Trust is important to our relationships with friends, family, and acquaintances. Less understood, though, is the role trust can play in business relationships. When businesses deal with each other, their first impulse often is to summon their lawyers. But I have found in my research that there are many situations in which trust can be an effective replacement for costly and time-consuming contract negotiations.
To understand the role of trust in business, I and two colleagues, Ozalp Ozer of the University of Texas at Dallas and Kay-Yut Chen of Hewlett-Packard Laboratories, conducted a series of computer laboratory experiments that simulated one of the most vexing problems in supply chain management: The tendency for manufacturers to issue overly optimistic forecasts.
I recently spoke to a reporter at the Financial Times about why I travel six hundred miles round trip, an international journey that often takes between eight and 12 hours one-way, to attend Sloan’s new MIT Executive MBA program. The article identifies a trend in the number of EMBA students willing to travel long distances to earn their degrees from the most competitive business schools, and highlights recent research by the Executive MBA Council that shows an increase – from 6 percent in 2005 to 18 percent in 2010 – in the number of EMBAs traveling more than 250 miles to their program of choice.