Nav: Home

Differences in levels of trust and power can affect buyer-supplier performance

May 05, 2017

Mutual trust does not appear on the ledger sheets of buyers and suppliers, but researchers suggest that levels of trust between companies may be an important influence on how they operate and perform.

"In business settings, we tend to believe that the more that a business trusts the other, that business will be perceived as less opportunistic, in other words, the higher the level of trust, the lower the opportunistic behavior," said Veronica Villena, assistant professor of supply chain management, Penn State. "In this study, we actually show that it doesn't work like that. It's not about the level of trust, though. It's about the asymmetry, or the difference between the levels of trust."

In a study, the researchers, who released their findings in a recent issue of Production and Operations Management, found that trust reduces opportunistic behavior only when both sides have similar levels of trust. However, a buyer or supplier with a higher level of trust than its counterpart is more likely to be perceived as being more opportunistic, not less opportunistic.

Business experts tend to focus on size differences in firms as the primary driver of opportunism in buyer-supplier relationships. For example, big buyers, which have more employees, larger sales, or both, are perceived as being more likely to take advantage of their smaller-sized suppliers.

"One example of this might be if you're a smaller supplier working with a company that has big purchasing power," said Villena. "Obviously, that company can press the smaller supplier to do things for it. But what if it's the other way around? These kinds of asymmetries happen all the time."

The researchers found that the size asymmetry -- and, thus, power asymmetry -- influence the perceptions of opportunism. For example, bigger buyers tend to perceive smaller suppliers as less opportunistic while smaller suppliers perceive their bigger buyers as more opportunistic. On the other hand, bigger suppliers are not necessarily perceived as opportunistic by their smaller buyers.

Suppliers may feel they have more to lose from future dealings than buyers, according to Villena, who worked with Christopher W. Craighead, Dove Professor of Supply Chain Management, University of Tennessee.

She added that while supply chain management is often viewed as solely a statistical endeavor, soft skills are often required in maintaining buyer and supplier relationships.

"In supply chain, we particularly talk about the hard skills -- the size and power of a firm -- and we tend to overlook the soft side, which is trust, reciprocity, interpersonal relationships," said Villena. "In this case, we show both are important, but the one with the higher impact is these softer skills."

The researchers collected survey and archival data from 106 buying companies and their matched suppliers from Spain during 2011 to 2012.

The survey asked how long the companies worked together and the perception of trust of companies on their counterparts. Questions also asked whether the companies believed their counterparts engaged in opportunistic behaviors, such as hiding information or exaggerating their needs to further their own interests.

The archival data was collected from the SABI database, which contains business information from companies in Spain and Portugal.
-end-


Penn State

Related Business Articles:

Great expectations force risky business acquisitions
A good reputation can be bad for business, according to new research from the University of Georgia.
Harnessing ADHD for business success
The symptoms of ADHD foster important traits associated with entrepreneurship.
From the Panama Papers to an intelligence service for your own business
In 2016 more than a hundred newspapers and others published revelations on tax avoidance and evasion.
OU study links entrepreneurial optimism with business success
Widespread collective entrepreneurial optimism in the United States is highly predictive of the number of new venture startups and small business growth, according to a University of Oklahoma study.
Business investment in innovation pays off
Firms need to invest in innovation in order to create new technologies and move the economy forward, according to new research from the University of Houston.
More Business News and Business Current Events

Best Science Podcasts 2019

We have hand picked the best science podcasts for 2019. Sit back and enjoy new science podcasts updated daily from your favorite science news services and scientists.
Now Playing: TED Radio Hour

Erasing The Stigma
Many of us either cope with mental illness or know someone who does. But we still have a hard time talking about it. This hour, TED speakers explore ways to push past — and even erase — the stigma. Guests include musician and comedian Jordan Raskopoulos, neuroscientist and psychiatrist Thomas Insel, psychiatrist Dixon Chibanda, anxiety and depression researcher Olivia Remes, and entrepreneur Sangu Delle.
Now Playing: Science for the People

#537 Science Journalism, Hold the Hype
Everyone's seen a piece of science getting over-exaggerated in the media. Most people would be quick to blame journalists and big media for getting in wrong. In many cases, you'd be right. But there's other sources of hype in science journalism. and one of them can be found in the humble, and little-known press release. We're talking with Chris Chambers about doing science about science journalism, and where the hype creeps in. Related links: The association between exaggeration in health related science news and academic press releases: retrospective observational study Claims of causality in health news: a randomised trial This...