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Electronic copy available at: http://ssrn.com/abstract=1646375
Electronic copy available at: http://ssrn.com/abstract=1646375
FORDHAM UNIVERSITY
SCHOOLS OF BUSINESS
Foundations of
Organizational Trust: What
Matters to Different
Stakeholders?
Michael Pirson
Deepak K. Malhotra
Published Paper
2010-004
Copyright © 2010 by Michael Pirson and Deepak K. Malhotra
It may not be reproduced without permission of the copyright holders.
Electronic copy available at: http://ssrn.com/abstract=1646375
Electronic copy available at: http://ssrn.com/abstract=1646375Electronic copy available at: http://ssrn.com/abstract=1646375Electronic copy available at: http://ssrn.com/abstract=1646375Electronic copy available at: http://ssrn.com/abstract=1646375Electronic copy available at: http://ssrn.com/abstract=1646375
Foundations of Organizational Trust: What Matters to Different Stakeholders?
0BTrust, defined as the willingness to be vulnerable to the discretionary actions of another party, has
been widely recognized as a key enabler of organizational success (Davis et al. 2000). Trust facilitates
efficient business transactions (Noteboom 1996; Williamson 1993), increases customer satisfaction
(Doney and Cannon 1997; Morgan and Hunt 1994), and enhances employee motivation and commitment
(Brockner et al. 1997; Tyler 2000). More generally, trust promotes cooperative behavior within
organizations (Gulati and Westphal 1999; Williams 2001) and between organizational stakeholder groups
(Jensen 2003; Uzzi 1997), as it fosters commitment (Ganesan 1994), motivation (Dirks 1999), creativity,
innovation, and knowledge transfer (Tsai and Ghoshal 1998). As such, by strengthening relationships
between the firm and its various stakeholders (e.g., employees, customers and investors), trust serves as a
source of competitive advantage for the organization (Barney and Hansen 1994; Nahapiet and Ghoshal
1998). With the impact of trust gaining increased substantiation, a vast and growing literature has begun
to focus on identifying the foundations of trust in organizational contexts (Kramer 1999).
This paper examines whether and how the basis of trust in organizations differs across different
types of stakeholders. As conceptualized here, stakeholder trust in an organization entails a willingness
on the part of the individual stakeholder (e.g., a customer, employee, etc.) to accept vulnerability to the
actions of the organization (Zaheer et al. 1998). As we discuss in greater detail below, this implicates an
individual-to-organization level of analysis, wherein trust in the organization may be based in part on
attributions that the stakeholder makes regarding the trustworthiness of relevant organizational actors.
We take as a point of departure the perspective that trust entails positive expectations regarding
another party’s behavior and intentions (e.g. Rousseau et al. 1998) and that these expectations are based
on the attributions the trustor makes regarding the trustworthiness of the other party (Malhotra and
Murnighan 2002; Mayer et al. 1995; McAllister 1995). For example, Mayer et al. (1995), in their seminal
review of trust research, identify attributions regarding “ability”, “benevolence” and “integrity” as three
primary dimensions along which the trustworthiness of the target may be evaluated. Mishra (1996)
Electronic copy available at: http://ssrn.com/abstract=1646375
Electronic copy available at: http://ssrn.com/abstract=1646375Electronic copy available at: http://ssrn.com/abstract=1646375Electronic copy available at: http://ssrn.com/abstract=1646375Electronic copy available at: http://ssrn.com/abstract=1646375Electronic copy available at: http://ssrn.com/abstract=1646375
includes attributions regarding “openness” as a relevant dimension, while Sitkin and Roth (1993) and
Lewicki and Bunker (1996) introduce the role of “identification”. Still others include attributions of
discretion, predictability, and reliability in their models (Rotter 1971; Sheppard and Sherman 1998).
While trustworthiness is widely considered to be multi-dimensional (Butler 1991; Tschannen -
Moran and Hoy 2000), which dimension is most relevant in a particular situation can vary (Coleman
1990; Schoorman et al. 2007). Boersma et al. (2003) find that in different stages of a joint-venture
relationship different dimensions of trustworthiness are critical. Similarly, Sheppard and Sherman (1998)
argue that in different types of relationships, entirely different dimensions of trustworthiness may be
relevant. As we elaborate below, the relevant dimension(s) of trustworthiness in any relationship are
likely to be a function of the type of vulnerability the trustor faces.
To examine the contingent nature of stakeholder trust (Zey 1998), we focus on the type of the
stakeholder relationship (see Friedman and Miles 2002; Wicks et al. 1999). Drawing on stakeholder
theory, which suggests that stakeholders differ greatly in their expectations and interests (Donaldson and
Preston 1995; Schneper and Guillen 2004), we posit that different stakeholders will also look for different
signals regarding the trustworthiness of the organizations with whom they interact. For example,
customers may trust an organization because they perceive its workers to be competent, while employees
base their trust in the organization on whether management is perceived to be benevolent. This raises an
important and, as yet, unanswered theoretical (as well as empirical) question regarding the basis of
organizational trust: which dimensions of trustworthiness are most relevant to which stakeholder groups?
While prior research has identified a host of dimensions—e.g., competence, benevolence,
integrity, transparency, etc.— which are potentially relevant across a variety of relationships, there has
been relatively little effort to integrate this important body of work. As a result, little is known regarding
which of these dimensions are most critical in building and sustaining stakeholder trust, and whether the
relevance of the various dimensions is contingent upon the nature of the stakeholder relationship (Bigley
and Pierce 1998). Furthermore, as we discuss below, this lack of integration has made it difficult to
identify the precise nature of organizational trust as it is built (or undermined) across stakeholders.
This paper seeks to bring remedy in three ways. First, we bridge organizational trust theory and
organizational stakeholder theory to create a contingency framework that identifies which dimensions of
trustworthiness are most relevant for which types of organizational stakeholders. Second, we leverage a
large, original survey of 1,298 stakeholders from four different stakeholder groups across four differently
structured organizations in order to test the absolute relevance and the relative importance of a
comprehensive set of trustworthiness dimensions. Third, whereas previous analyses have largely focused
on within-stakeholder comparisons ( e.g.Davis et al. 2000; Lusch et al. 2003; Mayer and Davis 1999;
Mayer and Gavin 2005), we evaluate how the relevance of trustworthiness dimensions differs across
stakeholder types.
We begin by defining trust, and then characterize trust as it pertains to an organization’s
stakeholder relationships. Next, we identify those dimensions of trustworthiness which are likely to play
a role in stakeholder relationships. We then develop a framework that identifies two dimensions along
which different stakeholders might be categorized and use this framework to develop and test hypotheses
regarding stakeholder-specific foundations of organizational trust.
THE ATTRIBUTIONAL BASIS OF TRUST
While definitions of trust vary across disciplines, most conceptualizations of trust include the
element of risk or vulnerability (Rousseau et al. 1998); trust exists when parties are willing to make
themselves vulnerable to the discretionary behavior of others. More specifically, following Rousseau and
her colleagues (1998), we define trust as the psychological willingness of a party to be vulnerable to the
actions of another party (individual or organization) based on positive expectations regarding the other
party’s motivation and/or behavior (Ferrell 2004; Mayer et al. 1995).
Trust, so defined, should be distinguished from dimensions of trustworthiness (Mayer and Davis
1999, p.134); attributions along these dimensions are what create in the trustor a willingness to accept
vulnerability (Branzei et al. 2007; Kim et al. 2006; Mayer and Davis 1999; Weber et al. 2005). This
conceptualization is consistent with earlier work that has focused on the attributional underpinnings of
trust (Ferrin and Dirks 2003; Jarvenpaa et al. 1998; Mayer and Davis 1999; McKnight et al. 1998;
Tomlinson and Mayer 2009; Weber et al. 2005). Leveraging attribution theory, Ferrin and Dirks (2003)
argue that individuals seek out information that will allow them to draw inferences regarding the
disposition and motivation of those they are in a position to trust. Kramer (1999) delineates a number of
sources for such information, including the target’s reputation as gleaned from third parties and the
target’s behavior in previous interactions. Prior research on the attributional basis of trust has not,
however, attempted to identify which types of attributions (i.e., along which dimensions) will be relevant
in which types of relationships.
