Trust and relational embeddedness: Exploring a paradox of trust pattern development in key supplier relationships

Industrial Marketing Management 42 (2013) 152–165

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Industrial Marketing Management

Trust and relational embeddedness: Exploring a paradox of trust patterndevelopment in key supplier relationships

Marc Day a,1, Stanley E. Fawcett b,⁎, Amydee M. Fawcett c,2, Gregory M. Magnan d,3

a Henley Business School, University of Reading, Greenlands, Henley-on-Thames, UK, RG9 3AUb Goddard School of Business and Economics, Weber State University, Ogden, UT 84408, USAc Department of Supply Chain Management, Walton College of Business, University of Arkansas, Business Building 302, Fayetteville, AR 72701, USAd Albers School of Business & Economics, Seattle University, 901 12th Avenue, Seattle, WA, 98122, USA

⁎ Corresponding author. Tel.: +1 8018510004.E-mail addresses: [email protected] (M

[email protected] (S.E. Fawcett), afawcett@[email protected] (G.M. Magnan).

1 Tel.: +44 1491414559.2 Tel.: +1 8018510005.3 Tel.: +1 2062966466.

0019-8501/$ – see front matter © 2013 Elsevier Inc. Allhttp://dx.doi.org/10.1016/j.indmarman.2012.12.004

a b s t r a c t
a r t i c l e i n f o
Article history:Received 31 August 2011Received in revised form 31 October 2012Accepted 12 November 2012Available online 31 January 2013

Keywords:TrustKey supplier relationshipsEmbeddednessRelational viewResource-based view

This paper explores the role of trust as an enabler and constraint between buyers and suppliers engaged inlong-term relationships. According to the relational view, cooperative strategies require trust-based mutualcommitments to co-create value. However, complete pictures of the positive and negative outcomes fromtrust development have yet to be fully developed. In particular, trust as an originator of path dependentconstraints resulting from over embeddedness is yet to be integrated into the relational view. We use acase-based methodology to explore whether trust is an optimizing phenomenon in key supplier relationships.Two cases where trust development processes demonstrate a paradox of trust-building behaviors cultivatedifferent outcomes constraining value co-creation.

© 2013 Elsevier Inc. All rights reserved.

1. Introduction

Trust is identifiedwithin the resource-based view as a key antecedentof building relational capital with suppliers (Barney & Hansen, 1994;Chen, Daugherty, & Landry, 2009). Trust shapes inter-firm relationalembeddedness, which Lawson, Tyler, and Cousins (2008) characterizeas a range of integration activities reflecting close working prac-tices between buyers and suppliers. Trust comprises the intangibleattributes built over time to deal with the shared vulnerabilities inbuyer/supplier relationships (Fawcett, Magnan, & Williams, 2004;Moorman, Deshpande, & Zaltman, 1993). By building relationalembeddedness from mutually perceived trustworthy interactions,buyers and suppliers rely on one another despite an ever-presentpotential for opportunistic behavior (Handfield & Bechtel, 2002).

High-trust relationships yield vital benefits for supply chain partners,including increased relationship satisfaction and enhanced firm perfor-mance (Johnston, McCutcheon, Stuart, & Kerwood, 2004), increasedinter-firm learning (Dodgson, 1993; Fawcett, Jones, & Fawcett, 2012),

. Day),ton.uark.edu (A.M. Fawcett),

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lower governance costs (Dyer, 1997; Dyer & Chu, 2003), reduced rela-tional conflict (Zaheer, McEvily, & Perrone, 1998), and an overallimprovement in cooperation (Palmatier, Dant, & Grewal, 2007). Thispositions trust at the heart of relational governance (Poppo &Zenger, 2002) because of its ability to enhance performance regard-less of governancemode (Gulati & Nickerson, 2008). Trust is therefore acore construct in the relational view (RV), is at the nexus of intra- andinter-organizational processes and exchanges, and gives insight intobuilding future relational capital (Lavie, 2006; Lorenzoni & Lipparini,1999; Madhok, 2002). Accumulated relational embeddedness is pro-ductive of, and governed by, trust, as well as norms of mutual gain andreciprocity (Granovetter, 1985; Larson, 1992).

Absent a foundation of trust, collaborative supply chain alliancesdo not emerge and relational advantage is foregone (Gulati & Singh,1998). Central to the trust-development challenge is the acceptanceof vulnerability as firms seek to build collaborative relationships(Ring & Ven de Ven, 1992; Rousseau, Sitkin, Burt, & Camerer, 1998;Sako, 1998; Zaheer et al., 1998). Because decision-makers are stronglyaverse to being vulnerable (McCarter & Northcraft, 2007) and opportu-nistic behavior is a perpetual risk in collaborative relationships (Hansen,Hoskisson, & Barney, 2008), building high levels of trust and relationalembeddedness are costly and difficult to achieve.

Although the positive outcomes from trust buildingwithin the RV areoften articulated, research has only begun to explore the negative out-comes, which may result from such interconnectedness (e.g. Gargiulo &Ertug, 2006; Villena, Revilla, & Choi, 2011). Specifically, inappropriatebonds built from trust may reduce efforts of both buyer and supplier to

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153M. Day et al. / Industrial Marketing Management 42 (2013) 152–165

1) stay vigilant against malfeasance, 2) capitalize on opportunities forleveraging existing relationships, and 3) monitor competing resourcedeployment options (Rowley, Behrens, & Krackhardt, 2000). Rela-tionships exhibiting inappropriate trust may suffer from constraintson governance choices beyond what is optimal (Bendoly & Swink,2007; Gargiulo & Benassi, 2000; Uzzi, 1997). These realities suggestthat trust in relationships is a careful balance, making it importantto understand how this trade-off is addressed over time so strategiescan be developed to optimize supply chain interactions (Grayson &Ambler, 1999). A re-assessment of trust in the RV therefore needs toaccount for the risks of embeddedness when modeling inter-firmvalue creation (c.f. Lavie, 2006).

Despite acknowledging the theoretical importance of trust andembeddedness, and the more general volume of work supporting therelational view (e.g. Chatain, 2010; Cousins, Handfield, Lawson, &Petersen, 2006; Leiblein & Miller, 2003), we find no studies detailingthe benefits and risks of trust-enabled embeddedness. Indeed, Lawsonet al. (2008) and Gulati and Sytch (2007) identify the need to extendour understanding of the conceptual inter-relationship betweentrust and embeddedness, and the consequent implications for rela-tional capital. It could be assumed that greater degrees of trust andresulting embeddedness are wholly positive for the performance ofrelationships. However, a more balanced role for trust bonds needsto discern more systematically which features of interaction mightenable or constrain key supplier relationships over their lifecycle.This requires re-conceptualizing trust as a construct shaped by localand broader relational norms, rather than ignoring its socially embed-ded nature (Wicks, Berman, & Jones, 1999). It also requires research inthis under developed branch of the relational view to position themulti-faceted role of trust and embeddedness, which prompts us toconsider the use of qualitative methods to achieve a richer case-basedexploration of the ‘black box’ of pivotal processes over time.

