1. technology and computing

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Category: Business Information Systems
Trust Management in Virtual Product
Development Networks
Eric T.T. Wong
The Hong Kong Polytechnic University, Hong Kong
INTRODUCTION
Business-to-business partnerships are gaining rising attention in management and academic research. Increasingly,
companies are advised to pursue their collaborative advantage
(Dyer, 2000) in order to co-create world-class products, attract the most valuable customers and generate exceptional
profits. Today, there is significant global overcapacity in most
industries. In this environment of scarce demand, customers
are becoming more demanding of customised and innovative products or services. With the advance of information
and communication technology (ICT) and the resulting
globalisation of markets and manufacturing, innovative
product designs are generating new opportunities. In such
a change-driven environment, a single manufacturer rarely
provides everything on its own anymore. Rather, the most
attractive offerings involve buyers and suppliers, allies and
business partners in various combinations. Consequently,
manufacturers or suppliers do not really compete with one
another anymore. Rather, it is offerings that compete for
the time and money of customers. The networked business
can take different shapes ranging from integrated product
development through a key player, to virtual production
networks, strategic alliances, virtual organizations, extended
enterprises, and so forth.
A review of business publications indicates that companies are extensively using ICT in their new product
development activities. Based on an analysis of numerous
industrial, high-tech, and business-to-business applications,
it appears that ICT can facilitate new product development
in a number of areas. These areas can include: speed, productivity, collaboration, communication and coordination,
versatility, knowledge management, decision quality, and
product quality (Ozer, 2000).
The number of strategic alliances between large, established firms and small, new ventures is on the rise,
especially in industries affected by technological change.
Theoretically, the combination of a smaller firm’s innovative
design capabilities with a larger firm’s production system
and financial prowess promises synergies that can contribute
to both firms’ competitive advantage, for example, Parts
Manufacturers Approval (FAA, 2006) parts as an alternative to Original Equipment Manufacturer (OEM) parts in
the aviation industry. Yet, not many of these partnerships
result in successful collaboration.
New product development is inherently risky, particularly
when new technology or emerging markets are involved.
Although collaborative product development has been
promoted as a means for reducing or at least sharing risk,
such partnerships have their own limitations. Collaboration
can also accentuate many of the risks inherent in product
development projects. In the case of virtual production
networks (VPN), this challenge is even greater because the
new product development team spans geographical as well
as organizational boundaries.
The basic hypothesis forwarded in this chapter is that
a major cause for VPN failure is managerial, and therefore
controllable and potentially avoidable. Although today’s
managers are well-trained in competitive behavior, cooperative processes in VPN require special trust management(TM)
skills, skills that a majority of managers do not possess. As a
result, cooperation often appears to be managed reactively,
rather than being based on a deliberate, proactive cooperation
strategy. For a VPN to be competitive and successful in a
dynamic environment characterized by constantly changing
customer demands and technological innovations, it must
be capable of rapid adjustment in order to reduce the time
and cost needed to deliver to the customer quality products.
The main objective of this chapter is to propose essential
guidelines for developing and maintaining partnership trust
in Virtual Product Development Networks (VPDN) such that
these networks can be managed in a proactive manner. In the
following sections, the background of VPDN collaboration
will be described, followed by an analysis of the key factors
likely contributing to successful VPN collaboration. Based
on findings reported in the trust and product development
literature, basic requirements for developing and maintaining
effective partnership trust in VPDNs have been proposed.
Barriers likely to occur in practice are also outlined.
BACKGROUND
The advantages of VPDN collaboration can be significant.
The pooling of resources and capabilities can generate synergistic growth between virtual organizations, either in terms of
Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited.
