Contextual Confidence and Active Trust Development in the Chinese Business Environment

Abstract

This paper contributes to the conceptual and empirical understanding of organizational trust. It confirms the importance of “contextual confidence” in institutions for building trust. Moreover, it extends models of trust production to include the effects of purposive action by the truster over and above the contextual prediction of trust emphasized in previous research. Accordingly, “active trust development” is conceptualized as a strategy to strengthen the basis for trust. Empirical evidence is drawn from a survey of 615 Hong Kong firms that manage operations in mainland China. Confidence in China's institutional context was found to have a strong positive association with trust in the local staff working within that context. Active trust development was validated as a means of enhancing trust, though its effect on trust was not as strong as that of perceived institutional effectiveness. Active trust development initiatives are particularly valuable in an environment such as contemporary China, where the institutional foundations for trust remain underdeveloped. The positive correlation of trust with organizational performance provides an incentive for managers to explore these initiatives. At the same time, government and other bodies in China and elsewhere, which are in a position to create and promote effective institutions, are encouraged to intensify their efforts in that direction.