2. Theoretical background

Interest in key supplier management derives from its potential toenable a firm to draw together complementary capabilities residingacross the supply chain (Peteraf & Barney, 2003; Verdin & Williamson,1994). Cao andZhang (2010) observe that, unlike studies acknowledgingthe role of both private and common benefits, the RV emphasizesco-created synergetic benefits accruing to partners which cannot begenerated independently. The RV is therefore an appropriate theoreticallens for evaluating how trust enhances key supplier management andthereby competitiveness.

The RV builds on the resource-based view of the firm (RVB),which characterizes a firm as “a collection of productive resources”(Penrose, 1959; Wenerfelt, 1984). Firms possessing key resources—thatis, valuable, inimitable, rare, and non-substitutable—will outperformtheir rivals (Barney, 1991; Dierickx & Cool, 1989). From an RV perspec-tive, relational advantage accrues to firms best able to invest in keyrelationships to enhance partner capabilities through inter-firmlearning. The effective governance of relationships is vital in achievingbenefits from relational exchange, and forms the essence of key suppliermanagement.

Importantly, inter-firm resource access, development, and integrationare dependent on a firm's ability to cultivate high levels of inter-organizational trust (Bradach & Eccles, 1989; Heide, 1994). Doney andCannon (1997: 35) identify trust as a critical governing mechanismsince it enables supply partners to “focus on the long-term benefits ofthe relationship, ultimately enhancing competitiveness and reducingtransaction costs.” This is supported by empirical evidence in a study ofseller–distributor relationships where trust plays a key moderating rolebetween relational norms and firm performance (Palmatier et al.,2007). In summing up the pivotal role for trust as a feature of the RV,Gulati andNickerson (2008) argue that it functions as both a complementand substitute to contractual governance arrangements.

2.1. Trust development and positive relational outcomes

Because trust underlies the development of relational capital,integrating conceptions of trust across the fields of social psychology,sociology, and economics is appropriate. Table 1 presents representativedefinitions of trust pertinent to the RV, showing trust primarily as a func-tion of credibility andbenevolence. Trust is the confidence that eachpartyin a relationship will perform as promised and genuinely take eachother's welfare into consideration as each makes decisions. Trust is pro-moted by strategic orientation, and inculcated via day-to-day behavior(Doney & Cannon, 1997).

The behavioral foundations of trust are consistent with the desireto use trust to develop relational capital. Specifically, trust definesboth how partners will perform as well as how they will treat eachother (Lui & Ngo, 2004; Sako, 1998). Similarly, the confidence that apartner will not act opportunistically and exploit the firm's weak-nesses engenders mutual commitment and the willingness to takerisks—that is, partners are willing to be vulnerable (Dyer & Chu,2003; Humphrey, 1998; Sako, 1998). The confidence to act decisivelyand the willingness to take risks promote the openness that helps anetwork sense and communicate opportunities and threats.

As trust facilitates key supplier management and enables thecreation of relational capital, it is built on a history of direct interactionsbetween actors and indirect reputational connections through thirdparties (Laaksonen, Pajunen, & Kulmala, 2008). Doney and Cannon(1997) disaggregate five interrelated processes (calculation, prediction,capability assessment, intentionality and transference) influencingtrust development in business relationships. This reflects what Zucker(1986) describes as ‘process-based trust’ built as a singularly positivefunction in a relationship. None of these processes, as practiced bymost firmsmay predominate. These processes also rely heavily on esti-mation and past experience (Dirks, 2000; McAllister, 1995). They alsofocus more on avoiding risk rather than cultivating opportunity(Williamson, 1991). The greater the evidence of trustworthy behavioracross these five processes, the more likely it is for trust to developfrom a basis of ever-increasing richness in relational antecedents suchas working together, promise keeping, and avoidance of cheating.Such behavior signals both the intent of a partner to perform at thehighest levels as well as the partner's confidence in its ability to do so(Jones, Fawcett, Fawcett, & Wallin, 2010; Perrone, Zaheer, & McEvily,2003).

A key element of Doney and Cannon's (1997) calculative assessmentof trust is the development of information sharing through the develop-ment of transparent processes and systems. Consistent policies likewisemake it easier for suppliers to gauge buyer capabilities and to attributebuyer intentions (Whitener, Brodt, Korsgaard, & Werner, 1998). Thus,buyers can facilitate a trust prediction process by publishing past prom-ises and performance statistics, making it easier and less costly forsuppliers to accurately predict the buying firm's future behavior. Bybroadcasting that they are worthy of trust, buying organizations reducesupplier assessment risks and promote trust building (Colquitt, Scott, &LePine, 2007). Indeed, to the extent that buying firms can demonstratetrustworthy behavior permeating their company culture, systems, andprocesses, they can cultivate greater levels of supplier trust, doing somore quickly than less transparent rivals (Zaheer et al., 1998).

2.2. Inappropriate trust and negative relational outcomes

Paradoxically, high levels of trust-enabled relational embeddednessmay also constrain relational advantage. For instance, Uzzi (1997) notesthat partners can become blinded to existing opportunities asembeddedness narrows their purview of wider network capabilities.This process is analogous to Leonard-Barton's (1992) description of acore rigidity at the inter-firm level where co-developed institutional-ized embeddedness gets reinforced by “blind” trust and unquestioned

Table 1Deriving a consensus definition of trust.

Author(s) Definition Primaryconceptualization

Anderson and Narus(1984)

A firm's belief that another company will perform actions that will result in positive outcomes for the firm, as well as nottake unexpected actions that would result in negative outcomes for the firm.

• Performance to promise• Benevolence

Ring and Ven de Ven(1992)

Confidence in the other's goodwill. • Fulfilling commitments• Goodwill

Doney and Cannon(1997)

The perceived credibility and benevolence of a target of trust. • Credibility• Benevolence

Zaheer et al. (1998) Expectation that an actor can be relied on to fulfill obligations, will behave in a predictable manner, and will act and negotiatefairly when the possibility of opportunism is present.

• Performance to promise• Predictability• Non-exploitation

Ireland and Webb(2007)

Trust is a willingness to accept vulnerability based upon positive expectations of partner behavior. Predictability,dependability, and faith are three key components of trust. When trust exists, the firm does not fear its partner's actions,because the partners can depend on each other to achieve a common purpose.

• Performance to promise• Non-exploitation• Goodwill

Dyer and Chu(2003)

One party's confidence that the other party in the exchange relationship will not exploit its vulnerabilities. • Non-exploitation

Handfield andNichols (1999)

Each party in the chain has mutual confidence in the other members' capabilities and actions. • Dependability• Benevolence

Lui and Ngo (2004) Expectation of a partner fulfilling a collaborative role in a risky situation, and [the reliability] of both the partner's intentionto perform and its ability to do so.

• Competence• Goodwill

Krishnan, Martin,and Noorderhaven(2006)

The expectation held by one firm that another will not exploit its vulnerabilities when faced with the opportunity to do so. • Non-exploitation

Gattiker, Huang, andSchwarz (2007)

Most definitions converge on two main dimensions: first, the idea of a belief in the other party being honest, dependableor reliable and, second, the belief that the other party would not take advantage of an opportunity to gain at the other party'sexpense, given the chance. We refer to [the first] dimension as honesty trust. We label the second dimension benevolence trust.

