• Background of the Study

While trust is widely acknowledged as being important for the efficient operation of inter-organizational business arrangements, the formation of trust remains challenging. Trust has several connotations. It refers to a situation attributed by one party (trustor) willing to rely on the actions of another party (trustee); the situation is directed to the future and the trustor forcefully or voluntarily abandons control over the actions performed by the trustee. The trustor is uncertain about the outcome of the others actions; he can only develop and evaluate expectations. The uncertainty involves the risk of failure to the trustor if the trustee will not behave as desired. Trust can be attributed to relationships between people. It can be demonstrated that humans have a natural disposition to trust and to judge trustworthiness that can be traced to the activity of human brain and neurobiological structure and can be altered.


It has become increasingly clear that inter-organizational trust is an important factor affecting the actions and performance of organizations engaged in dyadic and network relationships such as strategic alliances. Issues associated with organizational trust have generated a great deal of broad scholarly interest in the field, as evidenced by the dozens of articles and special issues of the leading journals that have been devoted to the theme of trust. Yet, although there exists a significant amount of literature on trust in an organizational context as well as research in related area such as alliances, social networks, and interpersonal trust-scholarly work specifically dealing with inter-organizational trust is a more limited area of research.  A commonly used definition of inter-organizational trust is the extent to which members of one organization hold a collective trust orientation toward another organization (Zaheer, McEvily, and Perrone, 1998). Relatedly, Currall and Inkpen (2002) draw attention to the socially constructed shared history within an organization toward another organization that constitutes a collective orientation. In this vein, it is important to avoid anthropomorphizing the organization by treating inter-organizational trust as equivalent to an individual trusting another individual.

The fact that trust is such a broad concept, complicated by its various connotations in common usage, results in researchers parsing trust into a variety of finer-grained dimensions, teasing out various aspects of trust. These dimensions often frame very different descriptive views of trust; for instance, inter-organizational trust can be seen as goodwill-based (Saparito, Chen, and Sapienza, 2004), or competence-based (Lui and Ngo, 2004).  Because trust has developed into a multidimensional construct, researchers both conceive of and measure trust in various ways. A major, economics-derived stream on trust views it as a dispositional characteristic of the trustor (Gambetta, 1988:19).


On the other hand, virtual organization exists in cyberspace. It is a new organization form that facilitates technological demands. The virtual organization is information-intensive and centres round the knowledge of workers linked by technology across space and time. While a clear historical perspective remains forthcoming Kasper-Fuehrer and Ashkanasy (2004) opine that, there is general consensus that the virtual organization is not a hierarchical structure but rather a type of network organization. As such, it facilitates open access to and exchange of information throughout the network and across organization boundaries. The collapse of space and time in virtual organizations highlights the need for a management approach that enable flexibility, coordinated communication and adaptability to address emerging issues regarding a dispersed workforce. Therefore, virtual operations require organizing efforts that move beyond efficiency and control to those that emphasize the ability to identify or create opportunities, and gather the needed players to harness these opportunities.


Definitions of the virtual organization are ambivalent and lack clarity due to conflicting characterizations in the literature (Shekhar, 2006; Warner and Witzel, 2004). A primary problem in the literature is that virtual organizations are approached as technology-enabled extensions of traditional, structurally bounded organizations. Conceptualization is based on the understanding of the term virtual, or degree of virtuality, where definitions imply that the virtual organization is merely a binary concept which is either virtual or not. This is evident in Bosch-Sijtsema (2002) who cites numerous historical perspectives ranging from descriptions of the virtual organization as a team within a single organization, to a web company where different organization partners combine resources and work through information technology. Divergent result from research focused on different units of analysis when studying virtuality, such as the individual unit, the group unit and the organizational unit (Shekhar, 2006:478). However, accurate conceptualization relies on this distinction because the degree of virtuality differs for each organization type that displays different characteristics. This implies that the organization processes of each need to be managed differently.


