INTER-ORGANIZATIONAL TRUST AND EFFECT ON VIRTUAL ORGANIZATIONS’ PERFORMANCE OF SELECTED NIGERIAN SERVICE FIRMS

ABSTRACT
This investigation is based on inter-organizational trust and effect on virtual organizational
performance of selected Nigerian service firms. Inter-organizational trust is the extent to which
members of a firm hold a collective trust orientation towards another organization. Virtual
organization brings together theories about the nature of work in the information age, the
organization of social behaviour, and the role technology plays in the evolution of social
structure. Inter-organizational trust in virtual organizations is difficult to manage, members work
individually and there is hardly any control. In today’s knowledge-based competitive
environment, a firm’s ability to establish inter-generational relationships in terms of strategic
alliances and performance inside and outside a firm has become a critical fount of
competitiveness. In inter-organizational relationships, the most common success factor, and
possibly the most critical one is trust. Trust is widely acknowledged as being important for the
efficient operation of inter-organizational business activities, the formation of trust remains
challenging, the experience with trust despite increased interest and the acknowledged role of
trust to a company’s competitiveness is that there has not yet been theoretically and empirically
coherent attempts to measure trust in inter-organizational contexts to the best of my knowledge.
Virtual organization is also a collection of geographically distributed, functionally and/or
culturally diverse entities that are linked by electronic forms of communication and rely on
lateral, dynamic relationships for coordination. Consequently lack of inter-organizational trust
and reliability in virtual organizations as a result of perceived risks from privacy concerns and
vulnerability to fraud may impede organizations’ performance. In carrying out this investigation,
seven research objectives and seven research questions were formulated along side with seven
research hypotheses.

Relevant data were reviewed, this provide an understanding of previous
work in an area of investigation thereby providing basis for the researchable problem at stake.
The chief instrument for data collection was questionnaire, which was designed for low, middle
and top level management staff. Thirty five (35) questionnaire items were administered to the
respondents. The data was analyzed using a chi-square statistical technique and Z Test. The
result of the study showed that inter-organizational trust influences virtual organizations
commitment and performance and firm benefitted more from inter-organizational trust when the
degree of interdependence between two organizations was higher. The result of the study also
showed that conflict to a large extent is adversely related to lack of shared understanding
between partners in virtual organizations. When we examine inter-organizational trust in virtual
organizations from the perspective of network organizations, then we certainly conclude that
inter-organizational trust in virtual organizations is a new type of network. Finally, it was
recommended that, the formation of organizational process should be based on trust and not on
the basis of power which will result in increase commitment, job-satisfaction, performance and
growth of employees and the organizations in general.

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