ABSTRACT
In many countries, the construction industry is criticized for being adversarial, inefficient and conservative (Latham, 1994; Egan, 1998; Ericsson et al., 2002; PSIB, 2003). Low trust is often seen as a major cause of inefficiency problems, and more collaborative procurement routes are advocated. In literature on trust, it is generally stated that an appropriate level of trust has important benefits for inter-organizational cooperation and relational performance. Research on inter-organizational trust appears, however, to be full of paradoxes (Nooteboom, 2002). For instance, trust can be based on contracts and control, but can also rely on affection and norms of reciprocity and fairness, in which case formalized control sometimes may hamper trust. It may enable openness and flexibility, but can also be so strong that it limits the variety of business relations needed for learning and innovation (Nooteboom, 2002). Furthermore, trust does not only arise in direct interaction in specific exchange relationships, but is also influenced by more general contextual characteristics. The contracting environment, involving legal and educational institutions as well as ethical norms and other cultural aspects, interacts with formal contracts and the behavior of individuals in shaping trust development in a specific relationship. The purpose of this chapter is to identify major bases of trust production in the construction industry. We assume a multilevel approach, focusing on the interaction between institutional and relationship-specific foundations of trust. A starting point for this chapter is that an industry or organization is not only structured to manage threats of opportunism, but also to coordinate the actions of different parts of the organization efficiently. In construction, where temporary organizations composed of a multitude of firms jointly produce unique and complex buildings, the need for information processing for coordination purposes is very high. Thus, in our analysis we assume that two parallel systems shape both industry level institutions and project level relationships: one system for information processing, coordination and knowledge management, and one system for mitigating opportunism and creating trust (cf. Madhok, 2006). The
systems are partly interrelated, so that goals of information processing may sometimes produce structures and actions that interfere – positively or negatively – with goals of trust and relationship building, and vice versa. In this chapter, we identify key aspects of these two systems in construction and discuss how they interact on different levels. First, we identify relevant forms of trust and processes of trust production, based on trust literature. We then briefly introduce central concepts in theories of organizational structure and coordination. Subsequently, we describe key characteristics of the construction industry and discuss their relationship with information processing and trust production.