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Trust Management in Virtual Product Development Networks
developing a current product or service offering, or through
the creation of an entirely new venture. Increased competitive
power can help firms to leapfrog jointly over larger competitors, and generation of higher returns on investment levels
can provide the means for further expansion into new market
areas at relatively little cost. In an increasingly unpredictable
and complex international arena, the flexibility and speed of
entry associated with collaboration is opening up new opportunities and possibilities which outright investment through
merger or acquisition cannot offer. Indeed, sharing the risks
and costs of new product development through collaboration
has been advocated by various authors. Securing access to
new processes or technologies or gaining information for
product development is another frequently mentioned benefit
of collaboration. The apparently increasing complexity of
technological and product development and convergence of
industries provides a strong motive for such collaborative
product development relationships.
Marketing considerations may also play an important
role in collaborating for product development, especially in
the face of increasing globalization of industries. The rapid
rate of product obsolescence does, according to some, focus
attention on securing rapid access to markets so that new
products can be marketed virtually simultaneously in several
regions. Collaborative product development relationships
may also be seen as a means of overcoming various barriers
to entry to foreign markets.
Collaboration can, however, have its shortcomings. History is strewn with the wrecks of failed partnerships left as
a warning to the unwary. Many more struggle on without
realizing their full potential, frequently to be ultimately
bought out by one partner
or the other. With almost 50% deemed as failures, collaborative partnerships are proving to be complex relationships which demand a particular level of expertise and trust
management skill in order to navigate the relationship through
the hazards associated with this form of virtual network.
Such failures might be due to various causes. For example, there can be a leakage to collaborating partners of a
firm’s design and analysis skills, experience, and product
knowledge that may form a significant part of the basis
of its competitiveness. There is a danger that its partners
not only acquire the competencies that the design partner
brings to the product development, but also gain access to
the knowledge and skills that the firm uses in other business
areas. A VPDN partner may also fire the opportunism of
its collaborators by providing information and insights into
possible markets and future possibilities that otherwise may
have been its exclusive domain.
Although collaboration is frequently suggested as a
means of reducing the cost and duration of the product
development process, one would need to consider the additional financial and time costs incurred in managing the
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collaboration, including the time involved in harmonizing
what are likely to be fundamentally different management
styles and budgeting processes of the collaborating parties.
Furthermore, there can be significant potential opportunity
costs because undue effort and resources are directed toward
the collaborative product development project, such that
the maintenance of the VPDN collaboration itself becomes
the prime objective, at the expense of the specific product
development. Given the small but growing number of studies
reporting dissatisfaction with the outcomes of collaborative
product development by one or more of the parties involved,
it is understandable that attention should be directed toward
key factors affecting the chance of success.
Defining success in product development has been the
subject of much research attention and has been shown
to be less than straightforward. Defining success in collaborative product development is similarly problematic,
given that the perspectives of two or more organizations are
involved. The most straightforward measure of the success
of a collaborative product development project is likely
to relate to whether or not the product was developed as
planned and to cost and time allocations. The termination
of an agreement cannot inevitably mean the collaboration
has been unsuccessful, because the original objectives may
have been met. Moreover, the objectives might change as
product development progresses. It also has to be recognized
that “success” in collaborative product development, as in
any product development project, can be multifaceted. There
can, for instance, be unintended advantageous side effects,
whereas even a prematurely terminated collaborative product
development project might yield beneficial experience and
knowledge and assist in developing future products.
MAIN FOCUS OF THE CHAPTER
The main focus of this chapter is to examine factors affecting VPDN collaboration with the objective of proposing
essential guidelines for developing and maintaining effective
partnership trust in VPDNs.
Factors affecting VPDN Collaboration
There has been considerable research into the factors affecting
both the success of product development and the outcome
of collaborative projects (Lam & Chin, 2005; McDonough,
2000). A number of factors that appear to have some bearing
on the success of collaborative ventures have been identified
and these will be briefly reviewed here. It is recognized that
some of these factors might also have an impact on product
development per se, whether collaborative or not, but other
factors referred to here are clearly of importance specifically
to collaborative product development through the VPN.
