*Presented in the previous version at the 5th Innovation and Entrepreneurship International Conference, Daegu, South

Korea, Nov. 13, 2014.

Trust and Innovation Interplay -

How to Sustain Competitive Advantage by Leadership*

Prof. Taina Savolainen

University of Eastern Finland, Business School, Finland

Leader of the Research Group ‘Trust within Organizations’

e-mail: taina.savolainen@uef.fi

ABSTRACT

The paper discusses trust in organizational leadership for sustaining innovations and enhancing vitality and

competitiveness in business. The paper examines and discusses the interplay between trust and innovation in view of

leadership as a driver for innovations. In today’s e-world, global business is more and more virtual, and multi-cultural

organizations need trust more and more for a foundation in their multi-form collaboration. The main questions is: how

innovativeness is supported in organizations by building and maintaining trust, and how leaders may nurture trustful

climate for creating new ideas and feeding innovativeness. Trust-building and maintaining belong to valuable intangible

assets and skills for leaders to influence on stimulating and sustaining innovativeness. Trust is discussed within workplace

relationships taking into account the emerging e-context of leadership. Implications are made to leaders of trust-building

in workplace relationships. Two ideas are highlighted. First, leaders foster organizational trust; trust-building is their

intangible asset and skill to influence organizational vitality. Second, leadership by trust enables innovation activity and

implementation within the organization supporting competitiveness in business. Trustful workplace climate is clearly a

social, collaborative and culture-specific process affected by local and global practices. Interaction and open

communication characterize trust cultures. Cultural issues need to be considered more deeply in diversifying

multicultural business.

Keywords: Communication, competitiveness, culture, innovation, intangible assets, leadership, trust, trust-building,

vital organizations

1. Introduction

Leadership and organizational culture has significant influence on innovation processes. Trust forms

one of the key elements and resources in building open culture manifested in effective communication

and knowledge sharing. In rapidly changing business environment where cooperation is more and

more important trust forms a foundation for collaboration in relationships. Trust is also critical for

idea and knowledge creation and sharing, and the entire innovation process (Savolainen, 2008;

Blomqvist & Levy, 2006). The importance of trust in leadership has been clearly recognized in the

literature and business practice (Burke et.al, 2007; Dirks & Ferrin, 2002; Savolainen & Häkkinen,

2011; Yukl, 2010). However, trust as intangible asset and skill for leaders to influence people in

innovation processes has not been widely discussed. A resource-based view on trust has lately been

suggested by (Savolainen, 2011;Savolainen & Häkkinen, 2011, Savolainen & Lopez-Fresno, 2013).

Trust building belongs to important leadership skills (Yukl, 2010). Trust forms a means to create

organizational climate that nurtures ‘spirit of innovativeness’ which enhances competitiveness

through effective idea generation and innovation implementation. Trustful climate increases openness

reducing uncertainty and vulnerability in the workplace relationships (Möllering et.al, 2004) which

encourages innovation activity.

Trust and innovation are inter-related in many ways. Interaction and communication that are essential in trust

formation are crucial to create and share new ideas, information and knowledge in innovation processes

(Savolainen et.al, 2014; Savolainen & Malkamäki, 2011). Innovation activity is combined of different

knowledge-related collaborative activities in the phases of innovation process from the generation of ideas to

implementation stage, for example, and to final selection and decision making of ‘proto’, new model, product,

processes etc. Trust forms a foundation for social, collaborative actions (Rousseau et al., 1998). Leader

behaviour and skills play a major role in building and sustaining trust. Some studies unambiguously confirm

the importance of leadership style (Anderson et al., 2014). For fostering innovations, the key managerial

leadership tasks is to create innovative culture with openness and atmosphere that encourages free flow of

ideas and knowledge creating and sharing (Burke et.al. 2007, Savolainen, 2008)). Trust-based leadership and

organizational culture is characterized by freedom, openness and high communication rate, which foster

learning and collaboration in intra-organizational relationships, for producing new ideas, developing new

services and processes, and implementing innovations to commercializing them in service business eventually.

