousand one hundred and sixty five (1165) were prepared and distributed but only one thousand one hundred and thirty nine (1139) were correctly filled and returned. Therefore, the researcher based his analysis on the number that was correctly filled. Table 4.1 shows the questionnaire distribution and collection schedule.

Table 4.1 Questionnaire Distribution and Collection Schedule

No Distributed No returned No rejected No accepted No not return 1165 1139 0 1139 26 100 97.8% 0% 97.8% 2.2% Source: Researcher Field Survey 2014

Table 4.1 indicates that 1165 questionnaire representing 100% were prepared and distributed, 1139 (Representing 97.8%) out of 1165 were correctly filled and returned while 26 questionnaire representing 2.2% were not returned at all. The researcher based his analysis on the number that was correctly filled and returned which is 1139.

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4.3 Analysis of Data or Responses Rate

Table 4.2 Inter-organizational trust influences on virtual organizations’ commitment in service firms.

Option Responses Percentages Strongly Agreed 797 69.9 Agreed 309 27.1 Strongly Disagreed 13 1.1 Disagreed 11 0.9 No idea 9 0.8 Total 1139 99.8 Source: Researcher Field Survey 2014

Table 4.2 depicts that, 797 respondents representing 69.9% strongly agreed with the fact that inter-organizational trust influences virtual organizations’ commitment, 309 respondents representing 27.1% agreed with the statement, 13 respondents representing 1.1% strongly disagreed and 0.9% that is, 11 respondents disagreed while 9 respondents representing 0.8% provided no answer. This means that inter-organizational trust influenced virtual organizations’ commitment in service firms.

Table 4.3 The extents to which members of one organization hold a collective trust orientation toward another organization facilitate commitment in service organizations.

Option Responses Percentages Strongly Agreed 510 44.8 Agreed 392 34.4 Strongly Disagreed 196 17.2 Disagreed 41 3.6 No idea 0 0 Total 1139 100 Source: Researcher Field Survey 2014

It could be seen from table 4.3 that 510 respondents representing 44.8% were of the view that the extent to which members of one organization held a collective trust orientation toward another organization facilitate commitment in service organizations, three hundred and ninety two respondents representing 34.4% agreed with the statement, one hundred and ninety six representing 17.2% strongly disagreed, while forty one respondent representing 3.6% disagreed entirely no respondents claim not to have knowledge about the statement. This shows that the extents to which members of one organization held a collective trust orientation toward another organization facilitate performance in service organizations.

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Table 4.4 Inter-organizational trust creation, growth and commitment are gradual and sequential.

Option Responses Percentages Strongly Agreed 642 56.4 Agreed 329 28.9 Strongly Disagreed 128 11.2 Disagreed 33 2.8 No idea 7 0.6 Total 1139 100 Source: Researcher Field Survey 2014

Table 4.4 reveals that 642 respondents representing 56.4% were of the view that inter-organizational trust creation, growth and commitments are gradual and sequential, 329 respondents representing 28.9 agreed with the statement, 11.2% that is 128 respondents strongly disagreed, while 33 respondents representing 2.8% disagreed entirely. Seven of the respondents representing 0.6% failed to respond to the statement for the reason best known to them. The above analysis shows that inter-organizational trust creation, growth and commitment are gradual and sequential.

Table 4.5 Firms that need alliance reduce its own power so the other part can trust it.

Option Responses Percentages Yes 382 33.5 No 544 47.8 No idea 213 18.7 Total 1139 100 Source: Researcher Field Survey 2014

Table 4.5 shows that firms that need alliance need not to reduce its own power before other part can trust it as the highest respondents of 544 representing 47.8% said no to the statement while 382 respondents representing 33.5% agreed with the statement and 213 of the respondent representing 18.7% claim not to have adequate knowledge about the statement.

Table 4.6 Trust plays a role in shaping inter-organizational structure and in structuring alliance relationships.


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Table 4.6 reveals that 410 respondents representing 35.9% strongly agreed with the statement, 496 of the respondents representing 43.5% agreed, while 87 respondents representing 7.6% and 28 respondent representing 2.5% strongly disagreed and disagreed respectively. Answer was not provided from 118 respondent representing 10.3%; this table therefore clearly shows that trust plays a role in shaping inter-organizational structure and in structuring alliance relationships.

Table 4.7 Environmental uncertainty and fluctuating workforce of inter-organizational relationship impact negatively on virtual organizations’ effectiveness in service organizations.


Table 4.7 indicated that environmental uncertainty and fluctuating workforce of inter-organizational relationship impact negatively on virtual organizations’ effectiveness in service organizations as 34.8 and 42.7% representing the majority opinion strongly agreed and agreed respectively. One hundred and twenty nine representing 11.3% and one hundred and twenty six representing 11.1% strongly disagreed and disagreed respectively while one of the respondents provided no answer.

Table 4.8 Organization experience unproductive high-trust relationships resulting from environmental uncertainty.


Table 4.8 shows that organization experience unproductive high-trust relationships resulting from environmental uncertainty because with level of yes response which is above average 77.6% and the level of No response which is below average, one can agree with me that environmental uncertainty can cause organizations to experience unproductive high-trust relationship.

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Table 4.9 Trust formation depends on certain relational behavior that foster or impede the creation of an engaging environment.


Table 4.9 depicts that trust formation depends on certain relational behavior that foster or impede the creation of an engaging environment basically because 315 respondents representing 27.6% strongly agreed, 294 respondents representing 25.8 agreed entirely. On the negative, 21.1 and 9.6% of the respondents strongly disagreed and disagreed respectively while one hundred and seventy nine representing 15.7% claimed not to have adequate knowledge about the statement.

Table 4.10 Lack of close supervision impact negatively on the performance of virtual organizations in federal capital territory Abuja.


Table 4.10 shows that lack of close supervision impact negatively on the performance of virtual organizations in federal capital territory Abuja, because with the level of strongly agreed and agreed response which is above average 28.1% and 35.0% respectively and level of strongly disagree and disagree response which is below average one can agree with the fact that, if members of virtual organizations are supervised through information and communication technology (ICT), it will help the organization to expand the more and equally help service sector of Nigerian economy to grow.

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Table 4.11 Lack of human contact negatively affects the performance of employees in service organizations.


Table 4.11 indicates that 331 respondents and 374 respondents representing 29.1% and 32.8% respectively agreed and strongly agreed that lack of human contact negatively affect the performance of employees in service organizations while 240 and 112 respondents representing 21.1% and 9.8% respectively disagreed and strongly disagreed that lack of human contact negatively affect performance of employees in service organizations eighty two respondents representing 7.2% claims not to have any knowledge about the statement. This indication shows that lack of human contact impact negatively on the performance of employees.