CONCEPTUALIZING STAKEHOLDER TRUST IN ORGANIZATIONS
Trust may be targeted towards an individual, a group, or an organization. In this paper, we
consider the degree to which an individual (stakeholder) trusts an organization, and we do so by drawing
upon the attributional model of trust described above. Consistent with this approach, Zaheer et al. (1998)
argue that the origin of trust is always grounded in an individual perspective, even if individuals
belonging to a certain group (such as a particular stakeholder type) may share a similar orientation
(p.143). They further argue that the trust referent—i.e., the target of trust—may be an organization.
Likewise, Currall and Inkpen (2002) argue that the individual-to-organization interaction is an
appropriate level of analysis when studying trust in organizational contexts. Accordingly, we leverage
Zaheer et al.’s (1998) approach to distinguish between interpersonal trust and organizational trust as it
pertains to stakeholder perceptions: interpersonal trust describes the extent to which individuals (origin)
trust other individuals (referent) along relevant trustworthiness dimensions; organizational trust, in
contrast, describes the extent to which individuals (origin) trust an organization (referent). Stakeholder
trust in organizations, then, entails the willingness of individuals (customers, employees, etc.) to accept
vulnerability to the actions of an organization based on positive expectations.
Also consistent with Zaheer et al. (1998), while we focus on the degree to which “the
organization” is trusted, we acknowledge that stakeholder expectations regarding an organization’s likely
behavior may stem, in part, from expectations regarding the likely behavior of relevant organizational
actors (e.g. Currall and Judge 1995; Inkpen and Currall 1998). Fombrun (1996) argues that attributions
regarding an organization constitute a reputational “umbrella” for the individual or collective actions of
those who represent the organization. This perspective is particularly appropriate in the current context
because we are studying trust across multiple stakeholder groups; different stakeholders are likely to
interact with different organizational members and be subject to vulnerability based on different types of
organizational behaviors.
TOWARDS A FRAMEWORK OF STAKEHOLDER-SPECIFIC TRUST
Two distinct lines of research on trust development appear to dominate the literature. One builds
on the premise that perceived trustworthiness, in any relationship and at any given time, is
multidimensional; the goal of the research is to delineate these different dimensions (e.g. Lewis and
Weigert 1985; Mayer et al. 1995; McAllister 1995; Williams 2001). The second line of research
investigates which dimensions are relevant at various stages of a relationship (e.g. Lewicki and Bunker
1996; Ring and Van de Ven 1994; Rousseau et al. 1998; Shapiro et al. 1992; Whitener et al. 1998).
Less extensive has been the effort to identify the potentially varying trust needs in distinct
relationships. A notable exception is the framework developed by Sheppard and Sherman (1998). Based
on Fiske’s (1990) relationship categorization (communal sharing, authority ranking, equality matching,
and market pricing), Sheppard and Sherman argue that relationships can be meaningfully distinguished in
terms of “depth” (deep vs. shallow) and “form” (dependent vs. interdependent). As a consequence, they
propose four distinct “grammars” of trust in which different dimensions of trustworthiness are relevant. In
shallow-dependent relationships, for example, they argue that perceptions of discretion, reliability, and
competence are the key determinants of trust. As relationship depth—defined by Sheppard and Sherman
(1998; p. 423) as being a “product of the importance, range and number of points of contact among
parties”— increases, integrity, concern, and benevolence become crucial. Meanwhile, a shift from
dependence towards interdependence leads to an increased role for empathy, foresight and intuition
(p.427). Sheppard and Sherman’s framework, while it has not been empirically examined, represents an
important step in examining the contingent nature of trust across relationship types.
The application of Sheppard and Sherman’s (1998) categorization to our context, however,
surfaces some limitations. In particular, our sample makes it difficult to apply the “form” dimension,
because all organizational stakeholders would be categorized as “dependent” according to Sheppard and
Sherman’s framework. According to Sheppard and Sherman (1998: p. 424), dependent relationships are
those in which “one’s outcomes are contingent upon the actions of another”; interdependent relationships
are those that require the parties to “coordinate behavior in order to achieve desired goals”. Sheppard and
Sherman’s (coordination-based) view of interdependence renders it applicable to too few stakeholder
relationships. Meanwhile, their characterization of dependence—which includes unilateral as well as
mutual dependence relations—would subsume all of the relationships in our sample, rendering the
classification moot; indeed, according to stakeholder theory, a stakeholder-organization relationship is
characterized by its inherent mutual dependence. We therefore take Sheppard and Sherman’s model as a
useful point of departure and guidance in our study of stakeholder trust.
We build on Sheppard and Sherman’s (1998) efforts by (a) leveraging research on stakeholder
theory in order to identify another dimension which, along with depth, helps to meaningfully distinguish
between stakeholder types, (b) leveraging trust research, as well as in-depth interviews of organizational
stakeholders, in order to deductively and inductively identify key dimensions of trustworthiness that we
expect will be relevant to stakeholders, and (c) bringing together these two lines of research in order to
formulate a stakeholder-specific model of organizational trust that yields a series of empirically testable
propositions regarding which dimension of trustworthiness will be relevant to which type of stakeholder.
Dimensions of trustworthiness
As Rousseau et al. (1998) posit, “trust takes different forms in different relationships”; depending
upon the situation, there are several potential attributions upon which trust may be based (Boersma et al.
2003). In their seminal review of the literature, Mayer et al. (1995) suggest that would-be trustors seek to
formulate attributions along three key dimensions: ability, benevolence, and integrity. Attributions
regarding ability gauge whether a trustee has the requisite level of competence to perform the tasks
entrusted upon it. Attributions regarding benevolence gauge whether the trustee exhibits goodwill toward
the trustor and has concern for the trustor’s well-being. Attributions of integrity gauge whether a trustee
is perceived to be forthcoming, honest, and of requisite moral character.
In this paper, we take Mayer et al.’s (1995) ability, benevolence, and integrity (ABI) framework
as the starting point for our analysis of the determinants of stakeholder trust. Mayer et al. (1995) suggest
that attributions regarding ability, benevolence, and integrity represent an exhaustive list of relevant
trustworthiness dimensions for both interpersonal and organizational contexts. However, for our analysis,
we added a fourth dimension: identification. According to Lewicki and Bunker (1996), identification-
based trust stems from the understanding and internalization of the interests and intentions of the other
party, based on shared values and commitment.F
1
F There were three reasons for this expansion of the ABI
framework. First, while Mayer et al. (1995) subsume elements of identification, or value congruence, as
part of integrity, they admit that others (e.g. Sitkin and Roth 1993) have studied identification as a
separate construct when the organization was the trust referent (p. 720). Second, in their first empirical
analysis of the ABI framework, Mayer and Davis (1999) devote only one item in their integrity scale to
identification. Finally, while Mayer et al. (1995) argue that the ABI dimensions are universally relevant,
Lewicki and Bunker’s (1995) work suggests that identification-based trust is formed only very late in a
relationship, and that identification, or perceived value congruence, may be a feature of very few, close
relationships. Our slight modification of the ABI framework creates four dimensions of stakeholder trust.
Despite Mayer et al.’s (1995) suggestion that the ABI framework is relevant to both individual
and organizational relationships, we found no evidence of its prior application in the study of
organizational trust across different stakeholder groups. As such, we sought to further validate our
adaptation of the ABI framework through qualitative interviews of actual organizational stakeholders.
Prior to conducting the expansive survey which represents the core of this paper, we conducted 32 semi-
structured interviews of four different stakeholder groups: employees, customers, suppliers, and
1 Identification (i.e., a belief regarding shared values) differs from—and can vary independently of—perceived
benevolence and integrity. For example, politicians from opposing parties can be close friends and believe in each
other’s integrity without perceiving shared values.
investors.F
2
F During these interviews, which lasted between 25 and 90 minutes each, we asked respondents
to describe their relationship with the target organization and to explain how they defined or interpreted
the notion of trust as applied to their relationship with the organization. As we describe in more detail in
the Methods section, the responses converged significantly with our definition of trust. (See Appendix B
for examples of trust definitions provided by the stakeholders we interviewed.) Then, in order to validate
our dimensionality of trustworthiness, we employed the critical incident technique (Woolsey 1986),
which involved the elicitation of thick descriptions of trust-related events to explore the different types of
attributions that seemed to underlie the interviewee’s trust in the organization.