Trust Management in Virtual Product Development Networks
A major factor relates to the choice of partner. A particular issue here is the compatibility of the respective cultures
of the cooperating organizations. It was suggested that the
partnering organizations must be able to communicate with
each other, having a language that they all understand. They
must have a working style which is complementary, in the
way they go about reaching decisions, their problem solving style and so forth. Above all, their management styles
must be compatible. There is also evidence suggesting that
collaborations that are related to the existing activities of the
production partners are more likely to be seen as successful,
while others emphasize the value of general experience of
collaborations as a factor that enhances the probability of
future collaboration success.
Some researchers have stressed the importance of clearly
establishing the ground rules for collaboration, such as ensuring that there are clearly defined goals, objectives, and responsibilities for the collaboration that are fully understood by all
parties involved. Some of the literature stresses the necessity
of preparing detailed and binding initial collaboration agreements in order that future ambiguity is avoided. Such advice
corresponds with the recognition of the importance of early
and upfront investment in any product development project.
It also needs to be recognized, of course, that circumstances
change and this alone suggests that there may be need for,
first, frequent appraisal of the collaboration and, second,
the scope for adaptability. The importance of establishing
the limits to the collaboration has also been noted to avoid
the transfer of general knowledge and experience during
the process of joint product development. Some researchers
advise collaborators to impose restrictions and exclusivity
clauses in order to limit the transfer of core technologies.
There does, though, need to be a balance between protecting the proprietary interest of the firm while establishing
trust and openness with its partners. This factor is regarded
by many as a critical ingredient in the continuation and effectiveness of interorganizational relationships. The task for
those involved in the management of collaborative product
development is to balance these potentially conflicting issues as the project evolves. Related to the establishment of
clear ground rules for collaboration is the corresponding
need for the monitoring of progress such as through the
establishment of milestones, significant points at which
progress can be assessed. However, it is obvious, too, that
at the outset it is difficult to plan for all the possibilities that
might emerge as product development proceeds and this
again highlights the need for frequent reappraisal and for a
degree of flexibility.
The importance of allocating sufficient financial resources
to a collaborative product development project is frequently
emphasized, as has been the case for product development
more generally. Of course, it is often the allocation of
management time and effort that can have a disproportionate influence. The perceived mutuality of contribution and
benefits from the various parties involved in a joint product
development project has also been highlighted as important.
A well managed collaboration, however, will not necessarily
result in a profitable outcome. The broader context within
which product development takes place is also likely to have
a significant bearing. Changes in the partners’ markets, in
their competitive fields, in the range of technologies available, in the wider economic environment, or in the policies of
government agencies can have a critical effect on the project,
as can a redefinition of the collaborators’ own missions and
objectives. Maintaining the necessary external focus may,
however, be awarded subsidiary importance given the administrative demands of maintaining the collaboration and
the often overriding desire to ensure the collaboration per se
is perceived by the partners as proceeding successfully.
Conflict, which affects NPD performance, is inevitable
in collaborative NPD. Practicing effective conflict management improves NPD performance as well as helps maintain a
long-lasting collaborative relationship. By incorporating the
judgments of clients and suppliers using Analytic Hierarchy
Process, Lam and Chin (2005) identified and prioritized
four categories of success factors for conflict management.
The results, based on the synthesized judgments, indicate
that of all the factors, the most critical is communication
management, followed by trust and commitment to the
collaboration.
Existing theories give inadequate attention to differences
among VPN members in recognition of these misalignments,
interpretation of their origin, proposed corrective actions, and
reconciliation of differences. It was found that lack of trust
and increased diversity among team members exacerbate
such differences (Susman, Gray, Perry, & Blair, 2003).
An effective interface between production and marketing is considered to be vital for the successful development
and commercialization of new products. Studies in the U.S.,
Japan and the UK have, however, identified that conflict
between engineers and marketers can act as a barrier to
effective cooperation (Shaw, Shaw, & Enke, 2003). It was
found that German engineers recognize the importance of
trust, good understanding, common knowledge, integration
and teamwork in building a good relationship with marketers.
