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Organizational Transparency 1
Organizational Transparency: A New Perspective on Managing Trust in Organization-
Stakeholder Relationships
Andrew K. Schnackenberg
Edward C. Tomlinson
Corresponding author: Andrew K. Schnackenberg
Email: Andrew.Schnackenberg@DU.EDU
Cite As:
Schnackenberg, A. K., & Tomlinson, E. C. (2016). Organizational transparency: A new
perspective on managing trust in organization-stakeholder relationships. Journal of Management,
42(7), 1784-1810.
Organizational Transparency 2
ABSTRACT
Transparency is often cited as essential to the trust stakeholders place in organizations. However,
a clear understanding of the meaning and significance of transparency has yet to emerge in the
stakeholder literature. We synthesize prior research to advance a conceptual definition of
transparency and articulate its dimensions, and posit how transparency contributes to trust in
organization-stakeholder relationships. We draw from this analysis to explicate the mechanisms
organizations can employ that influence transparency perceptions.
Keywords: Transparency, Disclosure, Clarity, Accuracy, Stakeholders, Trust, Trustworthiness
Organizational Transparency 3
ORGANIZATIONAL TRANSPARENCY: A NEW PERSPECTIVE ON MANAGING
TRUST IN ORGANIZATION-STAKEHOLDER RELATIONSHIPS
In the wake of a seemingly endless stream of corporate malfeasance, transparency is
often invoked as a salve for the many maladies that accompany distressed relationships between
an organization and its stakeholders through its presumed ability to reestablish stakeholder trust
in the firm (e.g., Bennis, Goleman, & O’Toole, 2008; Fombrun & Rindova, 2000; Jahansoozi,
2006; Tapscott & Ticoll, 2003; Walumbwa, Avolio, Gardner, Wernsing, & Peterson, 2008). In
fact, researchers who have called upon the transparency concept in organization-stakeholder
relationships have consistently suggested its role in creating, maintaining, or repairing trust,
either explicitly (Akkermans, Bogerd, & van Doremalen, 2004; Fleischmann & Wallace, 2005;
Pirson & Malhotra, 2011; Rawlins, 2008) or implicitly (e.g., transparency in financial markets is
important for enabling trust in the market system, even if the term “trust” was not mentioned
directly: Bansal & Kistruck, 2006; Bhat, Hope, & Kang, 2006; Bushman, Piotroski, & Smith,
2004; Leuz & Oberholzer-Gee, 2006; Perotti & von Thadden, 2005).
To date, however, researchers touting the benefits of transparency in this context have
relied on cursory assertions rather than rigorous theoretical development. Furthermore, to the
extent that it has been examined empirically, the lack of a theoretically-grounded consensus on
the transparency construct is manifested in a patchwork of ad hoc operationalizations across
areas of academic inquiry (see, for example, discrepant measures of transparency from Awad &
Krishnan, 2006; Kaptein, 2008; Pirson & Malhotra, 2011; Rawlins, 2008; Walumbwa et al.,
2008). In sum, the state of the extant literature on transparency suggests that it is not clear
exactly how the construct should be conceptualized, how it relates to managing trust in the
organization-stakeholder relationship, or how organizations manage it.
Organizational Transparency 4
Therefore, in this article we have three objectives. First, we integrate the literature on
transparency across academic disciplines to develop a more complete understanding of its
meaning and dimensional structure. This analysis reveals that transparency is not a
unidimensional construct as most researchers have commonly assumed. Rather, it is composed of
three specific dimensions: information disclosure, clarity, and accuracy. Second, we turn to
Mayer, Davis, and Schoorman’s (1995) model of trust to describe the impact of each dimension
of transparency on organizational trustworthiness and stakeholder trust in the firm. Finally, we
use this framework to describe several concrete mechanisms available to organizations to
manage transparency.
THE MEANING AND DIMENSIONAL STRUCTURE OF TRANSPARENCY
There is currently very little convergence about the fundamental meaning of
transparency. In an attempt to address this, we begin by synthesizing existing literature to
compose a parsimonious definition of transparency. To examine the literature, we conducted a
thorough search to trace common conceptualizations of the construct in line with suggestions
from Shepherd and Sutcliffe (2011). An initial scan of the literature produced more than 500
articles that referenced transparency. While the large number of articles reaffirms the broad
relevance of the transparency concept, it at the same time makes a thorough review of the
transparency discourse prohibitive within the scope of single article. Hence, to reduce this
number to a more manageable set, we retained only those articles that were published in
academic journals with a relatively high impact factor (> 3 for 5-year impact) or were cited more
than 50 times through Google Scholar. Next, to include the practitioner voice, we scanned major
practitioner focused journals including the Harvard Business Review and Sloan Management
Organizational Transparency 5
Review to include articles that discussed transparency. We also reviewed several trade and
professional books that discussed transparency.
Definition of Transparency
In the organization sciences, early reference to transparency can be traced back to
discursive accounts of organizational roles and social conformity in the mid-twentieth century
(e.g., Coser, 1961). Transparency remained a tangential concept most often summoned by
organization theorists as a rhetorical device until the late twentieth century. In the past two
decades, a more formal interest in transparency has taken shape across domains of organizational
research following a deluge of prominent corporate scandals (e.g., Enron in 2001, WorldCom in
2002, Lehman Brothers in 2008, and Madoff Investment Securities in 2009). Reflecting the
increasing usage of the term among researchers, Figure 1 shows the number of articles from
selected business journals referencing transparency in four year intervals from 1990-2009.
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Insert Figure 1 about here
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Over the years, organization scientists have offered a number of definitions of
transparency, with varying degrees of specificity. A review of common definitions of
transparency is presented in Table 1. Overall, information systems researchers have investigated
transparency in the context of business to consumer relationships and digital markets (e.g.,
Granados, Gupta, & Kauffman, 2005, 2006, 2008, 2010; Zhu 2004); organizational behavior
researchers have explored transparency in the context of organizational trust development,
organizational identity, perceptions of leadership, and organizational culture (e.g., Clair, Beatty,
& MacLean, 2005; Fombrun & Rindova, 2000; Kaptein, 2008; Pirson & Malhotra, 2011;
Walumbwa, Luthans, Avey, & Oke, 2011); researchers of finance and accounting have examined
Organizational Transparency 6
transparency in the context of financial markets, corporate disclosures, and monetary policy
decision making (e.g., Bushman et al., 2004; Madhavan, Porter, & Weaver, 2005; Winkler,
2000); marketing researchers have studied transparency using related terms such as product
disclosure in the context of consumer responses to nutrient and drug risk information (e.g., Cox,
Cox, & Mantel, 2010; Howlett, Burton, Bates, & Huggins, 2009); and social psychologists have
explored transparency in the context of negotiations (e.g., Garcia, 2002; Vorauer & Claude,
1998; Vorauer & Ross, 1999).
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Insert Table 1 about here
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These diverse applications suggest that, at its core, transparency neither exists within any
single domain of research nor does it operate within any one context of study. Rather, the
emerging consensus is that transparency can exist across contexts and domains of research. In
addition, our review shows that most (but not all) managerially-relevant applications of
transparency exist at the organization-level of analysis, specifically in relation to organization-
stakeholder relationships (internal stakeholders such as employees, see Kaptein, 2008 and
Walumbwa et al., 2011 as well as external stakeholders such as shareholders, governments, and
society, see Bloomfield & O’Hara, 1999; Bushman et al., 2004; and Flood, Huisman, Koedijk, &
Mahieu, 1999). Accordingly, a useful definition of transparency must be broad enough to enable
theorists from a variety of management traditions to incorporate it into their study designs. At the
same time, it must be specific enough to meaningfully inform management practice. For these
reasons, we do not distinguish between contexts of study, levels of analysis, or domains of
research in our definition, but in the sections that follow we adopt an organization-level
conception of transparency to draw examples from the literature that help us uncover its core
Organizational Transparency 7
theoretical properties and to elaborate on the aspects of its structure that are most relevant to
management practice. Prior to this, however, we offer a definition of transparency and discuss
the meaning of its individual components.
