Coordinating with the Competition: The Role of Trust

Background and Purpose: As funding for human services is increasingly targeted toward the costs of service delivery, rather than agency operations, non-profit organizations are under pressure to reduce administrative costs by coordinating administrative operations. However, organizational leaders are often encouraged to coordinate with agencies competing for the same resources. Competition can undermine coordination because one organizations' success in obtaining needed funding, clients, or staff may come at the expense of a partner, leading to partnership failure or dissolution. The negative influence of competition on coordination may be reduced when agencies trust one another. Although it is widely accepted that trust figures prominently in inter-organizational coordination, we know little about how trust interacts with competitive organizational environments to influence coordination of administrative operations among non-profit human service organizations. This paper addresses the question: does trust moderate the negative influence of competition on administrative coordination?

Methods: This study draws on quantitative data collected from a regional network of 32 children's behavioral health organizations. Data were collected in two ways. First, data on the three focal variables (competition, trust, and administrative coordination) and two control variables (size and relationship duration) were collected via a network survey administered to the executive directors of the organizations. Second, one control variable (financial performance) was extracted from IRS 990 forms publically available on Guidestar. To test moderation effects, analyses were conducted at the dyadic level (n=936) using two nested multiple regressions with the quadratic assignment procedure (mrQAP) which controls for interdependence in significance tests with networked data. The first baseline model tested multivariate relationships, and the second model included the interaction term for competition and trust.

Results: In the baseline model without the interaction term, competition was positively associated with administrative coordination (b=.18, SE=.24, p<.001). However, when the interaction term was entered into the second model, the main effect of competition on administrative coordination becomes negative (b=-.21, SE=.32, p<.05). The interaction of trust and competition is positively associated with administrative coordination (b=.44, SE=.29, p<.001) and the strength of the interaction is moderately strong. Together, these results demonstrate that under conditions of trust, competition is positively associated with administrative coordination but in the absence of trust, competition undermines administrative coordination. Thus, trust moderates the negative influence of competition on administrative coordination.

Conclusion: Under conditions of trust, competing organizations coordinate their administrative operations more by sharing their funding, space and staff expertise. However, in the absence of trust, competition undermines collaborative behavior among non-profits. The findings of this study highlight the importance of trust among organizational leaders and support the notion that economic transactions like the exchange of administrative resources are embedded within social relationships governed by social structures and norms. Therefore, the nature and quality of social ties such as trustworthiness are key for understanding organizational strategies like administrative coordination. Seeking out or creating opportunities for non-profit leaders to network, and test the waters of working together may help leaders learn about one another, establish trust and pave the way for administrative coordination.