The main sources of conflict between German engineers and
their marketing colleagues are differences in education and
training and different goals and priorities.
To enhance the performance of collaborative product development a VPN must overcome such barriers as resistance
to sharing proprietary information, and the not-invented-here
syndrome. It may be seen from above that most of the success factors noted suggest that overcoming such barriers
depends to a large extent on formal trust development processes. Within the ICT literature, only a handful of studies
have examined the recent introduction of ICT applications
aimed at helping virtual enterprises electronically collaborate
(Mezgar, 2003, 2005; Ratcheva, 2006; Wong, 2005, 2006).
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Trust Management in Virtual Product Development Networks
Of these studies, Mezgar (2003, 2006) and Wong (2005,
2006) have helped to advance theoretical understanding of
how trust connects with security services and mechanisms
and how it affects virtual enterprise operation, respectively.
According to Wong (2005), because many organizations will
become increasingly more reliant on geographically dispersed
NPD teams in the future, companies will need to understand
the essential conditions for successful trust building and
maintenance in virtual enterprises. In a PricewaterhouseCooper’s study on corporate innovation in companies listed
on the Financial Times 100, trust was ranked the number one
differentiator between the top 20% of companies surveyed
and the bottom 20% (Schaub & Altimier, 2006). The top
performers’ trust empowered individuals to turn strategic
aims into reality. People are more innovative in a climate
of trust. It is therefore expected that the development of a
trust management framework would provide an opportunity
for VPN partners to overcome the problems mentioned and
eventually improve collaborative product development.
Trust Management Guidelines
Partnerships are distinct from ordinary relationships, as they
require at least the restraint of partners from abusing power, a
high level of trust and a cultivation of common norms. Trust
has been regarded as the foundation of the digital economy
(Keen, 2000; Mezgar, 2005; Wong, 2005). A virtual enterprise network is characterized by the impersonal nature of
the online environment:
a)
b)
c)
the extensive use of information and communication
technology (ICT) as opposed to face-to-face transactions,
the implicit uncertainty of using an open technological
infrastructure for transactions, and
the newness of the transaction medium.
Given these attributes, trust development in VPNs presents significant challenges because it is difficult to evaluate
partners’ trustworthiness without ever having met them
(McDonough, Kahn. & Barczak, 2001). Moreover, as the
life of many virtual teams is relatively limited, trust must
quickly develop (Jarvenpaa & Leidner, 1999).
According to traditional studies, trust builds incrementally
and accumulates over time. VPN business relationships,
however, are characterized by project-oriented relationships
that may entail no past history, nor any plan for future association. In these temporary relationships, time is a vital
but often elusive component in the trust building process.
This does not mean, however, that trust cannot be apparent
in temporary groups. On the contrary, McKnigh et al. (1998)
have shown that trust in initial relationships can often be
high. Further, Jarvenpaa and Leidner (1999) argue that trust
is maximally important in new and temporary organizations,
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because it acts as a substitute for the traditional mechanisms
of control and coordination.
Creating a VPN takes more than just information technology. A study on issues of information technology and
management concluded that there is no evidence that IT
provides options with long-term sustainable competitive
advantage. The real benefits of IT derive from the constructive combination of IT with organisation culture, supporting
the trend toward new, more flexible forms of organization.
Information technology’s power is not in how it changes the
organisation, but the potential it provides for allowing people
to change themselves. Creating these changes, however,
presents a new set of human issues. Among the biggest of
these challenges is the management of trust between partner
organisations in the VPN (Wong, 2005; Wong & Lau, 2002).
Based on findings reported in the literature, a framework
for trust management in a VPN can be developed through a
serious consideration the following guidelines.