Transparency is the perceived quality of intentionally shared information from a sender.
This definition synthesizes a number of concepts from the literature. First, the emerging
consensus is that transparency is about information. With rare exception, transparency is seen as
a critical element of knowledge sharing such that increased transparency brings increased
awareness, coherence, and comprehensibility to information exchanged between two parties
(Pagano & Roell, 1996). For instance, Kaptein (2008) suggested that transparency is required to
ensure information about organizational conduct can be used by employees to modify or adjust
their behaviors. In the context of external stakeholder relations, Madhavan et al. (2005)
investigated transparency as the quantity of information released by financial institutions towards
market participants. Similarly, Nicolaou and McKnight (2006) examined transparency in the
setting of electronic information exchanges between organizations and stakeholders.1
Second, most conceptualizations of transparency involve intentionally shared
information such that ad hoc or unsystematic variations in information quality are not indicative
of transparency. Rather, organizations hold the capacity to deliberately wield information in
ways that increase or decrease transparency. For example, Rosengren (1999) has discussed
different types of information held by financial firms that, if intentionally released, would
increase the transparency in the banking system. In central banking, Winkler (2000) contends
that more deliberate openness and clarity of monetary policies would increase the transparency
of communications towards economic stakeholders. Others have similarly examined the factors
that lead firms to intentionally materialize various types of information into speech acts,
Organizational Transparency 8
contracts, policies, and other communications towards stakeholders (e.g., Bloomfield & O’Hara,
1999; Granados et al., 2005; Larsson, Bengtsson, Henriksson, & Sparks, 1998; Winkler, 2000).
These studies are based on the premise that, in absence of intentionality, transparency includes
aspects of information sharing (e.g., unintended miscommunications) that dilute the practical and
theoretical usefulness of the concept.
Third, our review suggests that transparency is a perception of received information,
although organizations have the capacity to influence that perception through their information
sharing behaviors. To illustrate, some researchers study transparency as a perception of
information that can be attributed to the senders of that information at different levels of analysis
(e.g., towards another human being, a group of individuals, or an organization, see Larsson et al.,
1998; Kaptein, 2008; and Vorauer & Claude, 1998). Bushman et al. (2004), for example, have
defined transparency as the availability of adequate information to stakeholders. Flood et al.
(1999) have defined transparency as the ability of actors to clearly see outstanding price quotes.
In electronic markets, Zhu (2004) has investigated transparency as the degree of visibility and
accessibility of information. These views suggest that transparency is most appropriately
conceptualized as a perception of information.
Finally, transparency perceptions vary according to the perceived quality of information.
The importance of information quality is highlighted either explicitly or implicitly across
virtually all of the studies we reviewed. For example, transparency has been measured as the
perceived quality of information shared by an organization towards its employees (Rawlins,
2008); the perceived quality of information gathered by an organization about its customers
(Awad & Krishnan, 2006); and the perceived quality of information shared by an organization
towards its external stakeholders (Bushman et al., 2004). These studies operationalize
Organizational Transparency 9
transparency in a variety of ways. Nevertheless, they carry with them a core belief that
information quality is central to transparency.
Gaps and Inconsistencies in the Literature
The apparent convergence around an emergent definition masks gaps and inconsistencies
in the literature that hinder systematic theorizing of the transparency construct. We view these
gaps and inconsistencies as opportunities for moving toward a more integrative theory of
transparency. To develop these opportunities, we organize existing gaps and inconsistencies into
three concerns that we believe are critical to resolve for a more theoretically meaningful and
empirically useful conception of transparency. These include (1) concerns about the meaning of
information quality, (2) concerns about the effects of transparency on organization-stakeholder
relationships, and (3) concerns about the mechanisms that influence transparency perceptions. In
the spirit of viewing each of these concerns as opportunities, we develop new theory that allows
our ideas to be tested in future empirical research.
First, empirical applications of transparency have suffered from a great deal of
conceptual variation as to what is exactly meant by information quality. Operational indications
of transparency vary significantly across studies and include: increased disclosure of information
(e.g., Akkermans et al., 2004; Bushman et al., 2004; Eijffinger & Geraats, 2006), greater
truthfulness and accuracy of information (e.g., Jordan, Peek, & Rosengren, 2000; Walumbwa et
al., 2011), enhanced visibility and accessibility of information (e.g., Kaptein, 2008; Madhavan et
al., 2005; Pagano & Roell, 1996; Prat, 2005; Zhu, 2004), increased clarity and understandability
of information (e.g., Flood et al., 1999; McGaughey, 2002; Potosky, 2008), reduced information
concealment (e.g., Granados et al., 2010; Larsson et al., 1998), and enhanced timeliness of
information (e.g., Bloomfield & O’Hara, 1999; Jordan et al., 2000). Across these studies, some
Organizational Transparency 10
researchers favor combining all possible dimensions as formative inputs into a single additive
transparency construct (e.g., Bushman et al., 2004; Khanna, Palepu, & Srinivasan, 2004; Patel,
Balic, & Bwakira, 2002). Others argue that transparency is best viewed as an underlying latent
construct without necessarily defining its dimensional structure (e.g., Kaptein, 2008; Pirson &
Malhotra, 2011; Rawlins, 2008; Walumbwa et al., 2008). This state of affairs reveals that, while
researchers are clearly interested in transparency, there is no consensus as to exactly what factors
differentiate higher quality information from lower quality information. As with any construct,
meaningful insights about transparency will only emerge if scholars have a clear understanding
of its definition and dimensional structure (e.g., Granados et al., 2010). Yet the lack of
convergence around a unified explanation of the aspects of information quality that matter most
to transparency has prohibited researchers from advancing a systematic theory of its antecedents
and consequences.
Second, there is general consensus that the likelihood of observing a positive effect of
organizational transparency on performance outcomes (Berggren & Bernshteyn, 2007; Bernstein,
2012; Christmann, 2004; Larsson et al., 1998) is dependent in part on how transparency
influences the firm’s relationship with its stakeholders. For instance, many theorists have
contemplated an association between organizational transparency and stakeholder trust in the
firm to theorize more generally about its effects on firm performance outcomes (e.g., Akkermans
et al., 2004; Pirson & Malhotra, 2011; Walumbwa et al., 2011; Williams, 2005). However, the
majority of this work is characterized by cursory assertion rather than rigorous development of
precisely how these constructs are theoretically related. Empirical examination is even less
common, and is characterized by mixed evidence as to how transparency actually influences
trust. One study found compelling evidence of a positive relationship between organizational
Organizational Transparency 11
transparency and stakeholder trust (e.g., Rawlins, 2008) while another found only marginal
support for the proposition that transparency is positively related to trust (e.g., Pirson &
Malhotra, 2011). These incongruent findings suggest a need for further theoretical clarification
of the transparency-trust relationship.
Third, no formal consensus has emerged to describe how organizations actually manage
transparency perceptions. To illustrate, Bernardi and LaCross (2005) examined transparency in
the context of code of ethics disclosures on organizational websites. Bernstein (2012) suggested
that transparency varies according to the extent to which organizations use encryption (e.g.,
industry jargon) and shift visibility (e.g., private versus open offices). Still others have examined
transparency as a function of the methods used by organizations to convey information related to
organizational governance and financing to stakeholders (Bhat et al., 2006; Bushman et al.,
2004). Overall, the lack of a formal integration of the transparency literature has limited our
ability to articulate the mechanisms available to organizations to manage it.
