Conditions to Relationship Building – Trust

In the fourth stage are the conditions to build the relationship and they include the whole bonding trust in the organizational and individual level. Whereas majority of research focus on the trust in the existing relationships the Relationship Emerging Flow of Mandjak et al. (2015) concerns the bonding trust prior the relationship. Trust has a certain role in nascent business relationships and as a condition it is fundamentally important for establishing a new business relationship (Wilson 1995).

In the previous literature about trust in business relationships, trust usually is based on prior experience and can be quantitatively calculated. In the case of new business relationships prior experiences do not, however, occur and trust can be seen only as a perceived sense of trust. Another basis of trust forming is in the predictability of another party’s behavior. (Mandjak et al. 2015.) When the basis of trust forming is the predictability of another party, it is easy to understand, why young firms are struggling with the liability of newness and why liability of newness is recognized as a major factor in contributing to the high rates of failure among new firms (Kor & Misangyi 2008; Mandjak et al.

2015).

Trust is multi-dimensional phenomenon and difficult to measure (Bunduchi 2005). It is not a behavior or a choice, but a psychological condition and as a psychological state it can help with actors’ decision making. Trust is involved in the interaction process facilitating the creation of information and social exchange episodes. In these exchange episodes different trust building scenarios occur both in individual and organizational level. Open sharing of information has seen the increase trust development, one-sided information flow on the contrary leads to low levels of trust. (Bunduchi 2001; Mandjak et al.

2005)

Society is made up by relations of social exchange and according to Lane

& Bachmann (2002, 10) exchange would not be possible without trust. This is the case in the exchange between organizations as well. According to Doney, Barry & Abratt (2007) (cited, in Mandjak et al. 2015) social interaction and open communication play an important role in trust formation in B2B environment.

Sahay (2003) in turn underlines the role of information shared in the interaction process and the prior information about the partner. This is in line with Anderson & Narus (1990) who define communication between companies to be the perquisite for trust, increases it and leads to better communication itself.

Consequently, both the awareness and the interaction phase in the Relationship Emerging Flow affect the formation of trust (Mandjak et al 2015).

Doney and Cannon (1997) argue that how partners evaluate each other’s credibility and benevolence is the basis of trust. Benevolence refers to partners motivation to engage in the relationship and credibility to the ability to fulfill other partner’s needs. The evaluation of these requires, again, a lot of information about the other party

According to Mandjak et al. (2015) there are several ways by which the interaction process may enter a state of whole bonding trust, where conditions are suitable for relationship building and the development of bonding trust is not linear. The development of bonding trust is a result of interaction processes between the two organizations and the people involved in the generation of a relationship. This development may occur in personal level or organizational level. In personal level, for example, trust is built on personal relationships between the people in the emerging relationship (salesperson and someone in the buying organization). Lincoln, Gerlach and Ahmandjan (1996), for example, found out in their research about Japanese industrial groups that personal relationships among key individuals played a crucial role in producing trust between organizations. In organizational level trust is bestowed in the whole organization and its image itself. Trust may occur first in the personal level and then be extended to the whole organization, or vice versa, but in order to build a relationship, positive perceptions at both a personal and organizational level are needed. Later on in the relationship, bonding trust in this new emerging relationship may transform into experienced trust.

As noted by Kor & Misangyi (2008) legitimacy in the industry can be also signaled through industry expert outside directors, especially when managers cannot send a signal themselves due to a void in their industry experience. Not only may outside director with industry experience have legitimacy but also useful industry connections and advice. Although a direct input of a particular industry expert to everyday activities might be small, it has a big meaning to image of the company.

This is in line with Aggarwal et al. (2005) who found a strong correlation between empathy, trust and satisfaction. Buyers in their study believed that salespeople with higher empathy were more trustworthy and buyers with the more empathetic sellers were also more satisfied with their relationship.

Trust is a dynamic phenomenon, which has a critical role in a birth of a new business relationship. According to Rousseau et al. (1998) it has three phases. Building of trust is the first of these and the focus of this study. It is essential to find out, what factors have an effect on the credibility of the company in the eyes of a potential business partner. For new and small companies operating in global environment trust is crucial, since organizations are more likely to engage in internet-based exchanges and interactions with trusted parties (Bunduchi 2005).

Figure 3 Relationship Emerging Flow (modified from the theory of Mandjak et al. 2015)