Ejkm Volume11 Issue3 Article407

ISSN14794411 244 ACPILReference this paper as: Savolainen, T and LopezFresno, P.Trust as Intangible Asset Enabling Intellectual CapitalDevelopmentbyLeadershipforVitalityandInnovativenessTheElectronicJournalofKnowledgeManagementVolume11Issue3(pp244255)availableonlineatwww.ejkm.com

TrustasIntangibleAssetEnablingIntellectualCapitalDevelopmentbyLeadershipforVitalityandInnovativeness

TainaSavolainen1andPalmiraLopezFresno21UniversityofEasternFinland,Dpt.ofBusiness,Finland2SpanishAssociationforQuality,[email protected]@palmiralopezfresno.comAbstract:Trusthasbecomeanessentialintangibleassetinorganizationsandleadership.Trustpromotessocialorderandcooperation in workplace relationships. It is a resource that creates vitality and enables innovativeness. The paperdiscusses and examines the highly timely topic of trust from the human intellectual capital (HIC) perspective. Morespecifically,thefocusisontheroletrustplaysinrenewingintellectualcapitalbyleadership.Inthepaper,trustisviewedinarelationalcontextdescribingthepositiveexpectationsofarespectfulhumanbehaviour.Originalityofthepaperisbasedonthetwoideasofboththeoreticalandpracticalsignificance.First,exploringandconceptualizingtrustasintangibleasset,resourceandskillinorganizations.Second,examininghowtrustinleadershipenablesHICdevelopmentandhowitaffects.Thepaperprovidesanovelview intomanaging intangibles, since trustas intellectual resourceanda leadership skill inrelation to HIC development have hardly been examined integrated. The main point highlights the importance ofleadership by trust in enabling the growth and utilization of HIC. The paper advocates the idea that, in managingknowledge, it is important to increase understanding of the interaction among different aspects of KM. The valueintangibleassets,suchas trust,add tohuman resourcedevelopment (HRD) ismultipleandstillpoorlyunderstood.Thepaperpresentsalsotworeallifecasestudiesofhowleadershipbytrustenablesvitalityandinnovativenessinorganizations.Thecasestudiesexaminethesharingoftacitknowledgeandcocreationwithcustomers.Keywords:humanintellectualcapital,innovativeness,intangibleassets,leadership,trust,vitality

1. IntroductionCompetitivenessinorganizationsiscurrentlybasedonquickcapacityforrenewingandeffectiveutilizationofopportunitiesandcapabilitiesthataremainlyhumanandintellectual(Slockumetal.,2008).Renewalcapacityis a more and more important quality in organizational management. It is manifested in organizationaloperations,proceduresandprocesses.Renewalisanabilitytoimplementstrategyandrespondtocontinuouschanges.Asorganizationsbecomemoreknowledgeintensive,andeventandopportunityoriented,astrategicchallengeincreasesforgainingcompetitiveadvantages.Peopleandknowledgeassetsarecrucialforachievingsuchadvantages(Wright&McMahan,2011;Teece,1998).Developmentofhumancompetenciesandactivitybuildsonknowledgeand itssharing,andtheirvaried invocation.Thisrequirescollaborationabilityforwhichtrustformsafoundation.Fromthisperspective,trustisasignificantintangibleasset.Trustiscreated,builtandsustainedbyandbetweenpeople.TrustbuildingandmaintenancedeservecarefulattentionbyHRMpeopleand leaders in renewing knowledge and capabilities for vitality and competitiveness (Savolainen, 2011).Therefore,thepaperadvocatesthe ideathatbuildingandsustainingtrust inworkplacesbecomesmoreandmoreimportantineffectivedevelopmentandutilizingofhumantalents,skills,competenciesandcapabilities(HkkinenandSavolainen,2008).WhentheICfieldevolvestowardsamoremultifocusedandmultipleresearchwiththeflavourofhowICis(Dumay, 2012), trust as intellectual resource may play a more important role when intra and interorganizationalnetworkand relationshippracticesare studied.Trusthasbeen identifiedasoneof themostfrequentlyexaminedconstructsintheorganizationalliteraturelately(Burkeetal.,2007).Itisamultifacetedandmultidisciplinaryissuethathasbeenwidelystudiedindifferentfieldsofscienceoverthelastyears(Ebert,2009). Trust is an antecedent of innovativework environments; it is an intangible, relational asset for cooperation between people. Relational trust means that it develops in interaction and reciprocal activitybetween individuals, and within groups and organizations. It is also a managerial resource and skill fordeveloping human intellectual capital. Leadership work is mainly about relationships, interaction,communication and collaboration with people. As competition challenges organizations to renew theirintangibleresources,relationalactivitysuchasinteraction,cocreationandnetworkrelationshipsarestressedmoreandmore.Trustasrelationalresourceisneededmorebutisenactedless.Thispaperfocusesontrustas