This paper examines interplay between trust and innovation by looking more specifically at leadership role

and trust in intra-organizational relationships. Culture-related aspects are also considered, as collaborative

efforts that are needed for stimulating and sustaining innovative activity. Focus is in trust and innovation

interplay by trust-based leadership driving innovation processes. Trust develops between people in interaction

and through communication processes in the course of time (Savolainen et al., 2014). Leadership matters in

enabling collaborative workplace relations for support of innovations and vitality in global business. Leaders

trust-building skills belongs to new leadership skills of the 21st century (Savolainen, 2014), as the technology-

mediated interaction has brought a major change in ways of interaction and communication in work places.

Currently, the entire workplace culture undergo change from traditional, f-to-f ways of interacting towards

virtual ways and e-relationships. Technology-mediated interaction emerges meaning that trust and

collaboration may be needed even more but where inter-personal communication may become more and more

challenging (Savolainen et al., 2014). Anderson et al., (2014) suggest that while working life moves more

extensively into geographically dispersed teams, the importance and effects of the Internet in innovation

management should be examined in more detail. This paper aims to add to this discussion presenting also a

real life example of the issues of trust-building and leadership in knowledge sharing in the real life case. The

role of trust in group leadership and its relation to innovations are illuminated.

2. Trust and Innovations

2.1 Defining Trust

Trust is a paradoxical issue in the modern society which is characterized by increasing uncertainty, complexity

and risk. Trust is needed more than ever. Yet, opportunities for trust to be built are becoming less since

globalization, virtualization and a more ‘hectic’ way of life, in general, do not support the forms of trust

developing incrementally in interactive processes between parties. The nature, forms and formation of trust is

in change. Therefore, it is necessary to understand the concept and different forms and formation of trust (i.e.,

individual-based, impersonal and institutional type of trust), and as related to innovativeness.

Trust as well as innovation have been defined and categorized in numerous ways. While trust has been defined

in several ways it remains without a generally accepted definition (McEvily et al. 2003, 101). There are many

approaches to trust in the research: the role and significance, how it is built and achieved, sustained, and what

are its outcomes. Processes of trust are quite scarcely studied so far, in other words, how it is created, built and

re-built. Many theorists have suggested that trust evolves over time based on a series of interactions. A critical

issue is the process by which trust evolves (Mayer et.al,1995). A brief discussion is made next of the concept

and approaches of trust which understandably falls short from comprehensive one giving the very extensive

area of the subject.

Deutsch (according to Das & Teng 1998, 494.) depicts that trust comprises of a person’s beliefs and

expectations on how the trustee will behave. Sabel (according to Das & Teng 1998) asserts that trust is a

person’s assessment of another’s trustworthiness and benevolence. Furthermore, trust describes the positive

expectations of a person in relation to the object of trust behaving respectfully also in situations of risk. Risk

taking is at the core of trust. Trust is a source of security. Therefore, it is clear that the more a person trusts

another’s future actions, the more securely and with more confidence the said person will take part in the

activities of the object of trust (Das & Teng 1998, 494.)

The relational definition of trust has been developed by Mayer et.al (1995): the willingness of a party to be

vulnerable to the actions of another party based on the expectation that the other will perform a particular

action important to the trustor, irrespective of the ability to monitor or control that other party. This definition

of trust is applicable to a dyadic relationships in an organizational context , i.e., in a relationship between a

trustor and a trustee who is perceived to act and react with volition toward the trustor. Making oneself

vulnerable is taking risk and implies that there is something of importance to be lost. Trust is not taking risk

per se, but rather it is a willingness to take risk (Mayer et.al 1995). Cooperation, confidence and predictability

are used often synonymously with trust and they are apparently overlapping concepts.

Furthermore, trust is viewed merely a part of control, and, also merely a substitute for hierarchical control.

Other views maintain that control and trust are separate concepts. If one trusts another, there is no need to

control the other person’s activities. Control comes in only if trust is not strong enough. For example, if

employers feel that the employees are motivated, there is no need for the employers to prove that to themselves

by controlling the behaviour or actions of the employees. The best result, however, is reached through

combining and balancing trust and control. Control alone can be very expensive, but so can mere trusting. In

conclusion, when applied appropriately, trust and control together increase the likelihood of a positive outcome

(Das & Teng 1998, 495-496.). Slackening control means often increasing communication and more open

information sharing. In creating trust open and precise communication and information are needed.