Common Business Understanding
In order to choose the appropriate virtual partners for a
collaborative product development project, Fuehrer and
Ashkanasy (2001) note that an important element in any
business cooperation is the establishment of common business understanding. An earlier work suggests that there are
three specifications necessary for the establishment of a
common business understanding in the virtual context. The
first is a clear product specification: the design, quality, and
functionality of the product. The second is specification of
the level of cooperation, which requires agreement about
deadlines, liability, prices, profit allocation, and staff and
resource input. The third is formal specification of agreements
between the virtual partners. In a virtual organization, these
specifications need to be communicated clearly between the
partners to achieve a common business understanding. There
is always varying uncertainty between members, however.
Therefore, there is a need to guard against opportunistic
behavior between the partners. This depends on the risk that
the member is prepared to sustain as a potential loss, and
also the partner’s fear of opportunistic exploitation and the
uncertainty of their behavior.
The three specifications (production, cooperation, and
agreements between partners) can be achieved by negotiating
relational contracts that guide the formation, operation, and
dissolution of the virtual organization, thereby facilitating an
increase in the level of collaboration-enabling trust. VPNs,
like other organizations, create fiscal and legal issues that
must be clarified, but they lack a formalized legal framework.
Therefore, it is incumbent on the VPN’s members to develop
their own guidelines for the operation of the enterprise. Such
agreements may include clarification of members’ tasks and
responsibilities, agreement on contracts, allocation of funds,
potential liability, and how members will contribute their
Trust Management in Virtual Product Development Networks
expertise. In this sense, clear guidelines, spelled out in an
early stage of the partnership, serve to reduce misperceptions
and to foster the establishment of trust.
Other mechanisms to establish a common business understanding in VPNs include development of an organization
handbook, design of a mutual Internet site, chat room technology, or the use of team addresses for e-mail. A specific
example is Livelink, a software selected by Siemens to enable creation of a common business understanding through
a standard computer interface.
The concept of common business understanding therefore
shares similarities with Organizational Identity, which may
be described as a set of distinctive and enduring traits that
members associate with their organization. Scott and Lane
(2000) have proposed that identity is determined in part by
the nature of stakeholder networks. Common business understanding, however, is more akin to Barney’s (see Barney
et al., 1998, p. 103) broader concept of identity: “the theory
organizational members have about who they are.” In this
respect, the author agreed with Gioia, Schultz and Corley
(2000) that Organizational Identity is not necessarily a stable
phenomenon, but mutates to suit the prevailing environment. In the virtual context, therefore, a common business
understanding may be defined as a transient understanding
between network partners as to what they stand for, about
the nature of the business transactions that they engage in,
and about the outcomes that they expect; their “vision.”
Scott and Lane (2000) emphasize that a common business understanding requires the creation of a shared vision,
together with communication of mutual aims through clear
definition of the roles and expectations within the team,
especially in the early stages of the partnership. In this
respect, the process is typically initiated by agreement on
a symbolic logo or design for a product or service. This is
because understanding each member’s role, together with
group identification, determines critical behaviors such as
willingness to cooperate with others, and willingness to
engage in mutual goal setting. The VPN partners thus need
rapidly to establish group identity and an awareness of mutual
needs and expectations, along with the clarification of tasks
and responsibilities. In traditional partnerships, awareness
and identity are in part shaped by the legal framework that
regulates organizational relationships, as well as by networks,
artifacts, and the organization chart. In the case of the VPNs,
however, mechanisms outside of the domain of traditional
organizations need to be put in place to establish a common
business understanding, which constitutes an important
precursor of trust formation (Jarvenpaa & Leidner, 1999).
Ploetner and Ehret (2006) suggest that successful collaboration rests on a system-wide identification of benefits
and that metrics and incentive systems constitute decisive
barriers as soon as they no longer apply to system-wide
benefits. Hence, the common vision for future benefits,
that is, the development of new design capabilities, new
products or new technologies, serves as a prime driver for
VPDN collaboration.
These examples illustrate how the creation of a sense of
shared meaning, member identification, and mission identity,
especially in an early stage of the partnership, facilitates
collaboration at an individual level and the operation and
productivity of the VPN as a whole. As such, a common
business understanding provides an essential condition for
the development of trust within the organization. In effect,
a common business understanding provides the virtual
organization’s members with an opportunity to share their
perceptions of the organization’s defined features, and creates a feeling of ownership and trust.
