Influence of Control Precision and Prior Collaboration Experience on Trust and Cooperation in Inter-organizational Relationships

Abstract

We investigate whether prior collaboration experience affects a focal partner’s response to the precision of monitoring controls adopted by a new partner, with consequences for their goodwill trust in, and subsequent cooperation with, the new partner. We expect the partner to interpret their new partner’s adoption of precise monitoring controls as either an effort to limit their autonomy or to reduce information asymmetry. The partner’s experience with past partners is posited to determine which interpretation is salient, with negative (positive) experiences favoring the former (latter). We find that partners with an uncooperative (cooperative) experience exhibit lower (higher) goodwill trust in the new partner when controls are more precise. Further, prior experience moderates the indirect relation between the precision of monitoring controls and partner cooperation acting through goodwill trust. The results demonstrate the importance of prior experiences in the design of interfirm controls for current partner relationships.