1. business and industrial
2. company
3. joint venture

SUMMER 2010
V O L . 5 1 N O. 4
Francis Bidault and Alessio Castello
Why Too Much Trust Is
Death to Innovation
REPRINT NUMBER 51411
I N N O VAT I O N
The tensions between the
Smart car’s codevelopers
led them to explore new
concepts — and engineer
a breakthrough solution.
WhyToo MuchTrust Is
Death to Innovation
When companies collaborate, low trust is detrimental to
innovation. But so is very high trust. The optimal level, yielding
maximum impact, lies in between.
BY FRANCIS BIDAULT AND ALESSIO CASTELLO
THE SMART MICROCAR, invented by the tumultuous partnership between Daimler-Benz
AG & Co. and The Swatch Group Ltd., finally seems to be reaping the benefits of its provocative design as more consumers order this compact automobile. By contrast, the minivan codeveloped by
PSA Peugeot Citroën SA and Fiat SPA (initially sold as the Peugeot 806 and the Fiat Ulysse) was the
result of a harmonious relationship but never garnered much attention. It was just another minivan.
These outcomes contradict common sense as well as a large body of academic literature. The
general assumption, after all, is that success grows out of good relationships — based on a common vision, cultural proximity, a sense of fairness and equity and, eventually, mutual trust — while
poor cooperation and lack of trust lead to disaster. Yet examples abound of high-trust partnerships that fail to innovate and of turbulent ones that succeed. Admittedly, many factors influence
the level of creativity and innovativeness of partnerships, and trust is only one of them. But it is
deemed to be a central one.1
Is trust in fact overrated? Is it sometimes an actual hindrance to innovation? Can we think in
terms of an optimal level of trust — not too little and not too much?
COURTESY OF SMART USA
THE LEADING
QUESTION
Can very high
trust between
innovation
project partners be too
much of a
good thing?
FINDINGS
!Some kinds of
conflict between
collaborators can be
good for innovation
performance.
!While personality
conflicts hinder
innovation, conflicting opinions about
tasks can spur new
solutions.
!Trusting partners
are more likely to
commit the resources needed to
implement jointly
developed ideas.
SUMMER 2010 MIT SLOAN MANAGEMENT REVIEW 33
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Trust as a Critical Ingredient One party trusts
another not only when he perceives honesty and an
absence of opportunism but also when expecting
that the other’s attitudes and capabilities will turn
out as promised.2 For example, we need to trust
that the plumbers repairing our bathroom will not
overcharge us and that they have the required competencies — knowledge, acumen, equipment and
supplies — to get the job done well and on time.
Trust is, above all, an interpersonal phenomenon. It occurs (or fails to occur) between individuals.
Even in terms of trust between organizations, it is
their key executives, more or less willing to rely on
trust in their dealings with each other, who make or
break the relationship. The higher the trust between
the executives involved, the higher the “relational
ABOUT THE RESEARCH
The pairs of partners were given an assignment to design and build a construction
using 200 colored plastic bricks on the theme of a small-scale clothes stand. We informed the partners that the other players would evaluate the construction by voting
on its originality and novelty, both in terms of functionality and aesthetics. In particular,
we asked participants to assess all constructions (other than their own) by distributing
20 tokens in ballot boxes next to each construction. We then collected the scores and
entered them into the data set, but we did not communicate the results to participants.
At this stage, participants received virtual capital of 300 euros each and were invited to bet all or part of their money on the ranking of the partnerships’ next
construction. Before betting, we informed all participants that at the end of the session
one of them would be selected randomly to receive the value of their capital in actual
euros. We introduced this reward to ensure more rational betting among participants.
After betting, participants joined their partners, and the process started again. This
time they designed and built a small-scale clothes stand using 400 bricks, then once
more assessed and voted for the resulting structures made by others.
Each run was limited to a maximum of 30 participants. We conducted 18 workshops in total, involving 364 players. Participants were executive MBA students
(with an average age of 28.2 years) with employment experience.