Communication also strengthens common values and norms, both of which have an effect on trust (Das &

Teng 1998, 504-505.) Higher level of trust makes decision making more efficient by simplifying the processes

of seeking and interpreting information (McEvily et al. 2003, 93.)

Even though trust does not resolve all of the problems in organisations, it may result in increased creativity,

openness, and higher efficiency in utilizing human and financial resources; the transaction costs decrease and

decision making becomes less complex. Conflicts can be solved more constructively - although trustworthy

behaviour may not be automatic - misappropriations may yet appear. Therefore, rebuilding trust as a

consequence of trust violation, e.g, malpractices, is thus an important subject in the area of trust in

organizations (McEvily et al. 2003, 99-100).

2.2 Trust-Building in Workplace Relationships Trust is a relational issue in workplaces. Trust-based relationships refer to the situation where, instead of the

intent to gain merely personal benefits, emotional and value-laden bonds exist between management and

employees. Besides trust this is also linked with commitment formation: people commit to

goal/organization/task because they think it is valuable and emotionally important as such and because they

perceive the trustee trustworthy. It is conceivable that in commitment emotionality and morality are embedded

within trust. Commitment is not only important for personal reasons but also for reasons which are outside the

self. It seems to arise in social relations between people. Consequently, a recognition of relationship

perspective instead of individual comes into focus. The emotional and value-laden aspect seems to enable

people to move beyond a mere rational prediction to the direction of faith, reliance and willingness to take risk

(cf. Mayer et.al., 1995). Dependence on the other party seems to be relevant.

The elements that underlie trust-based relationships are the individual’s feeling of being competent, a feeling

of safety and caring, a sense of autonomy and empowerment, consistency and fairness in social relationships,

congruence in the values of a manager and the organization. As a whole, trust-based relations implies managers’

credibility, fairness and competence with good intentions for the goal (mission/vision/strategy) setting and

accomplishing them. These factors are related to organizational culture and leadership. Herzog (2001, as stated

in Herting, 2002) describes how trust for collaboration is built over time, as perceptions of self and others

change through collaborative sharing. Trust is built, as team members, e.g., share perceptions and interact

around goals, problems, team pride, social events and expressions of values. Successful projects are delivered

in environments where high levels of trust exist among the collaborators, and in which they may openly share

their problems, concerns, and opinions without fear of punishments.

The relations of trust between the management and the employees may be even far from simple. According to

Davis and Landa (in Callan et al. 2003, 117 ), 43 % of employees believe their superiors lie and 68 % of the

employees do not trust their superiors. In order to gain an ampler trust, the employers should also assume the

role of mentor in regard to the employees. In this setting, the employees may feel that the employer cares about

them. Open communication between the employee and the employer is an important aspect and crucial for

building trustful relationships. Despite the caring attitude, however, the superiors commonly have authority

(power) over the employees (Callan et al. 2003, 119-120.). This makes trust relations more complex and fragile.

Moreover, cultural differences appear; they are manifested in varying degrees of power distribution (control

vs. delegation) in managerial behaviour, uncertainty tolerance, and collectivism (Hofstede 1997, cf.

Trompenaars 1995).

2.3 Innovation Innovation is very likely the most repeated term in the current global business world seeking strategies for

enhancing competitiveness. According to the recent definition by Anderson et.al (2014) innovation is seen to

involve ideas that are relatively novel adopted and adapted from other organizations being however new to

the organization adopting them. Kanter’s (1984) older definition involves innovation as the generation,

acceptance and implementation of new ideas, processes, products, or services. Innovation refers to the process

of bringing any new, problem-solving idea into use (technical or organizational). Ideas for reorganizing, cutting

costs, implementing new budgeting or production technology systems, improving communication, or

organizing production in teams are also innovations.

Recently Anderson, et.al (2014) have reviewed the rapidly growing body of innovation research particularly

during 2002-2013. They conceive that both creativity and innovation are integral parts of essentially the same

process and propose an integrative definition. They further note that research into creativity typically examines

the stage of idea generation, whereas innovation research has commonly also included the phase of idea

implementation (Anderson et.al, 2014). While there has been an exponential growth in the published articles

on workplace creativity and innovation in recent years and different definitions have been presented,

innovation and creativity lack generally agreed definition among researchers over what is precisely either

creativity or innovation. Boundaries between the two concepts are depicted to be unclear (Anderson, et.al,

2014).