Table 4.12 Cultural norms and values affect inter-organizational relationship in virtual organizations.


Making reference from the figures and percentages contained in table 4.12, the researcher is made to understand that the highest number of respondents 397 with the highest percentage 34.8% strongly agreed that cultural norms and values affect inter-organizational relationship in virtual organizations, 364 respondents representing 31.9% agreed with the statement, 289 respondents representing 25.4% actually strongly disagree, 73 respondents representing 6.4% disagree entirely while, 1.4% of the respondents claim not to have knowledge of the statement.

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Table 4.13. Cultural norms and values affect the establishment of inter-organization trust.


Table 4.13 shows that 25.6% and 34.9% of the respondents strongly agreed and agreed with the statement respectively, 271 respondents representing 23.8% strongly disagreed while 102 of the respondents representing 8.9% disagreed entirely. No answer was provided from 76 respondents.

Table 4.14 Managers in low-context cultures tend to evaluate a situation by facts that are immediately visible.


Table 4.14 indicates that, 410 of the respondents representing 35.9% strongly agreed 321 respondents representing 28.2% agree, with the statement, 8.6% and 10.65 of the respondents strongly disagree and disagree respectively, while 189 respondents representing 16.6% claim not to have any idea.

Table 4.15 High-context cultures are strongly driven by well-defined relationships between individuals or organizations.


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It could be seen from table 4.15 that 394 respondents representing 34.6% are strongly of the opinion that High-context culture are strongly driven by well-defined relationships between individuals or organizations. 387 respondents representing 33.9% agreed totally with the statement while 8.1% and 18.9% of the respondents strongly disagreed and disagree respectively. 51 respondents claim not have any idea.

Table 4.16 Management to a high degree acknowledged individual cultural differences in inter-organizational relationship.


From the percentages contained in table 4.16, 43.5% and 35.95 strongly agreed and agreed respectively that management to a high degree acknowledged individual cultures differences in inter-organizational relationship. 3.3% and 7.6% respectively strongly disagreed and disagreed while 9.5% provided no answer to the statement.

Table 4.17 ICT adoption influences the formation of trust within and between organizations in the virtual and real space.


When respondents were asked if ICT adoption influences the formation of trust within and between organizations in the virtual and real space, the responses show that 512 respondents representing 44.9% strongly agreed, 339 respondents representing 29.7 agreed entirely because members that are geographically dispersed depend on electronic communication for carrying out their production process, while 149 respondents representing 13.1% and 110 respondents representing 2.5% strongly disagreed and disagreed respectively while 2.5% of the respondents claim not to have adequate knowledge about the statement.

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Table 4.18 Trust increases dyadic information sharing and significantly lowering transaction cost.


Table 4.18 depicts that 36.2% and 43.2% of the respondents strongly agreed and agreed respectively that trust increases dyadic information sharing and significantly lowering transaction costs while 7.5% and 9.8 of the respondents strongly disagreed and disagreed with the statement. Meanwhile, 3.2% of the respondents provided no answer to the statement.

Table 4.19 Trust change when trust is network based.


The responses contained in table 4.19 shows that 846 respondents representing 74.3% maintained that trust does not change when trust is network based, while 210 of the respondents representing 18.4% agreed with the statement. Meanwhile, 7.3% of the respondents failed to lay claim to any of the options provided.

Table 4.20 Communication quality impact positively on trust formation in service organizations.


Table 4.20 reveals that, there is positive impact of communication quality on trust formation in service organizations because majority of the respondents with the highest

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percentages agreed while 17.2% are of the opposite opinion. No idea forms 2.9% of the respondents.

Table 4.21 Virtual organizations significantly use ICT for monitoring employees work.

Option Responses Percentages Strongly Agreed 610 53.5 Agreed 415 36.4 Strongly Disagreed 85 7.5 Disagreed 29 2.5 No idea - 0 Total 1139 100 Source: Researcher Field Survey 2014

When the respondents were specifically asked whether virtual organizations significantly use ICT for monitoring employees work, responses in table 4.21 reveals that 610 respondents representing 53.5% strongly agreed, 415 representing 36.4% of the respondents agreed entirely because the sophistication of technology permits managers if they prefer, to monitor every single key stroke or phone call of the employees, while 85 respondents representing 7.5% and 29 respondents representing 2.5% strongly disagreed and disagreed respectively.

Table 4.22 Development of inter-organizational trust enhances integration in virtual organizations.

Option Responses Percentages Strongly Agreed 341 29.9 Agreed 511 44.9 Strongly Disagreed 103 9.0 Disagreed 184 16.1 No idea - 0 Total 1139 100 Source: Researcher Field Survey 2014

Table 4.22 indicates that 341 respondents representing 29.9% are of the strong opinion that development of inter-organizational trust enhances integration in virtual organizations, 511 respondents representing 44.9% agreed entirely while 103 respondents with 9.0% and 184 respondents representing 16.1% strongly disagreed and disagreed respectively. The analysis from the table then shows that development of inter-organizational trust enhances integration in virtual organizations.

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Table 4.23 Inter-organizational trust in virtual organizations significantly provides flexibility and adaptability for integration.

Option Responses Percentages Strongly Agreed 414 36.3 Agreed 438 38.5 Strongly Disagreed 96 8.4 Disagreed 83 7.3 No idea 108 9.5 Total 1139 100 Source: Research Field Survey 2014

From the analysis contained in table 4.23, it is evidenced that inter-organizational trust in virtual organizations significantly provides flexibility and adaptability for integration because 36.3% and 38.5% representing the highest opinion strongly agreed and agreed respectively, while 8.4% and 7.3% strongly disagreed and disagreed entirely. On the other hand, 108 respondents representing 9.5% were not sure and therefore failed to provide any positive or negative answer.

Table 4.24 Recognizing and celebrating achievements at all levels build shared values and organizational integration.

Option Responses Percentages Strongly Agreed 510 43.9 Agreed 498 43.7 Strongly Disagreed 69 6.1 Disagreed 42 3.7 No idea 29 2.5 Total 1139 100


Table 4.24 shows that, 501 respondent representing 43.9% strongly agreed with the statement, 498 respondents representing 43% agreed, while 69 respondents representing 6.1% and 42 respondents representing 3.7% strongly disagreed and disagreed respectively and 2.5% of the respondents claim not to have any idea.

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Table 4.25 Encouraging employee participation in decision making builds loyalty and commitment and improve overall climate for integration.