The interviews validated the four dimensions we had identified ex-ante, but led to two further
modifications of our framework. First, as described in detail later, we found two different sub-categories
of references to ability. These corresponded closely with Madhavan and Grover’s (1998) distinction
between managerial and technical competence. Second, we found a number of references to the notion of
transparency. Although Mayer et al. (1995) nominally subsumed transparency (“openness”) under
integrity, their empirical examinations of integrity (e.g. Mayer and Davis 1999; Mayer and Gavin 2005)
exclude any mention of transparency or openness. We therefore decided to include transparency as a
separate dimension in our analysis. Consistent with this, several scholars have argued that transparency,
or the perceived willingness to share trust-relevant information with vulnerable stakeholders, is a distinct
critical dimension of trustworthiness (e.g. Mishra 1996; Tschannen-Moran 2000). (See Appendix B for
examples of trustworthiness dimensions mentioned by the stakeholders we interviewed.)
Based on the ABI model as an organizing framework, and on subsequent refinements stemming
from our qualitative interviews, we therefore examined attributions along six key dimensions of
trustworthiness: ability (disaggregated into managerial competence and technical competence),
benevolence, integrity, transparency and identification.
Dimensions of stakeholder relationships
2 20 of the 32 interviews were conducted with stakeholders of the four organizations that were targeted for our
survey: 6 customers, 7 employees, 4 investors and 3 suppliers. The remaining interviews were conducted with
stakeholders of other organizations who were participating in an unrelated project.
While stakeholders may differ along many different dimensions (e.g., the degree to which they
have power or legitimacy (Mitchell et al. 1997)), we follow the lead of network theorists who study
organizational stakeholders in focusing on (a) the degree of interaction between stakeholders and
organizations and (b) the structural positioning of stakeholders vis-à-vis the organization as critical
determinants of stakeholder influence and organizational behavior (see e.g. Rowley 1997). These two
dimensions are particularly appropriate when studying organizational trust because each of them
influences the type and degree of vulnerability a stakeholder faces, the type of information a stakeholder
can access, and the attributions the stakeholder is likely to make regarding the organization (Dervitsiotis
2003; Shankar et al. 2002; Swift 2001). Consistent with Sheppard and Sherman (1998), our first
dimension is “depth”; depth is a measure of the extent and intensity of a stakeholder’s interaction with an
organization. The second dimension, which we call “locus”, captures the stakeholder’s position (internal
vs. external) vis-à-vis the organization (Jones and Wicks 1999; Levin et al. 2006; Schneper and Guillen
2004; Schoorman et al. 2007). Limiting our attention in this paper to these two stakeholder dimensions
seems further warranted because one of these dimensions (i.e., depth) has firm grounding in the
organizational trust research and the other (i.e., locus) is well researched by stakeholder theorists, and
these are the two literatures that we are bringing together in this framework.
Relationship depth refers to the intensity and intimacy of a relationship. While it is often difficult
to assess the precise depth in a relationship, it can be approximated, at least in part, by interaction
frequency and relationship duration (Kramer 1999; Levin et al. 2006; Lewicki and Bunker 1995; Macy
and Skvoretz 1998; Mayer et al. 1995; Sheppard and Sherman 1998). Likewise, our depth dimension
consists of a measure based on the interaction frequency and relationship duration of a stakeholder with
an organization and distinguishes between those that have shallow versus deep relations with the
organization (Becerra and Gupta 2003; Kenning 2001; Lewicki and Bunker 1996; Lewis and Weigert
1985; McAllister 1995; Sheppard and Sherman 1998). This classification is largely consistent with
Granovetter’s (1985) categorization of strong versus weak ties. Depth may influence stakeholder trust for
two reasons: (1) it affects the degree to which a stakeholder is vulnerable to organizational actions, and
(2) it affects the degree of risk-related information exchange that is possible and likely between the
stakeholder and the organization (Eisenhardt 1989; Rousseau et al. 1998; Sheppard and Sherman 1998).
Our locus dimension, which focuses on the position of the stakeholder relative to the
organization, is based on extant stakeholder research that distinguishes between internal and external
stakeholders (Freeman 1984; Donaldson and Preston 1995). Following Schneper and Guillen (2004), we
view employees and investors as internal stakeholders. Stakeholder theory argues that internal
stakeholders represent the organization (e.g. Blair 1995; Freeman 1984): employees do so because they
work for the organization (Aguilera and Jackson 2003) and investors do so because they are owners of the
organization (Goodpaster 1991).F
3
F In contrast, customers and suppliers are external stakeholders: neither
group works for or owns the organization and neither is typically seen as representing the organization.
Locus is likely to influence stakeholder trust because internal and external stakeholders face different
types of vulnerabilities (Ogden and Watson 1999). For example, the emergence of a strong competitor
may threaten internal stakeholders of an organization (e.g., employees and investors), even as it makes
life better for external stakeholders (e.g., suppliers and customers) who stand to benefit from the
competition. Internal and external stakeholders also seek to access information regarding different
organizational behaviors (Brickson 2005; Scott and Lane 2000).
The Depth Dimension
Relationships can be differentiated according to the degree of uncertainty involved (Luhmann
1979; 2000). In shallow relationships, where interactions between the organization and the stakeholder
are sparse and the duration of contact has been short, uncertainty about the behavior of the other party is
likely to be high. According to Mayer et al. (1995), attributions of integrity are likely to play an
important role in trust development in such relationships. Likewise, Granovetter (1985) argues that
generalized morality—or integrity—plays a crucial role in the sustenance of ‘weak tie’ (i.e., low
3 We understand that there are many types of investors, and that a majority-owner of a firm is very different from
someone who owns a handful of shares through a mutual fund. Similarly, there may be suppliers who have few and
infrequent dealings with an organization, whereas others are so closely tied to the organization that they share an
office. In our framework, and consistent with the work of Schneper and Guillen (2004), these differences do not
impact categorization on the internal-external dimension. Rather, they are accounted for by our depth dimension.
intensity) relationships. Thus, in shallow relationships that entail high levels of uncertainty, perceptions of
integrity may be necessary to induce the degree of trust required for coordination and cooperation.
Similarly, Whitener et al. (1998) argue that trust initiation is based on perceiving the organization (i.e.,
relevant organizational decision makers) as honest and forthcoming. Mayer et al. (1995, p.722) make the
point succinctly: the “effect of integrity on trust will be most salient early in the relationship prior to the
development of meaningful benevolence data.”
Transparency is also likely to be of relevance to stakeholders in shallow relationships
(Dervitsiotis 2003; DiPiazza 2002; Sheppard and Sherman 1998; Turnbull 2002). According to Hardin
(2002) and McKnight et al. (1998), when there is little previous interaction and when information
asymmetry is high, all trust-relevant information is sought and scrutinized. This should accentuate the
importance of transparency. For example, corporate communication initiatives and newly developed
reporting standards (e.g., the Global Reporting Initiative) are aimed at building trust with stakeholders
(e.g., investors) who might otherwise not have access to information regarding organizational behaviors
and intentions. We therefore hypothesize:
Hypothesis 1. Stakeholder trust in shallow relationships will be based on perceptions of transparency and
integrity.
While stakeholders in deep relationships might also need to see a ‘track-record’ of ethical and
honest behavior (Elangovan and Shapiro 1998; Mishra and Spreitzer 1998; Sheppard and Sherman 1998)
their demands extend beyond those of stakeholders in shallow relationships (Rempel et al. 1985; Rempel
and Ross 2001). Deep relationships entail not only the need for, but also the capacity for more
information exchange. As contact with the organization increases and duration of the contact persists, a
stakeholder’s vulnerability is likely to increase (see also Gottman and Levenson 1992), but so does its
ability to better evaluate the impact of organizational behaviors. This reduces the need for perceived
integrity (Mayer et al. 1995, p.722; Lewicki and Bunker 1996; Rousseau et al. 1998), but increases the
role of perceived organizational benevolence (McAllister 1995; Shaw 1997; Sheppard and Sherman
1998). Unlike stakeholders in shallow relationships, stakeholders in deep relationships are not likely to
see themselves as “just another stakeholder”, and will thus have a greater need for (and access to)
information that signals organizational benevolence (Mayer and Davis 1999; McAllister 1995).
Consistent with the above logic, Mayer et al. (1995, p.722) argue that the effect of perceived benevolence
on trust increases “over time as the relationship between the parties develops.”
