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Trust in Market Relationships

Trust in Market Relationships

Sandro Castaldo

Trust in Market Relationships illustrates that the importance of trust in a commercial arena has intensified as markets have become more complex. As business relationships become ever critical for a firm’s economic results in highly competitive markets, and trust represents the basic platform for the development of successful long-term collaborations.

Chapter 1: Relationship- and Network-based Approaches: The Emergence of Trust Demand

Sandro Castaldo

Subjects: business and management, marketing, organisation studies


1. INTRODUCTION One of the phenomena that characterize markets today is the exponential development of their complexity, which determines major consequences on the behaviour of economic actors. Firms are incapable of autonomously managing the increasing level of environmental complexity and, therefore, require a specialization in the production of knowledge as well as in the development of trust relationships with their markets. Hence, the need to connect in networks and integrate complementary competencies and expertise emerges, in order to face the new competitive contexts. This represents a first, knowledge-based (or science-push) factor, which is crucial to the constitution of networks of subjects with complementary cognitive resources (for example, Arora and Gambardella 1994). On the other hand, the firm–market relationship is subject to a radical change, in order to satisfy the complexity of customer needs, which appear with increased frequency as bunches. Unilateral and instantaneous exchanges will have to become long-term bilateral relationships, in which the demand will actively interact with the firms’ network, thus contributing to the knowledge development. This leads to a second, customer-based (or demand-pull) vector, which contributes to the tendency towards interorganizational network creation. This not only expands the relational bandwidth that connects the set of firms seeking to satisfy a common bunch of needs, but also reduces the cognitive distance between companies and their customers. In turn, clients become co-producers of the reticular knowledge base. This seems to be the case with the so-called lead users (von Hippel 1988) directly committed to the new product development...

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