High Ethical Standards
Three factors uniquely characterize the virtual organization’s
position in regard to business ethics. Firstly, VPNs are
rarely guided by pre-existing codified laws, where values
and standards are written into legal systems enforceable in
court. Because the organization’s partners are not usually
legally bound to the organization, any negative outcomes
or perceptions attributed to poor business ethics could
result in the organization’s reputation suffering. Second,
because VPNs are intrinsically temporary, corporate ethics
are difficult to develop because members will typically be
finishing one virtual collaboration and entering into another
in a short period. Thirdly, VPNs are intrinsically boundary
spanning in nature, so that they must incorporate a diversity
of culturally-based values and morals.
Researchers focused on the notion of advances in ICT
and the related effects on social behavior agree that unethical behavior in the virtual context is predominantly caused
by technological changes and by the inside keepers of the
information systems. They also agree that social behavior
needs more than new laws and modified edicts, and that
ethical issues will become increasingly important to enable
business transactions to be carried out safely and securely.
Although technology has been largely secured by advancing software and technology for virus detection, as well as
en/decryption of information to ensure the security of business processes, Johnson (1997) notes that technology can
never be sufficient to control all aspects of social behavior.
Consequently, online behavior is predicated on an awareness and acceptance of ethical norms and behaviors. This
can best be achieved through specification and clarification
of the members’ tasks, responsibilities and agreed sanctions
for proscribed behavior.
Johnson (1997) posits further that the “only hope to control online behavior is for individuals to internalize norms
of behavior,” and suggests three rules for online ethics: (1)
know and follow the rules of the forums participated in;
(2) respect the privacy and property rights of others and,
if there is any doubt, assume the user’s desire for privacy
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Trust Management in Virtual Product Development Networks
and ownership; and (3) respect interacting partners by not
deceiving, defaming, or harassing them. Not surprisingly,
these rules for online behavior are essentially identical to
rules for off-line behavior. Indeed, there is no reason why
the same ethical guidelines that apply to regular behavior
should not be employed in respect to online behavior.
Pearson, Crosby, and Shim (1997) reported on ethical
standards for the IS profession proposed by three major
professional associations in this field. These associations
share an agreed set of behavioral obligations to society, to
colleagues, and to professional organizations. The standards
aim to promote the principle that individuals within the professions act in an ethical and responsible manner in order to
influence the success of their organizations (Pearson et al.,
1997). Clearly, similar standards can be developed for the
operation of individual VPNs specifying, for instance, the
obligation to virtual organization members and clients.
Other possible mechanisms to promote ethical behavior
in VPNs include formal codes of ethics, which comprise
statements of prescribed and proscribed values or behaviors, and thus provide a strategic tool within organizations
to inculcate and to demonstrate ethical standards. Ethical
standards also fulfill a strategic external role through recognition by government agencies and insurance companies.
Recent surveys show that in the case of VPNs, informal
rules known as “netiquette” are usually in place, but a lack
of a formal legal infrastructure means that a code of ethics
is simultaneously both imperative and difficult to achieve.
This is further compounded by different ethical standards
and regulations between countries. Nevertheless, trust in
interorganizational VPDNs clearly cannot be established
until all members recognize that ethical standards are in
place and are made aware of what the standards are.
Mutual Forbearance Between VPN Partners
Some researchers approach the issue of trust by defining
cooperation as coordination effected through mutual forbearance. Forbearance is refraining from cheating. Cheating may
take a weak form (failing to perform a beneficial act for the
other party), or a strong form (committing a damaging act).
The incentives for forbearance arise from the possibility of
reciprocity, leading to mutual forbearance. Parties that are
observed to forbear may gain a reputation for this behaviour,
which makes them potentially attractive partners for others.
