Distrust in Stakeholder Networks

Trust is a fundamental element of the relationship between organizations and their stakeholders (Burchell & Cook, 2006; Greenwood & Van Buren III, 2010). Among other things, trust fosters stakeholders’ commitment (Ruppel & Harrington, 2000) and cooperation (Jones & Wicks, 1999; Post, Preston, & Sauter-Sachs, 2002), reduces transaction costs (Jones, 1995), has a positive effect on innovation and organizations’ ability to adapt to external changes (Harrison, Bosse, & Phillips, 2010) and, in the end, can result in a competitive advantage for organizations (Barney & Hansen, 1994). For these reasons, it is not surprising that trust constitutes a central theme in stakeholder theory. Especially during the last decade, stakeholder literature on trust has been growing in size and significance (e.g. Greenwood & Van Buren III, 2010; Harrison et al., 2010; Pirson & Malhotra, 2011; Pirson, Martin, & Parmar, 2015).
At the same time, there has been an erosion of goodwill between stakeholders and organizations due to a number of recent issues such as Volkswagen’s emissions violations (Zhang, Veijalainen, & Kotkov, 2016), BP’s Deepwater Horizon oil spill (Brown, Buchholtz, & Dunn, 2016), and Lehman Brothers' bankruptcy that triggered the global financial meltdown in 2008 (Freeman, Harrison, Wicks, Parmar, & De Colle, 2010; Sachs & Rühli, 2011). Hence, stakeholders increasingly distrust organizations, especially private companies, and business as an economic institution (Werhane et al., 2011). However, stakeholder distrust is not unique to these latest developments but can exist in every organization-stakeholder relationship. Distrust is particularly important in highly salient and interdependent relationships because its consequences are mostly negative: lower contributions of stakeholders (Dervitsiotis, 2003; Dirks & Ferrin, 2002), higher transaction costs (Ghoshal & Moran, 1996), a negative relationship dynamic leading to stigmatization (Sitkin & Roth, 1993), hostility (Chambers & Melnyk, 2006) as well as fierce and often intractable conflicts (Tomlinson & Lewicki, 2006) and, as a result, lower organizational productivity and performance (Harrison et al., 2010; Sparrowe, Liden, Wayne, & Kraimer, 2001; Wicks, Berman, & Jones, 1999).
Despite its high relevance for organization-stakeholder relationships, distrust has received relatively little attention by stakeholder theorists. More developed, in this regard, is the field of organizational studies in which there has been a recent rise of publications on the topic of distrust (e.g. Bijlsma-Frankema, Wisse, Täuber, Sanders, & Sitkin, 2016; Guo, Lumineau, & Lewicki, 2016). However, even in this field, there is relatively little empirical research on distrust as a distinct concept from trust and the emphasis seldom lies on inter-organizational research. Considering this lack of knowledge, the aim of our project is to understand how organizations handle distrust-based, yet salient stakeholder relationships (Bundy, Shropshire, & Buchholtz, 2013). For this purpose, we would like to study the antecedents, consequences and contingencies of stakeholder distrust and potential stakeholder engagement practices to manage stakeholder distrust. In this project proposal, we draw on existing research on distrust in organizational studies and stakeholder theory in order to outline the current scientific knowledge concerning distrust antecedents, consequences and contingencies in both fields of research. Subsequently, we propose a mixed-methods approach based on four modules including the following research steps: (1) workshops and focus groups with practice experts on distrust in organization-stakeholder relationships who will serve as a Sounding Board for the duration of the project, (2) a key informant survey of Swiss organizations on their stakeholder relationships and stakeholder engagement practices and tools, (3) in-depth, theory-building case studies of companies that feature distrust in one or multiple stakeholder relationships, and (4) a survey that will allow us to test a model of distrust antecedents, consequences and contingencies (moderators) in organization-stakeholder relationships.