In addition to many definitions of innovations, the nature and types of innovation have been examined and

classified. For example, Henderson and Clark (as stated in Herting, 2002) differentiate radical, incremental,

and architectural innovations. Autonomous and systemic innovation is also distinguished. Furthermore, one of

the classifications is administrative (called also as organizational) and technical innovations. Technical

innovations concentrate on the products, services and production process technology (Daft, 1978; Damanpour

1991) and are rather measurable. Assessment criteria for a technical innovation are usually clearer and more

concrete than for an administrative/organizational one.

The types of innovation in literature is currently understood as more multiple than just technical and product

innovations. Innovation are mainly produced and implemented in the private sector, but also made in the public

sector. Types of organizational, managerial and service innovations are also recognized. Managerial,

organizational (administrative) innovations are different from the technical innovations in the sense that they

do not focus only on one concrete item or technique but are related to the organizational, management and

service processes and procedures (Damanpour, 1991, ). They involve administrative elements, organizational

resources and affect the organization’s social system. This makes their measurement more difficult compared

to e.g. product innovations (Daft, 1978; Damanpour, 1991). Management models such as TQM as a

management philosophy and system is an example of administrative innovation (Savolainen, 1997). Pertaining

to trust and innovation, administrative/organizational innovation is an important aspect due to its holistic,

cultural and managerial elements, and consequences. Moreover, innovation has been identified as a process

and described as multiple and complex in nature, i.e., (messy, reiterative and non-linear, step by step, with

forward and backwards moves, (Anderson et.al, 2014, as stated in King, 1992; Van de Ven et.al, 1989).

2.4 Trust in Innovation Management Trust gives work places vitality, which stimulates innovativeness for sustaining competitiveness. Creativity

and innovation in any organization are vital to its success. In the long run, few organizations may prosper

without innovations. Continuous change requires seeking of ideas, developing capabilities and implementing

innovation strategies that will be realized in diverse cultural and business environments. Challenges may still

grow in digital world, in general, and in processes of innovation implementation, specifically.

Trust affects an organisation in various ways. It has influence on many of the processes of an organisation,

such as information and knowledge sharing and, thus, innovativeness as well as commitment, and identity

(McEvily et al. 2003, 94, 97). Literature of trust and innovation seem to overlap in many points. When trust

is looked from the organization behaviour and management point of view, the link between the two appears in

organizational culture, leadership, climate, creativity, learning, knowledge sharing, and implementing change.

Innovation and trust are both social workplace processes appearing mainly at inter-individual level (dyadic &

group levels).

The overlapping factors are related to managerial and leadership behaviour and efforts to create atmosphere

for organizational renewal, i.e., producing ideas in collaboration. Trust is an organizational- and individual-

linked antecedent and foundation for collaborative efforts (Lewicki et.al, 1998) and, hence, is antecedent for

innovativeness (idea generation, development and innovation implementation. Several interrelated elements

of trust are linked to innovation, for example, risk taking and lower management control, creating and sharing

of information and knowledge, empowerment, freedom, and visionary, participative leadership. Innovation, in

turn, is more of a consequence and, ‘fruit’ or by-product of trust-related elements, and culture.

Concluding of the interplay between trust and innovation, in supporting innovativeness, organizational culture

and leadership style play a role. The aim is creating atmosphere and climate that balances trust and control.

Idea generation and innovation implementation may be achieved within the conditions of lower control and

open culture. Therefore, understanding the linkage between trust and innovation becomes important to all

organizations that are renewing their processes. The two feed each other. As is stated above, trust level in the

organization is related to collaborative climate that encourages innovation and creativity. Some studies show

connection between trust and productivity which is mediated by leadership and management. And innovation,

in turn, may result in economic gains. This way trust and innovation support competitiveness. Companies’

ability to launch new innovations continuously has become a key for sustainable competitiveness (Nonaka &

Takeuchi, 1995). Three aspects seem to be particularly pertinent for competitiveness: flexibility, co-operation

and learning. These require open culture and structural flexibility as well as practices supporting group and

individual learning in management.

