Trust and knowledge creation: the moderating effects of legal inadequacy

Abstract

Purpose This study aims 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 We 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/valueThe 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 knoweldge management.

Contract-Based Knowledge Protection and Cooperation Performance

“…Especially in developing economies, knowledge protection is much more important, because their legal system is still not well complete and the intellectual property protection is flawed (Roy & Oliver, 2009;Sheng, Zhou, & Lessassy, 2013;Wang et al, 2017). The findings suggest that technological turbulence and legal system completeness both have a significant and positive effect on contract-based knowledge protection.…”

“…On the contrary, when legal system is relatively incomplete, the formal laws and regulations protecting the interests of firm and intellectual property rights are relatively inadequate or poorly enforced. It is difficult or expensive for firms to follow legal procedures to protect business interests and enforce contracts in such case, which increasing transaction risk and costs (Wang, Zhang, & Li, 2017). A heightened perception of opportunism and distrust engendered by legal system incompleteness increases the resources required by both parties to monitor each other's behavior (Wang et al, 2019).…”

Entrepreneurial entry: The role of social media

“…We believe trust propensity in social media moderates the impact of individuals’ social media use on entrepreneurial entry by influencing their ability to network with strangers and known associates. Further, prior findings in the literature suggest that trust influences entrepreneurial information searching and processing ( Keszey, 2018 ; Molina-Morales et al., 2011 ; Wang et al., 2017 ). This supports the possibility of trust propensity as the moderator of the link between social media use and entrepreneurial entry.…”

“…For example, a customer with a high trust propensity is more likely to trust a salesperson without doubting their integrity ( Friend et al., 2018 ). While trust propensity enables trust, it may leave individuals vulnerable due to reduced monitoring ( Wang et al., 2017 ) and reduced flow of new ideas ( Molina-Morales et al., 2011 ). Furthermore, an individual with a high trust propensity may be inclined to obtain information from others indiscriminately and be locked into relationships.…”

“…In particular, network associates with low trust propensity may be reluctant to share valuable information. Individuals with high trust propensity will treat a network associate and the information they provide with trust and without suspicion ( Peralta & Saldanha, 2014 ; Wang et al., 2017 ). As a result, social media users may be exposed to both true and false information from associates.…”