In addition to the experiment itself, questionnaire data were also needed from
each player. The first questionnaire, conducted before the experiment, assessed the
amount of contact the two partners had experienced beforehand (work, study, leisure) and the level of trust within the pair. We also asked questions designed to
assess each individual’s propensity to trust others in general. The second questionnaire, conducted after the experiment, asked about the task itself and the role that
each partner played. It also polled the participants’ general propensity to trust and
their individual character and self-esteem traits. Finally, we collected demographic
information in an attempt to link one’s propensity to trust, and the individual’s own
trustworthiness, to personal characteristics.
We must acknowledge that our methodology does not eliminate the risk of bias in
participant behavior. With up to 30 participants, it is difficult to ensure that each voted independently and objectively for the best design, regardless of outside factors such as
friendship. To check for this possible bias, we ask a panel of outside observers to rank the
different constructions in some of our test rounds.
In any case, we believe that the methodology merits consideration from scholars
interested in R&D management as well as from companies involved in the setup of
joint development teams.
34 MIT SLOAN MANAGEMENT REVIEW SUMMER 2010
quality” between the organizations.3
Companies are increasingly joining forces to develop innovations, such as in supply chain
partnerships or precompetitive alliances. This trend
toward joint efforts, or “co-innovation” projects,
derives from factors that have lately been affecting
most industries — companies’ need to cope with
rising R&D costs, decrease development times, increase R&D project flexibility, access new markets
and boost revenues.4 Technology alliances have become particularly important, as evidenced by a
recent survey in which over 94% of the technology
executive respondents believed that alliances were
becoming critical to their strategy.5
Nevertheless, it is not easy for organizations to
create, and especially to maintain, such innovationoriented partnerships. Not only must they find the
right partner, negotiate and agree on common goals,
but the organizations must thereafter cooperate on
a daily basis — a process that faces many stumbling
blocks.6 A partner may be unable to contribute as
promised. The decision-making structure may lack
sufficient communication. Or the mechanism for
cooperation may be unable to adapt to unforeseen
changes in the market or the technological environment. It is therefore not surprising that 50% to 80%
of such partnerships end in failure.7
Innovation is by its very nature a risky activity,
and joint innovation projects can add further complications. For example, even when partners accept
the consequences of their risk exposure, they may
differ in their risk profiles. In such a situation,
partners typically rely on a contract that specifies
what is expected of whom under various contingencies. But although necessary, contracts tend to
be insufficient for coping with all the difficulties
that joint innovation can encounter. In contrast,
trust “constitutes a critical ingredient by which
partners can weather the conflicts that economic
and competitive changes, as well as shifts in corporate priorities, will throw their way.” 8 Trust is
beneficial to all types of partnerships that face risk
and require constant flexibility.
Joint innovation also requires something extra:
the sharing of knowledge. Partners look to create
innovation-oriented joint ventures largely because
they need to combine their own knowledge with others’ in order to find solutions that will probably not
SLOANREVIEW.MIT.EDU
materialize if they act alone. But such a relationship is
unlikely to occur unless there is a sufficient level of
trust to counter fears of abuses of confidential information and know-how. Contracts alone won’t help;
in fact, they could inhibit innovation because they
imply control of information flow and a range of legal
dispositions that typically slow the project down.
Consider the case of Poclain (formerly Europe’s
hydraulic shovel leader) and Potain (the leading
French tower crane maker), which decided in the
1960s to enter the mobile crane industry by using
their complementary technologies. The idea was that
Poclain’s mastery of hydraulic circuits would combine with Potain’s competence in crane design and
development to create new and improved machines.
But the joint venture, under the name PPM, lagged
behind because of scant innovation. The two partners’ management teams developed a system of
mutual control and double signatures, even on minor
expenses, necessitated by unrelieved mutual suspicion. In this atmosphere, the joint engineering
projects dragged along for years with little success,
delivering nothing more than “me-too” products.
