Chapter 5: The Paradox of Trust: Managing Trust and Cost Disclosure in Alliances

This chapter studies the management of trust in strategic alliances by focusing on the relationship between trust and cost disclosure. The chapter employs a multi-paradigm lens using information economics, social psychology, and sociological approaches to analyze paradoxical effects of the management of trust in alliances. The empirical domain of the investigation is a longitudinal study of a construction process where open books were used to calculate and optimize the aesthetics, functions, and economy. The process of disclosing cost information took place within a wider program of partnering, focusing on the institutionalization of trust and cooperative norms. However, changing the old institutions of arm’s length relationships was difficult. Disclosed cost data were difficult to understand, and contained cost data of questionable validity. This produced processes characterized by conflict and the use of skeptical strategies by some actors to verify cost data. Skeptical strategies however contradicted norms of trust. Trust was then used to try to stop skeptical strategies and cost verification. Trust was a discursive resource used to manage relationships. Based on these findings the chapter develops three unintended consequences and a paradox of trust. First, in a situation where data of questionable validity and high complexity are disclosed, sharing of cost information does not necessarily generate transparency. Second, conflict and skepticism may generate transparency in interfirm relationships. When accounts are invalid, skepticism serves to increase validity and comprehension of cost data. Third, trust facilitates and negates transparency. Trust in the extant literature is portrayed as a facilitator of cost disclosure; however, trust is also a discursive resource which may be used to inhibit skeptical strategies and thereby verification of cost data. Trust therefore, paradoxically, also constitutes a way to black box the economy in interfirm relationships.