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intellectual and relational resource and leadership skill in the interaction among different elements ofknowledgemanagement.Thepaperbringsanewperspectiveintodiscussion,astrustishardlyexaminedanddefinedasintangibleassetand forceful resource and skill in the leadership context. Yet its role as a collaborativemechanism and inconflictresolvinghasbeenrecognized.Inleadershiptrustbuildingisseenessentialandislistedasoneofthemaintasksofleaders.Leadersenabletrustfulworkplaceclimate(Yukl,2010;Dirks,2006).Theknowledgegapexists inhow leadersenacton trustful leadership showing trustworthiness indaily actions (Savolainen andHkkinen, 2011; Ikonen and Savolainen, 2011). The gap is therefore evident in how trust functions as avaluable leadershipresourceandskill.Thefactthat isworthnoticing isthat leaderfollowerrelationship isakeyrelationshipwithinworkorganizations.Notuntilrecentlyhastheroleoftrust in leadershipmorewidelyrecognized(Rousseauetal.,1998).Itisseenasawellspringforvitalityandcompetitivenessinorganizations.InFinland,forexample,aparadigmof new leadershipbytrustforsustainingcompetitiveness inthefuturehasbeen raisedby theFinnish InnovationFund (NurmioandTurkki,2010).Trustbuilding in leadershiphasbeenprioritizedasthetopthemeinleadershipdevelopmentandeducation.The purposeof thepaper is to add todiscussion about trust from the intellectual capital and its renewalperspectives. The objective is to increase awareness of trust in organization and leadership as a valuableintangibleresourceforpeoplemanagement.Thetopicalquestionsareposedasfollows:Doestheorganizationsetgoalsforpeopletogivetheirbest?Docultureandclimatesupportbuildingandmaintainingtrustorratherunderminetrust?Thepaperdiscusseshowtrust,leadershipandrenewalofICarerelatedandwhatitimpliestomanagingpeople.Twocasestudiesarepresented.Theyprovidefindingsofleadershipbytrustinenablinginteractionandcooperationfororganizationalvitalityandinnovativeness.

2. Theoreticaldiscussion

2.1 ConceptoftrustTrust has been a part of human social life for ageswhile interest in trust researchbegan to increase andmultiplyenormously15 to20yearsago in theseveral fieldsofsocialsciences (Mlleringetal.,2004).Asafairlynewresearchtopictrustresearchhasbeenmainlyconceptualuntiltheturnofthenewmillennium.Theresearchhassofarindicateditsroleasanantecedentofmanyperformanceoutcomes,butalsoasaprocessthatresultsfromcollaborativeinteractionbetweenorganizationalactorsinprocessessuchascommunication,cooperation and information sharing (Burke et al., 2007). Trust has been defined inmanyways. Yet, theconceptremainswithoutagenerallyaccepteddefinition(McEvilyetal.,2003).Trustisacknowledgedtobearelationalphenomenon in the literaturemeaning that itdevelopsover time in interactionsbetweenparties(Mayeretal.,1995).Inthispaper,therelationaldefinitionoftrustisadoptedfromMayeretal.(1995:712)asfollows:thewillingnessofapartytobevulnerabletotheactionsofanotherpartybasedontheexpectationthattheotherwillperformaparticularactionimportanttothetrustor,irrespectiveoftheabilitytomonitororcontrolthatotherparty.Mayersmodellooksattheformationoftrustbetweenactorsinarelationalcontext.Thismeansthattrustevolvesovertimebasedonrepeatedinteractionsandinformationavailableandsharedbetween parties. Trust is also a persons assessment of anothers trustworthiness which is manifested incompetence,benevolenceandintegrity.Risktakingisatthecoreoftrust,andnottakingriskperse,butratherawillingnesstotakerisk(Mayeretal.,1995).Cooperationandconfidenceareconceptsthatarecloselyrelatedtotrust(Schoormanetal.,2007).Inearlytrustresearcherswork(Deutsch,1962)cooperationwasusedalsoasasynonymforthetrustconcept.Rotter(1967),oneoftheearliesttrusttheorists,definedinterpersonaltrustasanexpectancybyanindividualoragroupthattheword,promise,verbalorwrittenstatement,ofanotherindividualorgroupcanbereliedupon.Trustisapsychologicalandfunctionalstate.Anindividualisgoingtotaketheriskofbeingvulnerablewiththeanticipationthatheorshewillhaveapositiveexpectationoftheintentionsandactionsofanother(DirksandFerrin,2002;Rousseauetal.,1998).Thepersontakesactionbasedonhisorherbeliefs(McAllister,1995)andmayhavetofacedisappointmentwhenexpectationsarenotmet.Thustrustinworkrelationshipsisdynamicandvarying. Itgrows from thebasisof relationshipsdependingon thecharacterand functionalityof thoserelationships.

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Trust is amultidisciplinary andmultilevel concept. The constructof trust and trust research involvemanyfieldsofscience,severaltheoreticalapproaches,definitions,factorsandmodels(Rousseauetal.,1998;Ebert,2009). Formation and development of trust have been examined in economic, behavioural andtransformationalperspectives (LewickiandBunker,1996;Lewickietal.,2006).Trust iscombinedof severalcomponentsrational,cognitiveandaffective(McAllister,1995).Inleadershipithasbeenexaminedfromtherelationshipbased and characterbased perspectives (Dirks& Ferrin 2002;Dirks, 2006). The elements thatunderlietrustingrelationshipsinvolvetheindividualsfeelingofbeingcompetent,safetyandcaring,asenseofautonomy,consistencyandfairness insocialrelations(GillespieandMann,2004;Savolainen,2011). Inworkrelationships, such as leaderfollower relations, trusthas traditionallybeenbasedon interdependence andreciprocal influencewhen common goals are pursued. A relationship existswhere there is an element ofinterdependence(Atkinson,2004).Trustcanbeseenasanopportunitytogetanaccesstoknowledgeandtopolitical,economicalandrelationalresourceswhicharecontrolledby individuals. It isalsoanopportunitytocreateloyalrelationshipswhichdonotdeteriorateorbreakeasily.Inthelongrun,theserelationshipsformahumanresourcethatbecomesrooted inandstratifiesassocialandcultural intangible, inimitablecapitalfortheorganization(Savolainen,2011).