Can Trust Become Detrimental? Given this ex-
ample, along with many similar ones in the literature,
it is tempting to suggest that higher levels of trust
would have produced higher levels of innovation
success. After all, trusting partners are more open,
more supportive, less hostile, less competitive and
therefore show more creativity — that is, generate
more new ideas.9 Of course, creativity is not innovation, which is the implementation of new ideas. But
one might expect that more creativity would lead to
more innovation in a higher trust partnership, which
would lead to greater partner commitment and consequently, better implementation.
After close observation of numerous joint innovations, however, it is obvious that very high trust
partnerships sometimes fail to be innovative. Fiat
and Peugeot’s long and lucrative alliance in the
commercial and passenger van markets serves as a
useful example.
In the late 1970s, the two companies launched
Sevel, a partnership to design and manufacture a
commercial van that would be marketed separately
as the Fiat Ducato and Peugeot J5. It met with
immediate success. Sevel was able to exceed all
COURTESY OF MANITOWOC
expectations, exhibiting a production capacity
twice that of the original plan. As a result, Fiat and
Peugeot announced in 1988 the Sevelnord project,
which would try to build on Sevel’s achievements
and aim to compete in the passenger minivan market
as well. The partners adopted the same governance
structure, the same general economic principles of
cost and investment sharing and even the same key
executives as in the previous successful venture.
After all, why fix what isn’t broken?
Both partners publicly hailed the excellent atmosphere of camaraderie they had established. “We find
solutions together,” they reported. “Whether it is Fiat
or Peugeot that has the idea — both groups come
out ahead. There is an exchange of experience that
is extremely rich.”10 Unfortunately, after Sevelnord
introduced the resulting passenger minivan —
Peugeot’s 806 and Fiat’s Ulysse — in 1994, the
product did not attain even half of its predecessor’s
success. It was simply not a very innovative minivan
and thus failed to gain much of a share in a market
already dominated by competitors.
How could this happen, given the “extremely
rich” possibilities? Although partners who trust each
other may commit more of their resources to a joint
venture, this does not ensure a high level of creativity, which requires a certain level of tension that may
not exist in a high-trust environment. On the contrary, a high level of mutual trust between partners
may result in soft, unchallenging and accommodating teamwork behaviors — the opposite of what is
needed to develop creative solutions. In fact, recent
studies do not find a positive link between R&D
teams’ mutual trust and resulting creativity.11
The promise of Potain’s
collaboration with
Poclain was hampered
by mutual suspicion
and mistrust, and
ultimately produced
disappointing results.
The Trust Experiments Case studies such as the
above are not adequate for evaluating whether trust
level is associated with higher or lower levels of innovativeness, as it is impossible to disentangle this
factor from the many other contributors.
For this reason, we decided to set up a series of experiments. We enrolled groups with up to 30 players
each, assigned them to as many as 15 pairs, and instructed each pair to design and build an object in the
most creative way possible. Because we needed to ensure that the pairs represented a spectrum from very
high to very low levels of trust, we chose individuals
who already knew each other and who had sufficient
SUMMER 2010 MIT SLOAN MANAGEMENT REVIEW 35
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prior experience together to have formed distinct
trust perceptions. To compose the pairs, we used an
algorithm that we had developed to minimize the difference of mutual trust between partners in a pair
and maximize it among pairs. A betting mechanism
was also included to gauge partner confidence in each
pair’s prospects. (For more detail on the procedures
employed, see “About the Research,” p. 34.)
The results point to a major finding: As mutual
trust increases, the partnership’s creativity goes up,
reaches a maximum point and then starts to decline.
(See “The Sweet Spot of Mutual Trust.”) To control for
the inherent creativity of individual participants in the
experiment, we considered not the individuals’ creativity but the pairs’creativity arising from the partnership.
The difference between the two was termed “partnership effectiveness.”
Partnership Effectiveness as
a Function of Mutual Trust
As the level of trust increases, effectiveness rises to a
maximum level and thereafter decreases. As trust
gets very high, effectiveness even goes negative.