Option Responses Percentages Strongly Agreed 528 46.4 Agreed 472 41.4 Strongly Disagreed 72 6.3 Disagreed 67 5.9 No idea 0 0 Total 1139 100


Table 4.25 depicts that encouraging employee participation in decision making builds loyalty and commitment and improve overall climate for integration as majority of the respondents with the highest percentages of 46.4% and 41.4% support the statement while 72 respondents representing 6.3% and 67 respondent representing 5.9 strongly disagreed and disagreed respectively.

Table 4.26 Formation of inter-organizational networks is driven by overcoming investment barriers and achieving of synergy effects.



Table 4.26 reveals that formation of inter-organizational networks is driven by overcoming investment barriers and achieving of synergy effect because 45.0% and 36.9% of the respondents strongly agreed and agreed with the statement respectively while 4.6% and 8.3% of the respondents are of the contrary opinion and 5.2% claim not to have idea.

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Table 4.27 Conflict is adversely related to lack of shared understanding between partners in virtual organizations.

Option Responses Percentages Strongly Agreed 615 53.9 Agreed 420 36.9 Strongly Disagreed 71 6.2 Disagreed 33 2.8 No idea - - Total 1139 100


Making references to table 4.27, 615 respondents representing 53.9% strongly agreed with the statement 420 respondents representing 36.9% agreed 71 respondents representing 6.2% strongly disagreed and 33 respondents representing 2.8% disagreed respectively. These clearly show that conflict is adversely related to lack of shared understanding between partners in virtual organizations.

Table 4.28 Unresolved conflicts to a large extent can deter the formation of trust.



Table 4.28 shows that 53.7% and 37.1% of the respondents strongly agreed and agreed respectively that unresolved conflict to a large extent can deter the formation of trust while 6.1% and 2.0% of the respondents strongly disagreed and disagreed respectively and 0.9% of the respondents were silent.

Table 4.29 Conflict when well managed can promote the effectiveness of a partnership.



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Table 4.29 indicates that 582 respondents representing 51.1% strongly agreed 421 respondents representing 36.9% actually agreed with the statement while 17 respondents representing 1.4% and 92 respondents representing 8.0% strongly disagreed and disagreed respectively and 2.5% of the respondents claim not to have any idea.

Table 4.30 Organization inability to satisfy all the needs of its workers facilitates conflict in inter-organizational relationship.

Option Responses Percentages Yes 472 41.4 No 600 52.7 No idea 67 5.9 Total 1139 100


When respondents were asked if organization’s inability to satisfy all the needs of its workers can facilitate conflict in inter-organizational relationships, 472 respondents representing 41.4% agreed while 600 respondents representing 52.7% which is the highest percentage disagreed because human needs are too numerous and their inability to satisfy all cannot facilitate conflict. 5.9% of the respondents provided no response.

Table 4.31 Management obtains negative behavior after helping their employees to meet their basic needs.

Option Responses Percentages Yes 721 62.5 No 312 27.4 No idea 106 9.3 Total 1139 100


Table 4.31 reveals that management does not obtain negative behavior after helping their employees to meet their basic needs because 62.5% of the respondents were of the view that it does not while 27.4% were of the opinion that management still obtains negative behavior after helping their employees to meet their basic needs. On the other hand, 9.3% of the respondents failed to provide any answer.

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Table 4.32 Inter-organizational trust influences on virtual organizations’ profitability in service organizations.


Table 4.32 depicts that, 697 respondents representing 61.2% strongly agreed with the fact that inter-organizational trust influences on virtual organizations’ profitability, 409 respondents representing 35.9% agreed with the statement, 9 respondents representing 0.7% strongly disagreed and 0.4% that is, 5 respondents disagreed while 19 respondents representing 1.7% provided no answer. This means that inter-organizational trust influenced virtual organizations’ profitability in service organizations.

Table 4.33 The degree to which members of one organization hold a collective trust orientation toward another organization enhances profitability in service organizations.


It could be seen from table 4.33 that 391 respondents representing 34.3% were of the view that the extent to which members of one organization held a collective trust orientation toward another organization enhances profitability in service organizations, 518 respondents representing 45.5% agreed with the statement, 11 representing 0.9% strongly disagreed, while 8 respondents representing 0.7% disagreed entirely and 18.5% respondents claim not to have knowledge about the statement. This shows that the extent to which members of one organization held a collective trust orientation toward another organization enhances profitability in service organizations.

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Table 4.34 Virtual organizations profitability is sequential and gradual.


Table 4.34 reveals that 384 respondents representing 33.7% were of the view that virtual organizations profitability were gradual and sequential, 499 respondents representing 43.8 agreed with the statement, 9.9% that is 113 respondents strongly disagreed, while 21 respondents representing 1.8% disagreed entirely. 122 of the respondents representing 10.7% failed to respond to the statement for the reason best known to them. The above analysis shows that virtual organizations profitability is gradual and sequential.

Table 4.35 Firms that need improvement in its profitability reduce its own power so that the other part can trust it.


Table 4.35 shows that firms that need improvement in its profitability need not to reduce its own power before other part can trust it as the highest respondents of 946 representing 83.1% said no to the statement while 149 respondents representing 13.0% agreed with the statement and 44 of the respondents representing 3.8% claim not to have adequate knowledge about the statement.

Table 4.36 Trust plays a role in shaping inter-organizational profitability and alliance relationships.


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Table 4.36 reveals that 332 respondents representing 29.1% strongly agreed with the statement, 461 of the respondents representing 40.5% agreed, while 153 respondents representing 13.4% and 64 respondent representing 5.6% strongly disagreed and disagreed respectively. Answer was not provided from 129 respondents representing 11.3%; this table therefore clearly shows that trust plays a role in shaping inter-organizational profitability and in alliance relationships.

4.4 Testing of Hypothesis and Z Test

Data already analyzed in tables 4.2, 4.7, 4.12, 4.17, 4.22, 4.27 and 4.32 respectively were used to achieve this test; the chi-square (X2) test was employed for tables 4.2, 4.7 and 4.12 while tables 4.17, 4.22, 4.27 and 4.32 were analyzed using Z test.

4.4.1 Testing of Hypotheses

In testing the hypotheses, it is important to find out whether the differences in opinion are significant enough to draw conclusion. To determine the degree of freedom, the researcher uses the formula: (R-1) (C-1) = (5-1) (3-1) = (4x2) = 8. Giving 0.05 as the significant level and the degree of freedom = 8.

Hypothesis one

Ho: Inter-organizational trust does not impact significantly and positively on virtual organizations’ commitment in Nigerian service organizations.

Hi: Inter-organizational trust impacts significantly and positively on virtual organizations’ commitment in Nigerian service organizations.

