Entrepreneurial Decisions and Trust Building in Networked Business Environments

The functioning of modern social and innovation networks is enabled by a combination of M.S. Granovetter's "strength of weak ties", F. Fukuyama's "spontaneous sociability", and R.D. Putnam's, thin trust". The entrepreneurs that coordinate their relations in innovation networks are faced with a continuous tension of making the independent competitive business decisions and building trust-based relations in their social and economic networks. These tensions call for an adequate integration of individual and collective perspectives in social behaviour of business organizations. The aim of this paper - to reveal the entrepreneurial approaches to decision making and trust building/maintaining in the networked business environments. This paper integrates insights from two separate yet complementary parts of research. In the first part, we discuss the main patterns of entrepreneurial decision making, based on S. Sarasvathy's theory of effectuation, and present the findings of empirical research on entrepreneurial decision making in complex business environments (survey of expert entrepreneurs in USA and Lithuania). The survey has shown that even though respondents operate in environments of similar uncertainty, their entrepreneurial predispositions are quite different. Despite these differences, they regard partnerships and networks as the single most important instrument for managing the environmental risk and uncertainty. In the second part, we present the theoretical insights and 3-stage model of trust emergence in entrepreneurial networks and findings of empirical research that covered 109 network facilitators from 37 countries from Europe and Americas. The development of trust in network of organizations contains at least three different stages that are characterised by different level / type of trust, and respective risks calling for the managerial intervention for promoting trust on the network level. The survey has revealed the personal factors as being of key importance throughout the process of inter-organizational trust development, while social and institutional factors becoming important in the later stages of the process. There is also an international diversity with regard to the choice of mechanisms for trust development (reliance on institutions vs. reliance on dominant organizations vs. self-organization).