As expected, there was also a strong correlation
between trust in the partner and the amount bet in
the partnership, suggesting that trusting partners
are more likely to commit the resources needed to
implement jointly developed ideas. If innovation is
the combination of creativity and commitment to
bring new ideas to fruition, then innovativeness in
a joint venture is the partnership payoff resulting
from the combination of the partners’ commitment and their respective creativity gains.
If we define innovativeness as the amount that
an individual gains on his investment thanks to the
creativity realized from cooperation with his partner, we can quantify its value as the product of an
individual’s initial investment (amount bet) and
creativity gained (percentage difference between an
individual’s creativity and the pair’s creativity). So
if those betting 300 euros exhibit high creativity
(say, twice their own creativity), they will obtain
600 euros as a payoff. By contrast, if a player betting
120 euros experiences a creativity loss in the partnership (say, 50% lower than his own), he will only
get 60 euros back. When we plot the average payoff
as a function of the pair’s mutual trust, we observe
another bell-shaped curve.
36 MIT SLOAN MANAGEMENT REVIEW SUMMER 2010
Innovativeness as a Function
of Combined Mutual Trust
Although innovativeness, like partnership effectiveness, also decreases after passing an optimal
point, its values are higher than those realized at
lower levels of trust.
Our findings show, as one would expect, that
low trust is not conducive to innovation. But counterintuitively, too much trust is bad for innovation
too. As mutual trust goes up, innovativeness increases, but only to a certain point (9.5 on our trust
scale). Afterward, innovativeness declines, even
though it stays at higher levels because of greater
commitment. Creativity gains, on the other hand,
can become negative (creativity loss) for very high
levels of mutual trust. There seems to be an optimal
level of trust, above or below which innovativeness
or creativity is impeded.
Moderate Trust Could Be the Most Effective We
can explain this seemingly strange pattern by observing how conflicts affect team performance. According
to some management thinkers, tension does not always play a negative role in team dynamics.12 Indeed,
while relational conflicts (which may arise, for example, from personal contempt for one or more team
members) are extremely detrimental to team performance, task-oriented conflicts are beneficial because
they foster critical thinking and in-depth analysis of
the team’s goals and actions. From our findings, we
could say that low levels of trust cause relational conflicts, while high levels of trust may induce a
reduction in task-oriented conflicts.
According to this analysis, participants who do
not trust each other experience relational conflict,
which prevents them from working together efficiently. If, on the other hand, a team enjoys a high
level of trust and mutual caring, individuals might
become too accommodating, quickly accepting
their partners’ ideas and thus reducing the amount
of dynamic task-oriented conflict. The team would
then have lower creative tension, consequently reducing the partnership’s effectiveness.
Trust is a combination of integrity, reliability
and mutual caring, and each component is likely to
play a different role in creativity and innovativeness. We can expect integrity and reliability to
generally favor joint problem solving and innovaSLOANREVIEW.MIT.EDU
tion. On the other hand, mutual caring, or the
extent to which one partner empathizes with the
other, may result in excessive accommodation.
Under such circumstances, a team member would
prefer to please his partner rather than to openly
question the partner’s ideas, decisions and actions.
Consider the example of the Renault Espace,
which was the product of a hugely successful partnership that lasted for nearly two decades.
Undoubtedly one of most innovative car models in
Europe in the 1990s, the Espace originated from a
challenging partnership between Renault SA and
Matra Automobile (now part of Lagardère SCA).
While the companies’ CEOs were said to have a
good relationship, Renault’s engineering and product management teams questioned Matra’s ability
to develop a successful car, given its modest achievements with previous models (such as the Bagheera,
Murena and Rancho). While the Renault teams
liked the freshness of Matra’s ideas, they were skeptical about its design solutions.13
For example, when Renault’s advanced marketing
group members found that customers increasingly
valued modular interiors (in which the car owner
could modify the seating arrangement) and deemed
that Matra’s minivan idea made this feature possible,
they insisted that the car incorporate it. At the same
time, however, the group was unsure that Matra
would be able to engineer the car on a high enough
level to reach minimum quality standards. Renault’s
marketing executives were so concerned that the Espace would not sell effectively as a passenger car that
they demanded it be designed with a flat floor, to
easily convert into a delivery van if need be. Matra engineers, who had designed racing cars, did not
appreciate this compromise.