• Integrity• Benevolence

McCarter andNorthcraft (2007)

A psychological state where a party is willingly vulnerable to the behavior of another party because of expected cooperationor benevolence from that other party.

• Cooperation• Benevolence

Grayson, Johnson,and Chen (2008)

We define “trust” as a belief that an exchange partner is benevolent and honest. • Benevolence• Integrity

Puranam andVanneste (2009)

The expectation that an exchange partner will not behave opportunistically, even when such behavior cannot be detected bythe victim.

• Non-exploitation

Hill, Eckerd, Wilson,and Greer (2009)

We define trust here as a firm's reliance upon other entities with which it is engaged to voluntarily recognize and protectits rights and interests.

• Benevolence

Nyaga, Whipple, andLynch (2010)

Trust refers to the extent to which relationship partners perceive each other as credible and benevolent. Credibility reflectsthe extent to which a firm in a relationship believes that the other party has the required expertise to perform the expectedtask effectively, while benevolence occurs when one relationship partner believes that the other party has intentions andmotives that will benefit the relationship.

• Credibility• Benevolence

154 M. Day et al. / Industrial Marketing Management 42 (2013) 152–165

commitment, resulting in an inter-firm incumbent inertia for the buyerand supplier (Lieberman & Montgomery, 1998).

Gargiulo and Ertug (2006) describe the negative outcomes associ-ated with overly embedded relationships as the “dark side of trust.”This suggests a threshold beyond which the costs of excessive trustoutweigh the benefits accrued from the key buyer/supplier relation-ship. Three key mechanisms may be at play when inappropriatetrust leads to relational vulnerability and diminished performance.

1. Relational inertia. Although commitment is an outcome of confi-dence in each other's goodwill (Ring & Ven de Ven, 1992), it maycreate what Gargiulo and Benassi (2000) term “relational inertia.”Complacency makes it more difficult to perceive objective deterio-rations in performance. Further, once the deterioration is acknowl-edged, it takes longer to engage in corrective action. Gargiulo andErtug (2006) suggest that high-trust relationships create a rela-tional bond, which prevents partners from discussing emergingchallenges. Neither side wants to risk disrupting the relationship.They also describe a cognitive “lock-in,” such that the relationshipbecomes isolated from the outer world (Uzzi, 1997). External infor-mation and perspectives are filtered, inhibiting managers' ability toperceive relational problems.

2. Resource misallocation. Gargiulo and Ertug (2006) note that hightrust levels may lead either party to unconsciously commit to obliga-tions that go beyond what is necessary to commit to the exchange.This may result from the carry-over of obligations from the initialstages of a relationship where partners over-invest in behaviors of

willingness and reciprocity in order to build trust because theywish to embed multiplex ties and increase trust (Uzzi, 1996). Alter-natively, Villena et al. (2011) argue that partners may feel forced toassist the other party even when they expect little benefit from thefuture exchange. This results from a fear of disrupting the relation-ship, and a follow-on reputation as an unreliable partner.

3. Malfeasance. High trust levels may lead firms to take a “leap offaith” regarding partner behavior and performance. Based on pastperformance, partners may unwittingly deactivate monitoringmechanisms. Without adequate monitoring, coordination losses,increased redundancy, and an overall misalignment in interests canemerge undetected. At the extreme, partners may devise specificways to cheat one another under the veil of close relations(Anderson & Jap, 2005). Further, lower levels of monitoring maynot only delay but also hinder appropriate remedial action.

Ultimately, inappropriate trust may result in a variety of risks, in-volving what Gargiulo and Ertug (2006) term dispositional factors,which lead the trustor to dismantle safeguards and reduce monitoringbecause one side of the relationship feels they are similar to the other.Partners may also be reluctant to switch to other relationships becauseof the strong attachment and wish to continue the existing relationship(Kim, Oh, & Swaminathan, 2006). There may be a fear that potentiallyvaluable assets accrued from the relationship will be lost (Anderson &Jap, 2005), or may reflect a misguided preference to work with a partic-ular partner (Gargiulo & Benassi, 2000). At the inter-personal level, trustbetweenpersonnel involved in the relationshipmight lead them to avoid


unpleasant, but necessary conflicts which erode personal friendships(Jeffries & Reed, 2000). Each of these features of inappropriate trustcan result from both conscious and unconscious choices around keysupplier relationships, all of which accumulate sunk costs and wastedtime.

To summarize, the literature related to the role of trust in therelational view leads us to suggest that the choice between formalcontracting, relational governance, or combinations of both as com-plements for arranging relational exchange might only partially ex-plain why parties experience sub-optimal returns from exchange.Gargiulo and Ertug (2006) therefore suggest a need for a more carefulanalysis of the risks as well as the benefits of investing in relation-ships. Of note, the more embedded and path dependent a relationshipbecomes, the more important it becomes to manage the trade-off be-tween the benefits accrued and the risks incurred through reliance ontrust as a governance mechanism. More research is thus necessary toexamine how the nature of a firm's pattern of trust development andspecific trust-building behaviors influence the effective deploymentof cooperative strategies.

3. Research design

3.1. Case study rationale

As a multi-faceted role for trust within the RV is under-researched,we employ the case method, which is an interpretive approach appro-priate for investigating phenomena comprised of manifold patterns ofinteraction that are yet to be well understood (Yin, 2007). Two focalcompanies (herein referred to using the pseudonyms of ‘Coach’ and‘Colleague’ to ensure their anonymity) were selected based on externalreports that their respective suppliers perceive them to be “highly trust-worthy” customers. Importantly, two cases with multiple participantsenable replication logic, allowing the researchers to confirm or discon-firm inferences drawn from each case (Yin, 2007).

As part of a theoretical sampling method (Eisenhardt, 1989) wechose two companies that had participated in a wider study of coop-erative value-creation strategies. This overarching study included 58companies—that had announced their intention to compete viacooperative strategies—in four sectors (service provision; materialssuppliers; finished good assemblers; retailers). Out of this initial re-search, we identified two cases where the following paradoxpresented itself: trust was highly developed, but did not appear toact uniformly as a positive feature of value creation. The cases werefrom separate sectors which aided in assessing whether there wereparticular sector-specific features which influenced trust development.In particular, we were keen to examine if trust developed differently be-tween supply chains for tangible items (a retailer) versus intangible capa-bilities (a service provider) due to the potential differential impact ofphysical sunk costs.

Extreme cases are useful in theory building since the dynamicsunder investigation are often better defined andmore easily documentedthan in other scenarios (Pratt, Rockmann, & Kaufmann, 2006). Our focalcompanies met the criteria for extreme, but highly pertinent instancesinwhich the processes aremore transparent than in other cases, enablinginferences to more conventional circumstances (Siggelkow, 2007).Following the suggestions of Swink and Zsidisin (2006) and Lawson etal. (2008), our aim was to obtain a detailed view of the processes con-tributing to trust. During the interviews, we asked respondents to talkfreely and share examples that explicate how trust emerged in the rela-tionship being investigated. Based on retrospection as well asmore cur-rent reflections, we sought to understand the relational antecedents ofthe interaction, aswell as contemporary events, alongwith future plans.