The Meaning of Information Quality
Theorists have come to disparate conclusions as to the aspects of information quality that
are most important to conceptualize the dimensional structure of transparency. Though most
theorists have measured transparency as a unidimensional construct (e.g., Pirson & Malhotra,
2011; Rawlins, 2008; Walumbwa et al., 2008), discordant applications across domains of
organizational research have cultivated a proliferation of views regarding the most appropriate
conceptualization and imply the need for a multi-dimensional structure. A closer examination of
this collective body of work suggests that researchers have conceptualized transparency in three
primary ways: disclosure, clarity, and accuracy. Based on a review of articles that discuss the
underlying characteristics of transparency, Table 2 illustrates that common conceptualizations
Organizational Transparency 12
are subsumed within the perception of these three dimensions. This leads us to expect that each
of these dimensions is a distinct critical factor that explains a fundamental aspect of
transparency. Specifically, each contributes a unique perspective on the meaning of information
quality such that together they provide a parsimonious foundation upon which to study
transparency.
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Insert Table 2 about here
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Disclosure. Disclosure is defined as the perception that relevant information is received
in a timely manner (e.g., Bloomfield & O’Hara, 1999; Williams, 2008). In the literature, a
variety of studies advocate for the use of disclosure as a central dimension of transparency (e.g.,
Bushman et al., 2004; Finel & Lord, 1999; Madhavan et al., 2005; Nicolaou & McKnight, 2006;
Pagano & Roell, 1996). Pirson and Malhotra (2011), for instance, measure transparency
explicitly as a stakeholder’s perception that firms openly share all relevant information. Perotti
and von Thadden (2005) suggest that perceptions of transparency are built around a
stakeholder’s ability to gather needed information about a firm. These views are based on the
premise that inaccessible information delimits the stakeholder’s ability to gain a full picture of
the organization (Zhu, 2004).
The concept of disclosure implies that information must be openly shared for it to be
considered transparent. Yet disclosure is more than the open transfer of all available information.
It also warrants a careful consideration of the most relevant information to disclose. To illustrate,
Williams (2008) has suggested four specific processes associated with disclosure: analysis (e.g.,
target audience identification), interpretation (e.g., determination of relevant information),
documentation (e.g., encoding of information), and communication (e.g., distribution of
Organizational Transparency 13
information to internal and external audiences). Of these, only documentation and
communication are associated with the open release of information. The other two processes
(analysis and interpretation) are needed to differentiate relevant information from irrelevant
information.
A number of theorists have discussed similar constructs as pivotal to transparency using
several synonyms. Granados et al. (2010) have used the words availability and accessibility to
describe fundamental aspects of transparency. Others have used the words visibility (Kaptein,
2008) or observability (Bernstein, 2012) to describe transparency. Similarly, Bloomfield and
O’Hara (1999) have used the term “real time” to define transparency. All of these are similar to
disclosure in the current conceptualization. Whereas visibility, availability, accessibility, and
observability refer to aspects of open information sharing, the term “real time” suggests
timeliness in our definition.
Intriguingly, we also found that information relevance was only passively incorporated
into many conceptualizations of transparency. Most researchers define transparency narrowly
(e.g., as trade and quote information in finance or as information regarding current order and
production status in operations) such that information relevance is assured by the construct
definition. This is clearly problematic for developing a systematic theory of transparency
because not all researchers will converge on a common conception of relevant information. To
remedy this, we specify the importance of relevance while leaving space for variation in
empirical application by emphasizing the broader concept of disclosure (e.g., Williams, 2008).
Clarity. Clarity is defined as the perceived level of lucidity and comprehensibility of
information received from a sender. In the literature, Winkler (2000) contends that organizations
must present information more clearly for it to be considered transparent. Similarly, Street and
Organizational Transparency 14
Meister (2004) has argued that organizational information must be understandable for it to be
considered transparent. Daft and Lengel (1986) have found that a major problem for managers is
a lack of informational clarity rather than a lack of sheer data. The importance of clarity is based
on the premise that information consisting of industry jargon (Nicolaou & McKnight, 2006),
unknown foreign languages (Larsson et al., 1998), and complicated mathematical algorithms
(Granados et al., 2010) cannot be considered transparent even if it is highly disclosed. For
instance, in the realm of financial markets, Flood et al. (1999) have argued that information must
be disclosed and clear for market participants to fully ascertain its value.
Clarity differs from disclosure in that it is largely about the seamless transfer of meaning
from sender to receiver rather than the amount or relevance of information shared. Accordingly,
clarity relies on the skillful use of linguistic devices such as pragmatics to achieve higher levels
of understandability (Watzlawick, Beavin, & Jackson, 1967). For instance, within uttered
representations clarity is a function of the perceived comprehensibility of both locutionary and
illocutionary acts (Austin, 1962; Chomsky, 1995). Locutionary acts refer to the phonology of the
utterance and its ostensible meaning, and illocutionary acts refer to the intended meaning of the
utterance (Schiffer, 1972). Clarity is also a function of the proper application of verbal
paralanguage such as grunts, giggles, laughs and sobs (Wilson, 2000), nonverbal paralanguage
such as turn-taking (Sacks, Schegloff, & Jefferson, 1974), and the interpretation of non-verbal
behavior related to body movements (Birdwhistell, 1970). In written communication, clarity is a
matter of perceived grammatical and semantic coherence. For example, the use of abstract
images (e.g., company logos) can delimit an observer from disentangling signifiers (words,
images and symbols) from denotata (what signifiers stand for) to render the image less clear
(e.g., a picture worth a thousand words is veritably unclear).
Organizational Transparency 15
While most theorists explicitly name clarity as a significant component of transparency
(e.g., Flood et al., 1999; Potosky, 2008), several researchers have used closely related terms to
describe the construct. McGaughey (2002) has used the term understandability to conceptualize
clarity. In the context of information quality, Miller (1996) has used the term coherence to
describe the degree to which information avoids confusion and promotes understanding.
Nicolaou and McKnight (2006) have similarly used the term interpretability to refer to the
perceived quality of information shared between two parties and Briscoe and Murphy (2012)
have suggested that information must be simple enough to be easily apprehended. These terms
are similar to our conceptualization of clarity. Specifically, clarity implies that received
information will “hang together” in a way that limits ambiguity.
Accuracy. Accuracy is defined as the perception that information is correct to the extent
possible given the relationship between sender and receiver. The importance of accuracy stems
from the perspective that information cannot be considered transparent if it is purposefully
biased or unfoundedly contrived (Walumbwa et al., 2011). However, accuracy does not imply
that information must be completely correct ex post for it to be considered transparent. Such a
standard would be an impossible end to apply to exchanges of necessarily imperfect information
(e.g., Taylor & Van Every, 2000). Instead, accuracy suggests that material claims should reflect
precise qualifications about their expected validity for information to be considered transparent.
In the literature, Vorauer and Claude (1998) and others (e.g., Granados et al., 2006) have argued
that accuracy is a pivotal component of transparency. In fact, Akhigbe and Martin (2006) have
suggested that inaccurate disclosures play a pivotal role in reducing corporate transparency and
prompting corporate scandals. Within manufacturing firms, Bernstein (2012) has found that
information accuracy is a cornerstone of workplace transparency.
Organizational Transparency 16
Accuracy is unique to disclosure and clarity in that it is about information reliability
rather than completeness or understandability (e.g., Angulo, Nachtmann, & Waller, 2004). With
this in mind, a number of theorists have used related words to conceptualize accuracy in their
assessments of transparency. Philippe and Durand (2011) have suggested that an organization’s
claims related to its environmental footprint must be precise enough for external stakeholders to
ascertain its actual ecological impact. Bushman et al. (2004) have suggested that information
must be valid for it to be considered transparent. Similarly, Williams (2005) and Nicolaou and
McKnight (2006) have suggested that organizational information must be seen as reliable for it
to be considered transparent. These terms are similar to our conceptualization of accuracy.
