Establishing and Sustaining Trust in Virtual Organizations

Abstract

The past decade has seen dramatic changes in the modern organization with virtual organizations (VOs) becoming an increasingly common form of economic enterprise (Lucas & Baroudi, 1994). Much of this change has been accelerated by advances in information and communication technology (ICT) as well as a contemporary globalized knowledge economy. Virtualization allows organizations to transcend traditional organizational boundaries and the limitations of time and geographic dispersion to ultimately explore and realize opportunities that traditional organization forms could not possibly consummate. There is consensus among practitioners and scholars that trust plays an essential role in the development and survival of VOs, where vertical control, hierarchical authority, and formalized organizational procedures and policies yield to self-management. In such organizations trust acts as a substitute for traditional control mechanisms (Morris & McManus, 2002), it lessens transaction costs (Bromiley & Curley, 1992), it minimizes uncertainty and risk (Grabowski & Roberts, 1999), and it helps in conflict and friction resolutions (Jarvenpaa, Knoll, & Leidner, 1998). Although trust is pivotal in ensuring the existence and successful functioning of VOs, literature on trust development in VOs is relatively underdeveloped. It is therefore the intention of this article to enhance the understanding of trust development in VOs by examining then enhancing a key theory on trust in traditional organizations then applying it to VOs.