Trust as a Governance Mechanism in Internet-based Interorganizational Cooperative Relationships

In a world of increasing complexity and situational variety, business-to-business collaboration based on real time information pooling is thought to be central for optimization of the value creation process. The qualities of the Internet render possible a simultaneous exchange of information among an unlimited number of firms, causing both academics and practitioners to assert that inter-firm alliances based on the Internet will become increasingly important in economic life. This paper reports on an explorative study that focuses on the use of Internet technology in interorganizational cooperative relationships, and the consequences this may have for the use of trust as a governance mechanism. The findings indicate that trust-based governance to a large extent is dependent on the specific actors that are involved in the relationship, and the particular industry in which the companies operate. Further, while interorganizational trust was very important in the initial stages of Internet business, mainly because of a need for flexibility that allowed for adapting to unforeseen situations, our findings indicate that we now experience an evolution towards more formal control mechanisms as companies are getting more acquainted with the Internet as a medium for conducting inter-firm business transactions