The parties to a successful agreement may develop a commitment to mutual forbearance, which cements the partnership, and, in this way, mutual trust is created, which alters
the preferences of the parties toward a mutually cooperative
mode. Thus, short-term, self-interested behaviour becomes
converted to cooperative trusting behaviour.
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Demonstrated Capability of VPN Partners
In a VPDN participants will be more willing to share knowledge when they trust in others’ ability. It is only natural
that they would want to converse with others who have the
knowledge and skills regarding the product development
project at hand because VPDNs almost always center around
a common theme.
Effective Communication and Interaction
between VPN Partners
Through communicating with people, we calibrate them, we
get a better sense of them and we understand their priorities.
Members of VPDN can therefore increase the trust they are
giving and the amount they will trust others, by actively seeking opportunities to communicate with other members.
Conflict Recognition and Reconciliation
It is widely acknowledged that effective integration of
marketing, product design and manufacturing is vital for
the successful development and commercialization of new
products and services. The literature suggests, however,
that there is much conflict between marketing and engineering personnel that can have a detrimental impact on
integration and thus successful new product development
(Shaw et al., 2003). A main reason for the existence of such
kinds of conflicts appear to be the polarization of functions,
with marketing and product designers wanting customized
products, whereas the production department wants to
manufacture standardized products (Susman et al., 2003).
This phenomenon clearly needs to be addressed in order to
improve the design-manufacturing interface. One way is to
provide education and training for all VPDN partners. This
will help different functions in the VPDN to become more
sensitive to each other’s needs.
Flexible Coordination of Design Activities
As product development involves processes mainly executed
by humans, rigid forms of procedural control would create
unnecessary conflicts between VPDN partners because
people like to keep their freedom regarding the way they
work. Product design, similar to other creative processes,
evolves according to a kind of anarchic flow of activities. It
is therefore necessary to support loosely constrained sets of
business processes. Additionally, temporal interdependencies
among activities would need to be considered. For example,
in the case of product design and process planning, although
both processes can proceed with some degree of concurrency
Trust Management in Virtual Product Development Networks
(e.g., process planning can start once the first draft of the
engineering design is available), process planning cannot
finish before product design finishes. Usually, some details
of the process plan depend on the final commitments on the
product model. One way of achieving coordination flexibility
is through the use of a multi-agent approach (CamarinhaMatos & Afsarmanesh, 2003).
Realistic Expectations of VPN partners
Prior research has indicated that trust creation may be a
history-dependent process in which trust accumulates and
builds incrementally. Based on this concept, interview and
questionnaire data obtained by Adobor (2005) 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 selffulfilling 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 was counterproductive
to trust building. It is suggested that VPDN coordinators
should develop reasonable product development targets,
such that each partner will be able to form realistic initial
expectations about each other’s design output.
Assuming that most of the above-mentioned conditions
have obtained top management support, it is expected that
the mutual trust created would enhance the openness within
a VPDN (i.e., freedom from censorship and willingness to
express innovative ideas) and VPDN partners’ ability to
reconcile their differences and reach agreements on most
of their product development projects.
FUTURE TRENDS
Current research on the management of trust in VPN has
limitations. Most work was based on a limited number
of case studies. These case studies cannot be considered
representative of all VPDN because of their industrial and
cultural biases. As most of these models are longitudinal, for
generalization purposes it is necessary to test them against
the behavior of VPDN over time, a difficult, costly and timeconsuming exercise. A possible next step is to confront the
above models with a richer, more widely dispersed set of
cases, with more cultural and structural variety in the VPDN
analyzed in order to investigate its degree of robustness.
While some studies (e.g., Pavlou 2002) posit positive
relationships between trust and its consequences, these
relationships are nonlinear. Given a minimum threshold
for trust to become effective, it is important to recognize
this nonlinearity.
