Trust and Technology in Inter-Organizational Business Relations

Introduction

The traditional manner of conducting business has changed with the advent of information technology and the focus of efforts to improve performance and relations among organizations has shifted from the organizational level to the inter-organizational level (den Hengst and Sol). Inter-organizational systems have been effective in improving efficiency and reducing costs (Swatman and Swatman, 1992; Subramani, 2004). They also help in reducing environmental uncertainty by facilitating communication and providing information (Henderson, 1990; Scala and McGrath, 1993) and encouraging closer relations with suppliers and customers (Cash and Konsynski, 1985; Swatman and Swatman, 1992; West, 1994; Siau, 2003). Numerous studies have been conducted to examine the impact of IT in inter-organizational relationships (Christiaanse and Huigen, 1997; Christiaanse and Venkatraman, 2002). Drawing on Malone et al (1987), Riggins and Rhee (1998), technology can enhance existing relationships between trading partners by promoting closer integration and increasing degree of interdependence between the trading partners. Furthermore, Bakos and Brynjolfsson (1993) proposed that IT use in business exchanges leads to closer cooperative relationships. Mukhopadhyay, Kekre and Kalathur (1995) asserted that technology leads to improved information sharing between trading partners. Although, the use of effective technology helps in sharing accurate and relevant information among the trading partners in less time (Anderson and Weitz, 1989; Malone, Yates and Benjamin, 1987), thereby greatly influencing their relationships, yet lack of trust in technology aided environment is often cited as a major hurdle in the growth of inter-organizational systems.

The role of inter-organizational trust has often been recognized as most effective in business relations. Trust in the physical trading environment is often built by various factors like face-to-face interactions, physical evidences, etc. The faceless environment offered by technology in electronic transactions, at times, is unable to provide such evidences, thereby generating reluctance on the part of the trading parties. Inter-organizational trust in an electronic business environment may relatively improve if the old adage “trust needs touch” (Olson and Olson, 2002) is addressed. In the virtual environment offered by inter-organizational systems, ‘touch’ needs to be replaced by effective evidences offered by technology. The issue is whether and how technology can be used to provide various ‘trust building cues’ to the trading parties, thereby improving the performance and relations in inter-organizational systems. The present paper makes a modest attempt to address this issue. It also attempts to identify certain technology-related trust issues, which can be addressed through effective deployment and implementation of relevant technology tools, and attempts to relate them with the levels of trust in various Indian companies involved in inter-organizational business relationships.