Triangulation of data was achieved by a number of means. The casestudy interviews included differentmanagement levels (top, senior andmiddle managers), both sides of each case study dyad, multiple infor-mants on the same dyadic relationship, and employees with different

types & depths of involvement in the relationship (see Appendix A).Two experienced researchers conducted the interviews followingan interview protocol (see Appendix B). Site visits and archivaldata provided further data for the study, as well as the opportunityto be present at the case organizations to witness day-to-day buyer/supplier interactions.

3.2. Data collection process

Once each focal firm agreed to participate, a brief overview of theresearch objectives with a brief description of the researchmethodologywas provided (Spradley, 1979). Coach and Colleague then provided theresearch teamwith a contact list for 100 key suppliers,with each sendingsuppliers an invitation to participate in the research project. We posi-tioned the interviews as a structured means of self-reflection about therelationship with Colleague or Coach in order to explain the value ofparticipation. Supplymanagerswere also promised complete confidenti-ality and received a copy of the final case write up. After the initialinvitationwas extended, all follow-on communication occurred betweenthe supplier and the research team. For example, the researchers calledeach supplier to set up a time to conduct the interviews. As theoreticalsaturation was achieved before all suppliers were contacted, theresearchers only met with a subset of the suppliers on each list.Importantly, this fact increased the anonymity for the managerswho participated.

The case process provided an opportunity to explore the nuancedwhat, why, and how questions associated with building trust-basedrelationships (McCutcheon & Meredith, 1993; Yin, 1981), givingmanagers the opportunity to elaborate the behaviors reflecting trustdevelopment and influence (Dyer & Wilkins, 1991; Eisenhardt, 1991).A four section semi-structured interview guide focused on the followingevents and processes involved in the relationship:

1. Define trust and evaluate the amount of trust in their typical supplychain relationship as well as in the focal-firm relationship.

2. Identify and describe focal-firm behaviors and practices that pro-mote trust development in the relationship.

3. Identify and describe focal-firm behaviors and practices erodingtrust development in the relationship.

4. Provide suggestions to help the focal firm increase trust by askingrespondents to reflect on practices that the focal firm and Coach/Colleague should consider adopting.

The typical supplier interview lasted 30–60 minutes and involvedaccount managers responsible for maintaining the supplier's relation-ship with Coach and Colleague. Account managers at supplier compa-nies often invited sales and replenishment managers to participate inthe interview. Multiple informants mitigate subject biases and providenuanced insights into complex phenomena (Golden, 1992; Miller,Cardinal, & Glick, 1997; Schwenk, 1985).

During each interview, extensive notes were made for later reflec-tion and were subsequently used to avoid “data asphyxiation” fromthe large amounts of information (Pettigrew, 1990) by creating richand reliable structured case write-ups (Graebner & Eisenhardt,2004). As the interview process continued, the researchers spokeoften to compare notes regarding the process and the content. Thisiterative discussion-based process helped improve research reliabilityand validity as well as derive a consensus regarding their meaning(Eisenhardt, 1989; Seidel, 1998).

3.2.1. Case study background—CoachCoach is a publically traded retailer with a large, professional pur-

chasing organization and thousands of suppliers. Philosophically andstrategically, Coach relies on its supply network to provide innovativeproducts and efficient processes to sustain competitive advantage.Coach views suppliers as an extension of its ownoperations and expectssuppliers to help it fulfil customer promises and to execute its strategic


initiatives. Of note, supplier relationships are managed vertically. Thisrequired the research team to interview three groups ofmanagerswith-in Coach: buyers, vice presidents, and senior vice presidents. To beginthe case study, a member of the research team met in two separatefocus groups with the buyers and vice presidents. Individual interviewswith five senior vice presidents followed.

In addition to these programmed discussions, one of the researchteam was invited to spend three days attending and observing ap-proximately 20 actual buyer/supplier negotiations. This opportunitywas taken as it allowed more insight into the day-to-day patterns ofthe relationship between Coach and its suppliers. It resulted in adeeper, more nuanced exploration of Coach's relationship strategiesby observing them deployed in a ‘live’ scenario. During these meetings,a variety of issues were discussed including pricing, inventory availabil-ity, performance metrics, and new product development. During thesethree days, the researcher had access to and spoke with a number ofbuyers and supplier representatives on an informal basis. This embed-ded research process enabled a deeper understanding of the relation-ships' contexts.

Managers from 68 suppliers were interviewed, with only two sup-pliers declining to participate. Interviews were conducted on-site atthe supplier's facility. In each instance, managers with direct responsi-bility for the supply chain relationship were interviewed.

3.2.2. Case study background—ColleagueColleague is a privately held human resources consulting and

services company. Specifically, Colleague manages negotiated aspectsof customers' employee development and recognition programs. Thus,Colleague may manage a customer's entire employee developmentprogram or merely provide recognition rewards. Inherent in most ofthese relationships is the provision of products—much like a retailer.As such, Colleague has developed a competent purchasing organizationto manage a global supply base.

Colleague's organizational philosophy is to forge strong relation-ships by treating people fairly, taking great pride in its ability to estab-lish close, collaborate relationships—both with internal employees andwith external suppliers. Although managers are conscious of howexternal constituents perceive Colleague, they realize that careful costcontrol is needed to remain competitive. Ultimately, Colleague's goalis to be its suppliers' customer of choice.

At Colleague, supplier relationships are managed cross functionally.Therefore, the internal discussions regarding buyer trust were carriedout with two groups of managers: marketers and supply chain man-agers. To begin the case study, the research team visited the corporateoffices to learn more about the company, its corporate philosophy,and its supply management practices. During this visit, a focus studywas conducted with nine supply chain managers and four marketingmanagers. The team also met with senior level executives. Importantly,at the conclusion of the case study, the research team returned tocorporate headquarters to present and discuss the findings with theleadership team. All of the individuals who had participated in theinitial discussions were invited to participate in this discussion. Thistwo-hour debriefing generated insightful discussion regarding keysupplier relationships.

Focusing on the supplier interviews, managers from 63 supplierswere interviewed. These interviews involved managers with directresponsibility for the focal-firm account and were conducted via tele-phone due to their geographic dispersion.

3.3. Data analysis approach

A grounded approach was used by two researchers to interrogatethe empirical data who shared notes and a jointly developed codingframework as it was elaborated. Initially, open coding allowed com-mon and distinctive points to emerge from the data which involvedbreaking down the data into distinct units of meaning (Goulding,

2002). It opened up the text to expose the thoughts, ideas, and mean-ings therein (Strauss & Corbin, 1998). Next, pattern codes were devel-oped which identified more meaningful and parsimonious themes orconstructs—a first order code (Strauss & Corbin, 1998). As patternsemerged, codes were clustered (e.g., “communication patterns”) andcausal relationships between them identified. This initial groundedanalysis provided the basis for the use of narrative (Langley, 1999;Pentland, 1999). The cases were written up as thick descriptions(Lincoln & Guba, 1985) using a common framework emerging fromthe data of “the trust development pattern,” “organizational capabili-ties,” and “value creation co-creation.” These stories recounted whatwas present within the case relationships.

