The Determinants and Economic Outcomes of Trust in Supplier-Buyer Relations
Author(s)
Chu, Wujin
Dyer, Jeffrey
Date Issued
August 12, 1996
Series/Report no.
IMVP;186a
Abstract
In this paper we examine the antecedents and outcomes of supplier trust in 453 supplier-automaker
relationships in the U.S., Japan and Korea. Our findings indicate that high supplier trust emerges
when (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 found
that 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 substantial
as evidenced by the fact that the automaker with the least trusting supplier relations had five times
the procurement costs and spent tice as much of its face-to-face interaction time with suppliers on
ex ante contracting and ex post haggling when compared to the most trusted automakers. Thus, our
findings suggest that trust in supplier-buyer relations can create economic value and may be an
important source of competitive advantage.
Subjects
supplier-automaker
supplier trust
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