2.2 Trustasintangible,intellectualassetTrust is recognized as a powerful intangible asset in the development of collaborativeworkplace cultures(Savolainen, 2011). In organizational renewal, trust is an internal motivational force for individuals. Indevelopingintellectualcapitaltrustworksthroughworkplaceclimatewiththesenseofcommunityandopencommunication.IndefininghumancapitalWrightandMcMahan(2011)refertoBeckersearlydefinitionoftheconcept(1964)consistingofknowledge,information,ideas,skills,andhealthofindividuals.Humanintellectualcapital includes competences, motivations, communication, sharing of knowledge and cooperation skills,amongothers.Ine,virtualizingandmulticulturalworld,cooperationandcocreationskillswillbethekeysforinnovations and sustaining competitiveness. The environmentsof coopetition seem to emerge. Theymayconquerthemostinspiringworkplacestobetheonesthatreflecttrustfulclimate.Trust is intangible resource for both individual and organization. In the workplace context, intellectualresources such as trust are used and owned by the organization, in principle. Trust is multilevel andreciprocalinnature.Thismeansthattheeffects,meansandconsequencesoftrustconcernboththeindividualandorganizationallevel.Interpersonalcommunicationandnormscreateforpeopleasenseofsecurityandanopportunity to identifywithagroup (Savolainen,2011).Rewards inwork relationshipsareaccumulatedbyindividualplayersstable relationshipsandbonds throughconsistent interaction,whichmakes itpossible tomaintain them. Subsequently, in cooperation one party can trust the other that he or she will not actdeceptivelytryingtogainshorttermadvantage.Intangible assets aremanaged by the organizations and are accumulated from the human capital.Humancapital isconnectedtoan individualanddisappearswithhimorher incontrastforexampletotechnologicalcapitalandinformation,whichisaccessibletoall(WrightandMcMahan,2011).Eventhoughintellectualassetsarestronglygroundedonthe individual,theyarealsoorganizational.The individualbuildsandbreakstrust,but the benefits and unfavourable effects spread to groups and organizations. When individuals build,maintain or violate and break trust, they obtain benefits or losses.More broadly, the effects are seen indifferent structures and processes in the organizational and societal level. This especially applies ethicalactivities.Anindividualsunethicalactionspropagatedetrimentalconsequencestotheorganizationallevelandeventheentiresociety.Themostblatantexamplesofthis inthesenseoftrustarethepyramidschemes, inwhichoneindividualssevereviolationoftrustleadstoveryseriousandvastnegativeconsequences.Inshort,intrinsicallytrustisafragileintangibleasset.Itcanbebuiltorbrokenbyanindividual,butheorshealonecannotutilize itorcarry itsunfavourableconsequences.Trust influences relationshipsandstructures,socially and collectively. At the individual level, trust can be invisible, even tacit and easily breakable(Savolainen,2011)whileattheorganizationallevelitisusuallymoretangible.Trustcanbesensedforexamplein thecultureandatmosphereaswellas invarious relationships, saybetweena leaderanda subordinate.Trust is invisibleand intangiblebut itsbenefitsandconsequencesmaybemultifacetedandbecomevisiblewithinandbetweenorganizationsandactors.



3. TrustinorganizationsandleadershipPertaining to intellectual capital, trust in leadershipplays a twofold role inorganizations. First, trust is aninfluential forceand intellectual resource for leaders inenablingandbuilding trustfulorganizationalclimateandrelationalcapital(Savolainen,2011).Second,leadingwithtrustisameansandskillforleaderstodevelophuman capabilities for the vitality and competitivenessof theorganization.Considering thatwork today islargelyexpertisebasedbynatureand isstronglybasedoncreatingandsharingknowledge,developmentofhumancapabilitiesandtheworkenvironmentsforutilizingthembecomeprioritized.Currently,trustisputontestandauthorityisreevaluatedinorganizationsduetomajorchanges.Whentheunderstandingofintangibleassetsincreasedinthe1980s,itbecameobviousthattheorganizationalperformancewasgreatlyaffectedby its intangiblecapital (Sullivan,2000;Slockumetal.,2008).Asa result,intangible capitalbecamean issue to leadership.AfterStewart (1997)defined intangible capitalasmental,humanandintellectualasset,itimpactedthetheoriesandpracticesofprovidingleadershipforknowledgeandknowhow. From the point of view of leadership, human capital is multidimensional and interrelatedcombination ofmental, structural and relational resources (Edvinsson&Malone, 1997). Trust provides anopportunitytogetanaccesstovaluableknowledgeandtopolitical,economicalandrelationalresources.Itisaway tocreate loyal relationshipswhichdonotdeteriorateorbreakeasily. In the long run, steadyand firmrelationships form a human, social and cultural intangible capital to be realized as inimitable competitiveadvantages(Savolainen,2011;Nahapiet&Goshal,1998;MartnDeCastroetal.,2011,Eggs,2012).