Importantly, several authors have discussed related aspects of accuracy that fall outside
of our current definition. For instance, Walumbwa et al. (2011) have defined transparency as a
perception of leader behaviors that reveal his or her true thoughts and feelings. Although
Walumbwa et al. emphasize disclosure as a conduit by which to assess leader behaviors, we
contend that transparency is ultimately about information and constructs such as truthfulness and
honesty are more appropriately defined in reference to individual behavior. Accordingly,
truthfulness and honesty are critical elements associated with individual behaviors that have the
capacity to influence information accuracy but fall outside the focal content area of the
transparency construct.
In sum, transparency appears to be a function of three theoretically viable and
managerially relevant factors: disclosure, clarity, and accuracy. Disclosure is increased as
stakeholders perceive information as more relevant and timely; clarity is increased as
stakeholders perceive information as more understandable; and accuracy is increased as
stakeholders perceive information as more reliable. Each of these dimensions contributes
Organizational Transparency 17
uniquely to overall levels of transparency by increasing stakeholder confidence in the quality of
information received from the organization.
TRANSPARENCY AND TRUST IN THE ORGANIZATION-STAKEHOLDER
RELATIONSHIP
Having described the dimensional structure of transparency, we now turn our attention to
posit how transparency dimensions relate to stakeholder trust in the organization. Assertions of
an association between transparency and the establishment or repair of trust in organization-
stakeholder relationships are common, especially in response to a series of high profile business
scandals (e.g., Eijffinger & Geraats, 2006; Herdman, 2001; Kramer & Lewicki, 2010; Seidman,
2009a, 2009b, 2009c; Sheppard & Sherman, 1998; Vishwanath & Kaufmann, 2001). These
views imply that organizational transparency is an antecedent to stakeholder trust. Yet these
claims have been made without rigorous theoretical development, so it is unclear exactly how
transparency and trust relate.
Mayer et al.’s (1995) trust theory postulates that trust refers to the willingness of
stakeholders to be vulnerable to the actions of the organization. The proximal determinant of
trust is the perceived trustworthiness of the organization, which is evaluated along three
dimensions: ability, benevolence, and integrity. Ability refers to “the group of skills,
competencies, and characteristics that enable a party to have influence within some specific
domain” (1995: 717). For example, investors might rely on investment advice received from a
wealth management firm because that firm is seen as having expertise in helping clients meet
their financial goals. Benevolence refers to “the extent to which a trustee is believed to want to
do good to the trustor, aside from an egocentric profit motive” (1995: 718). For example,
investors might perceive a wealth management firm as being more benevolent when that firm
Organizational Transparency 18
does not tie advisor pay to the client’s choice of specific investments; in this case, clients are
more likely to view the advice they receive as unbiased by the advisor’s own financial incentives
(which might otherwise be at odds with the client’s investment goals). Rather, advice is more
likely to be interpreted as being in the client’s best interests. Integrity refers to “the trustor's
perception that the trustee adheres to a set of principles that the trustor finds acceptable” (1995:
719). For example, a wealth management firm can foster perceptions of integrity with a
reputation for high ethical standards and behavior (e.g., characterized by fairness, honesty,
reliability, etc.). This theory has received extensive empirical support (Colquitt, Scott, & LePine,
2007; Davis, Schoorman, Mayer, & Tan, 2000; Mayer & Gavin, 2005), yet it did not specify the
antecedents of trustworthiness perceptions and very few empirical studies have examined this
issue (Frazier, Johnson, Gavin, Gooty, & Snow, 2010).
In the only empirical study to date examining the role of transparency in the
trustworthiness-trust relationship, Pirson and Malhotra (2011) assumed transparency to be a
dimension of trustworthiness. Their findings indicated marginal support for the effect of
organizational transparency on stakeholder trust when modeled with other trustworthiness
dimensions. In other words, at conventional significance levels, there was no effect of
transparency on trust when simultaneously accounting for established dimensions of
trustworthiness (ability, benevolence, and integrity). These findings could mean that
transparency (as a dimension of trustworthiness) is not actually related to trust, or it is
inaccurately specified as a dimension of trustworthiness. In an attempt to clarify how
transparency relates to stakeholder trust in the firm, we integrate our conceptual analysis of
transparency with Mayer et al.’s (1995) trust theory to develop formal propositions regarding the
role of transparency in managing trust in organization-stakeholder relationships.
Organizational Transparency 19
Transparency and Trustworthiness
Given the central role of trustworthiness perceptions in determining trust, it becomes
important to explain how these perceptions are formed. We argue that transparency perceptions
(an evaluation of the quality of information provided by the organization) are used in
determining trustworthiness perceptions (conclusions about the organization’s ability,
benevolence, and integrity). Perception research has demonstrated that individuals rely on visible
manifestations of an actor’s traits when forming perceptions of those traits (Bruner & Tagiuri,
1954; Estes, 1937). An application of this finding in the performance appraisal domain is the use
of multisource feedback tools (which often include self-appraisal) to provide managers with
performance-relevant information that would otherwise not be available to inform their
evaluation of subordinates (Borman, 1997). Therefore, assessment of an actor’s traits can be
facilitated by exposure to stimuli relevant to diagnosing those traits, especially when that stimuli
comes directly from the actor. Insofar as perceivers believe that organizations possess the
capacity to shape and share information with varying degrees of quality, the perception of
information quality from an organization should facilitate evaluations of the organization’s
trustworthiness. Consistent with this argument, Mayer and Davis (1999) found that employee
perceptions of information accuracy in the performance appraisal system were positively and
directly related to their assessment of top management trustworthiness. Other studies have
similarly shown that information sharing practices can precede the development of global
trustworthiness perceptions (Nakayachi & Watabe, 2005; Sonenshein, Herzenstein, & Dholakia,
2011).
Organizational Transparency 20
Taken together, these studies suggest that transparency is an antecedent (rather than
dimension) of trustworthiness. In the sections that follow, we posit specific relationships between
each dimension of transparency and each dimension of trustworthiness.
Disclosure. Disclosure of information entails the risk that this information might be
subsequently used against the one making the disclosure (Derlega & Chaikin, 1977; Kelly,
1966); this risk increases with the degree of disclosure. Voluntary disclosure of information by
organizations conveys a willingness to assume this risk in order to benefit the recipient in some
way (e.g., allowing investors to make more informed decisions in their best interest guided by
sufficient, relevant data). Information disclosure is central in the creation of integrative
agreements reflecting a commitment to maximizing joint (instead of self) gain (Lewicki, Barry,
& Saunders, 2010). Greater disclosure is therefore a signal that the one making the disclosure is
doing so out of a desire to help the trustor in a way that exceeds purely egocentric concerns
(Ganesan, 1997; Mayer et al., 1995).
Proposition 1a: Stakeholder perceptions of an organization’s information disclosure are
positively related to perceptions of the organization’s benevolence.
In addition, to the degree that disclosed information has the potential to neutralize or
impede the discloser’s egoistic motives, disclosure reflects fair dealing. Organizations may
recognize that divulging some types of information to stakeholders is appropriate because it
allows stakeholders to make informed decisions; yet this information might even be inherently
threatening to the organization’s interests. The decision to disclose the information nonetheless is
a decision to do “the right thing” rather than conceal the information to maintain unfair
advantage. Insofar as disclosure indicates the firm’s intent to adhere to moral and ethical
Organizational Transparency 21
principles related to openness and information sharing, it stands as a signal of the organization’s
integrity (Colquitt et al., 2007; Mayer et al., 1995).
Proposition 1b: Stakeholder perceptions of an organization’s information disclosure are
positively related to perceptions of the organization’s integrity.
