Trust as sensemaking: the microdynamics of trust in interfirm alliances

Although contracts are an important part of any interorganizational relationship, it is generally accepted that informal understanding, based on trust, may prove even more powerful than contracts in assuring a successful relationship. This study presents an empirical test of a theory of trust creation in economic exchange. The paper explores the theoretical proposition that trust creation may be viewed as a process of sensemaking in which small cues are enlarged through the incremental accumulation of evidence. Interview and questionnaire data obtained on strategic partnerships from chief executive officers and senior management in the biotechnology, pharmaceutical, and medical equipment manufacturing companies in North America showed that trust building in partnerships may be a sort of self-fulfilling prophecy in which initial expectations positively impact behavior and trust building. The results also show that there may be some optimal level of expectations. Both too low and too high an expectation were counterproductive to trust building.