3.1 LeadershiproleandtrustLeadership isessentiallyaboutmanaginghumanassets involvingactivityandprocessesbywhich intellectualcapital is recruited,developed and retained for thebenefitof anorganization. Leaders are responsible forknowledge sharing,guidance to learning,motivatingandcommitment,aswellas creatinganopen, trustfulclimate needed in renewing HIC. Especially in knowledge based operations, critical assets are human andintangible, and the leader cannot base his/her authority anymore on management position only. Theorganizational sourcesofpower aremorediversified and leadership is sharedmore andmore. Thepowerrelationsbetweenexpertsubordinateandleaderarebasedonknowledgeandknowhow,whilethepoweroftheleaderisbasedontrustworthiness,i.e.,competence,integrityandbenevolence(Mayeretal.,1995).Iftheleader wants to be successful, trustworthy behaviour cannot be disregarded. Leadership is an intraorganizational structure but has impact on external relationships in managing customer relationships, inpractice, for example developing personnels relational capital in customerorientation skills. Thus humancapitalrequiresandutilizesinterchangeablyotherintangiblecapital(Stewart,1997;Roos&Roos,1998).Thismakes the management more complex and challenging. Stewart (1997) points out the differences inleadershipbetweendifferenttypesofintangiblecapital.Varyingleadershipstylesareneeded.Forleadersitisofteneasier to influence internal structuresand relationships throughdailyactionsandvision,missionandstrategywhichdirectindividualsandtheentireorganizationtothesamedirection.

3.2 LeadershipbytrustanewfocusinleadersworkTrust in leadership work is largely embedded in the relationships between leaders and subordinates. Inchangingworkenvironments,anewkindof leadershipseeks itsrole.Leadership isundergoingmajorglobalchallenges,transformationandrenewal.Consequently,roleoftrust in leadership isapparentlyapartofthischange inworkingenvironments.Leadershipcannot functionany longersolelythroughan individual leader,positionpowerorhierarchy.Newcompetencesandresourcesthroughwhichaleadergainshisorherrighttoleadaretobediscoveredanddeveloped.Forleaderstrustisawayofinfluence,i.e.,trustworthinesshelpstobuild mutual cooperation and make people to give the best of their competencies. The leader plays asignificant and influential role in how the subordinates want to and actually perform. Subsequently thesubordinateinfluencesthewayheorshebenefitstheorganization.Byconcluding,leadershipbytrustcanbedefinedasaleadersability,intellectualresourceandskilltoenableinteraction,cooperationandproductivity(Savolainen,2011).Enablingiscentralinthis.Itmeansboththeremovalofobstaclesandsupportingnewideas,solutionsandchange.This is thenew focusof leadershipbasedon trust. It isa reciprocalprocessbetweenpeopleinnature.Ineverydayleadership,trustprovidesreadinessandabilityforsocialinfluence.Indailywork,itisshownintrustworthinessmanifestedinability,benevolenceandintegrity(Mayeretal.,1995).



Inmajorchange,trustbuildingfacessomechallengesatworkplaces.Theyare initially leadershipbased.Ononehand,leadershipcapacityandskillsdoneedrenewingbecauseofthedynamicchangeofleading.Ontheotherhand,leadersinitiateandenabletherenewalofHIC.Thusmaintainingaleadershipcapacitytodealwithuncertaintyandchangewhichcallsfortrustorientedleaderswhoareabletocoachpeopleandteams.Trustbased leadership assures readiness for change, thus sustaining vitality,wellbeing, and competitiveness.Astrustbelongsequallytoeachmemberoftheworkcommunity,everyoneisresponsibletobuildit.Themostcommon challenges are cultural hindrances, such as communication and relational skills (Ikonen andSavolainen,2011).