Next, we linked the analysis to the literature by moving betweeninductive (data-driven) and deductive (theory-driven) analysis. Thisallowed us, where appropriate, to establish connections betweenour empirical data and existing theory. When a category from theliterature was identified as relevant to our data, it was developed interms of its properties and dimensions, thus increasing its differenti-ation as a construct. Associative analysis was used to specify links anddirectional relationships between two or more phenomena (Ritchie,Spencer, & O'Connor, 2003). Finally, we used the paradigm approachsuggested by Strauss and Corbin (1998) to sort out and organizeemerging connections into patterns. A paradigm comprises threeelements: the conditions, the actions/interactions, and the conse-quences. The conditions were the internal and external relational con-text. The actions/interactions were the strategic or routine responsesmade by individuals or groups to issues, problems, happenings orevents, which arose under those conditions. Relevant consequenceswere then traced to particular chains of events. Finally, we were ableto engage in reverse theorizing to work back upwards from the detailednature of trust behaviors and to aggregate them into constructsreflecting the functions of trust.

Throughout the analysis we moved between the literature and ouremerging theory to test and advance its rigor, completeness and in-ternal consistency (Hallier & Forbes, 2004). A sample of the datastructure is shown in Fig. 1. This structure gradually emerged,grounded in the analysis, but also “enfolded” in the literature(Eisenhardt, 1989, 544).

4. Findings

The interviews confirm that suppliers watch buyer behavior closelyto credit or debit a “relationship-quality account.” Although relation-ship quality is perceived to be high at both focal buying companies,both suffer from sub-optimal long-term outcomes. This is manifest inColleague's case due to relationship inertia, whilst in Coach the negativepressure to continuously improve causes suppliers to misallocateresources.

We will firstly explore the two cases in terms of trust pattern de-velopment in detail, and then summarize the different outcomes fromthe emergent paradoxes. We summarize the positive and negativeoutcomes from trust patterns for both cases in Tables 2 and 3.

4.1. Coach's capability-focused trust pattern

Capability enhancement characterizes Coach's initiatives tobuild trust and improve relationship quality. Supply managers atCoach suggested that the capability-driven approach is motivatedby its own relentless pursuit of improvement. The fact that Coachexemplified the behavior it expects from suppliers helped buildtrust. This is reflective of the observation from a respondent at asupplier who explains, “Coach never settles for its current perfor-mance. They always want to do better. Coach is driven by a constantdesire to improve. Coach is pretty self-critical… pretty tough onthemselves.”

The need for better information (e.g. “donot share information on strategic initiatives,” “lack timely communication”)

Buyer imposing capability costs onsupplier (e.g. “they thrust initiatives on us with reward,” ”they push costs on us.”)

Buyer actions that adversely affectsupplier (e.g. “They don’t consider ourlead times,” “they nickel and dime us todeath”)

Inconsistent buyer behavior (e.g. “buyersare rotated too frequently,” “some buyers lack training or ethics”)

Perform to Promise

Behaviors Diminishing Trust

First-order Codes

First-order Codes

Theoretical Categories

Behaviors Promoting Trust

Sharing necessary information (e.g.“shares critical information to help us run our business,” “their systems provide visibility”)

Investing in supplier skills (e.g. “theycollaborate on valued initiatives,” “share insight and experience”)

Buyer actions that consider supplierneeds (e.g. “don’t over react to bad news,” “they adjust to meet our needs,”)

Good working relationships with buyers(e.g. “buyers are responsive,” “we enjoy working with them—they are goodpeople.”)

Information Sharing

Skill Enhancement

Empathy

Interpersonal Relationships

buyer performing to promise (e.g. “honors its order commitments as well as its commitments to the relationship,” “they always pay on time.”)

buyer failing to fulfill promises (e.g. “notfollowing through on commitments,”“open feedback leads to retribution”)

Fig. 1. Overview of data structure for concepts related to diminishing and promoting trust.


Supply managers at Coach describe two specific types ofskill-building behavior. First, they note that Coach actively initiatesvalue-added projects such as process improvement (e.g., warehouseoperations, truck loading) and technology adoption (e.g. informationsystems, radio frequency identification), and improving day-to-day storeoperations (e.g., department design, promotional planning, forecasting).The fact that these collaborative initiatives are designed to improve sup-ply chain efficiency and enhance end-market presence elicited positivecomments. For example, a manager at a small supplier noted that he

Table 2Behaviors and practices characterizing positive outcomes from trust bonds.

Behavioral dimension Representative quotes

Panel A: CoachSkill enhancement “An expectation that we participate in co-managed inventory allo

promotional planning;” “Coach creates a challenge and that's a goinsight, experience, scanning;”

Information sharing “provides great detailed data;” “information systems are far bettemuch of it is open sharing of data;” “the level of information Coa

Interpersonalrelationship

“we are more empowered;” “rely on us;” “ask for our input;” “givdeal of trust for our buyer;” “respectful in responses;” “accords m

Empathy “I don't feel I'm treated differently because I'm a small supplier;”greatest asset;” “when you do things well, they acknowledge it;”

Perform to promise “when Coach makes a commitment, they follow through;” “Coach

Panel B: ColleagueEmpathy “Colleague is flexible with their programs to help us manage inven

improve;” “They are understanding when we face a major challenrespect. It is refreshing to work with them;”

Information sharing “Provides great sales projections;” “They speak freely to me aboutwhen you are wrong; thank you when you are right;”

Interpersonalrelationship

“Wonderful people toworkwith–perhaps too nice at times;” “Respoare willing to spend the time to build the relationship;” “always pic

Skill enhancement “provide feedback regarding new products;” “they work for solutiomanagement and I'll get the help needed to resolve the problem

Perform to promise “It is nice to be paid on time;” “Colleague pays on time;” “pays bi

appreciates the fact that “the focus is to improve the business toimprove the customer experience.” There is a clear pattern in supplierrespondent's descriptions of Coach's behavior which is perceived bysuppliers as Coach desiring to help them grow their business.

Second, Coach's investments in improved supplier performanceare supported by Coach's fact-based decision-making, which enablesCoach to build a collaborative learning and working relationship.For instance, supplier respondents acknowledge that Coach, equallythe same as other major customers, is very demanding. But, they

ws up to collaborate and build trust;” “work together on department design andod thing. I like a challenge;” “They've helped us become a better company. Share

r than anybody else's system;” “information system is hugely beneficial to us;” “soch shares;” “provides us the best information to manage our business;”e us autonomy;” “we view them as the retail arm of our company;” “we have a greate respect;”“creates a sense of belonging;” “willing to work with us;” “our relationship is our

always pays on time—they don't nickel and dime us;”

tories;” “generous with their time;” “When a glitch occurs, Colleague gives us time toge;” “Flexible with ideas and willing to adjust when necessary.” “They treat us with

pricing decisions;” “Share sales forecasts that help us plan our operations;” “Tell you

nd to questions in a timelymanner;” “very appreciative—they say thank you a lot;” “theyk up the phone and are willing to resolve problems;” “they are very professional;”ns and are willing to think out of the box;” “when a situation arises, I can reach out toquickly”lls on time;”

Table 3Behaviors and practices characterizing negative outcomes from trust bonds.

