Trust-based management control in inter-organizational relationships

Abstract

High levels of trust can reduce the risk of inter-organizational relationships failing. Also, high levels of trust between business partners can be advantageous as less time and effort are spent controlling the motives and behavior of a company’s counterpart. This case study explores the management control systems between two small Norwegian salmon farming companies engaged in a joint venture. Specifically, we ask how trust influences management control in an inter-organizational relationship. We collected data by interviewing the management of the two companies constituting the joint venture and their collaborating partners throughout the value chain, resulting in two main findings. First, we find that collective values are the most critical control mechanism in managing the joint venture. As a result, other control mechanisms are toned down and become less prominent. Second, we find that a high level of trust enables management based on values. Hence, trust becomes directive for managing the joint venture. Our findings could be important for companies seeking to engage in different inter-organizational relationships. They indicate that it might benefit managers to seek out potential partners with the same fundamental values as themselves to facilitate trust-building.