3.3 TrustinhumanintellectualcapitaldevelopmentDespiteof the fact thatorganizationsaim to increase (tangible)capitalwhichcanbemeasuredby financialindicators,strengtheningcooperationbetweenactors isamongthemost importantattitudesandmeanstoassure the growth and learning of internal IC. Intangible capital, such as knowledge or trust, can grow ordisappearjustlikefinancialorotherkindofcapitalifnotdevelopedcontinuously.Therelationalresources,thatareessentialfortrustformation,arecreatedbyhumanactivity.Theorganizationisbuiltuponthepeopleandtheirtalentsaswellastheirknowledgeandexpertise.Relationalcapitalisquitegenerally defined to consist of the organizations external relations to interest groups, such as customers(Edvinsson & Malone, 1997). However, relational capital is more multidimensional involving also intraorganizational interactionand relationships.This viewhasnotbeen specificallyemphasizedwhen relationbasedintellectualcapitalisdiscussed.Itisnoteworthythatindividualhumancapitalmayalsoincludeinheritedand personal character traits such as intelligence, flexibility, and relatively consistent temperamentalcharacteristics suchasopennessor introvertedness.These factorsare relativelypermanent.However, theymaybeimportantprerequisitesforrenewinganddevelopmentofHIC,andtopotentialtobuildtrust.Currentresearchshowstheconnectionbetweentrustandorganizationalperformance(McEvilyetal.,2003).DirksandFerrin (2002) studied the impact of trust on how talent, knowledge and expertise are utilized in their fullpotentialinanorganization.Accordingtotheirempiricalresearchcovering40years,trustplaysanimportantrole in the employee attitudes and behaviour. It is seen in more positive work attitudes as well as in awillingnessandabilitytocooperate.Kong&Thomson (2009)have foundout thatpersonnelandhumancapitalarenotaseffectivelyandeasilymobileashasbeenexpectedinthephenomenalmobilityvolumeofworkforceintheglobalcontext.Mutualtrustfacilitatesandsecurestheeffectiveuseofknowhowandexpertise(Reychav&Charkie,2010;Hkkinen&Savolainen2008;Savolainen,2008).ThisisanimportantnotiononleadershipandHICdevelopmentinthemobile world. Yet, the effects of lack or failure in leadership can be even fatal for the organizationsperformance.Thereareexamplesoffailedleadershipinthestudiesofcrisiscompanies(Probst&Raisch,2005).Toostronglycentralized leadershipstructurecan leadtoacrisisandafeeble(vitalitylost)organization.Asaresult,thefailuremayoccur.TrustinknowledgesharingAs knowledge acquiring, creation, sharing and utilizing are central to the renewal ofHIC, trust provides astrongpotential forstimulatingandenhancing theseprocesses.Trusthassimilarity to tacitknowledge,as itmay be very unique personal knowledge and knowhow embedded in relationships (Savolainen, 2011).Asimportantas tacitknowledge is forgainingcompetitiveadvantages fororganizations, it iselusive innature.Consequently, ittendstoremainunarticulated; it isdifficulttounderstand,observe,acquireandshare,anddiffuseintheorganization.Bydefinition,tacitknowledgeissharedthroughpeoplewhichisasocial,interactiveprocess.Sharingincreasesawillingnesstochangewhichleadtoahigherdevelopmentactivity.Thus,sharingknowledgecallsfortrustwhichrequirespositiveattitudetocooperation.Itmayspecificallyrevealhowtrustisadoptedandutilizedasanorganizationalresourceandintangiblehumantalentinknowledgemanagement.TheentireideatostudyingtheroleoftrustintacitknowledgesharingisthatunlesssharedtacitknowledgeisnotconvertedtoexplicitandcannotbeutilizedforHICdevelopment.In theconceptualizationbyNonakaandTakeuchi (1995),explicitknowledge isdefinedaseasily identifiable,easy to articulate, detain and share. It is inwritten forms such as books, reports, etc. Tacit knowledge isdefinedasconsistingof intuition,feelings,perceptionsandbeliefsdeeplyembedded inthewaysofthinking,



talking andworking, and in relationships. It is thus complicated to articulate and expresswhichmakes itdifficulttoconvert,transferandsharebetweenpeople.Peopleneedgoodgrounds,motivesandsupportingatmosphereforsharing.Leadersarekeyrolemodelsandsupporters.Agoodexampleofenablingknowledgesharing in people management is trust building in newcomers job orientation process (Hkkinen andSavolainen, 2008). It seems that for the new staff member job orientation is an invaluable and uniqueopportunity for trust building. When the newcomer is introduced to positive interaction and sharing ofinformationfromthebeginning,atbestitleadstoeffectivelearningandsocializing.

3.4 CreatingvitalityandinnovativenessbytrustbasedleadershipOrganizationsareinneedforvitalityinordertosustainrenewalcapacity,innovativenessandcompetitiveness.Vitality is about energy,will, spirit, emotions, activity, influence, collaboration, courage and ability to seeopportunities and make changes. Vitality is enabled by different resources such as social and culturalfoundation and heritage of organizations (Savolainen, 2011). Trust belongs to these intangible resources.Leadersenableandcreate(orruins)vitality(Probst&Raisch,2005).Trustcreatesbasicvitalityandenergythatenablesgrowthandrevitalizationofhumancapitalinorganizations,andprofitableperformanceaccordingly. Itcanbeseen inpeoplesenthusiasm,aswellas fullyutilizingtheirdifferentskills,abilitiesand talents.Oneexample isachangeprocess inwhichpeopleareable to take riskswhile continuously facing the unpredictable. Trust gives birth to vitality and vitality strengthens trust.Practicallyspeaking,itmeanscourageandreadinesstodealwithdifferentopinionsandperspectives.Conflictsandtensioninanatmosphereoftrustcanalsoproducepositiveenergywhichresultsinactiveinteractionandcouragetomakeadifference(NurmioandTurkki,2010).Ifanorganizationsvitality isdepletedor isnotmaintained, thesefeebleorganizations faceunfavourabledevelopmentandevencrisis.Theorganizationsoverloadorprematureagingcanleadtoitsimpotence(ProbstandRaisch,2005).Thiscanbearesultofoverheatedgrowthspeedorrespectivelyofslowness;inotherwords,of strong change resistance. It takes creativity and flexibility to apply new ideas and decisions. Trustingrelationshipscanempowertheorganizationtosuccessjustinatimeofgreatuncertainty.Whenpeopletrusttheir colleagues, their energy can be focused on the core activity instead of games, politics and control(Savolainen,2011).Insummary,trustgivesworkplacesvitality,whichstimulates innovativeness forsustainingcompetitiveness.Continuous change requires leadershipdevelopment and leaders increasingunderstanding aswell asneweffortstoremoveorganizationculturalobstaclesfromthewayoftrustbasedleadership.Theorganizationwillbenefitifeachpartyinvestsintrust.Nahapiet&Ghoshal(1998)statethatitisintheeverydayroutineofboth(parties)wheretheskillstocreateandsharehumanintellectualcapitalwillbemanifested.

