The Determinants and Economic Outcomes of Trust in Supplier-Buyer Relations

In this paper we examine the antecedents and outcomes of supplier trust in 453 supplier-automakerrelationships in the U.S., Japan and Korea. Our findings indicate that high supplier trust emergeswhen (1) automakers have developed assistance-giving routines to help suppliers improve, and (2)automakers maintain a continuing (repeated) exchange relationship with the supplier. We also foundthat trust reduces transaction costs and increases information sharing in supplier-buyer relationships.Moreover, the findings suggest that the economic value created for tmnsactors may be substantialas evidenced by the fact that the automaker with the least trusting supplier relations had five timesthe procurement costs and spent tice as much of its face-to-face interaction time with suppliers onex ante contracting and ex post haggling when compared to the most trusted automakers. Thus, ourfindings suggest that trust in supplier-buyer relations can create economic value and may be animportant source of competitive advantage.