Hypothesis Two

Ho: Environmental uncertainty and fluctuating workforce of inter-organizational relationship do not negatively affect virtual organizations’ effectiveness in service organizations.

Hi: Environmental uncertainty and fluctuating workforce of inter-organizational relationship negatively affect virtual organizations’ effectiveness in service organizations.

Hypothesis Three

Ho: Cultural norms and values do not impact negatively on inter-organizational relationship in virtual organizations.

Hi: Cultural norms and values impact negatively on inter-organizational relationship in virtual organizations.

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Contingency table 4.4.1

Using table

Variable Table 4.2 Table 4.7 Table 4.12 Total Strongly Agreed 797 397 397 1591 Agreed 309 486 364 1159 Strongly Disagreed 13 129 289 431 Disagreed 11 126 73 210 No idea 9 01 16 26 Total 1139 1139 1139 3417

Using the following formula

X2 = (OF-EF) 2

EF

Where OF = Observed frequency

EF = Expected frequency

DF = Degree of frequency

X20 = Calculated chi-square value

X2 = Chi-square calculated from chi-square Distribution table

Level of significance = 0.05

X2 = 15.51

Computation for the Expected

= Row Total x Column Total

Grand Total

1139 x 1591 = 530

3417

1139 x 1159 = 386

3417

1139 x 431 = 144

∑

150

3417

1139 x 210 = 70

3417

1139 x 26 = 9

3417

Chi-Square Calculated

O E O-e (O-e)2 (O-e)2/e 797 530 267 71289 135 309 386 -77 5929 15 13 144 -131 17161 119 11 70 -59 3481 50 9 9 0 0 0

397 530 -133 17689 33 486 386 100 10000 26 129 144 -15 225 2 126 70 56 3136 45 1 9 -8 64 7

397 530 -133 17689 33 364 386 -22 484 1 289 144 145 21025 146 73 70 3 9 0.1 16 9 7 49 5

∑ = 617.1

Level of significance = 0.5, X2 = 15.51

X20 = 617.1

X20 = (617.1)>X2 (15.51)

Conclusion

Since x20 >X2 that is, the chi-square calculated is greater than chi-square of the critical value, the researcher therefore accept Hi and reject Ho. This indicates that, inter-organizational trust influences virtual organizations commitment in service organizations’ and that environmental uncertainty and fluctuating workforce of inter-organization relationship as well as cultural norms and values impact negatively on virtual organizations’ performance.

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4.4.2 Z Test (Test of Hypotheses)

The hypotheses earlier formulated in chapter one were tested below to ascertain the authenticity of table 4.17, 4.22, 4.27, and 4.32.

Hypothesis Four

Ho: ICT adoption does not impact positively on the formation of trust within and between organizations in the virtual and real space.

Hi: ICT adoption impacts positively on the formation of trust within and between organizations in the virtual and real space.

Hypothesis Five

Ho: Development of inter-organizational trust does not impact positively on the integration of virtual organizations.

Hi: Development of inter-organizational trust impacts positively on the integration of virtual organizations.

Hypothesis Six

Ho: Conflict to a very high degree is not adversely related to lack of shared understanding between partners in virtual organizations.

Hi: Conflict to a very high degree is adversely related to lack of shared understanding between partners in virtual organizations.

Hypothesis Seven

Ho: Inter-organizational trust does not influence virtual organizations’ profitability in service organizations.

Ho: Inter-organizational trust influences virtual organizations’ profitability in service organizations.

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Contingency t able 4.4.2

Using Table

Variable Table 4.17 Table 4.22 Table 4.27 Table 4.32 Total Strongly Agreed 512 341 615 697 2165 Agreed 339 511 420 409 1679 Strongly Disagreed 149 103 71 9 332 Disagreed 110 184 33 5 332 No idea 29 - - 19 48 Total 1139 1139 1139 1139 4556

Z =X - µ OR X - X

S x S

Where Z = Value equivalent to the mean value

µ = Population mean

S X = Standard deviation of the sampling distribution of the mean or more simply

S N Where X = Score

X = Mean of the distribution

S = Standard deviation of the distribution

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Z Test Calculated

X Deviation about the mean X-X

Z score X-X/S

512 258.8 258.8÷223.01 = 1.1605 339 85.8 85.8÷223.01 = 0.3847 149 -104.2 -104.2÷223.01 = - 0.4672 110 -143.2 -143.2÷223.01= -0.6421 29 -224.2 -224.2÷ 223.01 = 1.0053 341 87.8 87.8 ÷ 223.01 = 0.3937 511 257.8 257.8 ÷ 223.01 = 1.1560 103 -150.2 -150.2 ÷ 223.01 = - 0.6735 184 -69.2 -69.2 ÷ 223.01 = - 0.3103 615 361.8 361.8 ÷ 223.01 = 1.6223 420 166.8 166.8 ÷ 223.01 = 0.7479 71 -182.2 -182.2 ÷ 223.01 = - 0.8170 33 -220.2 -220.2 ÷ 223.01 = - 0.9874 697 443.8 443.8 ÷ 223.01 = 1.9900 409 155.8 155.8 ÷ 223.01 = 0.6986 9 -244.2 -244.2 ÷ 223.01 = - 1.0590 5 -248.2 - 248.2 ÷ 223.01 = - 1.1130 19 -234.2 -234.2 ÷ 223.01 = -1.0502

∑X = 4557

X = ∑X 4557 = 253.2

F 18

S = 223.1

Z score = - 0.0073

The researcher state the null hypothesis and the alternative hypothesis

Ho: X = µ either reject or accept

H1: X > O accept

H2: X < O reject

The test statistics shall be the sampling distribution of the mean.

The significance level is set at 5% (0.05) in view of the hypothesis formulated.

The computed Z score is - 0.0073 and the critical value of Z is -0.199.

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DECISION RULE

The computed Z score of - 0.0073 is < than the critical value of 0.199, that is thus falling into the rejection region. The researcher therefore reject Ho and accept Hi meaning ICT adoption impacts positively on the formation of trust within and between organizations in the virtual and real space, inter-organizational trust influences virtual organizations’ profitability in service organizations and conflict is adversely related to lack of share understanding between partners in virtual organizations.

4.5 Discussion of Results

The discussions revolved around the objectives of the study as presented in chapter one and analysis and testing of hypotheses in chapter four. The findings made in this work were compared with findings made in other related studies and effort were made to reconcile them where necessary. For ease of reference, the relevant objectives are presented each, before the discussion.

Research Objective One

To determine the extent to which inter-organizational trust influences virtual organizations’ commitment in Nigerian service firms.