4. Empiricalcasestudies

4.1 Leadershipbytrustintacitknowledgesharing

4.1.1 Methodology,data,andthecasecompany

Thefirstcasestudyexaminestheroleoftrustindevelopingintellectualcapital.Thecaseinvolvesthesharingof tacitknowledge inaprojectbasedorganization (Savolainen,2011,2008).Aqualitativemethodologywasselectedbasedonthescarcelystudiedtopicandthepurposeofthestudytogainmoreunderstandingoftheabstract topicof trust and tacit knowledge sharing (Yin,1994;Myers,2009; Serenko etal.,2010).The keyresearchquestionsareasfollows:howdoestacitknowledgeappear(forms),how is itshared(methods)andwhat roledoes trustplay in sharing.Thecase studydataweregatheredby indepth interviews.Sixprojectworkers,whoformaprojectgroup,were interviewed includingaprojectmanager.Theme interviewmethodwasusedwhichmeansthatthemainthemeswerelistedbeforetheinterviews.Allinterviewswererecordedand transcribed. The interview data were analyzed by a thematic analysis according to the content ofinterviews.Theanalysiswastheorydrivenbasedonthetheoreticalframeworkdevelopedforthestudy.Thecasecompany is from theservicesector,aFinnishsmallconstructionengineeringcompany focusingonstructural design. The companys operations are entirely performed in projects and project groups. Thecompany employs19people. There are approximately fourproject groupsworking in the company at the



sametime.Thecombinationsofthegroupsmayormaynotvarybetweenprojects.Projectsmay lastfrom6monthstooverayear.

4.1.2 Keyfindings

The results reveal four forms of tacit knowledge as follows: Professional knowledge (sound expertise andqualityofwork);Managementofgroupdynamics(interactionskillsandabilitytocollaborate);Managementofentities(abilitytoseetheessenceandrelationsbetweenparts);andmanagementofknowledgeresourcesandbase (recognizing and meeting the need for key knowledge). A uniting factor for these four elements isexperienceanditsimportanceintheevolvementoftacitknowledge.Theknowledgeevolvesfromexperienceandbecomesevidentassoundandfluentpracticalcapability.The findings show that tacit knowledge is shared by several methods. Six main ways emerge as follows:interactiveverbaladvising,modelling, jointproblemsolving,guiding to learn, jobenrichment,and initiationintothecompany.Inaddition,mentoring,workinpairs,tutoringandsparringmaybeused.Emailisperceivedas a hard and straight forward form of conveying knowledge yet used in sharing electronically. Tacitknowledge is shared in an interactive process between group members. Several individual, group andorganization level factorsarediscovered thataffect thesharingof tacitknowledgeby leadership.Themostimportant of them are highlighted in Figure 1. On significance of initiation in building trust with newemployeesseeSavolainen(2011).

Figure 1: Leadershipby trust in tacit knowledge sharing: affectingmultilevel factors (adapted: Savolainen,

2008,2011).

4.1.3 Conclusionsandimplications

Thefindingsshowthattrustfacilitatestheactivityofsharingtacitknowledgeinthegroup.Theleadersplayanimportant role in this. Trustful leadership enables interaction, communication and cooperation. Sharingoccurs as an interactive process between actors. The process pattern emerges in the study as a new andinteresting finding.Organization, group and individualrelated factors affect the stages in the process ofsharing knowledge. They seem to appear in combination, overlapping and as a whole. The sharing ofknowledge appears as a chainofevents starting from the identificationof key knowledgeneededand theindividualsinneedofknowledge.Theprocessproceedstochoosingmethodsofsharing.Sharingandreceivingknowledgeoccur inpersonal interaction leadingtoutilizingofknowledge.Finally, internalizingofknowledgetakesplaceifwillingnessandmotiveforknowledgestoringontheindividualspersonalknowledgebaseexists.This is an important finding from the learningpointof view.Motivation requires trustful leadershipwhichenables willingness to grow and learn. The individual level growth of vitality strengthens vitality at theorganizationallevelleadingtoinnovationactivitythroughlearningandsharing.



In conclusion, the groupdynamics andworkplace climate seem themost critical factors in sharingof tacitknowledge (Figure 1.) They are shown by trustful climate, open communication, functioning relationshipsbetweengroupmembersandcommitmenttocommongoals.Trustappearse.g.,inafrequencyofinteractionandcommunicationconsequently,keepingdealsandpromises,and inguidanceto learn.Mostofthe issuesandchallengesrelatedtotacitknowledgesharingareabout interactionbetweenpeopleand (dys)functionalworkplacerelationships.Trustcreatesopennessandfreedomandslackenscontrolthroughtrustworthyleaderbehaviour involvingskillful,benevolentand integrativemundaneactions.Thus, leadershipbytrustmaybeapowerful intangibleasset intheworkplaceforrenewingofHICwhichreinforcesgoodworkplaceclimateandmakesknowledgesharingmoreeffective(Savolainen,2011).Themainimplicationformanagersisthattrustbetweengroupmembersisneededforstimulatingknowledgesharing,andtheinnovativespiritoflearninginordertodevelopintellectualcapital.Leadersshouldespeciallypay attention to developing and maintaining trusting relationships between and within groups to assureknowledgegeneratingandsharing.Leaderssocialandcommunicationcompetenciesshouldbedevelopedaswell. Indailypractices, leaders shouldcommunicate informallyand theyneed tobeawarehow they couldshowtrustworthinessbysmalldailydeeds.