Whereas integrity refers to an organization’s general tendency (or propensity) to act fairly and
ethically, benevolence refers to the organization’s concern for their stakeholders’ well-being (see also
Whitener et al. 1998). Organizational stakeholders perceive benevolence when organizations (or relevant
organizational actors) express concern, care and interest (Edmondson 1999; Mayer et al. 1995) even when
fairness or equity does not demand it (e.g., will the employee be laid off during an economic downturn?).
Stakeholders in deep relationships may continue to value integrity, albeit less so than those in shallow
relationships, but their demand for perceived benevolence will increase (Mayer et al. 1995). We therefore
hypothesize:
Hypothesis 2. Stakeholder trust in deep relationships will be based on perceptions of integrity and
benevolence.
Hypothesis 3. Perceived integrity will be less relevant to stakeholder trust in deep relationships than in
shallow relationships.
Hypothesis 4. Perceived benevolence will be relevant to stakeholder trust in deep relationships, but not in
shallow relationships.
The Locus Dimension
Stakeholder trust is based not only on the perceived intention of the organization (as captured, for
example, by integrity and benevolence attributions regarding relevant organizational actors), but also on
the perceived ability of the organization to behave in ways that benefit the stakeholder (McAllister 1995;
Mayer and Davis 1999). Since different stakeholders face different vulnerabilities, there are different
capabilities that an organization must develop and signal in order to build trust. Based on our qualitative
analysis, described further below, we follow Madhavan and Grover (1998) and distinguish between two
types of competence—managerial competence and technical competence—and argue that the relevance
of each type depends upon the locus of the stakeholder (see also Hodson 2004; Tan and Libby 1997).
Managerial competence is implicated in the organization’s ability to make strategic decisions and manage
stakeholder relationships. Technical competence is implicated in the organization’s ability to deliver high
quality products and services (see e.g. Miles and Snow 1992). External stakeholders are more likely to be
directly impacted by, and also more likely to have information that allows them to assess, technical rather
than managerial competence. Consistent with this, Parmigani and Mitchell (2005) have found that the
extent to which suppliers (external stakeholders) trust the organization is highly dependent upon the
technical expertise of the buying organization. Similarly, Morgan and Hunt (1994) argue that customer
trust (also external) is based on satisfaction with the quality of the product or the service offered, which
again implicates the technical aspect of competence.
Internal stakeholders, on the other hand, such as employees and investors, may care relatively
more about—and be in a better position to judge—managerial competence, such as decision-making
ability and strategic vision, which are essential for long-term survival and competitiveness. For example,
Shockley-Zalabak and Morley (1994) argue that employees (internal stakeholders) evaluate organizations
on whether they will survive and be able to compete. Likewise, Mayer and Gavin (2005), Davis et
al.(2000), and Hodson (2004) show that employees trust organizations more because of high managerial
competence and enduring success in the market place, and less because of technical expertise or product
quality. Investor trust has also been shown to be based in large part on the perceived competence of the
firm’s management team (e.g. Manigart et al. 2002; Warner et al. 1988). Thus, we hypothesize:
Hypothesis 5. Perceived managerial competence will be more relevant to trust among internal
stakeholders than among external stakeholders.
Hypothesis 6. Perceived technical competence will be more relevant to trust among external stakeholders
than among internal stakeholders.
Locus can also affect trust development in another way. While external stakeholders are, by
definition, not a part of the organization (Brickson 2005; Freeman 1984; Schneper and Guillen 2004),
many internal stakeholders will have, at some point, made conscious decisions to join, and thereby
represent, the organization. This increases their vulnerability: the internal stakeholder faces not only
financial risks at the discretion of organizational decision makers, but also identity risk—i.e., the threat to
one’s self-perceptions based on the fact that one’s social identity may include an association with the
organization, its behaviors and its espoused values (Giddens 1991; Sitkin and Roth 1993, p. 371; Tajfel
and Turner 1979). This will be particularly true for those internal stakeholders who have frequent
interaction with the organization and are hence “closest” to it—i.e., deep internal stakeholders (cf.,
Lewicki and Bunker 1996). As Rousseau et al. (1998, p.:18) posit, “there is a tendency for repeated
interactions to…give rise to a psychological identity (Gaertner et al. 1996).” To mitigate identity risks,
these stakeholders will have to evaluate whether their own values are congruent with those of the
organization (Schein 1985; Sitkin and Roth 1993).
Like Rousseau et al. (1998), we argue that the relationship between an organization and its deep
internal stakeholders will be based in part on perceptions of value congruence, and more generally, on
identification (Enz 1988; Lewicki and Bunker 1996; Yaniv and Farkas 2005). Consistent with this,
Shockley-Zalabak, Ellis and Cesaria (1999) have posited that identification is a critical aspect of the
trusting relationship between employees and their organizations and Lewicki and Bunker (1996) have
argued that identification-based trust is the highest form of trust and is characteristic of relatively few,
close relationships. We therefore hypothesize:
Hypothesis 7. Identification will be relevant to trust only among deep internal stakeholders.
METHOD
Sample and Data Collection
We administered surveys to stakeholders from four different organizations in Western Europe. In
order to have as representative a sample as possible, we chose organizations of different sizes (ranging
from small/regional to large/multinational), with different ownership structures (privately held, publicly
held, government owned) and from different industries (manufacturing, logistics, consulting, and
research). Organization 1 is a small to medium-sized manufacturing firm in Switzerland; Organization 2
is a large logistical company in Germany; Organization 3 is a Western European branch of an
international consulting firm; Organization 4 is a public university in Switzerland.
The stakeholders we surveyed were investors (internal), employees (internal), customers
(external), and suppliers (external). Employees were primarily contacted by the organization itself via
emails that encouraged participation in the anonymous process and contained a link to the survey.
Customers, suppliers, and investors were sampled randomly based either on an organization’s internal
database or via publicly available databases containing personal profiles and organizational affiliations.
Investors included institutional investors, investment advisors, venture capitalists, and private investors.
All stakeholders were contacted via email or through direct contact (in which case they were
asked to fill out paper surveys). Those respondents contacted via email were also asked to forward the
survey to fellow stakeholders (snowball sampling). An introductory sheet described the survey and
explained the process used to ensure anonymity. The data for each organization was collected during a
period of one to two months to reduce potential effects of organizational change. The overall data
collection process spanned a period of 5 months.
Due to the snowball sampling procedure for customers, suppliers and investors, a response rate is
difficult to establish. We also cannot exclude the possibility, albeit remote, that some respondents may
have responded as a stakeholder for more than one organization (e.g., as a client for one organization and
as an investor for another).The response rate for employees contacted through the organization ranged
from 8 to 10 percent, except for Organization 1, where 63 percent of the employees responded. While we
cannot fully discount the possibility of response bias in such a survey (e.g. that the most and least trusting
stakeholders were more likely to answer the survey), such concerns are mitigated for two reasons. First,
we conducted supplemental analyses (e.g., checking for kurtosis in the distribution of trust responses) to
test whether our respondents exhibited a bi-polar distribution on trust. The results of these analyses argue
against such a distribution. Second, while response bias could affect the mean level of trust in our sample
relative to the overall population, our analysis does not focus on mean trust levels. Rather, we test the
relevance of different trustworthiness dimensions to different stakeholders, which is arguably less likely
to be affected by self-selection or representativeness issues. Finally, supplemental analyses with our data
revealed no evidence that high vs. low trust respondents based their trust on different types of attributions.
Overall, 1,298 usable responses were received. EM Imputation was used to deal with missing
data (Allison 2001).F
4
F Customers were the largest group (N=601), followed by employees (N=423),
suppliers (N=141) and investors (N=133). (Note: Because Organization 4, as a public university, may be
qualitatively different from other organizations in the sample, and because Organization 4 only allowed
us to reliably identify and reach one type of stakeholder (employees), we also ran a separate set of
analyses in which Organization 4 was eliminated. This did not affect the results in any of the hypothesis
tests we conducted.)
Seventy-four percent of the respondents were male; the age groups of 18-30 (43.3 percent) and
31-45 (41.9 percent) were most highly represented. Fifty-one percent of the respondents reported that
they had been in contact with the organization for more than 7 years; 23.3 percent reported 4-7 years of
contact; 18.6 percent reported 1-3 years. Fifty-nine percent of the respondents reported more than 100
prior interactions with the organization; 14.7 percent reported between 50 and 100 interactions.