From the analysis of data collected from the selected service organizations in the federal capital territory Abuja, it was observed, as indicated in table 4.2 that the respondent’s opinion clearly depicted that they were of the view that organizational commitment to a large extents depends on inter-organizational trust.

The respondents’ view confirmed that inter-organizational trust impacts significantly and positively on virtual organizations commitment in service organizations’. Furthermore, the respondent’s opinions revealed that inter-organizational trust depend on the levels of fairness, reliability, and goodwill in the relationship. The above result is further supported by the participant’s oral interview with some key informants who are believed to be a representative sample (not in the statistical sense) of the service organizations. Most of the informants believed that interorganizational trust facilitates committement, as this process makes possible a higher level of confidence between partners and lower cost and time spending for control. Mrs. Adeniyi said and I quote, “commitement to the interorganizational relationship increased when partners had a higher measure of relationship benefits or a higher degree of trust”.

To confirm the findings above, Chi-square (X2) was used to test the hypothesis at 5% level of significance. The calculated chi-square value was 617.1 and this value was greater than the critical chi-square value that was given as 15.51. Therefore, the null hypothesis was rejected and the alternative hypothesis was accepted. The conclusion was

-0.199

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that inter-organizational trust influences virtual organizations commitment and performance in service organizations.

The finding is in line with the finding of Krishnan et al (2006) that inter-organizational trust was positively related to alliance performance, and that alliance commitment and performance benefitted more from inter-organizational trust when the degree of interdependence between two organizations was higher. The result therefore agrees with Jap and Anderson (2003), who suggest that, there are performance implications for the relationship between interpersonal and inter-organizational trust. Jab and Anderson find that interpersonal trust between boundary spanners has a positive effect on organizational performance measures, but this effect diminishes as ex post opportunism rises. Nevertheless, interpersonal trust appears to be important in the development of inter-organizational trust and it relative effect on performance.

Research Objective Two

To identify the constraints to inter-organizational relationship in virtual organizations that impedes organizational effectiveness.

The responses to question in table 4.7 were analyzed to achieve this objective. The cumulative percentage of strongly agree and agreed of 77.5 indicated that environmental uncertainty and fluctuating workforce of inter-organizational relationship negatively affect virtual organizations effectiveness in service organizations. The respondents opinion based on the cumulative percentage of 77.5 supported the following statement: fluctuating workforce, changes in working conditions, differences that are getting more and more apparent, globalization, complicated partnerships, information technologies, replacement of traditional organizations by hierarchy organizations, replacement of control mechanisms based on authority by self management result in a dramatically increase in the importance of the concept of trust in organizational life to curtail the influence of environmental uncertainty. This in turn necessitates establishment of organizational processes not on the basis of power but on the basis of trust.

Chi-square test value at 5% level of significance using the mean value in table 4.7 was conducted to confirm these. The calculated chi-square value was 617.1, which was greater than the critical chi-square value of 15.5, leading to the rejection of null hypothesis. The conclusion therefore was that environmental uncertainty of inter-organizational relationship impact negatively on virtual organizations’ effectiveness of service organizations. The oral interview with key top management team also revealed that environmental uncertainty as well as fluctuating workforce of inter-organizational trust has negative influence on organizations’ effectiveness in service organizations. The informants point out that, environmental uncertainty and specifically the unstable workforce of virtual organizations often influence these alliances negatively, and they

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hope to contribute to equipping management with the information necessary for forming alliances and developing relationships that improve knowledge sharing, interorganizational alliances and joint ventures.

The finding correlates with Krishnan et al that found that when environmental instability was higher, the relationship between trust and alliance performance was weaker. The same pattern was seen for environmental unpredictability. The relationship between trust and alliance performance became no significant at very high levels of environmental unpredictability. As a whole, the relationship between trust and alliance performance depends on the type of uncertainty being considered, for instance, behavioral uncertainty increases the relationship, whereas environmental uncertainty can weaken the relationship.

Research Objective Three

To ascertain how cultural norms and values affect inter-organizational relationship in virtual organizations.

To achieve this objective, responses to question in table 4.12 were analyzed. The responses depicted that cultural norms and values impact negatively on inter-organizational relationship in virtual organizations as location and national culture influence the development of trust and its associated relational norms. More so, the respondent’s opinion show that the antecedents of trust differ depending on the national setting and this is supported by the notion to the cultural context. The above response was supported by respondent’s oral interview who believed that regional and cultural differences impact the effects and consequences of inter-organizational trust. One of the informants Mr. Okpanachi Dan said and I quote, “alliances among firms from the same country could be less costly because they know their own culture and way of working, for this reason, monitoring each other is less and they spend less for this activity”.

To validate the above findings, chi-square statistical techniques were conducted at 5% level of significance. The cumulative calculated chi-square value was 617.1 and this value was greater than the critical chi-square value that was given as 15.51. Therefore the alternative hypothesis was accepted and the null hypothesis rejected. The conclusion was that, cultural norms and values affect inter-organizational relationship in virtual organizations. The finding relate to that of Sako (1998) who examines the relationship between inter-organizational trust and performance outcomes by surveying component suppliers in the automotive industry across different countries. She finds that the cultural context gives rise to differences in the effects of trust, a finding echoed by Dyer and Chu (2003). Gulati and Singh (1998), affirming the result that trust behavior and its consequences differ according to national or regional differences in alliance location.

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Research Objective Four

Ascertain the degree to which information and communication technology (ICT) adoption influences the formation of trust within and between organizations in the virtual and real space.

Table 4.17 was analyzed in order to achieve this particular objective. The cumulative percentage of 74.6% of those who supported the question indicates that, information and communication technology adoption impacts positively on the formation of trust within and between organizations in the virtual and real space. The oral interview with the key informant in the selected service organizations buttresses the importance of communication and trust, and how they interact to define the relationship. They argue that communication constantly defines the relationship, both with the content of the messages and the context which must be used to interpret messages. A context of trust or distrust will fundamentally affect communication and be affected in turn. Mr. Martins J., one of the interviewees believed that, interorganizational partners with an appropriate degree of formal and informal communication had greater trust.

To confirm the findings above Z Test was employed at 5% level of significance. The cumulative computed Z test value was -0.0073 and this value was less than the critical value of 0.199. Thus falling into the rejection region. The researcher therefore accepts Hi and rejects Ho. The conclusions was that information and communication technology adoption influences the formation of trust within and between organizations in the virtual and real space as virtual organizations cannot perform favorable without the use or adoption of ICT.

