When Can You Trust ‘Trust'? Calculative Trust, Relational Trust, and Supplier Performance

Our research empirically assesses two distinct bases for trust: calculative trust, based on a structure of rewards and penalties, versus relational trust, a judgment anchored in past behavior and characterized by a shared identity. We find that calculative trust and relational trust positively influence supplier performance, with calculative trust having a stronger association than relational trust. Yet, important boundary conditions exist. If buyers invest in supplier-specific assets or when supply side market uncertainty is high, relational trust, not calculative trust, is more strongly associated with supplier performance. In contrast, when behavioral uncertainty is high, calculative trust, not relational trust, relates more strongly to supplier performance. These results highlight the value of examining distinct forms of trust. Copyright © 2015 John Wiley & Sons, Ltd.postprin

How managers can build trust in strategic alliances: a meta-analysis on the central trust-building mechanisms

Trust is an important driver of superior alliance performance. Alliance managers are influential in this regard because trust requires active involvement, commitment and the dedicated support of the key actors involved in the strategic alliance. Despite the importance of trust for explaining alliance performance, little effort has been made to systematically investigate the mechanisms that managers can use to purposefully create trust in strategic alliances. We use Parkhe’s (1998b) theoretical framework to derive nine hypotheses that distinguish between process-based, characteristic-based and institutional-based trust-building mechanisms. Our meta-analysis of 64 empirical studies shows that trust is strongly related to alliance performance. Process-based mechanisms are more important for building trust than characteristic- and institutional-based mechanisms. The effects of prior ties and asset specificity are not as strong as expected and the impact of safeguards on trust is not well understood. Overall, theoretical trust research has outpaced empirical research by far and promising opportunities for future empirical research exist

Exchange hazards, relational reliability, and contracts in China: The contingent role of legal enforceability

Building on institutional and transaction cost economics, this article proposes that legal enforceability increases the use of contract over relational reliability (e.g., beliefs that the other party acts in a non-opportunistic manner) to safeguard market exchanges characterized by non-trivial hazards. The results of 399 buyer-supplier exchanges in China show that: (1) when managers perceive that the legal system can protect their firm's interests, they tend to use explicit contracts rather than relational reliability to safeguard transactions involving risks (i.e., asset specificity, environmental uncertainty, and behavioral uncertainty); and (2) when managers do not perceive the legal system as credible, they are less likely to use contracts, and instead rely on relational reliability to safeguard transactions associated with specialized assets and environmental uncertainty, but not those involving behavioral uncertainty. We further find that legal enforceability does not moderate the effect of relational reliability on contracts, but does weaken the effect of contracts on relational reliability. These results endorse the importance of prior experience (e.g., relational reliability) in supporting the use of explicit contracts, and alternatively suggest that, under conditions of greater legal enforceability, the contract signals less regarding one's intention to be trustworthy but more about the efficacy of sanctions. © 2010 Academy of International Business All rights reserved.postprin

Contracting outsourced services with collaborative key performance indicators

While service outsourcing may benefit from the application of performance‐based contracts (PBCs), the implementation of such contracts is usually challenging. Service performance is often not only dependent on supplier effort but also on the behavior of the buying firm. Existing research on performance‐based contracting provides very limited understanding on how this challenge may be overcome. This article describes a design science research project that develops a novel approach to buyer–supplier contracting, using collaborative key performance indicators (KPIs). Collaborative KPIs evaluate and reward not only the supplier contribution to customer performance but also the customer's behavior to enable this. In this way, performance‐based contracting can also be applied to settings where supplier and customer activities are interdependent, while traditional contracting theories suggest that output controls are not effective under such conditions. In the collaborative KPI contracting process, indicators measure both supplier and customer (buying firm) performance and promote collaboration by being defined through a collaborative process and by focusing on end‐of‐process indicators. The article discusses the original case setting of a telecommunication service provider experiencing critical problems in outsourcing IT services. The initial intervention implementing this contracting approach produced substantial improvements, both in performance and in the relationship between buyer and supplier. Subsequently, the approach was tested and evaluated in two other settings, resulting in a set of actionable propositions on the efficacy of collaborative KPI contracting. Our study demonstrates how defining, monitoring, and incentivizing the performance of specific processes at the buying firm can help alleviate the limitations of traditional performance‐based contracting when the supplier's liability for service performance is difficult to verify

