Research on Trust Review, Chapter from my Thesis, based on the 'Trust' book by M?llering

I never imagined that reading research can be so interesting! This is a chapter from my thesis (unedited), heavily based on 'Trust: Reason, Routine, Reflexivity', a book by Guido M?llering. Check it out - it has immediate everyday applications!

My grade of the book: A- (using the American grading system) - highly recommended!

Research on Trust Review

A number of authors have shown that trust is a crucial element of successful sales relationships (Dwyer et al., 1987; Hawes et al., 1989; Prus, 1989; Schurr & Ozanne, 1985; Swan & Nolan, 1985). At the same time, relatively few studies have concentrated on how trust is built in entrepreneurship (e.g. Bergh et al., 2011; Neergaard and Ulh?i, 2006; Nguyen and Rose, 2009; Smith and Lohrke, 2008; Tillmar, 2006). That's why, now that we have looked at the client acquisition literature, let's look at the literature on trust and highlight relevant interactions with client acquisition and entrepreneurship. The question I would like to explore is whether the trust would emerge quicker in certain circumstances (for example, at conferences and tech events), which could lead to a smoother and quicker client acquisition process. 

One widely accepted definition of trust is that trust is ‘a psychological state comprising the intention to accept vulnerability based upon positive expectations of the intentions or behavior of another’ (Rousseau et al., 1998). As highlighted by M?llering (2006), at the heart of the concept of trust is the 'leap of faith', 'as-if attitude' of accepting vulnerability and uncertainty but acting as if nothing bad will happen. M?llering writes that ‘willingness to be vulnerable’ (Mayer et al., 1995) is related to optimistic, positive expectations and embracing vulnerability rather than avoiding or eliminating it, which makes trust different from other social processes. 

The notion of the leap of faith and optimistic, positive expectations as a precursor of trust is very interesting in a startup and entrepreneurship context since optimism is recognized as a primary characteristic of business owners (Cassar, 2010; De Meza, 2002). Welter (2012) also notes the similarity: 'When pursuing entrepreneurial activities and trusting, individuals deal with the unknown; when acting entrepreneurially, we do not know whether we will achieve the intended results; and when trusting, we do not know whether the persons in whom we trust will be worthy of it.'

At the center of the book by M?llering (2006) and his research is the framework of trust that he calls 'the wheel of trust'. In the center of the wheel is the trust itself, which through suspension ('leap of faith', 'as-if attitude', which we touched upon briefly in the previous paragraph) interacts with reason, routine, and reflexivity, the pillars of trust that are all contributing to trust and interacting with each other. In one of his papers, M?llering refers to trust and control as a duality, where each can't exist without the other and contributes to the relationship (M?llering, 2005). Suspension allows the actors to suspend the doubt and make the leap of faith towards increased control that might grow over time, to jump-start the vehicle of trust, to take the first step towards a process that could become self-reinforcing. M?llering (2006) emphasizes: 'It is not merely the case that trust rests on imperfect bases which leave a residual gap that needs to be crossed. Rather, by successfully crossing the gap, trust also validates those bases.' Suspension then is the irrational element that is like the glue for the different elements of trust, making them work together without making trust arbitrary or trivial. 

In the discussion of suspension noteworthy is the notion of 'fiction' that M?llering (2006) brings to light. In his own words, 'the fiction co-produced by trustor and trustee remains a fiction, potentially a dangerous ‘fake’, and it is ultimately still up to the trustor to suspend uncertainty and vulnerability'. Ortmann (2004) refers to a similar notion of 'fiction' saying that countless daily activities are only made possible because people behave as if certain things were true. This strikes a chord with the 'fictional stories' that make humans unique and enable our way of life and progress described by a historian Yuval Noah Harari (2014). This is particularly interesting in the startup context where startup hype and fanfare are a big part of the startup culture as well as tech conferences and events.

Some sources indicate that faith can be an attractive choice because it brings people the feelings of safety, comfort: 'It just makes you feel comfortable going through the process if

you have confidence in the doctor', say some patients facing brain tumor surgery (Bernstein et al., 2004). More than that, often the suspension doesn't happen in isolation and is enabled by the social networks and the support from other actors as trustors and trustees and embedded in relationships with each other (Brownlie & Howson, 2005; Brunetto & Farr-Wharton, 2007). 

Let's look at the 3 pillars of trust of M?llering's (2006) model and how they relate to other trust literature. The first one is the reason. A notion that trust is based on the rationality of the actors and that trusting behavior is rational.