Clarity. Clarity refers to information provided in a way that is deemed coherent and
lucid. The extent to which organizations convey information in a manner that can be readily
understood by stakeholders should relate to perceptions of the organization’s ability. Conveying
information with clarity involves understanding the perspective of the stakeholder audience(s).
Unlike organizational insiders, stakeholders often have unique interests, needs, and concerns.
They may also not be as familiar with internal organizational processes, routines, and jargon.
When organizations carefully package and tailor information in a way that can be readily
digested by stakeholders, they establish their ability to communicate effectively. Mayer et al.
(1995) refer to ability as perceived expertise reflecting high aptitude in a technical or
interpersonal domain. Other trust researchers have described ability in similar terms, including
the knowledge, interpersonal skills, and communication skills to perform successfully (Colquitt
et al., 2007; Gabarro, 1978).
Proposition 2: Stakeholder perceptions of an organization’s information clarity are
positively related to perceptions of the organization’s ability.
Accuracy. Accuracy refers to information that is regarded to be correct. Providing fully
correct information is a challenge for organizations operating in a complex, turbulent
environment. Stakeholders often desire information that is highly technical and subject to
compliance with a myriad of reporting regulations and standards (e.g., reporting on executive
pay or pension plan details: Milkovich, Newman, & Gerhart, 2011). Organizations perceived to
Organizational Transparency 22
convey accurate information should influence perceptions of their ability to successfully navigate
complex data and master the technical aspects of compiling needed data to develop reliable
information. Consistent with this line of reasoning, one study found that customer evaluations of
online sellers’ trustworthiness were predicted by the degree to which the seller processed their
transaction correctly (Singh & Sirdeshmukh, 2000).
Proposition 3a: Stakeholder perceptions of an organization’s information accuracy are
positively related to perceptions of the organization’s ability.
Accuracy also indicates the truthfulness behind information, and hence, the honesty of
the organization. Integrity perceptions refer to the degree to which the organization enacts values
that stakeholders find acceptable, including honesty (Dietz & Den Hartog, 2006; Larzelere &
Huston, 1980). Particularly when information refers to issues that might be detrimental to the
organization, accurate accounts signal honesty to stakeholders and hence reflect positively on the
firm’s values. More generally, accuracy signals a basic aversion to engage in manipulative
practices towards stakeholders, enhancing stakeholder perceptions of the firm’s integrity.
Proposition 3b: Stakeholder perceptions of an organization’s information accuracy are
positively related to perceptions of the organization’s integrity.
Transparency and Trust
We posit that greater transparency from organizations (in the form of greater disclosure,
clarity, and accuracy) will facilitate higher stakeholder trust in the organization. This is because
trust reflects a willingness to be vulnerable to a trustee based on confident positive expectations
of the trustee’s intentions and behaviors (Lewicki & Bunker, 1995, 1996); information quality
(i.e., disclosure, clarity, and accuracy) shapes these expectations. Disclosure, clarity, and
accuracy also enable accountability, whereby the organization can be rewarded for trustworthy
Organizational Transparency 23
behavior and punished for untrustworthy behavior; these factors also contribute to trust
judgments (Lewicki & Bunker, 1995, 1996). Other researchers have also suggested that
transparency and trust are positively related (e.g., Akkermans et al., 2004; Bennis et al., 2008;
Fleischmann & Wallace, 2005), and there is some empirical evidence of this relationship. A field
experiment in a downsizing company found that leadership transparency influenced followers’
level of trust and evaluations of leader effectiveness (Norman, Avolio, & Luthans, 2010).
Another study found that transparency was instrumental for repairing damaged trust among
stakeholders after a breach by the organization (Jahansoozi, 2006).
Proposition 4: Stakeholder perceptions of an organization’s information disclosure,
clarity, and accuracy are positively related to trust in the organization.
Transparency, Trustworthiness, and Trust
Finally, we consider the relationships among transparency, trustworthiness, and trust. As
we have stated earlier, we contend that transparency is an antecedent to trustworthiness, not a
dimension of trustworthiness. Furthermore, we argue that transparency influences trust via its
effect on trustworthiness perceptions. Specifically, transparency refers to characteristics of
information, whereas trustworthiness refers to characteristics of the organization. Thus,
transparency (i.e., information quality) informs the extent to which an organization is regarded as
trustworthy (refer to Propositions 1-3). In turn, trustworthiness is the proximal predictor of trust:
we place trust in those who are perceived to be worthy of that trust (Mayer et al., 1995). As a
result, the relationship between transparency (of information) and trust (in the firm) should be
due to trustworthiness perceptions (of the firm). This line of reasoning extends prior research
indicating that trustworthiness is an antecedent to trust (e.g., Chou, Wang, Wang, Huang, &
Organizational Transparency 24
Cheng, 2008; Mayer & Davis, 1999) by explaining how trustworthiness perceptions are formed,
and how trustworthiness is the mechanism that facilitates the effect of transparency on trust.
Proposition 5: The effect of stakeholder perceptions of an organization’s transparency on
trust in the organization is mediated by stakeholder perceptions of the organization’s
ability, benevolence, and integrity.
MECHANISMS TO MANAGE TRANSPARENCY
In this section, we extend discussions related to the theoretical dimensions of
transparency by examining specific ways in which organizations can manage it. This discussion
is rooted in the understanding that, when organization-stakeholder interests are misaligned,
organizations might face incentives to strategically support or suppress transparency perceptions
(e.g., Eisenberg, 1984; Gaa, 2009; Hannan, Polos, & Carroll, 2003). A firm’s stock of internal
knowledge and effort to manage impressions towards its stakeholders give it some (but not
ultimate) power to manage stakeholder perceptions. Firms carry the capacity to sway
transparency perceptions through their tactical repertoires to manipulate information quality. For
example, competitive advantages are often gleaned from the strategic withholding of information
on the one hand (e.g., organizational trade secrets) and the strategic releasing of information on
the other (e.g., partnerships or joint ventures) (e.g., Ndofor & Levitas, 2004). Consistent with
this, Granados et al. (2005, 2008, 2010) suggest that the concept of transparency strategy—
defined as organizational attempts to reveal, conceal, bias, or otherwise distort information
shared with stakeholders—can be used to explain the tactics applied by firms to manage
transparency. To formalize an intuition of the mechanisms that allow organizations to
accomplish this, we discuss a number of common approaches adopted by firms to manage
transparency next.
Organizational Transparency 25
Mechanisms to Manage Disclosure
Organizations can reduce disclosure through the keeping of secrets on the one hand, or
increase disclosure through the use of open information systems on the other. For instance, many
researchers have noted that managers have a tendency to conceal negative organizational
information (e.g., Abrahamson & Park, 1994; Eisenberg & Witten, 1987). Based on the widely
accepted premise that organizations can produce rents from withholding proprietary knowledge
(Liebeskind, 1997), case studies have revealed a number of examples of nondisclosure by
corporate officers towards uninformed shareholders for the purposes of maintaining secrets
(Starbuck, Greve, & Hedberg, 1978; Sutton & Callahan, 1987). Building on these studies,
empirical findings suggest that organizations can hold one of two kinds of secrets: sanctioned
and unsanctioned (Anand & Rosen, 2008).
Sanctioned secrets are intentionally maintained by the organization for the purposes of
competitive advantage. Sanctioned secrets are “sanctioned” because they are generally
considered legitimate by the firm’s stakeholders (e.g., Coca-Cola keeping its proprietary
beverage formula confidential). Unsanctioned secrets, on the other hand, are considered
illegitimate in the eyes of stakeholders (e.g., concealment of negative organizational performance
information from stockholders) and can result from the need to maintain competitiveness in the
midst of internal organizational crises (Starbuck et al., 1978). An example would be the
shredding of material documents by Enron Corporation prior to its downfall (Sims & Brinkmann,
2003). Researchers have found that firms are particularly likely to engage in this form of non-
disclosure when they are failing (Agnew, Piquero, & Cullen, 2009) or confronting resource
scarcities (Finney & Lesieur, 1982). Taken together, the use of sanctioned and unsanctioned
secrets allows organizations to strategically reduce transparency through nondisclosure.