The data on prior interactions and the length of the relationship between stakeholders and their
organization was used to classify stakeholders as being in shallow vs. deep relationships. We classified
stakeholders who reported more than 100 interactions and more than 3 years of contact with the
organization as having a deep relationship. Stakeholders with less than 100 interactions or less than 3
years of contact were classified as low-depth stakeholders.F
5
F This classification resulted in relatively equal
sample sizes between the shallow (N=665 stakeholders) and deep (N= 633 stakeholders) categories. In
addition, N=556 stakeholders were classified, by definition, as internal (employees and investors) and
N=742 stakeholders were classified as external (customers and suppliers).
4 EM Imputation is more appropriate than listwise deletion when, as in our data, > 5 percent of cases have one or
more missing data points, the data is missing at random, and multivariate normality can be assumed Allison (2001). .
Notably, listwise deletion and EM imputation provide similar results in our analyses.
5 We tested an alternative classification in which we characterized as shallow those stakeholders who reported less
than 50 interactions or less than 3 years of contact. Results of this analysis were similar to those reported below. We
focus on the proposed categorization because this more evenly divides the sample between low and high depth.
Measures
While it would have been preferable to use existing scales for measuring trust among our
respondents, a review of existing trust scales revealed two problems (see also Dietz and Den Hartog
2006). First, most established scales (e.g. Mayer and Davis 1999; Robinson 1996; Spreitzer and Mishra
1999)—even those designed to measure trust in organizational contexts—are aimed at assessing trust
perceptions within one specific stakeholder group (usually employees). Second, and even more
problematic, existing scales consist of items that already presume which dimensions of trustworthiness
will be relevant (Dietz and Den Hartog 2006). In other words, whereas we distinguish between trust (our
dependent measure) and dimensions of trustworthiness (our independent measures), existing scales
typically combine these constructs.
To the extent possible, we based our independent measure items—i.e., those relating to
trustworthiness dimensions—on suitable, existing scales (e.g. Mishra 1996; Shockley-Zalabak et al. 1999;
Tschannen - Moran and Hoy 2000), and followed Dillman’s (2000) tailored design method to adjust
items as needed to: a) orient them to trust in organizational relationships, b) broaden their scope so they
apply to all stakeholders groups, and c) maintain the ability to create a separate dependent measure for
trust. Because the survey was conducted in German speaking parts of Europe, we had the items translated
and back-translated in order to ensure accuracy (Chapman and Carter 1979). We then used university
faculty and doctoral students to reassess the face validity of the items (DeVellis 1991). This assessment
yielded a set of revised items that were then tested for clarity in another set of interviews and in survey
pretests with 260 stakeholders of the target organizations. Appendix A lists the items for each measure.
Independent Measures. In order to validate and/or modify, in our empirical context, the trustworthiness
dimensions suggested by the ABI framework, we interviewed 32 stakeholders with regard to their
understanding of trust in the organizational context and with regard to their specific stakeholder
experiences. We asked them to provide us with a definition of organizational trust and, following the
critical incident technique (Woolsey 1986) ), to tell us about incidents in which their trust in an
organization had increased or decreased. Some interviewees provided responses from more than one
stakeholder perspective and we therefore ended with 16 narratives regarding employee relationships, 18
narratives regarding customer relationships, and 5 narratives each for supplier and investor relationships.
We coded the interview transcripts using template analysis (King 1998; Maznevski and Chudoba 2000).F
6
F
As predicted, we found significant overlap with the ABI framework provided by Mayer et al. (1995).
However, as described previously, we deconstructed Mayer et al.’s construct of integrity in order to
include transparency and identification as separate constructs. We also found that stakeholders who
mentioned ability or competence seemed to clearly distinguish between managerial and technical
dimensions of competence. We then created survey items to measure the six trustworthiness dimensions.
Responses were marked using a 5-point scale with endpoints labeled “strongly disagree” (1) and “strongly
agree” (5). Following a procedure similar to Hoy and Tschannen-Moran (1999), for each dimension of
trustworthiness, we identified 2 to 4 items that demonstrated high convergent and discriminant validity in
pretest samples using exploratory factor analysis (see also Ross and Lacroix 1996).
The convergent and discriminant validity of the measures was then calculated using the full
participant sample. Using Exploratory Factor Analysis we found that all item-factor loadings were
significant (p<.05), and greater than .40, supporting the convergent validity criterion. We used
confirmatory factor analysis (CFA) based on AMOS 7 (Arbuckle 2006) to compare the fit of our
hypothesized model (which predicted 6 separate constructs) to a number of alternative models (see Table
1). A test for multivariate normality had been conducted prior to the analysis, which yielded positive
results (skewness and kurtosis of all items below 1). Additionally, estimating the CFA model using
Maximum Likelihood Estimation (MLE) and Asymptotically Distribution Free (ADF) Interval estimation
did not reveal any significant differences, thus making it safe to assume that the model was stable even if
the data violated assumptions of multivariate normality. The fit indexes reveal that the hypothesized six-
factor model fit much better than any of the alternative models, including a three-factor model based on
Mayer et al.’s (1995) ABI framework (see Table 1). Despite some high correlations, the data supports
6 Template analysis uses a research template (such as ABI) for the set of initial codes rather than an open ended
coding system. The coding categories may be revised, added, or deleted during the process based on the data
analysis (Maznevski and Chudoba 2000).
sufficient discriminant validity of the items. The scale reliabilities are high, with Cronbach alphas ranging
from .85 to .93. Supplemental analysis, in which the model was tested separately for customers,
suppliers, employees, and investors, was also supportive (CFI’s ranging from .92 to .96), suggesting
model stability despite the variance in sample size across stakeholders. Table 2 displays descriptive
statistics and correlations for all variables.
[Insert Tables 1 and 2 About Here]
Dependent Measure. To measure the stakeholder’s trust in the organization without referencing specific
trustworthiness dimensions that may be expected to impact trust (integrity, benevolence, etc.), we created
a three-item trust measure based on our definition of stakeholder trust. The first item asked whether the
respondent trusted the organization (“I trust the organization”). The second and third items sought to
proxy for the respondents’ willingness to be vulnerable to the actions of the organization; this was done
by evaluating their willingness to recommend the organization. Ideally, in evaluating respondents’
willingness to accept vulnerability, we would have asked them to provide their own willingness to interact
with the organization. However, because all respondents were already interacting with the organization
(as stakeholders), we instead used the two “recommendation” items as proxies. One was a general
recommendation item (“I would recommend the organization, because I predict a good future for the
organization”); the other was a targeted, stakeholder-specific recommendation item, with respondents
being asked whether they would recommend to friends that they buy, invest, work for, or work with the
organization: The alpha for these three items was .84.
We then conducted a battery of tests and assessments to ensure the validity of our measure. First,
we tested to ensure that the concept of trust was not understood differently across stakeholder groups. To
do so, we conducted a measurement invariance test based on the survey data, which suggested no
significant effect of stakeholder group on the interpretation of “trust”. We also tested for discriminant
validity of the dependent (trust) measures and the independent measures. To do that we included the
dependent measures as a seventh factor in the CFA model comparing the different models tested before.
The seven-factor model fit significantly better than any other model combining the DV with IV’s (as
indicated by modification indices >100 and the reduction of χ2 > 500). The discriminant patterns of the
model fits remained stable, indicating discriminant validity of the dependent and independent measures.
Finally, we did a qualitative analysis of the text of our interviews. Although the interviews were
semi-structured, many interviewees were asked to define “trust” as the term would be used in the surveys,
i.e., with an organization as the referent. Of the 32 interviewees, 20 provided a definition of trust. Of
these responses 85% (N=17) seemed to correspond closely (or precisely) with our definition of trust,
explicitly or implicitly citing the willingness to take risk or accept vulnerability in interactions with the
organization. Appendix B contains examples of these responses from each stakeholder group.
Control Measures. To ensure the robustness of our results we included a number of control variables:
age, gender, organization type, and whether the respondent interacted with the organization in more than
one capacity (e.g., as a customer and an employee). We also controlled for stakeholder type (employee,
customer, investor or supplier). Respondents checked one of five age brackets: “under 18”, “18-30”, “31-
45”, “46-60”, “60 or older”). Gender was measured as a standard dichotomous variable (1=female,
0=male). Dummy variables were included for the four organizations in the sample.