Looking at the research on trust in economics, it's clear that it's been dominated by exploring the rational choices of the actors and seeing actors as inherently opportunistic (Lindenberg, 2000). This notion unavoidably leads to a line of thinking that's focused on avoiding exploitation by the bad actors and averting negative outcomes. Calculativeness becomes the central mechanism in explaining trust and behavior that surrounds it, according to economists and rational choice theorists (Bradach & Eccles, 1989; Williamson, 1993)

Calculative thinking leads to the question of trustworthiness, which has been one of the answers to the game of trust. A classic study by Henslin (1968) found that taxi drivers

use a number of criteria such as sex, age, ethnicity, neighborhood and the person’s degree of sobriety in order to decide the trustworthiness of their passengers. This led to a number of studies into the trustworthiness indicators, for example, a study by McKnight et al. (1998) exploring the characteristics of benevolence, competence, honesty, and predictability.  Unfortunately for startups and salespeople overall, Dasgupta (1988), who studied trust signaling in sales relationships, concluded that ‘there is nothing which enables the honest salesman to distinguish himself from the dishonest one’ (p. 70). There is a significant exception: ‘no poisoner seeks to demonstrate his honesty by drinking from the poisoned chalice’ (Bacharach & Gambetta, 2001, p. 159). But this argument explains trust away, bringing it to the territory of complete control where overwhelming evidence reduces the vulnerability and uncertainty to zero.

Trustworthiness indicators do not always represent the rational approach to trust though. Some researchers such as David Lewis and Andrew Weigert (1985) have also explored the notion of emotional trust that relies on the notion of ‘I trust him because I like him’. A similar notion has been discovered by Gulati (1995) in an even broader sense: he states that familiarity breeds trust, whereas familiarity is defined as favorable previous ties between actors. In the same vein, Lorenzen (1998) described how trust is often facilitated by communities with common rules and history.

M?llering (2006) presented emotional trust mostly as the evidence of paradoxes in the rational theory and as a tool to rescue actors from the 'dilemmas and dysfunctional social paralysis' but never explained how it fits in his own framework of the wheel of trust. Nonetheless, emotional trust and trustworthiness indicators might have a noteworthy relationship with startup sales and client acquisition at conferences and events. In such events, startup representatives give corporate clients a better chance to evaluate themselves in the face to face interaction, which could lead to a faster emergence of trust. In comparison, cold calling offers fewer opportunities to communicate emotion and trustworthiness indicators.

Another famous rational explanation of trust explored by a number of researchers is the 'shadow of the future’ (Axelrod, 1984; Gibbons, 2001; Granovetter, 1985; Pruitt & Kimmel, 1977). It states that the actors' awareness of the possibility of future interactions will decrease the number of bad acts in the anticipation of retribution. 

Lastly, a notable rational approach to trust by Hollis (1998) considers that actors recognize their need to be a member of the community and that changing the question from 'What is good for me?' to 'What is good for us?' allows for the trust to emerge. This is somewhat related to the 'shadow of the future' in a specific context. 

To sum up on the rational views on trust, according to M?llering (2006), there may be an element of reason in all trust, but trust as such can not be explained solely by rationality and that rational trust theory runs into paradoxes. ‘If one trusts another, because there are incentives for the other to be trustworthy, then the vulnerability to exploitation is removed which gives trust its very meaning’ (James, 2002, p. 291). M?llering concludes that perhaps non-rational trust should be distinguished from the rational acts of cooperation.

Continuing with the second pillar of M?llering's (2006) trust model, trust as routine, M?llering relies on the established notion of embeddedness of trust (Meyer & Jepperson, 2000). Meyer and Jepperson write that both the trustor and the trustee are embedded into the social context which influences how they act. Actors make society and are made by society (Berger & Luckmann, 1966). The core concept in enabling trust as a routine is its institutionalization, such that trust becomes taken for granted. Institutional trust is studied by researchers in this context as a system of rules and meanings, not a third-party guarantor or enforcer as it would be looked at in rational trust theory (DiMaggio & Powell, 1991; Zucker, 1986). 

DiMaggio and Powell (1983) studied 'institutional isomorphism', which they divided into coercive, mimetic and normative isomorphism. Coercive isomorphism relates to external pressure to conform as a way to preserve legitimacy. Mimicry refers to the imitation of the behavior of others. Normative isomorphism describes how institutions shape what is normal, thus framing the world of the actors in a certain way. 

The institutional trust could very well be the most significant influence on many startup-corporate interactions, especially at conferences and tech events. Studies show that institutional trust contributes to entrepreneurship and economic growth (Knack &

Keefer, 1997; Lane, 1997; ?zcan and Bj?rnskov, 2011; Welter, 2012; Zak & Knack, 2001). At events, notable is the influence applied to potential clients. Coercive isomorphism and mimicry might be making corporate representatives to come to tech conferences, to showcase how innovative they are, to engage in startup relationships. 