Keinanen and Oinas-Kukkonen (2001) state that, virtual “organizing” focuses on the importance of knowledge and intellect in creating value. As an intra-organizational form the virtual organization is a collaboration of business units, such as cross-functional teams, in an existing organization charged with completing a common task. These intra-organizational designs do not substitute traditional structures; rather, they are integrated into the extant design. As a result, intra-organizational boundaries are blurred and the degree of virtuality is low. In contrast, from the inter-organizational perspective business units of different organizations collaborate to establish a cooperative form of virtual organization (Kasper-Fuehrer and Askhanasy, 2004).


The idea of virtual enterprise (VE)/ virtual organization (VO) was not “invented” by a single researcher, rather it is a concept that has matured through a long evolutionary process. Some of the early references first introducing the terms like virtual company, virtual enterprise, or virtual corporation go back to the early 1990s, including the works of Jan Hopland, Nagel and Dove, and Davidow and Malone (2003-2004). Since then a large but disjoint body of literature has been produced mainly in two communities, the Information and Communications Technology Community and the Management Community.


However, concepts and definitions related to the VE/VO paradigm are still evolving, and the terminology is not yet fixed. There is still not even a common definition for the VE/VO that is agreed by the community of researchers in this area. Nevertheless, many real examples of VE/VO are already available and functional in different regions of the world, which indicates the importance of this area and the need for stabilizing the terminology and definition for this paradigm, as well as research in developing a model of their life cycle, behavior, and evolution.


The area of VE/VO is particularly active in Europe, not only in terms of research and development, but also in terms of the emergence of various forms of enterprise networking at regional level. This “movement” is consistent with the process of European integration, which represents a push towards a “culture of cooperation”, but also with the very nature of the European business landscape that is mostly based on small and medium size enterprises (SME) that need to join efforts in order to be competitive in open and turbulent market scenarios.


The virtual organization is a cooperation of enterprises. Members of Virtual Organization can be great trusts as well as small one person firms. It is imaginable that a self-employed consultant becomes a member of virtual organization and of a multinational corporation at the same time. This means that virtual organization will be decomposed when the objective is accomplished. In most cases virtual organization will only exist for a short time. If there are no other advantageous organizational alternatives to produce a special out-put, virtual organization are also imaginable for a long-term period                     (Bultje and Van-Wijkt, 2011:19).


The use of information and communication technologies is a constitutional feature of virtual organizations (Gill, 2012:330). Sometimes IT is called an “enabler” of virtual organizations (Franke, 2011:62). Such, inter-organizational arrangements will form and reform as problems arise, so providing a flexibility of response to changing circumstances of an organization’s needs.


The effect of inter-organizational trust on other aspects of organizational behavior, are matters of some debate. Bagguley, (2010:6) for example, writes of such forms as involving ‘more intricate, collaborative’ relationships in which ‘mutual responsibilities to colleagues’ rather than to the larger organization itself become more prominent. In a similar vein, Casey (2012:109) argues that the new forms of teamwork in which people share knowledge, skills and resources and work co-operatively in the manufacture of their products’ will displace ‘identification with an occupation and its historical repository of skills, knowledge and allegiances’ in favour of relationship to a product, to team family members and to the company. Such team working, ‘less fettered by the constraints of traditional hierarchies and spheres of responsibility, engenders a heightened sense of empowerment, commitment and collective responsibility          (Casey, 2012:45).


There are others, who are less sanguine, that is, less cheerful and less confident about the future  views concerning the beneficent consequences of such organizational forms for effecting transformations in skill, team working, identification and empowerment (Hammer and Champy, 2012), and it is certainly too early to write the obituary of more traditional hierarchical organizational forms. In any event, it is clear that many of the claims involved in the debate are in need of somewhat closer empirical scrutiny.


It is against this background that the researcher seeks to examine inter-organizational trust and effect on virtual organizations’ performance with particular reference to selected Nigerian service firms (a study of selected service organizations’ in the federal capital territory Abuja), with the objective of recommending ways by which the present practices can be improved.


  • Statement of the Problem

The fact that virtual organization is something new which is not well known yet, will keep many people and companies away from virtual work and structures. The employee work is based almost entirely on self-motivation and responsibility. While this might work with some people, we seriously doubt that a big organization can be built on such an insecure base.


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