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This paper contributes to the conceptual and empirical understanding of organizational trust. It confirms the importance of "contextual confidence" in institutions for building trust. Moreover, it extends models of trust production to include the effects of purposive action by the truster over and above the contextual prediction of trust emphasized in previous research. Accordingly, "active trust development" is conceptualized as a strategy to strengthen the basis for trust. Empirical evidence is drawn from a survey of 615 Hong Kong firms that manage operations in mainland China.Confidence in China's institutional context was found to have a strong positive association with trust in the local staff working within that context. Active trust development was validated as a means of enhancing trust, though its effect on trust was not as strong as that of perceived institutional effectiveness.Active trust development initiatives are particularly valuable in an environment such as contemporary China, where the institutional foundations for trust remain underdeveloped. The positive correlation of trust with organizational performance provides an incentive for managers to explore these initiatives. At the same time, government and other bodies in China and elsewhere, which are in a position to create and promote effective institutions, are encouraged to intensify their efforts in that direction.

This paper treats organizations as adaptive systems that have to match the complexity of their environments. The nature of this complexity is analyzed by linking an institutional Information-Space (I-Space) framework to the work of complexity theorists. The I-Space framework identifies the codification, abstraction, and diffusion of information as cultural attributes. Codification involves the assignment of data to categories, thus giving them form. Abstraction involves a reduction in the number of categories to which data needs to be assigned for a phenomenon to be apprehended. Information is diffused through populations of data-processing agents, thus constituting the diffusion dimension. Complexity theorists have identified the stability and structure of algorithmic information complexity in a way that corresponds to levels of codification and abstraction. Their identification of system parts and the richness of cross-coupling draws attention to the fabric of information diffusion. We discuss two modes of adaptation to complex environments: complexity reduction and complexity absorption. Complexity reduction entails getting to understand the complexity and acting on it directly, including attempts at environmental enactment. Complexity absorption entails creating options and risk-hedging strategies, often through alliances.The analysis, and its practical utility, is illustrated with reference to China, the world's largest social system. Historical factors have shaped the nature of complexity in China, giving it very different characteristics than those typical of Western industrial countries. Its organizations and other social units have correspondingly handled this complexity through a strategy of absorption rather than the reduction strategy characteristic of Western societies. Western firms operating in China therefore face a choice between maintaining their norms of complexity reduction or adopting a strategy of complexity absorption that is more consistent with Chinese culture. The specifics of these policy alternatives are explored, together with their advantages and disadvantages.The paper concludes with the outlines of a possible agenda for future research, focusing on the investigation of complexity-handling modes and the contingencies which may bear upon the choice between them.

The paper examines the process of investment decision making in six Chinese state enterprises during the economic reform which combined moves towards a market system with a continuing role for the state in industrial governance. This placed investment at the boundary between bureaucratic control and market forces, the theory being that enterprise managers would advance investment proposals in response to the market while government authorities retained the right of final approval in the light of broader-based priorities. This mixed "market socialism" model has been treated with considerable scepticism by the so-called "reform economists" in Eastern Europe who doubt that enterprises can pursue policies which are rational in terms of market forces so long as they remain subject to significant administrative influence. Resource dependence and institutional perspectives, in drawing attention to higher administrative agencies as providers respectively of critical resources and of legitimacy for the state enterprises under their purview, also predict that institutional constraints will continue to operate on enterprise decision making. North's discussion of informal institutional arrangements and incremental change gives rise to similar expectations. Detailed examination of the investment decision process at the three major stages of initiation, design and detailing, and final authorization does in fact indicate that it remains heavily dependent upon higher authorities. The reasons for this continuing dependence are discussed and comparisons are drawn with the investment decision process in western countries.