3. Trust-Based Leadership Fostering Innovations Innovation processes are complex and multilevel in nature developing over time and requiring skillful

leadership in order to benefit competitiveness. Continuous change present challenges to leadership

development. Leaders need more understanding and efforts to remove organization cultural obstacles from the

way of trust‐based leadership. Trust is an influential force in organizational management enabling good

leadership (Savolainen, 2011). In leadership, creating collaborative relationships draws on one of the core

concepts of leadership: interpersonal influence (Yukl 2010), and on the important role that managers play in

acquiring, selecting and sharing information. Leaders’ influence becomes visible in innovative behavior, which

is also about entrepreneurship, i.e., in catalyzing new business ideas, implementing change and renewing

organizational processes. Management is thus a ‘natural’, active part of the dynamics of the innovation process.

Collaborative and participative management style seems to be essential for these processes. In a change

process, leadership is the force that “sows the seeds”, a mediating actor, that promotes and conveys new ideas,

beliefs, visions, goals, etc. Before the seeds can germinate, faith in the idea and the acceptance of a critical

group of people are required (Savolainen, 2000, 1997). In other words, a sufficient number of supporters are

needed. This is possible when individual leaders have sufficient commitment and skills. Management

commitment and empowerment of employees may reinforce and sustain innovative behaviour. Delegation of

power supports commitment by increasing freedom which, in turn, supports creativity and feeds

innovativeness.

Empowerment is important part of innovative culture. According to Kanter (1984), monetary rewards do not

motivate entrepreneurial behaviour as much as the perception of being empowered to act. The ability and

willingness of people to take initiative is rooted in the tension between stretch and discipline. The combination

of trust and leader support motivate collaborative actions. Trust makes cooperation possible and desirable; and

support enables individuals to convert that desire into action. Both are necessary, but in combination they

create conditions for integrating the disparate actions of dispersed people. Kanter (1984, 153–154) depicts that

people commit to innovative projects because they are encouraged to go-ahead for an idea they have always

wanted to try, or they feel honoured as the organization trusts in them or they simply want to solve a problem

that will remove a roadblock to something else they want to do.

Visionary, value-oriented leadership is often connected with innovation. Shane (1995) has defined four

championing roles in the innovation process: (1) the organizational maverick, (2) the transformational leader,

(3) the organizational buffer, and (4) the network facilitator. Each of these roles is instrumental in providing

power, information, and resources at different stages of the innovation process. In addition, these roles are

valued differently by different cultures, depending upon the degree of uncertainty acceptance. Howell &

Higgins (1990) have studied leaders identified as innovation champions and non-champions suggesting that

the innovative success of champions depends upon their capacity to articulate vision, express confidence in

others, and guide innovative actions. Innovative organizations are known for having pervasive value systems

that reflect the priorities of management for change, customer focus, and internal entrepreneurship. Kanter

(1984) describes innovative cultures as having an organizational pride and sense that innovation is one of the

core values.

According to several studies, the management’s ability to maintain procedures well increases the employees’

trust in the management’s decision making. This type of leadership will make the employees feel that the

management is considering their views as well, and the employees will feel confident to leave major decisions

in the hands of the management (Korsgaard et al. 1995, 67.) In addition to trust, fairness and equality increase

the commitment levels of the employees. (Das & Teng, 1998, 504). Recent studies, for example, in social

psychology show interestingly that increasing equality creates trust which, in turn, improves efficiency and

affects competitiveness (Helkama, 2006).

In daily leadership work, showing trustworthiness is one of the most important behaviors for fostering

innovations. Trust between leaders and followers is manifested in frequency, and quality of interaction through

open communication, among others. Employees in organizations show their trustworthiness towards leaders

by performing their daily tasks skillfully (Savolainen, 2011). If feelings of insecurity in workplaces prevail it

may be often a reason for atmosphere- related problems such as conflicts, bullying, and disputes which affect

trust and innovation activity, accordingly. Employees who trust their leaders work more effectively and have

a high level of commitment (Dirks & Ferrin, 2002). Employees share ideas and knowledge, including tacit

knowledge (Savolainen, 2008). Trust is reciprocal and may strengthen and grow in mutual input forming a

positive trust cycle in workplace relationships (cf. Ikonen, 2013).