Behavioraldimension

Representative quotes

Panel a: coachLack of empathy “Coach does not always recognize supplier lead times, especially out of China;” “They put so much pressure on you, but we look at the volume and say, ‘If

this is what it takes, we'll do it.” “Some corporate arrogance. Sometimes use suppliers as a stepping stone to cultivate good ideas and then they gooverseas leaving the suppliers behind;”

Neglectinterpersonalrelationship

“Inconsistency and inexperience among buyers makes life challenging;” “I hate to lose a good buyer, I'll tell you that;” “not as responsive as they couldbe;” “how can we build trust with constant turnover?” “Inexperienced buyers with big pencils.”

Impose costs of skillenhancement

“Require new programs that require up-front investments that can be painful.” “They mandate, ‘You will adopt this program’;” “Coach replenishment isstretched so thin they fail to communicate, leaving suppliers to cover added costs like expediting;”

Failure to performto promise

“Lack long-term commitment to plans. Create a vision or strategy for growth—sometimes it happens; sometimes it doesn't;” “Store level execution tomerchandising commitments often breaks down;” “Coach overloads its employees to the point that they cannot communicate let alone execute topromise;”

Insufficientinformationsharing

“We don't get the ‘why’ feedback;” “We don't receive customer knowledge. We have to manage with one eye closed;” “Coach isn't doing very well withcomparative data;” “need to share a little more strategic vision.”

Panel b: colleagueInsufficientinformationsharing

“we don't know how our product is being used;” “…like you have to feel your way through the dark.” “I'd like some benchmarking data to help us identifyopportunities for improvement;” “they leave us too far removed from the project to be effective;” “better long-term information about where theirprograms are going—its kind “a like a black hole;”

Failure to performto promise

“always one buyer who does not follow through . . . there is one who never seems to have enough time to do what he says his is going to do;” “when Isubmit a bid and don't hear back, get a little suspicious how they are using the information;”

Neglectinterpersonalrelationship

“it takes much longer to get feedback;” “the buyer does not always respond to my inquiries;” “send out mandates;” “there's implied pressure to holdprices to stay in a program;” “they force the supplier to bear all of the costs and risks;”

Lack of empathy “it's a very one-sided relationship;” “sometimes I don't knowwhere we stand. We get stuck in a holding pattern;” “I don't feel the buyer listens to me. Thebuyer gets locked into the way we have done business and is not willing to listen to new ideas;” “they keep asking for compressed lead times;” “pricingflexibility does not take into account commodity swings”


indicate with confidence that they know where they stand and whatthey have to do to be successful. Fact-based decision-making nurturesan environment where collaborative improvement can flourish. Thisis encapsulated by one account manager, “We have great brainstorm-ing sessions based on the feedback Coach shares about trends in themar-ket.” Another account manager elaborates,

“Coach is the only customer who's willing to have the collabora-tive discussion. For example, about a year ago, production costswere up. We were going to deliver a price advance. We started a“What if” discussion with Coach. The outcome was good foreveryone… It was a triple win—good for us, for Coach, and theend consumer.”

Suppliers note, “Coach shares an incredible amount of informa-tion.” Numerous supply managers note that Coach's informationsystem is “far ahead of anybody else's system.” Beyond improvingoperations, open information sharing improved supplier perceptionsof relational quality. A respondent explained, “Coach is moretransparent in its strategy and decision-making. We understandwhy we get or don't get a program. We can then improve what weare doing.” Transparency therefore appears to minimize what getsfrequently termed “game playing” by respondents and is translatedby suppliers as fairness.

To yield positive feelings and consistent performance improve-ments, Coach's information-enabled, capability-focused trust strategyrequires positive interpersonal relationships demonstrating a degreeof empathy. To promote this aspect of trust, Coach established twocore policies. First, a policy decision was made by Coach expectingbuyers to treat suppliers fairly. Supplier perceptions indicate thatbuyers generally follow this policy. Such behavior led many supplierrespondents to state, “we have a great deal of trust for ourbuyer.” Indeed, as the following quote shows, supply managersvalued collaborative buyer behavior, “Collaboration is the key.

Some buyers just get this… The collaborative spirit makes it easierto do business.”

Second, Coach established what it termed “an open-door policy,”inviting supply managers to speak to Coach's senior managers whenthey feel unfairly disadvantaged. Supplier respondents noted “seniormanagers are widely accessible.” More importantly, they felt confidentthat when buyers make adverse decisions, Coach's executives wouldre-evaluate to see if another approach can be found to diminish thenegative impact. Coach was even willing to use its resources tohelp suppliers avoid financial losses. Of course, supplier respondentsacknowledged that sometimes it did not make business sense forCoach to change a decision. Nonetheless, they felt Coach executiveswere willing to listen.

4.2. Colleague's empathy-focused trust pattern

Similar to Coach, existing company culture and policy withinColleague significantly influenced the management of supply relation-ships. From its inception, Colleague has cultivated an internal cultureof appreciation and respect with the goal of encouraging passion andcontribution across its workforce. Colleague's emphasis on apprecia-tion and respect elicits a strong sense among supply managers thatColleague is perceived as empathetic. A supplier respondent, illustra-tive of this pattern across the data, notes that buyers at Colleague“Treat people the way they want to be treated.” The account managerelaborated, “Colleague uses very proactive methods to solve problems.They are easy to work with and seek equitable solutions. We don'thave to be afraid to call or to meet face to face when a problem arises.There will be no shouting… no ranting and raving.”

Communication patterns at Colleague also promote a supplier'ssense of well-being. Because purchase decisions were based on factsand communication was perceived by suppliers to be open and honest,supply managers felt they knew where they stood. Supply managers


also noted that buyers at Colleague were good listeners—a trait theyperceived as communicating respect. Empathetic listening instilled asense of fairness and partnership into the buyer/supplier relationship.One supplier respondent expressed this point as follows in respect ofthe relationship structure, “They are open to our ideas and listen to usas we discuss how to grow our joint business. It is as if we are partnersin doing the business.”

