Accounting, contracts and trust in supply relationships

Purpose – The paper investigates the operation of the trust‐formal control dynamic in collaborative supply relationships. Design/methodology/approach – A case study of an Australian metal manufacturer (IronBiz) and its collaborative supply relationships is conducted. Findings – Relationships between formal controls (comprising accounting controls and contracts) and trust are developed based on the empirical observations from the case study conducted and prior literature. Research limitations/implications – The main limitations of the paper include: an empirical examination of the buyer organisation only in dyadic supply relationships; the limited generalisability associated with the methodology and field site chosen. Originality/value – In contrast to the continued popularity of collaborative arrangements as a form of organisation, gaps in the literature still exist as to the dynamics of trust creation and the relationship between trust and formal controls. This paper focuses on the trust‐formal control dynamic, with an emphasis on how trust is generated and sustained in supply relationships and the role of formal controls in this process.