Since many stakeholders (especially in larger organizations) belonged to more than one
stakeholder group, we created a dummy variable labeled “Multidimensional Stakeholder”. After having
identified their “primary” relationship with the organization, respondents were asked to answer yes (1) or
no (0) to the following question: “Do you belong to more than one stakeholder group?” 28.9 percent of
the sample identified themselves as multidimensional stakeholders. Finally, we included dummy variables
for stakeholder type, which respondents selected from a given list (including employee, investor, supplier
and customer). In a separate analysis we also controlled for moderating effects of the organization on the
independent variables. The results did not reveal any significant effects, supporting the results below.
1BRESULTS
To test our hypotheses we ran several multiple regression models (see Tables 3 and 4). In a first
analysis, we regressed trust perceptions on the six dimensions of trustworthiness, using the entire group of
stakeholders in the sample and without any control variables (Table 3, Model 1). We found that all
dimensions are significant predictors of trust except for transparency, which is only marginally significant
(p<.10). The results are unchanged when we include control variables. While multi-collinearity exists, as
would be expected given that all of the dimensions are related to trust as a second-order construct, it does
not confound our results because variance inflation factors among the main constructs do not exceed 3.16,
which is well below the critical level (>5) for multi-collinearity to be a concern (McDaniels 2005). In
addition, while the trustworthiness dimensions were correlated, we found them to be meaningfully
distinct, as demonstrated by the CFA described earlier. Finally, a test of the discriminant validity of
constructs that would have been combined if using the original ABI framework (technical with
managerial competence, identification with integrity, and transparency with integrity) revealed that
modification indexes were well above 100 when constructs were combined, and that our model fit
significantly better than ABI.
[Insert Tables 3 and 4 About Here]
Depth: The Relevance of Integrity, Benevolence, and Transparency
Our model predicted that integrity and transparency would be relevant for stakeholder trust in
shallow relationships (Hypothesis 1) and that integrity and benevolence would be relevant for stakeholder
trust in deep relationships (Hypothesis 2). We tested these predictions, separately, for internal and
external stakeholders (see Table 4). Hypothesis 1 received mixed support: as predicted, trust in shallow
relationships was based on perceptions of integrity for both internal (b=.478, p<.001) and external
stakeholders (b=.296, p<.01). However, perceived transparency did not predict trust in shallow
relationships for internal stakeholders (b=.095, p=.444), and did so only marginally for external
stakeholders (b=.203, p<.10). As predicted by Hypothesis 2, benevolence was a significant predictor of
trust in deep relationships, for internal (b=.325, p<.01), and external stakeholders (b=.288, p=. 067).
Contrary to Hypothesis 2, but consistent with Hypothesis 3, integrity was not a significant predictor of
trust in deep relationships (internal: b=-.083, p=.485; external: b=.190, p=.148).
Hypothesis 3 predicted that integrity would be more relevant to shallow stakeholders than to deep
stakeholders. Consistent with this, as discussed above, integrity is a significant predictor of trust in
shallow, but not in deep relationships. In an additional set of analyses (see Table 3), we tested the relative
strength of trustworthiness dimensions (e.g., integrity) across stakeholder groups (e.g., deep vs. shallow)
using interaction terms for each combination of stakeholder category and each dimension of
trustworthiness. As predicted (Table 3; Model 2), integrity is more relevant for stakeholders in shallow
relationships than in deep relationships, as indicated by the marginally significant Integrity x Depth
interaction term (b=-.211; p<.10).F
7
Finally, as predicted by Hypothesis 4, benevolence was relevant to trust for stakeholders in deep
relationships (internal: b=.326, p<.01; external: b=. 288, p=.0671), but not those in shallow relationships
(internal: b=.047, p=.729; external: b=.089, p=.513). Because Hypothesis 4 predicted, in part, a null
result, we conducted a supplemental analysis in which we tested the relative strength of benevolence in
deep vs. shallow relationships (Table 3, Model 2). Consistent with Hypothesis 4, benevolence mattered
significantly more in high depth relationships (b=.267, p<.05).
These results lend considerable support to the model. As predicted, stakeholders in shallow
relationships base their trust on integrity (not on benevolence), while stakeholders in deep relationship
base their trust on benevolence and not integrity. Consistent with this, we also find that perceptions of
integrity matter significantly more in shallow relationships than in deep relationships. The one result that
represents a significant departure from our model pertains to the role of transparency: contrary to
expectations, transparency was not a significant predictor of trust in shallow relationships. In a post-hoc
analysis, we considered the possibility that transparency might play a role, but only when stakeholders
have extremely few interactions with the organization (i.e., in very shallow relationships). To test this, we
analyzed a sub-sample of stakeholders who reported the fewest interactions with the organization (1-10)
and the shortest duration (<1 year); again, no significant effects of transparency were found.
Stakeholder Locus: The Relevance of Managerial and Technical Competence
7 As an alternative approach to testing such hypotheses, we can compare factor coefficients for the trustworthiness
dimensions across stakeholder types. We ran additional analyses using this approach and replicated our results.
The model predicted that internal stakeholders will value managerial competence more so than
external stakeholders (Hypothesis 5), and that external stakeholders will value technical competence more
so than internal stakeholders (Hypothesis 6). The results reveal that trust among internal stakeholders
(employees and investors) is based on perceptions of managerial competence (shallow: b=.433, p<.001;
deep: b= .465, p<.001) and technical competence (shallow: b=.311, p<.01; deep: b= .504, p<.001).
Meanwhile, trust among external stakeholders (customers and suppliers) is based only on perceptions of
technical competence (shallow: b=.580, p<.001; deep: b= .694, p<.001). Consistent with predictions, we
find that internal stakeholders rely significantly more so than do external stakeholders on perceptions of
managerial competence, supporting Hypothesis 5; meanwhile, external stakeholders rely significantly
more so than do internal stakeholders on perceptions of technical competence, supporting Hypothesis 6
(both interaction terms are significant at p<.05; see Table 3, Model 2).
Identification and Trust
We predicted that identification would only be a significant predictor for trust among internal
stakeholders in deep relationships with the organization (Hypothesis 7). Contrary to this prediction, an
analysis of the absolute relevance of trustworthiness dimensions across stakeholder types revealed that
identification plays a significant role in all stakeholder relationships (Table 4): shallow-internal (b=.687;
p<.001), deep-internal (b= .757, p<.001), shallow-external (b=.677, p<.001) and deep-external (b=.726,
p<.001). This intriguing result runs contrary to prior research (Lewicki and Bunker 1996; Shockley-
Zalabak et al. 1999) which suggests that identification is a relevant factor in very few relationships.
Furthermore, there was no significant interaction between identification and internal/deep stakeholders
(b=.047, p>.1), suggesting that identification was not more relevant to internal deep stakeholders than to
others (Table 3; Model 3). Figure 1 summarizes all of our findings.
[Insert Figure 1 About here]
DISCUSSION
Prior research on trust within and between organizations has not sought to distinguish between
the potentially varying dimensions on which stakeholders base their trust (e.g. Lusch et al. 2003; Mayer
and Davis 1999; Mayer et al. 1995; Morgan and Hunt 1994). Moreover, the surveys that researchers
typically employ when studying stakeholder trust tend to presume—rather than examine—which
dimensions of trustworthiness are relevant to trust. The results of our analyses are consistent with the
perspective that trust is relationship-specific (Zey, 1998). Moreover, there are identifiable categorizations
along which stakeholders vary, and these categories meaningfully distinguish between more and less
relevant dimensions of trustworthiness.
Both of the dimensions we studied—depth and locus—had significant predictive power.
Stakeholders who had shallow relationships with the organization based their trust in the organization
largely on perceptions of integrity, whereas trust among deep stakeholders was based on perceptions of
benevolence. Thus, while some research (e.g. Dirks and Ferrin 2001) has combined benevolence and
integrity and treated it as one construct (as in “character”), our results suggest that these are meaningfully
distinct (cf., Mayer et al. 1995), at least in the context of stakeholder trust. The locus dimension also
provides insight into how organizations might best manage trust across different stakeholders. We found
that trust among internal stakeholders depended significantly more on perceptions of managerial
competence, while trust among external stakeholders was based significantly more on perceptions of
technical competence.
An interesting—and unexpected—result entailed the relevance of identification-based trust to all
stakeholder groups in the sample. Lewicki and Bunker (1996) have argued that few relationships are
likely to reach a point at which identification is relevant to trust. Our results suggest that the decision to
trust others—even in relationships that are not particularly intense—may be more personal and more
relevant to one’s self identity than is typically assumed. This result also challenges and extends Mayer et
al.’s (1995) model of organizational trust which argues that ability, benevolence, and integrity constitute
the three primary dimensions of trustworthiness. Our results support the broad relevance of (at least some
aspect of) ability. We do not find support for the general relevance of integrity or benevolence; rather,
identification emerges as an independent, fundamental component of organizational trust.