Organizational Transparency 26
The strategic use of secrets can be juxtaposed against the use of open information
systems as a method to increase disclosure. Setia, Rajagopalan, Sambamurthy, and Calantone
(2010) have found that organizations are progressively integrating open source procedures as a
means to share otherwise private information with stakeholders. Having a firm grasp on the
information requirements of stakeholders is important to successfully increase disclosure through
open information systems. To accomplish this, Web 2.0 technologies such as social bookmarking
(i.e., publicly viewable lists of bookmarks) can be used to move ideas and knowledge from one
context to another (Peter, Salvatore, & Bala, 2011). Similarly, Wikis (i.e., websites that anyone
can edit) provide opportunities for organizations to collaborate and share knowledge with
stakeholders (Kane & Fichman, 2009).
Mechanisms to Manage Clarity
Organizations can influence clarity through the strategic use of frames to (1) bring
coherence and understanding to stakeholders or (2) stimulate tactical confusion and ambiguity
(e.g., Druckman, 2001; Kahneman & Tversky, 1984; Kuhberger, 1998; Levin, Schneider, &
Gaeth, 1998; Tversky & Kahneman, 1981). The study of frames and framing has its origins in
the work of Goffman (1974), who analyzed the cognitive processes that enable individuals to
label and articulate experiences in terms of socially meaningful and familiar categories. In the
domain of social movements, theorists have greatly advanced our understanding of frames as
devices used to selectively punctuate and encode events in order to render them meaningful
(Gamson, Fireman, & Rytina, 1982). In this way, frames are tools used by organizations to build
collective momentum around shared interpretations of social activity (Hunt, Benford, & Snow,
1994). Consistent with this, we use the term “framing” to connote organizational attempts to alter
the meaning of information content in ways that render it more or less understandable.
Organizational Transparency 27
To increase clarity, one alternative is for organizations to compose “outsider” frames that
reflect the interests and information requirements of specific stakeholder groups. Similar to
managing disclosure, having an understanding of the information requirements of stakeholders is
important to build frames that unambiguously transfer knowledge. For example, research on
technology acceptance suggests that organizations can increase interest in new technology by
constructing frames that appear lucid and straightforward to end users (e.g., Davis, 1989;
Venkatesh & Davis, 2000). In a similar vein, organizations can use outsider frames to more
clearly communicate with stakeholders through messages that accommodate the knowledge and
information requirements of the stakeholder (Wolfe & Putler, 2002).
Alternatively, interest-driven actors can strategically distort information shared with
stakeholders through “insider” frames that interrupt the stakeholder’s ability to decipher the
meaning of received information (e.g., Campbell, 2004; Fiss & Zajac, 2006; Ronde, 2001). For
example, Walker, Martin, and McCarthy (2008) have found that organizations alter their tactical
repertoires, including their framing strategies, as they confront different stakeholders. Similarly,
Kaplan (2008) has argued that frames are resources that politically savvy actors can use to alter
the meaning of information. Consistent with this, organizations can tactically distort information
by framing it as context specific (e.g., legalese or medical jargon, see Castro, Wilson, Wang, &
Schillinger, 2007), socially embedded (e.g., foreign languages), or technically altered (e.g.,
modified typeface or small print, see Hagtvedt, 2011).
Mechanisms to Manage Accuracy
Organizations can decrease accuracy through faking and decoupling on the one hand, or
increase accuracy through candid interactions with stakeholders on the other. With regard to the
former, institutional theorists have elaborated a number of conditions that lead organizations to
Organizational Transparency 28
reduce accuracy by decoupling symbolic expressions of conduct from actual behaviors (e.g.,
Westphal & Zajac, 1998, 2001). For instance, Fiss and Zajac (2006) have found that managers
often decouple espousal from actual implementation of strategic change initiatives to
accommodate the interests of divergent stakeholder groups. Others have used the term “faking”
to describe the condition that exists when individuals misrepresent known facts in an effort to
appear competent and legitimate to the outside world (Komar, Brown, Komar, & Robie, 2008;
McFarland & Ryan, 2000, 2006).
Greenwood, Oliver, Sahlin, and Suddaby (2008: 25) suggest that decoupling reveals “the
dark side” of symbolic behavior when it reflects a willful manipulation of stakeholder
perceptions in order to increase organizational performance. For example, Enron Corporation
was successful in falsifying documents to preserve images of prosperity prior to its collapse in
2001 (Sims & Brinkmann, 2003). In the context of transparency strategy, faking and decoupling
are forms of manipulation that reduce accuracy by diminishing the extent to which information
conforms to the beliefs, logic structures, and lived experiences of the source.
The strategic use of decoupling and faking can be contrasted with organizational tactics
to candidly share information with stakeholders (e.g., O’Toole & Bennis, 2009). To build a
capacity for candid interactions with stakeholders, Serpa (1985) suggests that organizations must
promote honesty across all levels of the firm by, for example, hiring authentic leaders
(Walumbwa et al., 2011). Evans, Hannan, Krishnan, and Moser (2001) have found that
organizations can cultivate honesty in management by offering employment contracts that
allocate a greater share of total surplus to managers. With regard to external stakeholder
relations, Pany and Smith (1982) have found that audited financial statements are perceived as
more reliable by stakeholders than non-audited financial statements. Taken together, managers
Organizational Transparency 29
appear to have a variety of leadership, resource allocation, and third party alternatives to
influence accuracy.
The above sections discussed a number of independent mechanisms that can be used to
strategically manage transparency. These mechanisms are by no means an exhaustive list of
alternatives available to organizations to manage transparency perceptions nor are they meant to
operate in complete isolation. Rather, they represent an initial set of approaches available to
firms to manage specific aspects of transparency. In practice, organizations regularly implement
policies that impact more than one dimension at a time. For instance, the development of a new
website might increase disclosure but reduce clarity towards outside stakeholders if the
information presented on the website is highly contextualized (e.g., industry specific). In
addition, organizations often face resource constraints and competitive dynamics that render
efforts towards complete transparency difficult to achieve (e.g., Chen & Miller, 2012). Taken
together, these factors suggest that managing transparency is a complicated endeavor requiring
organizations to balance internally defined objectives against the interests of divergent
stakeholder groups. The mechanisms we propose above are offered as a first step towards future
research on managing transparency in firms.
Our conceptual model of the mechanisms available to organizations to manage
transparency and the proposed relationships discussed in the previous section is provided in
Figure 2.
____________________________
Insert Figure 2 about here
____________________________
DISCUSSION
Organizational Transparency 30
Notwithstanding growing interest in the topic of transparency, researchers have thus far
made little progress towards a unified definition of the construct. Moreover, despite the fact that
researchers have operationalized transparency in a variety of different ways, it has continued to
be regarded as a unidimensional construct. Theorists, practitioners, and pundits have increasingly
called for greater transparency to curtail corporate malfeasance (e.g., Bennis, et al., 2008;
Fombrun & Rindova, 2000; Herdman, 2001; Jahansoozi, 2006; Tapscott & Ticoll, 2003), yet
very little is known about how organizations actually manage it. To complicate matters, while
many claims have been made about the relationship between transparency and trust (e.g.,
Eijffinger & Geraats, 2006; Kramer & Lewicki, 2010; Seidman, 2009a, 2009b, 2009c; Sheppard
& Sherman, 1998), these have been devoid of rigorous theoretical development. Just as the
transparency literature has been vague about how it relates to trust (the relationship has rarely
been specified, and when it has, transparency has been viewed as a dimension of
trustworthiness), the trust literature has ignored seemingly important questions related to the
antecedents of trustworthiness (Elsbach, 2004).