Colleague's culture of respect promoted productive interpersonalrelationships between buyers and supply managers. Supply managersat both Colleague and its suppliers suggested that the cultureattracted a certain type of buyer—one more likely to persuade andcollaborate rather than employ what they labelled “bullying tactics.”Importantly, the “good people” at Colleague were exhibiting a varietyof “important relationship-building skills.” For instance, a supplierrespondent noted, “They are willing to spend the time to build therelationship. Some people just don't care.” One supplier related, “Theyshow respect by providing almost immediate responses after only onecall or e-mail. That doesn't happen much anymore. Most of the timeI'll have my response by the next morning… Colleague invests timeand emotional energy in the relationship…”

A willingness to share certain information supported Colleague'sempathy-based approach. Supply managers also consistently notedthat Colleague provides the best forecast and inventory informationin the industry. Suppliers valued this information because it helpedthem plan their operations for maximum efficiency. One supplieraccountmanager summedup awidely held attitude, “Weare extremelymetrics driven… We rely on the reliability of Colleague's forecasts.”Finally, supply managers suggested that when problems arise,Colleague was willing to “work for solutions and . . . think outof the box” as it participated in joint problem solving. For instance,a supplier respondent noted, “when a situation arises, I can reachout to management and I'll get the help needed to resolve the prob-lem quickly.”

4.3. Cross case summary and explanation of the trust-building paradox

Both case study firms' suppliers identify the same four facets ofcommitment—information sharing, skill enhancement, interper-sonal relationships, and empathy as positive features of the rela-tionship. In both cases there is a double edged sword to trustdevelopment.

Both cases demonstrate an in-built frustration in dealing with rela-tionship inertia, which appears to be variably evident to differentsides of the relationships in both case companies. Finally, differentdevelopment paths of trust as a balanced feature of social capital areevident. The case of Coach is dominated by capability building, whilstColleague is dominated by empathy maintenance, which we nowexplain in detail.

4.3.1. Coach's quest-for-improvement paradoxCoach's pursuit of improved performance creates a palpable tension

in supply relationships. Respondents at Coach maintained that tensionwas necessary to avoid complacency and assure long-term competitive-ness. Suppliers perceived the tension differently, arguing that Coachmay not fully realize how constant stress to raise the bar may bedetrimental to relationship quality and performance. Overall, theresponses of supply managers suggest that Coach seeks to navigatea delicate balancing act. Too aggressively pursued, the desire todrive improvement leads to adverse effects across all dimensions oftrust behavior.

The most prominent tension was in the area of empatheticdecision-making. Specifically, as the following quote denotes, thequest for improvement translated into immense pressure to reduceprices to win shelf space at Coach's retail outlets: “They put somuch pressure on you, but we look at the volume and say, ‘If this iswhat it takes, we'll do it.” Such pressure was amplified by competing

suppliers' irrational decisions. A supplier account manager explained,“When one supplier makes an unrealistic promise, it puts almostcrazy pressure on us. It doesn't make any sense to follow someonedown the stairs.” Suppliers' conciliatory communication exacerbatedthese potentially negative outcomes. One supplier account managerdescribed this as “Pressure to not want to appear as if you are not a‘partner’ leads to accommodation.”

The pressure to reduce costs magnified by insufficient empathyleads to more extreme examples of counter-productive behavior. Al-though infrequent, supplier respondents felt certain buyers at Coachwould share confidential product innovations with their foreign rivalsin order to obtain lower costs. Perceptions of this practice as unethicalbehavior not only hurt trust formation but it led to a negative publicimage amongst other suppliers.

Supply managers further suggest that Coach's efforts to improveprocess capabilities placed undue burdens on supplier resources.Additional costs arose when Coach failed to perform to promise.For instance, supply managers noted that when Coach changed anorder unilaterally, supplier operations were unsettled. That is,Coach operated on a much shorter lead time than its suppliers anddid not realize how long supply lead times could be, especiallywhen sourcing from an international facility. These challengeswere amplified when Coach failed to share the strategic informationsuppliers need to understand customers and invest in long-termcapacity and capabilities.

Suppliers identified deteriorating interpersonal relationships as aconcern that resulted from Coach's quest for constant improvement,and contributed to diminished empathy. Coach's inclusion of suppliersas part of the analysis team had allowed Coach to become, in the lan-guage of suppliers, too lean. Further, to create breadth of experienceand bring new insight into commodity management, Coach rotatedbuyers on a frequent basis. The consequence was that buyers were toostretched—and so constantly on the move—that they were not alwaysas responsive as supplierswould like. Day-to-day operations and strate-gic plans were also occasionally disrupted. The following three illustra-tive quotes from account managers at suppliers to Coach documenthow three aspects of behavior impeded interpersonal relationshipsand relational performance:

1. “Our group hesitates to really invest in building trust with thebuyer because we know Coach is going to move [them] within18 months anyway.”

2. “Momentum on collaborative efforts is lost by buyer turnover:When buyers turn over, that's the end of it. Sometimes we're leftorphaned.”

3. “Coach buyers are so busy they come off as if they just don't care. Itseems to be really tough for them to get things done—it's as if theyare always in a mad scramble.”

Overall, as Coach sought to excel in a more competitive and chaoticmarketplace it increasingly turned to its supply network for physical re-sources and improvement ideas. One manager within Coach suggeststhat, “Coach is at an intensity crossroads” and may be in jeopardy ofcrossing the fine line delineated by what he perceived to be “toughbut fair.” The natural result for Coach is summed up as “sharing thepain—not just the gain”with its supply network. It is paradoxical there-fore that the same quest for excellence which makes Coach a desiredally also makes Coach a demanding, difficult partner.

4.3.2. Colleague's pro-activity paradoxColleague's efforts to extend its internal culture of appreciation,

fairness, and respect to supplier relationships made Colleague a‘customer of choice’ for many of its suppliers. Even so, supplierresponses suggest that Colleague's likability may actually thwartrelational advantage. Too pervasively pursued, suppliers perceived“fair-and-friendly” buyer/supplier relationships undermined thelearning needed to capture and hold market share.


Substantively, suppliers felt Colleague was too satisfied withthe development of “friendly” relationships without striving to buildcollaboratively competitive relationships. Although suppliers trustedColleague to predictably perform to promise and to be easy to workwith, they doubted Colleague's desire to pursue deeper relationshipsand uniquely value-added collaboration. It was striking, in contrast,to witness the benefits of high degrees of relational capital (Gulati& Sytch, 2007; Lawson et al., 2008). Colleague's suppliers seldomdiscussed skill enhancement or proactive, resource-intensive colla-boration. Supplier respondents consistently explained that theyoften approach Colleague with two goals in mind: 1) to ask Colleagueto share more strategic information with them and 2) to inviteColleague to reach out to suppliers to participate in joint value crea-tion activities.

The limitations of Colleague's approach of building harmoniousbut not deeply value co-creative relationships was manifest in the in-formation Colleague did not share. Supply managers were frustratedby the lack of strategic, customer-oriented information. A supplieraccount manager noted, “Colleague is very secretive about who theircustomers are and what their customers are looking for. We do notknow how our products are positioned in their programs. Sometimesit's like ‘you have to feel your way through the dark.” More timely anddetailed information about relationship status was therefore perceivedas a means of strengthening collaboration. Comparing Colleague toother customers, a supplier account manager explained, “We'd like tosee how the vendor evaluation process works. . . . We have somecustomers that hold an annual performance review. We sit down foran hour and they share their feelings about our historical performanceand we talk about what is expected in the coming year.”

