This week’s research tidbits considers the role of trust in business.

Is more interorganisational trust always better or could more trust be worse?
This study conducts an investigation of interorganizational trust and its positive and negative effects. We consider how positive and negative effects operate differently under two types of uncertainties—buyer dependence and market instability.

Trust is studied in the buyer–supplier relationship (BSR) context from the buyer’s perspective. The analysis is conducted based on survey data and secondary archival data from a sample of 133 BSRs. Results show that trust follows an inverted-U shape with performance. There is a point at which the negative effects of trust offset its benefits, and beyond that point, performance declines.

The results also suggest that the positive and negative effects of trust become more pronounced when buyers are highly dependent on suppliers or when environmental uncertainty surrounding buyers is low. Trust’s negative effects are more severe for those buyers that are highly dependent and operate in stable markets.

Verónica H. Villena, Thomas Y. Choi and Elena Revilla. 2019. Revisiting Interorganizational Trust: Is More Always Better or Could More Be Worse?
Journal of Management, 45(2),752-785.


The many ways to trust a firm 
The decision to trust encompasses evaluation of multiple information cues that are used by evaluators to make inference about the trustee’s qualities and capabilities. The information about the social status of the trustee firm is one of such cues available to evaluators. Yet the relationship between perceived social status of the trustee and the evaluator’s trust remains underexplored.

In two experimental studies, we (1) find a non-linear relationship between a firm’s status and the evaluator’s trust, and (2) test theorized mechanisms that can explain this relationship. The paper reveals that firms having low, middle, and high status are not only trusted differently, but are trusted for different reasons: qualities, such as perceived benevolence and integrity, mediate higher trust for middle-status firms, while trust for high-status firms is mediated by ability and integrity.

The findings thus suggest that in the assessment of an organization’s trustworthiness, the relative importance of a particular virtue, such as ability, benevolence, or integrity, varies depending on the status position of that organization.

Fei Song and Alex Bitektine. 2018. Firm Status and Evaluators’ Trust: The Many Ways to Trust a Firm.
Journal of Business Ethics, 153(2), 503–518.


A multilevel trust-based model of ethical public leadership 
I develop and test a multilevel trust-based model of ethical public leadership, which links ethical leadership, trust and leadership outcomes both within and across organizational levels. I examine how both ethical leadership and trust relate to employee well-being and satisfaction, group organizational citizenship behaviour and perceived organizational performance.

The findings, based on data collected from an online quantitative survey conducted in three local councils of the north east of England, provide evidence in support of positive relationships between ethical leadership and employees’ trust in leaders at multiple levels. This trust is in turn shown to influence employees’ attitudes, behaviours and cognitions.

N. A. Mozumder. 2018. A Multilevel Trust-based Model of Ethical Public Leadership. 
Journal of Business Ethics, 153(1), 167–184.


Repairing broken trust between leaders and followers 
This study examines the conditions under which apologies help to elicit forgiveness and restore trust following trust violations between leaders and followers. The intentionality and severity of violations are examined in a critical incident study and a laboratory study.

The results support a model in which forgiveness mediates the relation of apology quality and trust. More importantly, the moderation–mediation model shows that apology quality influenced forgiveness and subsequent trust following violations that were moderate in severity–intentionality combination. The effect of apologising affects trust directly without forgiveness when the severity–intentionality combination held minor or extreme intensity.

The results suggest a range in which apologies are effective and enrich understanding of the conditions under which trust can be recovered through an apology–forgiveness process in leader–follower relationships. The contribution of the study lies in elucidating that the combination of severity and intentionality of leaders’ trust violations has greater importance than either one separately.

Steven L. Grover, Marie-Aude Abid-Dupont, Caroline Manville and Markus C. Hasel. 2019. Repairing Broken Trust Between Leaders and Followers: How Violation Characteristics Temper Apologies. 
Journal of Business Ethics, 155(3), 853–870.


Mentoring: A path to prosocial behaviour through trust
Public accounting firms can build integrity within their organizations through early detection of fraud. One way to reduce and detect fraud is to encourage whistleblowing as a prosocial behaviour. We explore the impact of mentoring on intention to report fraud.

A survey with 120 responses from the US public accountants suggests that quality mentoring relationships, a common feature in the profession, and caring ethical climate positively relate to internal reporting of fraud. Two intermediate variables, trust and affective commitment, mediate these effects. Mentor-relationship quality also increases perceptions of caring ethical climate.

The study contributes to two bodies of research by (1) finding extended benefits from mentoring, beyond those typically discussed in academic literature; and (2) identifying a previously unexplored firm intervention capable of positively influencing prosocial behaviour and combating fraud.

Eileen Z. Taylor and Mary B. Curtis. 2018. Mentoring: A Path to Prosocial Behavior. 
Journal of Business Ethics, 152(4), 1133–1148.


Social trust and auditor reporting conservatism 
We examine the implications of social trust for auditor reporting conservatism. Using a sample of listed companies in China, we find that clients located in high-trust regions are less likely to receive a non-clean audit opinion. This negative impact of social trust on auditor reporting conservatism increases (decreases) when the client’s parent firm operates in a region of higher (lower) social trust, suggesting that social trust is contagious from a parent firm to its subsidiaries in a consolidated entity.

We provide evidence that the trust contagion is more pronounced for clients with a higher percentage of parent-appointed directors on their boards and clients whose parent firm has fewer subsidiaries. These findings indicate that monitoring and, to a lesser extent, personnel rotation may serve as potential channels of trust contagion. We also find that the impact of trust is more pronounced when the client is located closer to its audit firm, when the client’s parent firm is a state-owned enterprise or holds a higher percentage of the client’s shares, and when the client is associated with greater discretionary accruals.

We provide further evidence that it is client rather than auditor trustworthiness that influences auditor reporting conservatism, auditors charge trustworthy clients lower fees, and clients from high-trust regions are less likely to manipulate earnings. Overall, our evidence suggests that social trust alleviates auditor concern about client moral hazard.

Deqiu Chen, Li Li, Xuejiao Liu and Gerald J. Lobo. 2018. Social Trust and Auditor Reporting Conservatism. 
Journal of Business Ethics,153(4), 1083–1108.


The limits of blockchain technology and trust in the sharing economy
At the tip of the hype cycle, trust-free systems based on blockchain technology promise to revolutionize interactions between peers that require high degrees of trust, usually facilitated by third party providers. Peer-to-peer platforms for resource sharing represent a frequently discussed field of application for “trust-free” blockchain technology.

However, trust between peers plays a crucial and complex role in virtually all sharing economy interactions. In this article, we hence shed light on how these conflicting notions may be resolved and explore the potential of blockchain technology for dissolving the issue of trust in the sharing economy.

By means of a dual literature review we find that

1) the conceptualization of trust differs substantially between the contexts of blockchain and the sharing economy,

2) blockchain technology is to some degree suitable to replace trust in platform providers, and that

3) trust-free systems are hardly transferable to sharing economy interactions and will crucially depend on the development of trusted interfaces for blockchain-based sharing economy ecosystems.

Florian Hawlitschek, Benedikt Notheisen and TimmTeubner. 2018. The limits of trust-free systems: A literature review on blockchain technology and trust in the sharing economy. 
Electronic Commerce Research and Applications, 29(May-June), 50-63.