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Title: When trust has a negative impact on firm performance in buyer-supplier relationships. Case studies in the Dutch OEM leisure market.
Authors: Rijsdijk, R
Keywords: Buyer-Supplier Relationships
Trust (negative side of trust)
Firm performance (Supply Chain)
Relational Capital
Risk Taking
Firm Size
Multiple-case design
Issue Date: 9-Mar-2016
Publisher: Open Universiteit Nederland
Abstract: Problem statement It is generally agreed that trust is beneficial to supply chain management. Many studies have reported positive effects of trust in buyer-supplier relationships on performance. However, some feel that most publications ignore or neglect the darker side of buyer-supplier relationships. Too much trust may result in relational slackness, i.e. that partners increase the likelihood of using coercive power strategies, and the probability of behaving opportunistically. Unexplored issues refer to conditions under which trust does not have a positive impact on performance. In contrast with a growing number of publications on trust and performance, there is a lack of research that addresses the issue of conditions that amplify the negative effect of trust on performance. This study investigated the following problem statement: “Whether, why and under which conditions may trust have negative effects on firm performance?” Research method A multiple-case study design was used to gain insight in the conditions under which trust has a negative impact on firm performance in buyer-supplier relations, to reveal the neglected side of trust. The Dutch OEM leisure industry were selected, because in these markets there is a high level of trust between buying and supplying organisations. The leisure industry consists of organisations which are a part in the supply chain of a manufacturer which produces refrigerators, sanitary products & additives. By obtaining the negative side of trust, we collected data exclusively from five organisations through seven in-depth personal interviews. Supply chain managers, buyers and CEO’s of these buying organizations are interviewed face-to-face on the basis of an in-depth structured and semi-structured questionnaire. Results This study indicate that respondents indeed have experienced trust-based relationships with a negative impact in firm performance. In each case the supplier put his own interest above the buyer-supplier relationship to achieve a greater financial performance. The results of this study indicate that trust may easily lead to blind spots on the behaviour and performance of (trusted) suppliers. The most prominent conditions in this study were: • a lack of reality checks on the actual performance of a supplier (‘over-trust’) • a tendency to take too much risk (‘risk taking’) • a lack of controls and agreements (‘no contractual governance’). Other potential conditions, such as communication and firm size, did not appear to have a moderating effect on the relationship between trust and performance. Recommendations for practice Buying organisations should pay more attention to “friendly” buyers who have an open and familiarity assumption towards suppliers. This type of buyer-supplier relationships should be carefully monitored by an objective manager. The buyer can be fully blindfolded towards the supplier which is a high risk for the buying organisation. This creates the need to manage the buyer-supplier relationship where there is too much trust in place. Buying organizations should be more active in discussing potential buyer-supplier relations which can result in a negative effect on firm performance. The better the buyer understands the various reasons why trust can result in a negative effect, the better they can respond and increase their power in the relationships. Recommendations for future research It became clear that organizational controls do have some influence on the over-trusting behaviour, so it would be interesting what the effects of controls are on firm performance. Due to different and contradictory outcomes of the factor ‘communication’ it is interesting to do go deeper in the ‘communication’ effect on firm performance. As an outcome on the semi-structured interview it would also be interesting to examine the effects of ‘investments’, ‘project timing’, ‘age and experience buyer’, ‘business strategy supplier’, ‘flexibility’ and ‘judging by the experiences of others’ on the negative effect of trust related to firm performance.
Appears in Collections:MSc Management Science

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