Nevertheless, the Espace gradually became the
leader in its category in Europe, causing the two
partners to repeatedly adjust the production capacity upward, eventually reaching an impressive 600%
of its initial level.
Renault and Matra, despite a stormy relationship, were able to find an effective balance in their
partnership and offer the market an innovative
concept that competitors later adopted. The tensions and limited trust between the two teams
resulted in a set of unconventional solutions, and a
unique car design, that enjoyed long-term success.
SLOANREVIEW.MIT.EDU
THE SWEET SPOT OF MUTUAL TRUST
The degree to which collaborators trust each other has a large effect on their
ability to innovate. But more trust isn’t always better. Innovativeness increases
with the degree of trust until a “sweet spot” is reached, after which it declines
even as trust becomes greater.
Effectiveness
08
06
04
02
00
-02
-04
-06
-08
0
2
4
6
8
10
12
14
16
Mutual Trust
Managerial Implications Our findings clearly
confirm that joint innovation projects benefit from
a committed and trusting environment. But companies not only should avoid very low mutual trust
among the individuals working on the project, they
also should avoid situations in which it is very high.
Trust matters not just at the sponsor or executive level; it is also essential in the teams formed to
be creative and produce innovations. Leaders entering a joint innovation partnership should
therefore consider the following:
■ Do not expect much innovation from new partners (or new teams); it takes time for trust, and
the consequent openness and cooperative behavior that generate benefits, to develop.
■ Help teams involved in a joint innovation project to
build trust early. This implies that a minimum level
of trust should be created through trust-building activities such as those of the FAcT-Mirror method.14
■ Monitor the level of mutual trust during the project in order to avoid a rift and improve efficacy. Too
often, managers pay no attention to trust; it is left
to develop, or degrade, haphazardly. Proper monitoring should include a clear warning system.
■ Ensure that there is an appropriate level of healthy
criticism. If too much trust develops, it might be
necessary to remind the team of its objectives and
priorities. Here again, careful monitoring can alert
management to an excessive buildup of groupthink.
■ The risk of excessive trust should not be overestimated, however. Barring extreme conditions, there
SUMMER 2010 MIT SLOAN MANAGEMENT REVIEW 37
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is still a creativity gain. It is just lower than the peak
that occurs in the medium-to-high-trust range.
At this writing (late 2009), Daimler-Benz and
Swatch’s codeveloped Smart car is reaping the benefits of its innovative design. As gas prices increase,
global warming concerns grow and consumers flock
to microcar dealerships, the Smart factory in Hambach, France, is running at full capacity. Despite
initially disappointing sales and a fair amount of
mockery among observers, the market seems ripe to
adopt the microcar concept, and other automakers
must now catch up if they hope to compete in this
new product category.
When innovation analysts study this chapter of
the car industry’s history, surely they will debate
who was the mastermind behind the microcar: Nicolas Hayek, CEO of Swatch, or Helmut Werner,
then head of Mercedes-Benz. But given our findings about the dynamics of innovation, it may be
that neither gentleman was the true innovator.
Rather, it was the tension between the two companies (and their respective teams) that caused the
partners to explore new concepts and designs that
led to the Smart car breakthrough.
When inventing together, trust is good; but
avoiding too much trust is better.
Francis Bidault is a professor of management at the
European School of Management and Technology in
Berlin, Germany. Alessio Castello is adjunct professor of management at the Institut d’Administration
des Entreprises, l’Université de Nice, in Nice, France.
Comment on this article or contact the authors at
[email protected].
ACKNOWLEDGMENT
The authors wish to express their gratitude to the PeterCurtius Stiftung (Peter Curtius Foundation) for its generous
support of the research project reported in this article.
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Reprint 51411.
Copyright © Massachusetts Institute of Technology, 2010.
All rights reserved.
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