The findings synchronized with that of Koeszegi (2004), who findings reveals that organizations that successfully apply information and communication tool have tremendously reaped enormous benefits of inter-organizational trust in network organizations. They are rated the best in terms of performance and efficiency.

Research Objective Five

Determine the extent to which development of inter-organizational trust enhances integration in virtual organizations.

The responses to question in table 4.22 clearly indicate that inter-organizational trust impacts positively on the integration of virtual organizations with the highest percentage of 74.8 strongly agreed and agreed respectively supporting the statement. The respondent’s views confirm that, inter-organizational trust has positive contribution to institution of commitment and organizational integration as well as improvement of social relationships. This was supported by oral interview with the key informant in the selected service organizations who believed that organizational trust boosts the job

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satisfaction and performance of employees. When the factors of motivation for the employees are considered the most important one seems to be creating an atmosphere that would encourage inter-organizational integration and improved productivity. One of the interviewees Mr. Bassy Okon believed that, interorganizational trust appears as a powerful mechanism for integration in interorganizational relationships even when it does not derive from calculative motivations, as trust explains a variety of interorganizational actions much more plausible than calculative self-interest.

To confirm the findings above, Z Test was employed at 5% level of significance. The cumulative computed Z test value was -0.0073 and this value was less than the critical value of 0.199. Thus falling into the rejection region. The researcher therefore accepts Hi and rejects Ho.

The conclusion was that inter-organizational trust facilitates integration in virtual organizations and boosts the effect of strategic importance on contact complexity.

These findings synchronized with the study of Chenhall and Smith (2003) who suggest that the relationships based on trust in organizations facilitate reaching the goals either individual or organizational, developing innovative strategies and sharing values, enhance integration and causes effective communication and participation in problems solving.

Research Objective Six

To examine how conflict is related to lack of shared understanding between partners in virtual organizations.

From the analysis of data in table 4.27, the respondent’s opinion clearly indicated that conflict to a very high degree is adversely related to lack of shared understanding between partners in virtual organizations. The respondents view confirmed that conflict in inter-organizational relationship is as a result of lack of shared understating as conflict is inevitable and adequate knowledge and shared understanding will facilitate effective management of conflict which will result in organizational performance.

The above result is further supported by the participants’ oral interview who believed that conflict is a necessary evil in organizational relationship that if well managed can bring togetherness, reveal area needing remedial action and in turn boost the performance of the service organizations. One of the informants Mr. Felix Itodo believed that, conflict causes the positive(s) that constitute(s) the relationship to disappear and/or negative states to arise as perceived by one or both parties.

To confirm the findings above, Z test was used at 5% level of significance. The cumulative computed Z test value was -0.0073 and this value was less than the critical

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value of 0.199. Thus falling into the rejection region. The researcher therefore rejects Ho and accepts Hi. The conclusion was that, conflict to a large extent is as a result of lack of shared understanding between partners in virtual organizations.

The findings relate to Panteli and Sockalingan (2005), when they analyzed the empirical relationship between trust and conflict within virtual inter-organizational alliances. The research suggest that, conflict is something that can either increase or decrease inter-organizational trust and productivity. If conflict is well managed; it can provide a mechanism for idea transfer and trust building. On the other hand, if conflict is poorly managed (or unduly avoided) this can stop or hinder the development of trust and/or erode trust and increase rigidity, in turn decreasing productivity. Thus, the main view of the authors was that knowledge sharing is positively related to inter-organizational productivity as long as adequate and appropriate levels of trust are present and conflict can be effectively managed.

Research Objective Seven

To esterblish the extent to which inter-organizational trust influences virtual organizations’ profitability in service organizations.

Table 4.32 was analyzed in order to achieve this particular objective. The cumulative percentage of 97.1% of those who supported the question indicates that, inter-organizational trust influences virtual organizations’ profitability in service organizations. The oral interview with the key informant in the selected service organizations buttresses the significance of inter-organizational trust, and how they interact to enhance profitability and relationship. They argue that a context of trust or distrust will fundamentally affect the profitability of service organizations and in turn be affected. They were of the opinion that profit margin will be higher when the organizational parttern show a higher level of trust. This finding indicates that higher levels of profit were associated with higher levels of interorganizational trust.

To confirm the findings above Z Test was employed at 5% level of significance. The cumulative computed Z test value was -0.0073 and this value was less than the critical value of 0.199. Thus falling into the rejection region. The researcher therefore accepts Hi and rejects Ho. The conclusions was that inter-organizational trust influences virtual organizations’ profitability in service organizations as virtual organizations cannot perform favorably without improved resources or profitability as finance is seen as the major pillar of modern organizations.

The findings synchronized with that of Bruneel et al (2004), whose findings reveal that low resources increase the need for trust with complex partner, presumably because having few resources would heighten the need for interdependence to enhance it

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profitability. Organizations that trust each other are rated the best in terms of commitment, performance, profitability and efficiency.

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CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1 Summary of Major Findings

The following findings were arrived at after taking into consideration the analysis of data and test of hypotheses in chapter four in line with the objectives of the study.

Findings show that inter-organizational trust impacts significantly and positively on virtual organizations commitment and performance in service firms and that alliance performance benefitted more from inter-organization trust when the degree of interdependence between two organizations was higher.

Secondly, environmental uncertainty and fluctuating workforce of inter-organizational relationship negatively affects virtual organizations effectiveness in service organizations. The relationship between trust and alliance performance is of no significance at very high levels of environmental unpredictability. When environmental instability was higher, the relationship between trust and alliance performance was weaker.

Thirdly, cultural norms and values impact negatively on inter-organizational relationship in virtual organizations as location and national culture influence the development of trust and its associated relational norms, as trust producing mechanisms vary according to the cultural context.

Fourthly, information and communication technology adoption was seen as a foundermental instrument that impacts positively on the formation of trust within and between organizations in the virtual and real space. Findings reveal that organizations that successfully adopt information and communication tool will tremendously reap enormous benefits of inter-organizational trust in network organizations as no virtual organizations can perform favorably without the use of ICT.

More so, findings reveal that inter-organizational trust enhances integration in virtual organizations. It has positive contribution to institution of commitment and organizational integration as well as improvement of social relationships.

Findings further reveal that conflict to a very high degree is adversely related to lack of shared understanding between partners in virtual organization. Conflict is inevitable in inter-organizational relationship and adequate knowledge and shared understanding will facilitate effective management of conflict which will result in organizational performance.

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Finally, findings show that inter-organizational trust influences virtual organizations’ profitability in service organizations as virtual organizations cannot perform favorably without improved resources or profitability as finance is seen as the major pillar of modern organizations.

