Proceedings of the 8th International Conference on Intellectual ...

The Management <strong>of</strong> Trust in <strong>the</strong> Knowledge-Intensive
Industrial Clusters: Institutional vs. Personal Approaches
Rita Babiliūtė and Kęstutis Kriščiūnas
Institute <strong>of</strong> Europe, Kaunas University <strong>of</strong> Technology, Kaunas, Lithuania
rita.uni@gmail.com
kestutis.krisciunas@ktu.lt
Abstract: The issues <strong>of</strong> trust and trust building are becoming <strong>of</strong> ever greater importance in <strong>the</strong> social sciences
and practice, especially in <strong>the</strong> areas related to knowledge exchange. The lack <strong>of</strong> trust may lead to a vicious circle
in organizational relationship and preclude any knowledge diffusion from taking place. The main focus <strong>of</strong> this
paper is on <strong>the</strong> knowledge-intensive industrial clusters because <strong>the</strong>y are characterised by <strong>the</strong> inter-organizational
knowledge interactions where <strong>the</strong> element <strong>of</strong> trust is omnipresent. Both researchers and practitioners
acknowledge <strong>the</strong> importance <strong>of</strong> trust in <strong>the</strong> activities characterized by <strong>the</strong> high possibility <strong>of</strong> risk, in this case
organizations where <strong>the</strong> main “product/outcome” is intangible and related to knowledge generation, sharing and
management. Thus, <strong>the</strong> environment <strong>of</strong> knowledge exchange involves multiple risks and trust is a central tool
and precondition for minimising <strong>the</strong> risks in interactions. The paper provides a comparative analysis <strong>of</strong> two
competing approaches as far as <strong>the</strong> trust building in inter-organizational environment is concerned. The first
approach, dominated by <strong>the</strong> psychology-related stream <strong>of</strong> literature in social sciences, stresses <strong>the</strong> importance <strong>of</strong>
personal qualities and characteristics in trust building, e.g. <strong>the</strong> aspects <strong>of</strong> leadership. The second approach, on
<strong>the</strong> o<strong>the</strong>r hand, focuses on <strong>the</strong> institutional aspects <strong>of</strong> trust that are as important for <strong>the</strong> performance <strong>of</strong> <strong>the</strong> social
system as are <strong>the</strong> personal interactions. The literature analysis has shown that mainstream management
literature is largely dominated by <strong>the</strong> first perspective. However, <strong>the</strong> successfully established industrial clusters
are complex inter-organizational entities that tend to possess a high degree <strong>of</strong> institutionalization. The paper
establishes <strong>the</strong> linkages between <strong>the</strong> different typologies <strong>of</strong> trust and <strong>the</strong> nature <strong>of</strong> industrial clusters, based on
<strong>the</strong> analysis <strong>of</strong> research literature and several empirical case studies <strong>of</strong> <strong>the</strong> industrial clusters. It also seeks to
structure <strong>the</strong> personal and institutional trust-related incentives that could be used to ensure successful
knowledge-based co-operation within <strong>the</strong> clusters.
Keywords: trust, industrial/knowledge intensive clusters, trust management
1. Introduction
The phenomenon <strong>of</strong> trust has been extensively analysed by a variety <strong>of</strong> social disciplines, such as
psychology, sociology, political science, economics, anthropology, history and even socio-biology. Not
surprisingly, <strong>the</strong>re have been numerous attempts to define and conceptualize trust, as well as its
antecedents and outcomes. This paper relies on <strong>the</strong> concept suggested by Mayer, Davis and
Schoorman (1995) who claim that trust is “<strong>the</strong> willingness <strong>of</strong> a party to be vulnerable to <strong>the</strong> actions <strong>of</strong>
ano<strong>the</strong>r party based on <strong>the</strong> expectation that <strong>the</strong> o<strong>the</strong>r will perform a particular action important to <strong>the</strong>
trustor, irrespective <strong>of</strong> <strong>the</strong> ability to monitor or control that o<strong>the</strong>r party”. The authors predicate that
being vulnerable implies that <strong>the</strong>re is something <strong>of</strong> importance to be lost and making itself vulnerable
is taking risk. Besides, as it is emphasized, trust is not taking risk per se, but ra<strong>the</strong>r – a willingness to
take risk.
There is a bulk <strong>of</strong> academic literature regarding <strong>the</strong> positive impact <strong>of</strong> trust on <strong>the</strong> economic
performance <strong>of</strong> firms. The presence <strong>of</strong> trust reduces <strong>the</strong> transaction costs (Williamson, 1985),
promotes flexible specialization (Sabel, 1989), collaborative behaviour <strong>of</strong> system actors (Child and
Faulkner, 1998), which results in <strong>the</strong>ir increased productivity (Fukuyama, 1995) and national
economic growth (Knack and Keefer, 1996). Rus and Iglič (2005) note that trust affects economic
performance in direct (e.g. reducing costs <strong>of</strong> transactions) and indirect way, e.g. by enabling actors to
adopt complex governance mechanisms that would o<strong>the</strong>rwise be impossible under <strong>the</strong> conditions <strong>of</strong>
low trust.
Thus, trust is key to any cooperation-based inter-organizational mechanisms <strong>of</strong> governance, such as
strategic alliances, networks, knowledge partnerships and clusters. The concept <strong>of</strong> industrial cluster,
made popular by Porter (1990), relies heavily on <strong>the</strong> regional social capital where trust is <strong>the</strong> key
ingredient.
As far as trust is concerned, most case studies on industrial clusters fall into two major categories. On
one hand, <strong>the</strong>y analyse <strong>the</strong> established industrial structures that are successfully supported by <strong>the</strong>
existing socio-economic relations, including trust. On <strong>the</strong> o<strong>the</strong>r hand, <strong>the</strong>re are studies that focus on
56