Against this backdrop, this article takes initial steps towards a theory of transparency by
systematically integrating the literature to compose a unified definition of the construct. This
analysis addresses inconsistencies in the literature by illustrating overall consensus that
transparency is best viewed as a perception of the quality of intentionally shared information
from a sender (e.g., Akkermans et al., 2004; Bloomfield & O’Hara, 1999; Nicolaou &
McKnight, 2006). Building on this emergent definition, we extend existing research on
transparency by distinguishing between three of its underlying dimensions. Specifically, we
suggest that transparency can be meaningfully conceptualized as the degree of information
disclosure, clarity, and accuracy.
Organizational Transparency 31
Prior empirical attempts to explain the impact of transparency on stakeholder trust have
been met with mixed results. For example, one study found a positive relationship between
organizational transparency and stakeholder trust in the firm (Rawlins, 2008) while another
found only marginal evidence of such a relationship between transparency and trust when
transparency was assumed to be a dimension of trustworthiness (Pirson & Malhotra, 2011). In
this article, we draw on Mayer et al.’s (1995) framework of trust to propose new associations that
illustrate how disclosure, clarity, and accuracy of information (i.e., transparency) are distinct
from, and lead to greater stakeholder perceptions of organizational ability, benevolence, and
integrity (i.e., trustworthiness). We further propose that transparency leads to greater trust in the
firm through its effects on stakeholder perceptions of organizational trustworthiness.
Importantly, these propositions contribute equally to the trust literature by describing new
mechanisms that can be used to increase trustworthiness.
To further elaborate the transparency concept, we describe common mechanisms used by
organizations to manage disclosure, clarity, and accuracy. We suggest that organizations can
decrease disclosure towards stakeholders through the keeping of sanctioned and unsanctioned
secrets (e.g., Anand & Rosen, 2008) or increase disclosure towards stakeholders through the
tactical use of open information systems (e.g., Peter et al., 2011; Setia et al., 2010). Firms can
also decrease clarity towards stakeholders through the use of “insider” frames to bring confusion
and distortion (e.g., Kaplan, 2008) or increase clarity towards stakeholders through the use of
“outsider” frames to bring coherence and understanding (e.g., Hunt et al., 1994). Additionally,
organizations can decrease accuracy towards stakeholders through decoupling and faking (e.g.,
McFarland & Ryan, 2006; Westphal & Zajac, 2001) or increase accuracy towards stakeholders
through authentic leadership and auditing (e.g., Evans et al., 2001; Serpa, 1985). Together, these
Organizational Transparency 32
mechanisms compose an initial set of factors that can be used by researchers to examine how
organizations influence transparency by positioning it within a broader nomological network of
antecedent conditions.
We discuss the theoretical, management, and research implications of our framework of
transparency in the sections that follow.
Theoretical Implications
We integrate the literature to provide a clear conceptual definition and build the case for a
three dimensional model of transparency. Our analysis illustrates that transparency is best
viewed as a perception of the quality of intentionally shared information from a sender (e.g.,
Akkermans et al., 2004; Bloomfield & O’Hara, 1999) and emphasizes that transparency is a
function of information disclosure, clarity, and accuracy. In this way, we provide a considerable
step forward in the transparency literature through a new framework that has the capacity to be
applied across contexts of organizational research. Next, we clearly distinguish between
transparency perceptions and trustworthiness perceptions to crystallize an intuition of the role of
transparency in the trustworthiness-trust relationship. Our analysis separates transparency from
trustworthiness and trust to assert a new theory of transparency as a standalone concept ripe for
further theoretical and empirical advancement. Although our ultimate objective is to
systematically develop the transparency concept, our integrative framework of transparency and
trust suggests a new category of antecedents of trustworthiness. We then explicate concrete
mechanisms available to organizations to manage transparency perceptions. These mechanisms
contribute to our theoretical development of “transparency strategy” (Granados et al., 2005,
2010) insofar as they outline specific approaches to manage information for deliberate changes
in transparency.
Organizational Transparency 33
Management Implications
The primary management implications of this article are threefold. First, the definition
and dimensions of transparency offer managers a set of categories to increase transparency
towards their internal and external stakeholders (Kochan & Robinstein, 2000; Mitchell, Agle, &
Wood, 1997). Recent changes in organization-stakeholder relations indicate a trend towards
interactions governed less by face-to-face communication and more by technology-enabled
exchanges of information that can develop over great distances and intervals of time (e.g., via
emails and letters, see Daft & Lengel, 1984; Daft, Lengel, & Trevino, 1987). Having an
awareness of the meaning and dimensions of transparency should allow managers to maximize
information quality given the specific nature of the organization’s relationship with its
stakeholders.
Second, existing theory is insufficient to adequately explain the trust development
process in environments characterized by arms-length exchanges of information. As a
consequence, managers know little about how to avert large-scale organizational failures (e.g.,
Lehman Brothers) that are impacted greatly by dramatic shifts in outside stakeholder perceptions
of trustworthiness. The framework presented in Figure 2 suggests that organizations can use
information to increase stakeholder perceptions of organizational trustworthiness and trust even
when the stakeholder does not have direct (i.e., face-to-face) interaction with the organization.
This framework has the potential to be especially important in environments where (1) the firm
is attempting to quell stakeholder unrest related to unsubstantiated claims of corporate
malfeasance, (2) a breach of trust has already occurred (Kramer & Lewicki, 2010), or (3) the
organization is interacting with a stakeholder for the first time.
Organizational Transparency 34
Third, we offer concrete approaches to toggle between higher and lower levels of
disclosure, clarity, and accuracy. In the management discourse, the framing of transparency as a
strategic initiative has become ubiquitous (e.g., Bennis et al., 2008; Granados et al., 2010;
O’Toole & Bennis, 2009; Zhu, 2004) yet we know very little about how organizations actually
manage transparency. The mechanisms described in this article are offered as an initial set of
approaches to increase or decrease transparency towards stakeholders.
Research Implications
Our theoretical framework suggests a number of directions for future research. First, and
perhaps most obviously, it highlights the need for researchers to further investigate the role of
transparency as a means to manage stakeholder relations. In this article, we have discussed the
meaning, dimensionality, enabling mechanisms, and consequences of transparency in an effort to
provide interested researchers with ample opportunities to empirically examine the role of
transparency in organization-stakeholder relationships. For example, future research might
examine our claim that transparency is indeed more appropriately viewed as a perception of
information rather than a perception of the organization’s trustworthiness, and that the former is
an antecedent to the latter. Our work also points to the use of distinct measures of transparency
and trustworthiness, with distinct referents (information and organization, respectively). Future
studies should be designed to model and capture the mediating process we propose as well.
Second, subsequent research might also examine potential inter-relationships among
transparency dimensions. Each of these dimensions is posited to be a distinct factor of
information quality (i.e., transparency) and hence, may vary independently of the others. Other
than suggesting that an organization perceived as high on all three dimensions is regarded as
high in transparency (and an organization perceived as low on all three dimensions is regarded as
Organizational Transparency 35
low in transparency), it is beyond the scope of our article to contemplate minimum levels of each
dimension necessary to create a perception of transparency, or to articulate how these dimensions
might interact with each other (cf. Mayer et al.’s (1995) analogous discussion in relation to
trustworthiness dimensions). Yet this may be a fruitful area for future research.
Third, we have suggested a number of mechanisms to influence disclosure, clarity, and
accuracy. Yet it is possible that other mechanisms might also influence each dimension of
transparency. More research is needed to verify the influence of the mechanisms described in
this article as well as to identify new mechanisms used to manage transparency.