5.2 Conclusion

The corollary of discussion in the thesis is that psychological and sociological changes, cultural differences, economic, and changing environmental conditions result in different points of view about the concept of trust among individuals. However, for the realization of some vital elements demanded for the success of the organizations such as team work, job satisfaction, organizational commitment, motivation, employee empowerment, information sharing, and organizational justice, one of the most critical factors is trust among the employees and towards their managers and the organization itself. The concept of inter-organizational trust which covers the feeling of assurance in the employees about the discourses, acts and decisions of each other and the belief that they would act for the good of the organizations has become an important instrument of success in organizations since the discovery of the benefit of human factor with the organization.

However, the literature scanning has proven that there are a large number of studies analyzing inter-organizational trust and related concepts while there are inadequate number of studies to direct human resources management, which bears the most important role in institution of organizational trust.

On the other hand, virtual organizations is a complex phenomenon that cannot be reduced to singular dimensions that are often used in the literature-spatial dispersion of members, the buyers switching between suppliers and outsourcing and a combination of these and some other characteristics is needed in order to identify and assess a virtual organizations. After all, almost every organization includes share tasks or projects, which include other participants, which literally and figuratively take place outside the organization. These partnerships are increasingly maintained by way of electronic communication. However, when we examine inter-organizational trust in virtual organizations from the perspective of a network of organizations and its internal patterns, then we can certainly conclude that the virtual organizations is a new type of network. The novelty lies in the essential role that trust and informational and communication technology plays in inter-organizational relationship.

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5.3 Recommendations

Based on the findings above, the researcher recommends as follows:

The considerably growing importance of collaboration within organizational life necessitates the formation of inter-organizational processes not on the basis of power but on the basis of trust; therefore formation of organizational processes should be on the basis of trust which will result in institution of interaction between the employers and the employees within organizations and increase in commitment, job satisfaction, performance and growth of employees and organizations.

For organizational effectiveness, environmental instability should be curtail, the relationship between trust and alliance performance in inter-organizational relation should be strong, considered-behavioral uncertainty and improve inter-partner relationship.

The influence of cultural factors on virtual interaction also should deserve attention due to the importance of culture building. Organizations should build a strong organizational culture to enhance its success.

Special issue makes an important advance in the adoption of ICT for virtual organizations. Practical, prescriptive statements about how to manage communication for virtual organizations should be developed to achieve the kinds of scientific knowledge required.

For institutional commitment and organizational integration, inter-organization trust should be the primary objective of virtual organizations to facilitate the improvement of organizational profitability and social relationship.

Since conflict is inevitable factor in social relationship and could bring positive or negative result in inter-organizational relationship, management should develop adequate knowledge and shared understanding about each other’s principle and ethics to facilitate organizational performance.

Finally, members of modern day organizations should facilitate effective and efficient trust based relationship to enhance its capital base and remain competitive in today’s turbulent market place.

5.4 Contribution to Knowledge

This study adds to the research on inter-organizational trust and effect on virtual organizations’ performance of the service sector using selected service organizations in FCT Abuja Nigeria as a case study. Presently, there is no existing study (to the best of my

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knowledge) on inter-organizational trust and effect on virtual organizations performance in Nigerian context, as most studies focused majorly on information and communication system in virtual organizations. This study therefore takes a departure from the generalized communication and information system in inter-organizational relationship and focused specifically on inter-organizational trust and effect on virtual organizations performance in Nigeria, with specific reference and/or emphasis on service sector of Nigerian Economy.

Gill, (2012:330) performed a study on the use of information and communication technologies in virtual organizations. The study concludes that, communication is fundamental to any form of organizing, but it is preeminent in virtual organizations. Without communication, the boundary-spanning among virtual entities would not be possible. Electronic communication enables parties to link across distance, time, culture, departments, and organization.

Electronic communication loosens constraints of proximity and structure on communication, making it possible for spatially or organizationally distant parties to exchange messages with one another (Feldman, 1987:98). Electronic communication provides an opportunity to signal interest in forming connections that otherwise would be difficult or impossible to maintain (Fulk et al, 1996:67). In this way, communication is not only the trigger for virtual relationships but also can be the outgrowth of them (DeSanctis, Staudenmayer and Wong in press). New exchanges between parties, or new relationships, can occur as a result of established connections among distributed entities (Monge et al, 1998). Indeed, one of the hopes for virtual organizations is that new connections among entities will result from lateral boundary spanning and blending of expertise (Davidow and Malone 1992:10). According to this view, the real power of the virtual form is realized when relationships among electronically connected people or firms produce new and/or qualitatively different communication that yields product or process innovation (Ring and Van de Ven, 1994).

Theorists continue to look at communication either as a strategy for an organization or as a lower-level skill. Grates (1995: 42-46) encourages communication as a means of creating and to leveraging information as a way to achieve long-term growth. Grates (1996: 12-15) also considers integrating communication into corporate strategy as a way to create momentum need for growth. Argenti (1994: 28) advocates such a communication strategy throughout a corporation, from employees to shareholders to customers. Ackley (1997: 32-33) believes that unless communication is strategically full time, the organization and its communication is dysfunctional.

Grates (1995: 42-46); Grates (1996: 12-15); Argenti (1994: 28); and Ackley (1997: 32-33) studies were carried out in Europe not only in terms of research and development but also in terms of the emergence of communication and information system and emergence of

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various forms of enterprise networking at regional level. This “movement” is consistent with the process of European integration, which represents a push towards a “culture of cooperation”, but also with the very nature of the European business landscape that is mostly based on small and medium size enterprises (SME) that need to join efforts in order to be competitive in open and turbulent market scenarios.

However, the present study differs from the previous studies by focusing on inter-organizational trust and effect on virtual organizations’ performance which is aimed at organizational performance in service organizations in Nigeria.

The findings of this study are important from business and academic research point of view. From business perspective, the result of this study can contribute to enhanced decision making and positives expectation of employee about the application and policy of the organizations even in difficult situation in inter-organizational relationship. From academic research point of view, this study fill the knowledge gap by contributing to the existing literature on inter-organizational trust in virtual organizations in Nigerian context (if any) as most previous studies on inter-organizational trust and virtual organizations have been carried out in developed economies of Europe and USA.

5.5 Suggestion for Further Study

Since this research work was based in services oriented organizations, further studies is required in this field on organizational trust in virtual organizations in a technical industry where high risk of accident are prevalent. This will facilitate in the assessment of inter-organizational trust in virtual organizations as well as the response of the workers towards performance in Nigeria.

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APPENDIX 1

INTRODUCTORY LETTER

Department of Management,

Faculty of Business Administration,

University of Nigeria,

Enugu Campus.