Another intriguing finding concerns perceptions of transparency. As reported above, there was
little evidence for the relevance of transparency in shallow relationships. In a follow-up analysis, and
contrary to predictions, we found that perceptions of transparency were only significant predictors of trust
for stakeholders in deep, internal relationships (b=.347, p. <.01). This result seems interesting for at least
two reasons. First, based on prior research (Dervitsiotis 2003; DiPiazza 2002; Sheppard and Sherman
1998), we would have expected transparency to matter more so in shallow relationships, where
stakeholders have limited access to first-hand information regarding the organization’s likely behavior.
Second, of the two types of internal stakeholders that are in our sample—employees and investors—the
latter group is the one that is most often associated with a desire for transparency (DiPiazza 2002;
Turnbull 2002). Follow-up analysis comparing employees and investors in our sample reveals, however,
that transparency is a significant predictor of employee trust (b= .217, p<.05), but not of investor trust.
One possible interpretation of these results is that while transparency may be most needed by those who
lack first-hand information regarding the organization (e.g., those in shallow or external relationships), it
may be most valued by those who have the most at stake in their relationships with the organization (i.e.,
those in deep, internal relationships).
Our study also informs stakeholder theory. In addition to further validating the locus dimension
(Freeman 1984; Huse 1998) as a relevant means of distinguishing between stakeholders, we tested and
validated depth as a relevant dimension in characterizing organizational stakeholders. The paper also
represents what may be the first attempt to theoretically and empirically examine stakeholder-specific
foundations of trust, and in doing so, takes a step towards bridging trust research and stakeholder theory.
Taken together, our findings extend, and in some cases challenge, existing theories of
organizational trust and stakeholder theory. The results refine and provide nuance to existing
conceptualizations of organizational trust by highlighting and carefully examining contextual
contingencies. In particular, the stakeholder-specific framework of organizational trust we have
developed allows for more accurate predictions regarding the basis on which stakeholder trust in
organizations is actually structured.
The results also suggest practical implications. In particular, organizational actors that are
interested in managing trust with various stakeholders might be well advised to consider the type of
relationship they have with the target stakeholder. Rather than to assume the generalized need to enhance
transparency, to engage in acts of benevolence, or to signal competence, organizations should seek to
understand the specific types of attributions that are relevant to the stakeholder whose trust is sought. For
example, a company that tries to project an image that it cares about each of its individual customers or
investors (i.e., benevolence), might be wasting resources; if these are shallow relationships, you might
more effectively build trust by signalling that your management has high ethical standards (i.e., has
integrity). As another example, organizations might try to focus on building identification across all
stakeholders (and not simply with their key employees and customers). More generally, organizational
actors would benefit from better understanding and appreciating the types of vulnerabilities different
stakeholders face and the kinds of information that can most clearly signal trustworthiness to them.
Some limitations of the study warrant mention. First, because this study is based on cross-
sectional data, it is not possible to infer causality. As a result, we have focused on understanding the
stakeholder-specific nature of trust (i.e., the dimensions of trustworthiness that matter to different
stakeholders), and not on temporal antecedents of trust. Second, inherent in the methodology employed
(i.e., one survey that yields both independent and dependent measures), is the risk of common method
bias. Following the advice of Podsakoff et al. (2003), we followed survey procedures to minimize
common method bias, and conducted statistical analyses that revealed low risk of such a bias in our data,
but such risks cannot be entirely eliminated. Third, while our research leverages organizational trust
research and stakeholder theory to identify two key dimensions along which stakeholder trust may vary
there are other relevant dimensions that were not included here. One such dimension, implicated in the
work of Sheppard and Sherman (1998) and Weber et al. (2005), relates to the level of dependence. While
all stakeholder relationships entail interdependence with the organization, future work could analyze how
trustworthiness dimensions vary based on the degree of dependence or the asymmetry in dependence
between the stakeholder and organization. Fourth, our survey included stakeholders and organizations
from Western Europe; the extent to which the results extend to other institutional and cultural contexts is
worth studying. Finally, while beyond the scope of this paper, future research might examine the specific
organizational actors or actions stakeholders evaluate when making trust judgments about organizations.
Our framework takes an initial step towards creating a stakeholder model of organizational trust.
While there are limitations, our analyses challenge some existing beliefs regarding organizational trust
and offer a number of intriguing avenues for future research. In particular, the results suggest a need to
better understand the seemingly expansive role of identification, to examine the targeted role of
benevolence, to more carefully study the distinction between managerial and technical competence, and
to further our understanding of when transparency might be important. We believe the framework we
have developed may provide guidance in approaching and answering these and other important questions.
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FIGURE 1
Relevance of Trustworthiness Dimensions Across Stakeholder Types
y Transparenc
external
internal
high low
DEPTH
Managerial
Competence
Technical
Competence
Benevolence
Identification
LOCUS
Managerial
Competence
Technical
Competence
Integrity
Identification
+ Technical
Competence
Benevolence
Identification
+ Technical
Competence
Integrity
Identification
+ indicates that a specific trustworthiness dimension matters relatively
more
in this type of relationship than in another type of relationship.
Note: Benevolence significant at p =.067 (CI =90%) in high/external relationships , and
Managerial Competence significant at p=.078 (CI=90%)
in external/low relationships.
TABLE 1
Results of Confirmatory Factor Analysis for Study Variables
NOTE: The chosen five factor model was the best fitting five factor model.
Model
χ
² df NFI RFI IFI TLI CFI RMSEA
Six-factor Model 640.794 104 0.963 0.951 0.969 0.959 0.969 0.063
Five-Factor Model * 945.774 109 0.945 0.932 0.951 0.939 0.951 0.077
One-factor model 3341.024 119 0.806 0.778 0.812 0.785 0.812 0.144
*Managerial and Technical Competence combined NFI: Normed Fit Index; RFI: Relative Noncentrality Index; IFI: Incremental Fit Index
TLI: Tucker-Lewis Index; CFI: Comparative Fit Index;
RMSEA: Root Mean Square Error of Approximation
TABLE 2
Descriptive Statistics, Correlations among Key Variables, & Alpha Coefficients
Variable Mean S.D. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
1. Managerial Competence 3.16 1.14 (0.87)
2. Technical Competence 3.54 1.05 0.68 ** (0.85)
3. Integrity 3.25 1.02 0.61** 0.63** (0.85)
4. Transparency 2.87 0.91 0.64** 0.57** 0.69** (0.87)
5. Benevolence 2.97 0.96 0.60** 0.61** 0.76** 0.71** (0.88)
6. Identification 2.96 1.20 0.65** 0.64** 0.67** 0.63** 0.70** (0.93)
7. Trust 2.65 0.80 0.70** 0.71** 0.68** 0.63** 0.68** 0.77** (0.84)
8. Gender 0.26 0.44 -0.05** -0.06 -0.03 -0.01 -0.05 -0.09 -0.09**
9. Age 2.72 0.76 0.05 0.04 -0.02 -0.02 -0.03 0.01 0.00 -0.14**
10. Multiple Stakeholder 0.29 0.45 0.18** 0.18** 0.12** 0.10** 0.14** 0.22** 0.17** -0.07** 0.02
11. Organization 1 0.07 0.26 0.23** 0.14** 0.18** 0.22** 0.26** 0.17** 0.19** -0.12** 0.18** -0.06*
12. Organization 2 0.63 0.48 -0.65** -0.42** -0.36** -0.36** -0.35** -0.41** -0.45** 0.05 -0.05 -0.18** -0.36**
13. Organization 3 0.21 0.41 0.46** 0.29** 0.20** 0.19** 0.13** 0.22** 0.26** -0.03 -0.07* 0.16** -0.14** -0.71**
14. Organization 4 0.08 0.28 0.24** 0.18** 0.17** 0.14** 0.18** 0.22** 0.21** 0.07* 0.03 0.14** -0.08** -0.4** -0.16**
15. Locus 0.57 0.50 -0.50** -0.44** -0.36** -0.3** -0.35** -0.51** -0.46** 0.01 0.03 -0.32** -0.05 0.51** -0.34** -0.35**
16. Depth 0.49 0.50 0.02 0.02 -0.07* -0.08** -0.08** 0.07* 0.05 -0.07 .095** 0.06* -0.07* 0.064* -0.06* 0.04* -0.06*
N=1298 Alpha Coefficients on the diagonal in parentheses. ** correlations significant at 0.01 level, * correlations significant at 0.05 level.