A Customer Perspective on Product Eliminations: How the Removal of Products Affects Customers and Business Relationships

Regardless of the apparent need for product eliminations, many managers hesitate to act as they fear deleterious effects on customer satisfaction and loyalty. Other managers do carry out product eliminations, but often fail to consider the consequences for customers and business relationships. Given the relevance and problems of product eliminations, research on this topic in general and on the consequences for customers and business relationships in particular is surprisingly scarce. Therefore, this empirical study explores how and to what extent the elimination of a product negatively affects customers and business relationships. Results indicate that eliminating a product may result in severe economic and psychological costs to customers, thereby seriously decreasing customer satisfaction and loyalty. This paper also shows that these costs are not exogenous in nature. Instead, depending on the characteristics of the eliminated product these costs are found to be more or less strongly driven by a company’s behavior when implementing the elimination at the customer interface

Sequencing and timing of strategic responses after industry disruption: evidence from post-deregulation competition in the U.S. railroad industry

This paper examines the sequencing and timing of firms’ strategic responses after significant industry disruption. We show that it is not the single strategic choice or response per se, but the sequencing and patterns of consecutive strategic responses that drive a firm’s adaptation and survival in the aftermath of a shift in the industry. We find that firms’ renewal efforts involved differential adaptability in finding balance at the juxtaposition of responding to demand-side pressures and choosing a path of new capability acquisition efficiently. Our study underscores the importance of taking a sequencing approach to studying strategic responses to industry disruption

Angel investor's selection criteria: a comparative institutional perspective

Despite the important role of angel investors as critical financial providers for new ventures, little is known regarding how institutions make their investment decisions. While angels make decisions based on selection criteria during the first stage, they are also embedded within and affected by different institutional settings and as a result weight these criteria differently than other investors. We compare angel investors' selection criteria in China and Denmark using the comparative institutional perspective. We use a policy capturing approach and hierarchy linear modeling, revealing that since Chinese angels are embedded within relationship-based institutional settings they tend to reply more on strong ties such as family and friends in management team, as well as weighting risks less compared to Danish angels operating within more rule-based institutional contexts

What lies between market and hierarchy? Insights from internalization theory and global value chain theory

In this paper, we suggest that internalization theory might be extended by incorporating complementary insights from GVC theory. More specifically, we argue that internalization theory can explain why lead firms might wish to externalize selected activities, but that it is largely silent on the mechanisms by which those lead firms might exercise control over the resultant externalized relationships with their GVC partners. We advance an explanation linking the choice of control mechanism to two factors: power asymmetries between the lead firms and their GVC partners, and the degree of codifiability of the information to be exchanged in the relationship

Network capitalism and the role of strategy, contracts and performance expectations for Asia-Pacific innovation partnerships

© Springer Nature Singapore Pte Ltd. 2018. With the growth of emerging economies in Asia-Pacific over the last three decades collaboration with the aim of innovation between firms within and with partners outside the region have developed substantially. Not always have such partnerships fulfilled their anticipated strategic objectives. The literature suggests that the nature of market arrangements and the role of government within that system play a role, but also innate contracting practices and governance of innovation partnerships are related. Yet, our understanding about the specific relationships between these factors and the emerging partnership innovation culture that facilitates joint business activities in an Asia-Pacific context remains vague. In this conceptual chapter we suggest how characteristics of so called network capitalism in conjunction with the nature of contractual agreements between partners, the alignment of their innovation objectives and the ambiguity inherent in their mutual contributions to the partnership can be interpreted as indicators of joint innovation culture. However, while innovation partnerships generally may result to be bureaucratic, market, clan, or adhocracy, we discuss how in an Asia Pacific context, innovation partnerships are limited by the extent of codification and diffusion of information and the social embeddedness of economic transactions