5th Dec, 2012.

THESIS TOPIC: INTER-ORGANIZATIONAL TRUST AND EFFECT ON VIRTUAL ORGANIZATIONS’ PERFORMANCE OF SELECTED NIGERIAN SER VICE FIRMS.

Dear Respondent,

This investigation is been conducted on the above topic for academic purposes and the researcher would be grateful if you could provide answers to the questions in the next page. Please be inform that the strictest confidentiality is assured with respect to answers given as facts are needed for the academic purposes which would enable management decide upon the right managerial techniques to adopt that would enhance performance and bring forth achievement of objectives in the service firms of Nigerian economy.

Please tick where appropriate.

Thank you for your co-operation.

Yours faithfully,

Omale Sunday .A

183

APPENDIX II

QUESTIONNAIRE

SECTION A

Inter-organizational trust influences virtual organizations commitment in service organizations.

Response: Strongly Agreed [ ] Agreed [ ] Strongly Disagreed [ ] Disagreed [ ] No idea [ ]

The extents to which members of one organization hold a collective trust orientation toward another organization facilitate performance and growth in service organization.


Inter-organizational trust creation, growth and commitment are gradual and sequential.


Do the firms that need alliance reduce its own power so the other part can trust it?

Response: Yes [ ] No [ ]

Trust plays a role in shaping inter-organizational structure and in structuring alliance relationships.


Environmental uncertainty and fluctuating workforce of inter-organizational relationship impact negatively on virtual organizations effectiveness in service organizations.


Does organization experience unproductive high-trust relationships resulting from environmental uncertainty?


Trust formation depends on certain relational behavior that foster or impede the creation of an engaging environment.

184


Lack of close supervision impact negatively on the performance of virtual organizations in federal capital territory Abuja.


Lack of human contact negatively affects the performance of employees in service organizations


Cultural norms and values affect inter-organizational relationship in virtual organizations.


Cultural norms and values affect the establishment of inter-organizational trust.


Managers in low-context cultures tend to evaluate a situation by facts that are immediately visible.


High-context cultures are strongly driven by well-defined relationships between individuals or organizations.


Management to a high degree acknowledged individual cultures difference in inter-organizational relationship.


ICT adoption influences the formation of trust within and between organizations in the virtual and real space.

185


Trust increases dyadic information sharing and significantly lowering transaction costs.


Does trust change when trust is network based?


Is there positive impact of communication quality on trust formation in service organizations?


Virtual organizations significantly use ICT for monitoring employees work.


Developments of inter-organizational trust enhance integration in virtual organizations.


Inter-organizational trust in virtual organizations significantly provides flexibility and adaptability for integration.


Recognizing and celebrating achievements at all levels build shared values and organizational integration.


Encouraging employee participation in decision making builds loyalty and commitment and improve overall climate for integration.


Formation of inter-organizational networks is driven by overcoming investment barriers and achieving of synergy effects.

186


Conflict is to a very high degree related to lack of shared understanding between partners in virtual organizations.


Unresolved conflicts to a large extent can deter the formation of trust.


Conflicts when well managed can promote the effectiveness of a partnership.


Can organization inability to satisfy all the needs of its workers facilitate conflict in inter-organizational relationship?


Does management obtains negative behavior after helping their employees to meet their basic need?


Inter-organizational trust influences virtual organizations profitability in service organizations.


The extents to which members of one organization hold a collective trust orientation toward another organization enhances profitability in service organization.


Virtual organizations’ profitability are gradual and sequential.


187

Do the firms that need improvement in its profitability reduce its own power so the other part can trust it?


Trust plays a role in shaping virtual organizations’ profitability and in structuring alliance relationships.


188

SECTION B

ORAL INTERVIEW GUIDE (KEY TOP MANAGEMENT STAFF ONLY )

In your own opinion, do you think inter-organizational trust influences virtual organizations performance?


Briefly explain.

___________________________________________________________________________________________________________________________________________________________

In what way do constraint such as environmental uncertainty and fluctuating workforce of virtual organizations impact negatively on organizations effectiveness?

Briefly explain.

___________________________________________________________________________________________________________________________________________________________

How do cultural norms and values affect inter-organizational relationsip in virtual organizations?

Briefly explain.

____________________________________________________________________________________________________________________________________________________________

Is it possible for virtual organizations to perform favorably with the use of information and communication technology (ICT)? Yes [ ] No [ ]

Explain briefly sir.

___________________________________________________________________________________________________________________________________________________________

Do you think development of inter-organizational trust facilitate cooperation and integration in virtual organizations? Yes [ ] No [ ]

Explain briefly. ____________________________________________________________________________________________________________________________________________________________ In your own view, is conflict adversely related to lack of shared understanding between partners in virtual organizations?

Explain briefly.

189

____________________________________________________________________________________________________________________________________________________________ In your own opinion, do you think inter-organizational trust influences virtual organizations profitability in service organizations?


Briefly explain.

___________________________________________________________________________________________________________________________________________________________

THANK YOU VERY MUCH FOR YOUR ASSISTANCE

190

APPENDIX III

CORRELATIONS COEFFICIENT

First questionnaire (X) 9 7 10 8 7 9 8 10 9 8 Second questionnaire (Y) 6 7 7 8 9 8 9 6 8 9

r = Covariance (XY) = S2xy óx2 X óy2 S2x X Sy2 The covariance (XY) is:

£ X Y - £ X. £ y n n The variance of X is £X2 - ﴾£X)2

n n The variance of Y is £Y2 - (Y)2

n n

X Y X = x-x Y =y-y x2 Xy y2 9 6 0.5 -1.7 0.25 0.85 1.89 7 7 -1.5 -0.7 2.25 1.05 0.49 10 7 1.5 -0.7 2.25 1.05 0.49 8 8 -0.5 0.3 0.25 0.15 0.09 7 9 -1.5 1.3 2.25 2.1 1.69 9 8 0.5 0.3 0.25 0.15 0.09 8 9 -0.5 1.3 0.25 0.65 1.69 10 6 1.5 -0.4 2.25 2.55 1.89 9 8 0.5 0.3 0.25 0.15 0.09 8 9 -0.5 1-3 0.25 0.65 1.69 £X=85 x = 85 10 =8.5

£Y=77 y=77 10 =7.7

£x2=10.5 £xy=9.35 £y2=10.01

r = £xy

(£x)2 (£y)2

191

Where £xy = 9.35

£x2 = 10.5

£y2 = 10.01

Substitute the value

; r = 9.35

10.5x10.01

r = 9.35

105.105

r = 9.35 10.25 r = 0.93 Ans

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