Distrust situations

Psychologically seen, trust declines most often when positive expectations are disconfirmed (Lewicki et al.,

2006). Respect and appreciation stimulate the development of trust, while poor leadership underestimates

employees’ personal competences. This results in declining work and company performance and may be

manifested in the low activity of innovation, e.g., in R&D. As trust breaches tend to happen in workplaces it

is important to know ways of restoring violated trust. Managers should be aware of the fact that they are

initiatively responsible for beginning to repair trust even though the other side (follower in this case) has caused

an occasion leading to a breach (guilty part).

The key in beginning to repair violated trust relationship between a leader and a follower seems to be opening

up a discussion between parties. Therefore, communication is the first step in the process. Both leader and

need to be aware that the process may be long and needs effort from both sides. To conclude, the best practical

advice for as to distrust and restoration of trust is to avoid trust breaches! It makes the better workplaces not

to violate trust. If, nonetheless, trust violation or breach occurred, it is possible to repair and restore trust by

applying the right procedures.

4. Real Life Example of Supporting Innovation by Trust-Based Leadership

4.1 Case of sharing tacit knowledge

The purpose of this case example is to illustrate real life practices and make implications to promoting

innovativeness by trust-building and showing trustworthiness in group level leadership. The case is about

sharing tacit knowledge in a project‐based organization (Savolainen, 2011, 2008; Savolainen & Lopez-Fresno,

2013). A qualitative method was applied and the purpose of the study was to gain more understanding of trust

and tacit knowledge sharing (Yin, 1994; Myers, 2009). The research question is as follows: how is tacit

knowledge is shared (methods) and what role does trust plays in sharing.

The case study data were gathered by in‐depth interviews from project workers who form a project group

including a project manager. Theme interview method was used which means that the main themes were listed

before the interviews. The interview data were analyzed by a thematic analysis according to the content of

interviews. The case company is from the service sector, a Finnish small construction engineering company

focusing on structural design. The company’s operations are entirely performed in projects and project groups.

The company employs 19 people. There are approximately four project groups working in the company at the

same time. The combinations of the groups may or may not vary between projects. Projects may last from 6

months to over a year.

The findings show that tacit knowledge is shared by several methods. Six main ways emerge as follows:

interactive verbal advising, modelling, joint problem‐solving, guiding to learn, job enrichment, and initiation

into the company. In addition, mentoring, work in pairs, tutoring and sparring may be used. E‐mail is perceived

as a ’hard’ and straight forward form of conveying knowledge yet used in sharing electronically. Tacit

knowledge is shared in an interactive process between group members. Several individual, group and

organization level factors are discovered that affect the sharing of tacit knowledge by leadership.

Further, the findings show that trust facilitates the activity of sharing tacit knowledge in the group. The leaders

play an important role in this. Managing group dynamics turns out to be crucial. Trustful leadership enables

interaction, communication and cooperation. Lack of communication or unreliable words may cause declining

of trust in the supervisor decreasing interaction and innovative behavior, accordingly. Sharing occurs as an

interactive process. The sharing of knowledge involves the identification of key knowledge needed and the

individuals in need of knowledge, and choosing methods of sharing. Sharing and receiving knowledge occur

in personal interaction leading to utilizing of knowledge. Finally, internalizing of knowledge takes place if

willingness and motive for knowledge storing on the individual’s personal knowledge base exists. This is an

important finding from the learning point of view. Motivation requires trustful leadership which enables

willingness to grow and learn. The individual level growth of vitality strengthens vitality at the organizational

level leading to increased innovation activity through learning and sharing. On the other hand, poor leadership

may underestimate employee competences. As a result, trust does not develop, and even disputes and conflicts

may occur. Eventually, such situations show declines in employee and company innovation activity and

performance, eventually. Organization‐, group‐ and individual‐related factors affect the stages and sharing of

knowledge in the case company’s project group.