4.2Leadershipbytrustincustomercocreation

4.1.4 Methodology,data,andthecasecompany

Thesecondcasestudyexaminestheroleoftrustinenabling(orundermining)interactionandcooperationinknowledgesharingwithstakeholdersfororganizationalvitalityandinnovativeness.Specifically,thefocusisincustomercocreation.Astrategyforserviceinnovationwascoproducedwithendusersasexternalsourcesofknowledge(Chesbrough,2011a,b;Rubalcabaetal.,2012).Asinthefirstcasestudy,aqualitativemethodologywasapplied(Yin,1994;Myers,2009).Casestudydataweregatheredby indepth interviews(fourcorporatedirectors,twodepartmentdirectorsfrommarketingandcustomerservice,andfouremployeesfromthesamedepartments).Theanalysisofthecasestudydatawasbasedalsoonwrittenandtextualmaterialavailableonthecompanyswebpage,severalblogsandtwittersandotherinternetandprinted(press)material;moreover,participatoryobservationsweremadeduringtheresearchersattendancetoconferenceswherethecompanypresentedthecocreationprogram.Thecasecompany isfromtheservicesector,theairlineenterprise,setup in1986. Itwasthesecondmajorairline inSpainforyears,withover40aircraftsand1800employees(LpezFresnoandFernndezGonzlez,2002).Thecompanywascharacterizedbythevitality,groundedinemployeesstrongmotivation,commitmentandexperience.Peoplewerepreparedtosuccessfullyfacenewopportunitieswithaspiritofcollaboration.Aclimateoftrustwasperceivedandsensedatthetime;acorporateclimateunderpinnedbythe leaders,whostimulated interaction and cooperation for better productivity and innovativeness. As of 2001, the airlinesector faced a global economic crisis. A new CEO was appointed; company downsized in aircrafts andemployees and an important costreduction project was implemented, but the change process was notmanagedproperly.Trustdeteroriatedand vitality started todecrease. In2009 the companywas sold.Topmanagementwasalmostentirely renewedandheadquarterswasmoved toanother city.Manyemployeeswerefiredorforcedtoresign.Changeprocesswasmanagedpoorly,withthedirectinvolvementofthenewlyappointedChairman&CEO.Employees lostmotivationanddistrust spread throughout the company.Trustbuildingwas not among the priorities of topmanagement. Conflicts occurred and developed evenworse.Cooperationandcollaborationactivityamongemployeesdecreased;sodidalsoservicequality.Productivity,innovativenessandcompetitivenessrecessed.Thenewowners intended to rebuild the imageof the company (new logo,newheadquartersand values).Theyhadavisiontobuildan emotional/hedonic linkwithcustomers(Brown,2001;Dermody,1999). Itwasbased in thepoliticalnationalist feelingexisting in the regionwhere theheadquarterswasmoved to. Thecompany of all of uswas the new slogan. Based on the servicedominant logic (Vargo and Lusch, 2008),focusingcustomersascocreatorsofvalue,butwithashorttermfocus inmind,Chairman&CEOdecidedtoimplement a cocreation program to improve customer value in use and reinforce loyalty (Ordanini andParasunaman,2011;Chesbrough,2009;Ferrs,2010)whichwas rooted in thenewmotto.Giving the tightcompetition,theshorttermobjectivewastoincreasecorporatevisibilityasawaytogaincustomers,butalsoto recover some internal vitality in terms of employee motivation and collaboration and, as a result, to



increaseproductivity.Cocreationwas inserted inthecompanyswebpage inavisiblewaytoreceiveahighrelevance. Itwasmarketedaccordingly.Theprogramwas theoreticallybasedon theprinciplesofdialogue,transparency, innovation, involvement, sustainabilityand responsibilitywhichwere stated in themarketingcampaings(Goula,2009;LaVanguardia,2010;Interactividad,2009;Spanair,2011).