TABLE 3
Relative Relevance of Trust Dimensions for Different Stakeholder Groups
BS.E. BS.E. BS.E. BS.E.
(Constant) 2.353*** (0.076) 0.393*** (0.047) 1.183*** (0.279) 1.001*** (0.256)
Managerial Competence 0.113*** (0.016) 0.447*** (0.108) 0.269*** (0.063)
Technical Competence 0.173*** (0.017) 0.341** (0.1) 0.559*** (0.057)
Integrity 0.077*** (0.020) 0.335** (0.115) 0.327*** (0.067)
Transparency 0.041
†
(0.021) 0.18 (0.121) 0.092 (0.071)
Bene volence 0.071*** (0.022) 0.078 (0.128) 0.162* (0.078)
Identification 0.241*** (0.016) 0.75*** (0.097) 0.697*** (0.057)
Age -0.088 (0.025) -0.073 (0.049) -0.073 (0.049)
Gender -0.112 (0.043) -0.123 (0.085) -0.139 (0.084)
Multiple Stakeholdership -0.034 (0.044) -0.04 (0.085) -0.037 (0.085)
Organization 1
‡
0.686*** (0.077) -0.394* (0.163) 0.399* (0.162)
Organization 3 0.434*** (0.053) -0.062 (0.125) 0.103 (0.122)
Organization 4 0.392*** (0.078) 0.14 (0.161) 0.177 (0.159)
Employees
‡‡
0.601*** (0.052) -0.264 (0.375) 0.494** (0.158)
Customer 0.158** (0.064) -0.317
†
(0.127) 0.308* (0.126)
Investors 0.357*** (0.072) -0.181 (0.379) 0.413* (0.179)
Depth 0.113 (0.131) 0.159 (0.143)
Deep/ Internal 0.159 (0.147)
Managerial Competence * Depth -0.046 (0.101)
Technical Competence * Depth -0.061 (0.1)
Integrity * Depth -0.211
†
(0.121)
Transpare ncy * Depth -0.063 (0.124)
Be ne vol en ce * De pt h 0.267* (0.135)
Identification * Depth -0.104 (0.096)
Managerial Competence * Locus -0.218* (0.107)
Technical Competence * Locus 0.256* (0.109)
Integrity * Locus 0.021 (0.125)
Transpare ncy * Locus -0.121 (0.129)
Benevolence * Locus -0.026 (0.136)
Identification * Locus 0.019
†
(0.105)
Manager ial Compe tence * Deep/Internal 0.108 (0.124)
Technical Competence * Deep/Internal -0.121 (0.127)
Integrity* Deep/Inte rnal -0.424** (0.155)
Transparency * Deep/Internal 0.269
†
(0.155)
Benevolence* Dee p/Internal 0.140 (0.153)
Identification * Deep/Internal 0.047 (0.129)
Adjusted R
2
0.293 0.708 0.717 .717
† p < .10; * p < .05; ** p < .01; *** p < .001
‡
Organization 2 is base case.
‡‡
Suppliers are base case. Stakeholder controls are introduced in Model 2 and 3 instead of a separate locus variable.
Model 0 Model 1 Model 2 Model 3
TABLE 4
Absolute Relevance of Trust Dimensions for Different Stakeholder Groups
Stakeholder Type Internal External
Shallow Deep Shallow Deep
Variable B S.E. B S.E. B S.E. B S.E.
Intercept
2.181*** .497 .948 .474 .840 .455 1.383** .464
Managerial Competence
0.433*** .113 0.465*** .119 0.194†.110 .169 .129
Technical Competence
0.311** .100 0.504*** .109 0.580*** .102 0.694*** .108
Integrity
0.478*** .114 -0.083 .119 0.296** .118 .190 .131
Transparency
.095 .124 0.347** .117 .203 .121 .027 .137
Benevolence
.047 .135 0.325** .117 .089 .136 0.288†.157
Identification
0.687*** .100 0.757*** .099 0.677*** .100 0.726*** .107
Gender
-.109 .153 .005 .158 -.160 .162 -.218 .192
Age
-0.181 .109 -.068 .100 .089 .100 -0.160†.094
Multiple Stakeholdership
-.071 .139 -.089 .135 .044 .201 -.058 .219
Organization 1
-.077 .284 .231 .290 0.692* .300 .474 .505
Organization 2
-.052 .207 -.091 .212
Organization 3
.051 .243 -.099 .418
Organization 4
.020 .224 .037 .206
Employee (base case for internal)
Supplier (base c ase for external)
Investor
-.165 .171 .005 .180
Customer
.198 .194 0.566* .216
Adjusted R Square 0.713 0.722 0.591 0.625
N 265 291 400 342
† p < .10
* p < .05
** p < .01
*** p < .001
APPENDIX A
Scale Items Measuring Each Construct
Managerial Competence
The organization...
• can successfully adapt to changing demands.
• is able to reach set goals.
Technical Competence
The organization...
• is very competent in its area.
• generally has high standards.
Integrity
The organization…
• does not try to deceive.
• has high moral standards.
• treats its stakeholder with respect.
Benevolence
The organization...
• is caring.
• listens to my needs.
• does not abuse stakeholders.
Identification
• I can identify with the organization.
• My personal values match the values of the organization.
• I feel connected with the organization.
Transparency
The organization...
• explains its decisions.
• says if something goes wrong.
• is transparent.
• openly shares all relevant information.
APPENDIX B: Sample Trust Definitions and Trustworthiness Dimensions from Interviews
Sample Trust Definitions from Stakeholders
UEmployee 1:U ...it means making myself vulnerable, increasing my risk.
UEmployee 2:U Trust is the confidence that someone places in you to be able to do a task of relevance.
USupplier 1:U Trust is reduced when you risk assigning a task to somebody, who [may] not do it.
USupplier 2:U The more trust there is, the less need for a contract...
UInvestor 1:U Trust is when you don’t need a 20 page MOU or 120 page contract; a handshake is enough.
UInvestor 2:U I don’t trust [certain] places...we don’t invest there because it is too risky..
UCustomer 1:U Depends on the situation…The difference is the risk involved.
UCustomer 2:U One thing that’s important for me to trust is that I feel secure that I’m not taken advantage of.
Sample Trustworthiness Dimensions from Employees (E), Suppliers (S), Investors (I) & Customers (C)
UManagerial Competence
(1) The layoff wasn’t large enough to fix the problem. Basically [management] was incompetent.(E)
(2) When we invest we only look at companies that are managed well. The quality of the
management team is very important to us, especially in smaller companies.(I)
UTechnical competence
(1) I trust (Organization X) because the [service works] well and they get you from A to B safely. (C)
(2) I trust (Organization X), because they really know their stuff. I could imagine telling my friends
to work there, since they are competent to deliver what they promise, unlike others…(E)
UTransparency
(1) I cherish open communication. In one case the founder presented new numbers, and one of my
investment colleagues jumped in and said, ‘Oh yeah I am already sold’, and then the founder said,
wait one second until you have heard all the downsides to this….. (I)
(2) When the ‘s*** hits the fan’ I want to know. Will they tell me? I want to know from them and not
via the newspapers. I want to know everything that is relevant, like in a family. (S)
UIntegrity
(1) Honesty…this is what counts in professional life. Then [the relationship] works. (S)
(2) What made me trust (Org X) less is they tried to come up with new projects to sell [the client] and
I was not sure if there was a need. They tried to take advantage of people to get contracts. (E)
UBenevolence
(1) My computer broke while on warranty, but (Org X) did not seem to care. I had to call a lot…the
computer was fixed, but they gave me such a hard time I decided to not buy there again. (C)
(2) I trust the organization because in the end they take care of you. (E)
UIdentification
(1) There are situations where you feel you should invest based on numbers. Still there is the feeling
not to since values do not match. The reverse also occurred. The opportunity did not look
attractive from an economic stance, but the values match and you want to promote this cause. (I)
(2) I trust (Bank X) more, because it has…principles…the bank does a lot to support local businesses
and they run a lot of classes for people [in the community], and [host] local activities. (C).
