Trust and knowledge creation: the moderating effects of legal inadequacy

Purpose The purpose of this paper is to empirically investigate the effects of competence and goodwill trust on knowledge creation and the moderating effects of legal inadequacy on those relationships. Design/methodology/approach A questionnaire survey was used to collect data from 196 research and development alliances in China. Hierarchical moderated regression was used to test the research hypotheses. Findings The authors find that competence trust has a positive and linear relationship with knowledge creation while goodwill trust has an inverted U-shaped relationship with it. The results also reveal that the inverted U-shaped relationship between goodwill trust and knowledge creation is stronger when legal inadequacy is high, while the impact of competence trust on knowledge creation is not influenced by legal inadequacy. Originality/value The findings provide insights into the distinctive effects of competence and goodwill trust on knowledge creation in partnerships, deepening current understandings of the bright and dark sides of inter-firm trust. This study also clarifies the influences of legal inadequacy on the effectiveness of competence and goodwill trust, which enhances existing knowledge about the impact of legal systems on the relationships between inter-firm trust and knowledge management.