Balancing risk and trust for strategic alliance formation decisions

Abstract

PurposeTrust entails the assumption of risk by the trustor to the extent that the trustee may act in a manner unaligned with the trustor's interests. Before a strategic alliance is formed, each firm formulates a subjective assessment regarding whether the other firm will behave in a trustworthy manner and not act opportunistically. To inform this partner analysis and selection process, the authors leverage the concept of value of information to quantify the benefit of information gathering activities on the trustworthiness of a potential trustee.Design/methodology/approachIn this paper, the authors develop a decision model that explicitly operationalizes trust as the subjective probability that a trustee will act in a trustworthy manner. The authors integrate the concept of value of information related to information gathering activities, which would inform a trustor about a trustee's trustworthiness.FindingsTrust inherently involves some degree of risk, and the authors find that there is practical value in carrying out information gathering activities to facilitate the partner analysis process. The authors present a list of trustworthiness indicators, along with a scoring sheet, to facilitate learning more about a potential strategic alliance partner.Originality/valueThe need for a quantitative model that can support risk-based strategic alliance decision-making for partner analysis represents a research gap in the literature. The modeling of strategic alliance partner analysis decisions from a value of information (VOI) perspective adds a contribution to the trust literature.