Shaping Governance in an Outsourcing Relationship : Dynamics of Control, Trust and Power

This paper theorizes the dynamic relationship between control, trust and power. On the basis of a longitudinal case study of an interfirm relationship, we posit an interactive relationship between explicit controls (particularly formal controls) and implicit control (trust or power). Explicit controls and implicit controls are not distinct categories that fit with Eisenhardt's distinction (1985) between external measure based controls (hard controls) and internal value based controls (soft controls), but form a duality. Measures and numbers play crucial roles in this duality. External measure based control as instituted in contracts and as practiced in explicit control practices may (re)produce tacit frames that enable the development of commitment and the building of trust. The trust as an implicit control defines and guides cooperative behavior. When boundary spanners (i.e. the managers representing the collaborating organizations) perceive trust to be an ineffective implicit control, power may take the place of trust as an implicit control. So the acts of boundary spanners and their ways of using explicit controls may entail either trust or power that subsequently embeds the agency of the boundary spanners. The work ethic of the boundary spanners proves to be a significant factor that influences the nature of explicit controls and the nature of the implicit control (trust or power). Contrary to much of the extant research it is demonstrated that trust developed over time may be destroyed. In this case such destruction was observed during contract renegotiations with new boundary spanners. Moreover, the history and context of the interfirm relationship are important for the relationship between control, trust and power