Fourth, while most managerially relevant applications of transparency materialize at the
organization level, our review of the literature suggests that transparency can develop across
contexts of study and levels of analysis (e.g., between a firm and its suppliers or a government
and its citizens). Our integrated definition and dimensions leave space for application at different
levels of analysis, opening room for additional research opportunities.
Fifth, given the reciprocal nature of organization-stakeholder relationships (e.g., Pfarrer,
Decelles, Smith, & Taylor, 2008; Rowley & Moldoveanu, 2003), we should also consider the
role of stakeholder trust as an enabler of organizational transparency. For example, do
organizations increase transparency when they perceive high stakeholder trust in the firm? This
should allow us to further distinguish the influence of stakeholder groups on organizational
conduct and policy.
Organizational Transparency 36
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FOOTNOTE
1 To many, characterizing transparency as a matter of information invokes imagery of
existing sender-receiver models of information exchange. Sender-receiver models depict the
encoding, sending, receiving, and decoding of messages between a source and a destination
under the influence of noise (see, for example, Berlo, 1960; Newcomb, 1953; Shannon &
Weaver, 1949). These models recount the processes that enable communication and hence,
transparency. Simultaneously, they describe the factors that constrain transparency by
highlighting critical fault lines in the communication process (e.g., encoding, transmission,
decoding, etc.) that trigger losses of fidelity in information quality. Without question,
transparency builds on existing models of information exchange. In practice, however, what
interests theorists about transparency is how actors establish, maintain, or deconstruct the
integrity of communications and how these shifts influence the behaviors and outcomes of the
parties involved. While sender-receiver models provide a useful framework of the
communication process, they are insufficient to explain how actors actually accomplish this.
Organizational Transparency 52
TABLE 1
Definitions of Transparencya
Study
Study Domain
Definition of Transparency
Akkermans, Bogerd, & van
Doremalen (2004)
Strategic Alliances
Sharing data regarding current order and production statuses as well as plans and
forecasts with various supply chain partners
Bloomfield & O’Hara (1999)
Financial Markets
The real time, public dissemination of trade and quote information
Bushman, Piotroski, & Smith
(2004)
Organizational
Governance
The availability of firm-specific information to those outside publicly traded
firms
Eijffinger & Geraats (2006)
Monetary Policy
The extent to which central banks disclose information that is related to the
policymaking process
Flood, Huisman, Koedijk, &
Mahieu (1999)
Financial Markets
The ability of market participants to clearly see outstanding price quotes
Granados, Gupta & Kauffman
(2010)
Electronic Markets
The availability and accessibility of market information to interested parties
Jordan, Peek, & Rosengren
(2000)
Financial Markets
The disclosure of timely and accurate information
Kaptein (2008)
Organizational Culture
Ensuring visibility within the organization to allow employees to properly
modify or correct behaviors
Larsson, Bengtsson, Henriksson,
& Sparks (1998)
Strategic Alliances
Openness towards partners
Madhavan, Porter, & Weaver
(2005)
Financial Markets
The ability of market participants to observe information about the trading
process
McGaughey (2002)
Strategic Management
The extent to which members of a population have 1) identified or are aware of
an intellectual asset's existence and 2) understand the intellectual asset's
underlying principles.
Nicolaou & McKnight (2006)
Organizational
Governance
The availability of adequate information to verify or assess the data exchange
taking place
Pagano & Roell (1996)
Financial Markets
The degree to which the size and direction of the current order flow are visible to
the competing market makers involved in setting prices
Potosky (2008)
Organizational
Governance
The extent to which a communication medium facilitates a clear or unobstructed
communication exchange
Organizational Transparency 53
Prat (2005)
Organizational
Governance
The ability of the principal to observe how the agent behaves and the
consequences of the agent's behavior
Vorauer & Claude (1998)
Negotiations
The degree to which an individual’s objectives are readily apparent to others
Walumbwa, Luthans, Avey, &
Oke (2011)
Leadership
Leader behaviors that are aimed at promoting trust through disclosures that
include openly sharing information and expressions of the leader’s true
thoughts and feelings.
Zhu (2004)
Electronic Markets
The degree of visibility and accessibility of information
a Articles were included if they explicitly defined transparency and were published in academic journals (empirical or theoretical) with a relatively
high impact factor (> 3 for 5-year impact) or were cited more than 50 times through Google Scholar. Working papers, books, practitioner-oriented
articles and industry publications were omitted from this list.
Organizational Transparency 54
TABLE 2
Overlap of Transparency Dimensionsa
Study
Similar Conceptualizations Discussed
Disclosure
Clarity
Accuracy
Akkermans, Bogerd, & van
Doremalen (2004)
Disclosure, openness
Not considered
Reliability
Bernstein (2012)
Observability
Encryption (language that only
selected others can interpret)
Accuracy
Briscoe & Murphy (2012)
Not considered
Clarity, simplicity
Not considered
Bushman, Piotroski, & Smith (2004)
Disclosure, availability,
timeliness
Not considered
Validity (related to audited
information)
Eijffinger & Geraats (2006)
Disclosure, openness
Not considered
Precision (of political and
economic information)
Granados, Gupta & Kauffman (2010)
Disclosure, availability,
accessibility
Simplicity
Distortion (related to the display
of inaccurate information)
Kaptein (2008)
Visibility, observability
Clarity
Not considered
McGaughey (2002)
Disclosure, observability
Simplicity, understandability
Not considered
Nicolaou & McKnight (2006)
Availability, relevance, timeliness
Interpretability
Accuracy, reliability
Philippe & Durand (2011)
Disclosure, timeliness
Simplicity
Precision (of information related
to the firm’s environmental
impact)
Potosky (2008)
Not considered
Clarity, simplicity
Not considered
Street & Meister (2004)
Accessibility
Understandability
Correctness
Vorauer & Claude (1998)
Accessibility
Not considered
Accuracy
Walumbwa, Luthans, Avey, & Oke
(2011)
Disclosure, openness
Clarity
Not considered
Zhu (2004)
Visibility, accessibility
Not considered
Accuracy
a Articles were included if they explicitly discussed the characteristics of transparency and were published in academic journals (empirical or
theoretical) with a relatively high impact factor (> 3 for 5-year impact) or were cited more than 50 times through Google Scholar. Working papers,
books, practitioner-oriented articles and industry publications were omitted from this list.
Organizational Transparency 55
FIGURE 1
Number of Articles from Selected Business Journals Referencing Transparency (1990 to 2009)
0
50
100
150
200
250
300
350
‘90
to
‘93
‘94
to
‘97
‘98
to
‘01
‘02
to
‘05
‘06
to
‘09
Note: Articles were included if the word “transparency” or “transparent” was included in the title,
abstract, or text. Articles were extracted from the following journals: Academy of Management Review
(106, 16%); Journal of Finance (97, 15%); Journal of Accounting Research (95, 14%); Strategic
Management Journal (66, 10%); Academy of Management Journal (64, 10%); MIS Quarterly (60, 9%);
Journal of Marketing (51, 8%); Administrative Science Quarterly (48, 7%); Organization Science (45,
7%); Information Systems Research (27, 4%).
Organizational Transparency 56
FIGURE 2
Conceptual Model of Mechanisms to Manage Transparency and the Association between
Transparency, Trustworthiness, and Trust
Transparency
Perceptions Trustworthiness
Perceptions
P1a
P1b
P2
P3b
P3a
Mechanisms to
Manage Transparency
Organizational
secrets (-)
Open information
systems (+)
“Insider”
framing (-)
“Outsider”
framing (+)
Decoupling and
faking (-)
Authentic leadership
and auditing (+)
Disclosure
Clarity
Accuracy
P5
P4
Direct
relationships
Indirect
relationships
Benevolence
Integrity
Ability
Trust
