Is Higher Level of Trust in Organizations Always Positively Correlated with Higher Economic Results? Evidence from Estonian Farms

Abstract

Social capital and economic performance, especially the connection between social capital and economic success, has been a challenging subject since the 1980s. The researchers mostly agree that a high level of social capital impacts the economy positively. According to the OECD study (OECD, 2015), it is suggested that an increase in social capital can be the driver of economic growth in Estonia. Trust is considered an essential factor of both social capital and organizational success. The objective of the study was to investigate the relationship of trust and organizational performance as well as the financial results of the organizations based on Estonian farms. A sample of 89 farms was studied. To investigate trust and organizational performance, the instrument with three parts, management trust (MT), organizational trust (OT), and organizational performance (OP), was used. The measures of MT, OT, and OP integrated a Likert-type scale. The data of annual reports were used as indicators of economic results. Both MT and OT positively contributed to organizational performance, but no positive correlation was found between trust indices and economic indicators. The additional study was carried out among the farmers of 32 companies to indicate the possible reasons for no correlation. The main causes pointed out were connected with external conditions like weather, political events (sanctions to Russia), and price level at the stock market.

Appendices

Appendices

1.1 Appendix 1: The Positive Impact of Trust on the Organization’s Performance

No.	Connection of Trust with the organization’s performance
1.	Interpersonal Trust between managers and subordinates improves performance and productivity.
2.	Interpersonal Trust between managers and subordinates influences high organizational commitment and morale; and low turnover and absenteeism.
3.	Improving behavior and enhancing the quality of communication are other positive characteristics when interpersonal trust between managers and subordinates is present.
4.	Trust is crucial to successful knowledge sharing, and it appears to influence organizational performance.
5.	Trust is enhanced when quality relationships are present among leaders and workers.
6.	Organizational Trust is very important for effective leadership.
7.	Organizational Trust is a very important factor in shaping employees’ engagement.
8.	There is a positive connection between organizational trust and knowledge sharing.
9.	Organizational Trust is faith in the positive intentions of others.
10.	Described organizational trust as a belief that employers will follow the rules.
11.	Trust in organizations involves employees’ willingness to be vulnerable to their organization’s actions.
12.	An important source of information is the employee’s immediate social environment, which largely comprises co-workers.
13.	People can trust only others who also are willing to trust them.
14.	Lack of interpersonal Trust in an organization will give rise to higher supervision costs.
15.	Trust is related to quality relationships, clear communication, knowledge sharing, and a clear understanding of expectations.
16.	Reported a causal, positive effect of trust on growth and economic development.
17.	Increased trust has a positive effect on productivity.
18.	Trust has a positive effect on investment and the accumulation of physical capital.
19.	When subordinates trust their managers, they should be more willing to provide benefits in the form of extra effort toward job performance.
20.	When managers trust their subordinates, the subordinates are likely to be the recipient of more favorable benefits and to experience feelings of self-esteem.
21.	As a result, subordinates should be motivated to perform well and should be more committed to the exchange relationship.

1. Sources: Paliszkiewicz et al. (2014a, 2014b); Bjørnskov (2009) and Brower, Lester et al. (2009); Compiled by the authors

1.2 Appendix 2: The Basis of Grouping Companies According to the EMTAK Code

Type of production	EMTAK code	EMTAK code explanation	Number of enterprises
Field crops	01111	Growing of cereals (except rice), leguminous crops, and oilseeds	30
	01199	Growing of fodder crops and grasses and other non-perennial crops	1
Horticulture + permanent crops	01131	Growing of vegetables (including gourds), roots, and tubers, including mushrooms	6
	01281	Growing of spices, aromatic, drug, and pharmaceutical crops	1
	01301	Plant propagation	2
	01241	Growing of pome fruits and stone fruits	1
	01251	Growing of other tree and bush fruits and nuts	3
	01291	Growing of other perennial crops	1
Milk production	01411	Raising of dairy cattle	23
Grazing livestock + pig and poultry farming + others	01421	Raising of other cattle and buffaloes	7
	01461	Raising of swine/pigs	9
	01471	Raising of poultry	2
	01491	Beekeeping	2
	01501	Mixed farming	1

1. Source: compiled by the authors