4.1.5 Keyfindings

Yet,atthetimethecocreationprogramwaspromoted,theauthoractedasadvisorforthecompanymakingsomeproposalsforserviceimprovements.Thecompanysofficialwebpagewasusedforthat.Itwasrealizedthatthefeedbackquestionnaireforwritingsuggestions/proposalswasnotuserfriendlyandnoanswerswerereceived. Microblog of the Chairman had 4,926 followers as of January 2012, which is in estimation aconsiderablefigure,butheonlykeptcontactwith96microblogers.Intotaltherewere475registeredtweetssentbyhimorforwardedfromotheraccountsduringthewholeyear.Numberofsuggestionsreceivedfromcustomersinthecocreationprogramdecreasedsignificantlyin6months,from771tolessthan60permonth.Severalcustomerswrotetheircomplaints inblogsastheyfeltdeceivedafterreceivingapoorservicequality(frequent flightdelays;poorservice in frontoffice;baggage losts,etc.)whilethecompanypromotedsuchavisiblecocreationcampaign.Theanalysisbasedontheseinternetdatatogetherwiththeinterviewdataandtheother textual sourcesmentionedabove revealed that thecocreationprogramwasdesignedmoreasamarketing campaign to get shortterm results rather than a real strategy for innovativeness to reinforcecustomerrelationshipandloyalty.Theresultsobtainedwerethecontrarytotheintendedones.Thecompanylostmarketshareandtheimagedeteriorated.Somebasicfactorswere identifiedascriticalfactorsforfailureorsuccess: i)appropriateculturethatfosterscollaboration and cooperation (Laszlo, 1999); ii) commitment to common goals, shared by all employees,rooted in leadership by trust; iii) appropriate and clear, renewed strategy, operationally deployed throughgoals,clearallocationofresponsibilitiesandefficientanduserfriendlyprocesses;iv)multidirectionaldialoguebetweenstakeholdersandorganization;v)allchannelsandconsistentserviceateverymomentoftruth.The findings show how delicatematter trust is. It is fragile, intangible, relational asset and, hence, easilybreakable.Itisneededforcooperationbetweenthecompanyandstakeholders.Trustenablesinteractionandcooperationinknowledgesharingforstakeholders.Astrustdevelopsinreciprocalactivitybetweenindividuals(customersandcompany representatives),andonepartyattempts togainshort termadvantage,customersfeel usedanddissatisfied.Theyperceivesharing theirknowledgeand timewith thecompanyonly for thebenefitofthecompany.Itmaybeevenworse,i.e.,forthebenefitofsomeindividualsonly.Consequently,therelationship and trustmay become seriously deteriorated. The stronger the emotional bond is, that trustinvolves,themorefragiletrustbecomesindisappointmentexperiencesandthelowercustomerdissatisfactionratedevelops let alone the consequences if trustbreaches in customer relationships.Customersdeservetrustworthy care. Inhighly competitiveenvironments,noone company canafford to ignore that today.Somanagers should look at customers not just as consumers, but rather as employees and ambassadors(Lukosius,2007).

4.1.6 Conclusionsandimplications

In conclusion, trust is a fragile, relational asset, formed by a combination of rational and affective oremotional elements. Trust is an opportunity to create and reinforce loyal relationships. Sharing and cooperation requires trustandalsoawillingness to cooperate.When trustbreaches, theeffectsare seen inseveralstructuresandprocessesbothattheorganizationalandsocietallevel.Formanagersthestudyimpliesthat commitment, transparency, openly shared goals, clear strategy and its deployment are the basicrequirementstobuild trust.They leadtosharingmoreknowledgeand fostervitalityand innovativeness.Asthe potential for obtaining knowledge from outside the companys boundaries has significantly increased,manyfirmsareintheprocessofchangingtheirinnovationsystem.Anemergingopeninnovationmodelwouldgiveleadershipbytrustincreasingattentionandrelevanceinresearch,literatureandpracticeasenablerofcooperation,andawaytoassuringvitalityandinnovativenessinorganizations.

5. SummaryandmanagerialimplicationsofthecasestudiesThefindingsshowtheseveralwaysofhowtrustsupportsinnovativenessandvitality(wellspringsofrenewal)inorganizations.Trustplaysan important role in intraand interorganizational relationships. It strengthenshuman intellectualcapacityby renewingcompetencesandexpertise.Thepaperhasdiscussedan important



rolethattrustworthyleadersplayintrustbuildingandmaintenance.Inessenceitmeanssharingknowledgeopenly and on the right time. The findings show that trust plays amajor role in knowledge sharing, bothbetween group members (engineering company) and between stakeholders (airline customers). Groupdynamics and functioning relationships between individuals facilitate the sharing of knowledge. This wasshownbythefirstcasestudywhichmadeleadershipbytrustpracticesvisibleaswellasthesecondcasestudy.The functioning relationships are very important because tacit knowledge is based on the individualsprofessional experience and is complicated to transform into explicit and be shared. Moreover, trustfulworkplace climate, which is characterized by open communication at the individual and group level (seeFigure1),seemstobeacriticalorganizationallevelfactoraffectingthesharingoftacitknowledge.ThisinturnstrengthensvitalityofHICneededfortheinnovationactivity.The case study findings imply for leaders thatopennessand transparencyof informationare important forgenerating relational capital and developing intellectual human capital. Further, essential to leadership bytrust is enabling, i.e.,developing andmaintainingworkenvironments thatnurture knowledge sharing and,hence, innovativeness.Open culture and trustful climate support functioning relationships and strengthentrust.Trust reinforces and creates loyal relationshipswith internal andexternal stakeholders.Thepracticalimplicationforgroupleadersistounderstandhowimportantitistodevelopcommunicationskillsandsustainrelationshipswithinthegroup,butalsobetweenotherstakeholders. Indaily leadershipwork, it isthesmalldeedsthatmakeadifferenceinleadingbytrustnotthegreatpromises!Finally, themain point of this paper is crystallized in the suggestion that the growth and development ofhuman intellectual capital is of utmost importance in sustaining innovativeness and competitiveness inbusinessorganizations.Forthatmanagingknowledge,morespecificallygeneratingandsharingknowledgearethekeyactivitiesandprocesses.Thepaperhasmadeanempiricalreferencetotheroletrustandleadershipplay in theseprocesses.ConcludingbyHamel (2007:97) if theorganizationwantsmembers to trusteachotherinallissuesattheworkplacenothingshouldbekeptsecret.

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