Currently, a popular experimental paradigm employed
by Human-Computer Interaction (HCI) researchers to assess trust between people interacting via computer-mediated
communication covers social dilemma games based on
the Prisoner’s Dilemma (PD). HCI researchers employing
this experimental paradigm currently interpret the rate of
cooperation, measured in the form of collective pay-off, as
the level of trust the technology allows its users to develop.
Some researchers argue that this interpretation is problematic,
because the game’s synchronous nature models only very
specific trust situations (Reigelsberger, Sasse, & McCarthy,
2003). Furthermore, experiments that are based on PD games
cannot model the complexity of how trust is formed in the
real world, because they neglect factors such as ability and
benevolence.
It is noted from the literature that little theoretical explanation exists in order to understand the impact of trust in
various forms of VPN relationships. It has been found that
firms in horizontal alliances would display a lower level
of organizational trust and a weaker relationship between
interfirm cooperation compared to firms in vertical integration of alliances and that trust is unrelated to cooperation
in horizontal alliances (Rindfleisch & Moorman, 2001). It
was suggested that this different impact of trust could be
due to higher opportunism, lower interdependency, and
stronger institutional linkages among horizontal collaborators compared to their vertical counterparts. If this finding
is substantiated by future empirical research in the VPN
domain, researchers may need to reconsider the popular
notion that trust is an essential component of all types of
relationship exchanges in the VPN.
In view of the positive association between expectations
and trust, finding out how VPDN partners form expectations
about each other will yield important insights. Perhaps they
are influenced by factors external to the VPDN relationship,
such as the amount of technical investments, rate of technological progress or the reputation of partners.
CONCLUSION
Collaborative teamwork offers greater chance for VPDN to
be successful in nowadays’ agile competition. Trust models
based on traditional familiarity would not meet the special
needs of the VPDN, which is having a much shorter life
cycle and involves a large number of partners who have
never met before. Consequently, the VPDN partners must
realize the need to effectuate this paradigm shift. This chapter
identifies eight essential guidelines needed for effective trust
management in a virtual environment: a common business
understanding, high ethical standards, mutual forbearance
between partners, capability of partners, effective communication and interaction within the VPDN, conflict rec-
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Trust Management in Virtual Product Development Networks
ognition and reconciliation, flexible coordination of design
activities, and reasonable expectations about VPDN partners.
VPDNs with high levels of trust among their members can
effectively utilize interactions and communication processes
at their interfaces so members can learn together, and can
develop shared mental models of reliability and a shared
culture of safety. It is anticipated that the likely impact of
trust management would imply continuous product innovation because trust plays an important synthesis role. VPDN
with its flexible organizational structures can leverage the
partners’ ability and willingness to learn, thereby enhancing
new product developments.
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KEY TERMS
Virtual Enterprise: A temporary business organization
set up between trading partners operating from geographically dispersed sites, for the duration of a common project.
The design and manufacture of new products or services
frequently requires the talents of many specialists. When
many corporations combine their specialties to create a
product or service, the result can be called a virtual enterprise. A virtual enterprise must be able to form quickly in
response to new opportunities and dissolve just as quickly
when the need ceases.
Virtual Private Network (VPN): A private communication network often used within a company, or by several
different companies or organizations, to communicate confidentially over a publicly accessible network.
Agile: Being agile means being proficient at change, and
allows an organization to do anything it wants to do whenever
it wants. As virtual enterprises do not own significant capital
resources of their own, this helps to make them agile, as they
can be formed and changed very rapidly.
Ethical: Conforming to standards of professional or social
behavior agreed by all members of a virtual enterprise.
Self-Fulfilling Prophecy: A predetermined idea or
expectation one has toward oneself that is acted out, thus
“proving” itself. For example, in the stock market, if it is
widely believed that a crash is imminent, investors may
lose confidence, sell most of their stock, and actually cause
the crash.
Traditional Familiarity: Traditional familiarity combines an assumption of continuity with the past experience
of a partner. Traditional trust therefore relies on the fact that
VPN partners who could be observed as trustworthy in the
past will display the same kind of behavior in the future.
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