A group of researchers (Mitchell et al., 2002) described that entrepreneurs from eleven countries shared a common culture that was distinct from the beliefs of the non-entrepreneurs. Perhaps normative isomorphism at tech conferences helps to bring corporate clients along for the ride with startup hype, dark conference buildings with neon lights, epic stages and performances, and overly optimistic entrepreneurs with their unrealistic ventures. DiMaggio (1988) and a number of others studied the role of 'institutional entrepreneur' as an important influence on such processes of institutionalization: 'New institutions arise when organized actors with sufficient resources (institutional entrepreneurs) see in them an opportunity to realize interests that they value highly’ (p. 14; see also Beckert, 1999; Garud et al., 2002; Munir & Phillips, 2005). Fukuyama (1995) introduced the concept of high-trust and low-trust environments, where both are self-reinforcing and high-trust environments, among other things, foster productive entrepreneurship. This could mean that one of the most important roles of the institutional entrepreneurs behind the tech events and conferences is to enable high-trust environment.

In order to promote trust, institutions have to be trusted. Thus, trust in the system has been explored by a number of researchers, especially in political science (Barber, 1983; Coleman, 1990; Dunn, 1988; Fukuyama, 1995; Putnam, 1995; Sztompka, 1999; Warren, 1999). Luhmann (1979) writes that ‘the person trusting realizes his dependence on the functioning of a highly complex system which he cannot see through, although it is, in itself, capable

of being seen through’, so that in effect the individual actor ‘has to continue trusting as though under compulsion to do so’ (p. 50). There might be some parallels here with the startup world. While most of the startups fail, the corporate actors have seen startups being around for a couple of decades already and, even though their immediate experience might be negative, they must act with the faith that they will encounter the unicorns that media preaches about. 

Luhmann (1988) also recognizes the social elements of the system trust where the actor assumes that everyone else trusts the system too. Another social element of system trust is that it depends on the representatives of the system that the trustor encounters. It's been shown that patients develop their trust or distrust towards medical institutions though their interactions with doctors and other representatives of these institutions (Brownlie & Howson, 2005; Lowe, 2005).

The last of the three pillars of trust is what M?llering (2006) called reflexivity. In his own account, M?llering's concept of reflexivity is related to that of Giddens' (1994) 'active trust' and Zucker's (1986) 'process-based trust' both of which describe trust as dynamic and dependent upon the actions of the actors and the development of their relationship. Another model that seems to describe the thinking behind reflexivity is an integrative model of organizational trust (Mayer et al., 1995). A defining feature of this model is that it starts with the assessment of the factors of perceived trustworthiness and ends with a certain outcome of trusting behavior, which then feeds back to the factors of perceived trustworthiness creating a loop of trust.

Understandable feature of the reflexivity of trust is that it builds slowly, step by step. ‘Social exchange relations evolve in a slow process, starting with minor transactions in which little

trust is required because little risk is involved and in which both partners can prove their trustworthiness, enabling them to expand their relation and engage in major transactions. Thus, the process of social exchange leads to the trust required for it in a self-governing fashion’ (Blau, 1968). The concept is also referred to as the ‘principle of gradualness’ (Luhmann, 1979). This mirrors the startup-corporate collaboration well: in the vast majority of cases, such relationships start with a pilot project, which is a project that has small costs or is free and enables the client to try out the product. 

A few models describe the development of trust as occurring in stages, for example, Child (1998) wrote about trust evolution, from calculation to prediction to bonding. There exist different views on whether only exceptional experiences count as a contribution to the trust-building (Luhmann, 1979) or positive experiences in general (Zucker, 1986). 

The dark side of the trust-building has also been brought to light questioning whether the lock-in, privileging certain groups while effectively excluding others, over-confidence and the lack of effective controls due to over-reliance on trust are potentially dangerous possibilities for the actors (Kern, 1998; Thomas, 2000; Smallbone & Welter, 2009; Welter & Smallbone, 2011; Zahra et al., 2006). 

Another interesting feature of the reflexivity of trust is that trouble has been found to also contribute to the trust-building and not necessarily being detrimental, allowing the actors to prove their trustworthiness (Six, 2005). This could play well for startups since mistakes in the early stages of product development are a given.

References

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Thanks for sticking till the end! I publish book reviews every Wednesday. Are you curious about what I do in my job as a startup CEO? We coach employees via Teams/Slack to drive agile and digital transformation, change management, learning, sales. Working with Bayer, Posti, Futurice. Winner of DigiEduHack and Sanako EdTech Hackathons. https://panda-training.com