Overall, the most prominent factors in sharing tacit knowledge seem to be:

Top and/or upper management's visible leadership

Managerial commitment – showing trustworthiness: credible, competent, and fair behavior

Coaching management style – guiding people to do what they cannot do yet

Strategy to proceed gradually and in collaboration, with persuasion, persistence and patience

Managing change – to let some time for people to adapt and let the workplace ‘mentality’ to mature

towards higher level of trust, even though opposing and resistance appear.

By concluding the case, leadership is expected and needed; Leaders need personal sensitivity in their trust-

building behaviors, i.e., awareness of how important but fragile resource trust may be and the frequency and

quality of communication are. Leaders influence their followers by both actively and passively. The break-up

of trust may occur without intent, for example, by leader’s passive behavior (Ikonen, 2013). The implication

is that it is crucial to be aware and know how trust develops or deteriorates. Trust is an everyday issue in the

workplace built and sustained by mundane, ‘small daily deeds’ that may have a notable impact, e.g., on leader

trustworthiness towards followers. The spirit of trust may best nurture the climate where new ideas and

innovations may germinate, grow and prosper for the success of the organization.

5. Conclusions

Trust matters in leadership and in innovation processes. Leaders should increase their awareness and

knowledge about building trust, and develop behavioral skills for demonstrating trustworthiness. Leaders need

sensitivity for seeing the right time, or even key moments for building and sustaining trust. They also need

competency in social skills when interacting with employees and groups (Savolainen, 2014; Ikonen, 2013).

Trust forms invaluable asset for leadership and skill to influence innovation activity.

In e-era, the challenge is how to enact presence, in infrequent or increasing non-face- to-face interaction. As

trust is relational in nature, built in interaction and by open communication, it facilitates collaboration even in

completely virtual work place relationships. Therefore, skills of building trust and showing trustworthiness

have become more and important for leaders and e-leaders (Savolainen, 2014). In building and maintaining

trust, regular multi-form interaction, and communication skills play a key role both in f-to-f and technology-

mediated leadership (Savolainen et.al, 2014).

6. Implications

The case example implies that it is the small deeds of the leader that matter for employees in daily work.

Leader’s mundane behavior plays a visible role; trust is built and maintained by ‘small deeds and not just great

promises’. The paper implies for managers that they need to take a risk of communicating openly. Managers

need to show and enforce unified values and beliefs which is the way for generating flow of ideas and sharing

information and knowledge. Poor communication (often lack of interaction) leads to loosing trust and may

cause trust breaches. Distrust may permeate through the organization, and even beyond the original parties

involved (Savolainen et.al, 2014). Leaders, in turn, need support from HRM professionals to make innovation

management more effective and systematic through trust-building skills development. In e-leadership, in

specific, support and skills development are even more significant.

Finally, trustworthiness cannot be overemphasized as a leadership trait and managerial skill. It should be on

the top-three list of leader competences, along with the social skills for collaboration and communication. In

addition, organizational culture plays an important role in the development of trust (and distrust). Leaders’

actions affect culture significantly. In the case of, for example, an authoritarian management style employees

become socialized by following the actions of their leaders and adopt their style as role models. Leaders who

fail to behave in the expected ways earn disrespect and become judged as untrustworthy. This has

consequences to the entire organization and affect innovation activity. More research is needed on the effects

of leadership style and behavior on creativity and innovation in workplaces and, as Anderson et al. (2014)

suggest, in particular, on effective leadership styles at different stages in the innovation cycle, e.g., an

implementation stage, where empirical research has been limited so far.

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Author Biography

Taina Savolainen, Professor in Management and Leadership, is Finland’s leading experts and researchers of trust within

organizations and their leadership and workplace relationships. She leads the research group of ‘Trust within

Organizations’ in the University of Eastern Finland, Business School. She has held several Professorships in

Management and Leadership, and Quality Management in Finnish universities. Prof. Savolainen is also specialized in

organizational change and development, e-leadership, managing competitiveness, and creating vitality and developing

human intellectual capital in organizations. Prior to taking up her academic appointments, Taina Savolainen has worked

for years as a corporate adviser and deputy director in the Ministry of Trade and Industry. She has been extensively

involved in leadership & trust training and consulting for both private and public sector organizations and has spoken

on trust, leadership, organizational change, and quality management at seminars and conferences around the world. Her

scientific achievements have been recognized in Who is Who in the World.