Is public trust in business at a low? This week’s research articles present some recent research on trust issues.
Public trust in business and its determinants
Public trust in business, defined as the degree to which the public—meaning society at large—trusts business in general, is largely understudied. This article suggests four domains of existing trust research from which scholars of public trust in business can draw.
The authors then propose four main hypotheses, which aim to predict the determinants of public trust, and test these hypotheses using a factorial vignette methodology. These results will provide scholars with more direction as this article is, to the authors’ knowledge, one of the first empirical studies of public trust.
Furthermore, the study will enable those companies interested in increasing public trust to understand better respective determinants of public trust.
Michael Pirson, Kirsten Martin, Bidhan Parmar. 2019. Public Trust in Business and Its Determinants.
Business & Society, 58(1), 132-166.
From a sociological and anthropological viewpoint, the ability of complete strangers to carry out transactions that involve significant risk to one or both parties should be complicated by a lack of trust. Yet the rise of e-commerce and “sharing economy” platforms suggests that concerns that seemed prevalent only a few decades ago have been largely assuaged.
What mechanisms have been used to facilitate trust between strangers online? Can we measure the extent to which users trust each other when interacting online? This article reviews the existing literature on cyber trust and proposes directions for further research.
Amitai Etzioni. 2019. Cyber trust.
Journal of Business Ethics, 156(1), 1–13.
Developing trust through stewardship
This paper examines the gap between reporting and managers’ behaviour to challenge the current theoretical underpinnings of intellectual capital (IC) disclosure practice and research.
The authors explore how the key features from IC and integrated reporting can be combined to develop an extended model for companies to comply with EU Directive 2014/95/EU and increase trust in corporate disclosures and reports. This essay relies on academic literature and examples from practice to critique the theories that explain corporate disclosure and reporting but do not change management behaviour.
Based on this critique, the authors argue for a change in the fundamental theories of stewardship to frame a new concept for corporate disclosure incorporating using a multi-capitals framework. The authors argue that, while the inconsistency between organisations’ reporting and behaviour persists, increasing, renewing or extending the information disclosed is not enough to instil trust in corporations.
Stewardship over a company’s resources is necessary for increasing trust. The unanticipated consequences of dishonest behaviour by managers and shareholders compels a new application of stewardship theory that works as an overarching guide for managerial behaviour and disclosure.
Emanating from this new model is a realisation that managers must abandon agency theory in practice, and specifically the bonus contract. The implications for integrated reporting and reports complying with the new EU Directive are profound. Both instruments rely on agency theory to coax managers into reducing information asymmetry by disclosing more. However, agency theory only re-affirms the power managers have over corporate information. It does not change their behaviour, nor to act in the interest of all stakeholders as the stewards of an organisation’s resources.
The authors advocate that, in business education, greater emphasis is needed on how stewardship has a more positive impact on management behaviour than agency, legitimacy and stakeholder theories.
Dumay, J., La Torre, M. and Farneti, F. 2019. Developing trust through stewardship.
Journal of Intellectual Capital, 20(1), 11-39.
Revisiting interorganisational trust: Is more always better or could more be worse?
This study conducts an investigation of interorganisational trust and its positive and negative effects. The authors 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.
Read this Open Access article online for free
Verónica H. Villena, Thomas Y. Choi, Elena Revilla. 2019. Revisiting Interorganizational Trust: Is More Always Better or Could More Be Worse?
Journal of Management, 45(2), 752-785.
Ethical leadership, trust, organisational citizenship behaviour and CSR in China
Using multisource data and multilevel analysis, the authors propose that the ethical stance of supervisors influences subordinates’ perceptions of corporate social responsibility (CSR) which in turn influences subordinates’ trust in the organisation resulting in their taking increased personal social responsibility and engagement in organisational citizenship behaviours (OCB) oriented toward both the organisation and other individuals.
Using a multilevel model, the authors assessed the extent to which ethical leadership and CSR at the work unit level impacts subordinates’ behaviours mediated by organisational trust at the individual level. The authors employed a sample of 71 work unit supervisors and 308 subordinates from five businesses of a conglomerate company located in mainland China. Subordinates were asked to rate supervisory ethical leadership practices, CSR, and their extent of organisational trust. Supervisors were asked to rate the personal social responsibility taking and OCB of their respective subordinates.
A multilevel path analysis revealed that ethical leadership has a positive effect on CSR at the work unit level and that CSR has a positive cross-level effect on organisational trust at the individual level, which in turn significantly and positively impacts OCB through the mediating effect of taking personal social responsibility. Results are discussed in the context of China’s manufacturing sector.
Louise Tourigny, Jian Han, Vishwanath V. Baba and Polly Pan. 2019. Ethical Leadership and Corporate Social Responsibility in China: A Multilevel Study of Their Effects on Trust and Organizational Citizenship Behavior.
Journal of Business Ethics, 158(2), 427–440.
Repairing investor trust through managerial reputation and announcing corrective actions
Following SOX, financial restatements increased dramatically. Prior research suggests that how investors respond to restatements, particularly those involving fraud, may mitigate or exacerbate damage suffered. The authors extend both accounting and management research by examining the joint effects of pre-restatement managerial reputation and the announcement of managerial corrective actions in response to a restatement on nonprofessional investors’ judgments.
The authors find that pre-restatement managerial reputation and the announcement of managerial corrective actions jointly influence investors’ managerial fraud prevention assessments, which mediate their trust in management. These trust perceptions in turn affect investors’ investment and CEO retention judgments.
The results have implications for firms that are concerned with lessening the negative consequences associated with issuing a restatement.
Anna M. Cianci, Shana M. Clor-Proell and Steven E. Kaplan. 2019. How Do Investors Respond to Restatements? Repairing Trust Through Managerial Reputation and the Announcement of Corrective Actions.
Journal of Business Ethics, 158(2), 297–312.
Consumer processing of online trust signals
The growth of online transactions coupled with the worldwide expansion of Internet-based information exchange has triggered fear, distrust and risk among online consumers. Despite the well-proven benefits to retailers when they include assurance services (online trust signals) such as seals of approval, rating systems or assurance statements in their websites, there is no consensus as the most trustworthy type.
To fill this research gap, the current study reverts to neuroscience (fMRI) to compare the underlying brain mechanisms linked to each type. Twenty-nine subjects participated in an experiment simulating a low-involvement online purchase. The functional neuroimaging analysis reveals that seals of approval are the most trustworthy as they elicit activation of brain areas linked to reward and expected values. Although assurance statements reveal lower scores of trust than seals of approval, they do not arouse negative brain areas.
By contrast, products accompanied by rating systems elicit brain areas linked to ambiguity, negativity and risk. Interestingly, more positive trust and purchase intentions toward seals of approval were predicted by the activation of value-computation areas, whereas higher scores of risk associated with rating systems were predicted by negative-related activations.
These results offer invaluable insight into the psychological origin of trust conveyed to different types of online trust signals.
Luis-Alberto Casado-Aranda, Angelika Dimoka & Juan Sánchez-Fernández. 2019. Consumer Processing of Online Trust Signals: A Neuroimaging Study.
Journal of Interactive Marketing, 47 (August), 159-180.