Trust and the Decision to Outsource: Affective Responses and Cognitive Processes

Many of the various forms of cooperative strategy that firms are pursuing in today's economy entail the placing of important business functions in the hands of a partner. This paper examines the role of trust in the decision by a producer to place the marketing function in the hands of another entity, namely a cooperative. Although others have studied the effect of what may be termed general trust on inter-organizational relationships, few have examined the antecedents of that trust. We propose a model in which affective responses and cognitive processes are precursors to a sense of general trust, which, in turn, influences the outsourcing decision. These affective responses and cognitive processes have both direct and indirect (mediated) effects on the decision to place an important function in the hands of another entity. Perceptions of partner expertise in the business function at hand and the perceived need for the focal firm to maintain control over that function are also considered in the model. The model is tested in a somewhat novel context: the decision of cotton producers to outsource the marketing of their cotton fiber. Using survey data gathered from the actual decision-maker, and structural equations modeling, we find that the inclusion of affective responses and cognitive processes in our model produces a richer explanation of the outsourcing decision. The differences between the effects of affective responses and cognitive processes have potentially important implications for managers engaged in cooperative strategies and for the scholars who study them.