Interestingly, a clear pattern of evidence suggested that supplierswere sceptical about Colleague's investment in what they perceivedto be core processes, believing perhaps that likability adequatelysubstitutes for performance. This was linked to buyer training, asnoted by one supplier respondent; “There is always one buyer whodoes not follow through! Most are pretty good, but there is onewho never seems to have enough time to do what he says he isgoing to do.” The phenomenon also appears in process sophistica-tion. Supplier account managers explained that supply chain glitchescaused by Colleague's relatively weak systems imposed addedsupplier costs, with three key elements encapsulated in the followingextracts:

1. “Some direct ship orders come in with the wrong name andaddress. We ship to the wrong person at considerable expenseand ship twice or intercept in route. This increases costs andreduces overall customer satisfaction.”

2. “They need to look at their order and inbound logistics policiesto see how they can streamline them so that they do notcost their supply partners extra money to do business withthem.”

3. “As they keep asking for compressed lead times, everythingseems like it needs to be expedited. When that happens nothingis urgent anymore. As a result, we may have 30 orders we areworking on and hit 28, but we get a black eye for the two wemissed.”

Ultimately, suppliers doubted Colleague's willingness to capitalizeon relationship quality. Suppliers felt that such efforts were vital totheir ability to grow their businesses. Yet, Colleague's reticence tomove beyond amicable relationships to a cooperative strategy appearedpurposeful. Colleague's buyers were adamant that they were happywith the state of their supplier relationships. These buyers were insis-tent that suppliers could not or would not use more tightly coupledrelationships to create relational advantage. Colleague's managersseemed to trust more in their core culture than in the intent, resources,and creativity of their supply network.

5. Discussion

In both case study companies the key shortcoming identifiedby each set of suppliers to Coach and Colleague is the same: Lostopportunities to create more intensified value from cooperative inter-action. They are different in as much as trust development patternfollows distinct paths. In both patterns trust building is a balancedprocess to protect the firm from malfeasance whilst opening upvalue creation options not made available through contractingalone. This is different to risk-focused perspectives (e.g. Gargiulo &Ertug, 2006; Handfield & Bechtel, 2002; Poppo & Zenger, 2002)where conceptualizations of trust are dominated by comparisonswith contracting primarily to constrain malfeasance and accumulateprivate benefits.

Neither Colleague nor Coach appears to lack a capability tocultivate highly trusting relationships. Even so, their trust-buildingstrategies potentially hinder value co-creation. The objective of trustbuilding needs therefore to extend the uniformly positive perspectivepresented by Doney and Cannon (1997). The long-term benefitof relationships needs to be re-balanced by appreciating the effectsof relationship inertia, resource misallocation, and negative co-dependency. The risks from high trust patterns integrate the findingsof Uzzi (1997) where cognitive lock-in creates counter-productivedependency, resulting in an additional manifestation of resourcemis-allocation over and above that identified by Villena et al.(2011). We summarize these different risks from four relationaloutcomes in Fig. 2. It presents an integrated conceptualization ofthe benefits and risks likely to be encountered as trust is used as anenabler of relational advantage.

Partners therefore need to be realistic about the evidence ofincreasing inertia in relationships with high intensity and be able todemonstrate enough empathy to understand how decisions trulyaffect each side's well-being. This repositions trust within theresource-based view as a key antecedent of building relational capitalwith suppliers (Barney & Hansen, 1994; Chen et al., 2009), but eachpartner's intensity will not sum to a positive building of valuefor both sides. Loosely coupled relationships are well explainedby existing conceptualizations of trust in the relational view. Inparticular, the building of value is a function of five processes identi-fied by Doney and Cannon (1997). Each process contributes to thebuilding of intangible attributes which must be balanced over timeto deal primarily with the unequal vulnerabilities in buyer/supplierrelationships where relationship intensity is low. Our results exem-plify the need to not only select and build up a limited number of re-lationships, but to realistically assess if capabilities can be unequallydeveloped to the satisfaction of both parties over their extendedlifetime.

6. Conclusion and future research directions

Recent literature argues that a detrimental “dark side” to trustexists; yet, there are few studies that detail the behaviors whichcharacterize it. We sought to redress this critical gap. We identifiedtwo patterns of trust development (empathy-driven and capability-driven) that reflect a firm's approach to relationship development.Vitally, each development pattern appears to invoke different risks.Both patterns of trust are built over time, and develop from embed-ded internal cultural and policy norms, which carry over into externalrelationships. It is clear in both case studies that these norms, sharedby those at each case company, have considerable influence over theexpectations of relationships with suppliers.

Although empirical research regarding the consequences of trustoften assumes a positive, linear correlation with value co-creation,we observe a more complex and paradoxical interplay among thesephenomena. Our findings provide empirical support and extendthe conceptual arguments of Gargiulo and Ertug (2006) and Villena

Loosely Coupled

Em

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Tightly Coupled

Cap

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Relationship Intensity(Depends on Value-Creation Potential)

Key Benefit:Transactional Efficiency

Risks:• Buyer or supplier malfeasance• Relationship defection• Unequal capability development

Key Benefit:Harmonious Relationships

Risks:• Fail to create realizable value• Stifled relationship growth• Root motives unclear

Key Benefit:Collaborative Innovation

Risks:• Locked-in co-dependency• Resource misallocation• Disrupts relationship quality

Key Benefit:Responsive Relationships

Risks:• Relationship inertia• Failing to make tough decisions• Covert supplier malfeasance

Fig. 2. Key benefits and risks arising from trust in key supplier relationships.


et al. (2011) concerning the possibility of a negative curvilinearrelationship between relational capital (comprising trust, respectand reciprocity) and performance. Our research further suggests asequencing of relational inertia and resource misallocation, the needto consider the roles of skill enhancement, along with specific typesof information sharing, empathy, and dependability as features oftrust. An on-going assessment of the degree of relationship intensitybetween partners is needed.

Our findings further present a wider paradox when relationshipquality is assessed between a buyer and supplier. At both focal com-panies, the behaviors that led suppliers to 1) value the buying firmas a partner, 2) seek deeper relational embeddedness, and 3) pursuea value co-creation strategy simultaneously sowed the seeds for rela-tionship dissatisfaction. For both Coach and Colleague, relationshipcommitment is manifest across all four dimensions of informationsharing, skill enhancement, interpersonal relationships, and empathy.However, we observed distinct patterns of effort and investment.Focusing on Coach, deep relationship commitment portends intenseskill enhancement. Coach expects its suppliers to continuously im-prove and to work cooperatively on joint programs to improveefficiency and performance. Although Coach invests heavily in itssuppliers, suppliers are expected to bring significant resources tothe relationship. Without doubt it is useful to build trust via improvedrelationship performance with key suppliers; however, the conse-quent tensions caused by unbalanced capability building betweenfirms may undermine longer-term relationships, hurting futurevalue co-creation.

In the case of Colleague, buying managers deliberately and repeat-edly forewent opportunities to capitalise on the positive, harmoniousrelationship between themselves and their key suppliers. Althoughsuppliers to Colleague complained about a lack of what they perceiveto be openness, it reflects a lack of desire to engage in much deeperand more complex value co-creation relationships. Colleague isaccepting of the result: An obvious inertia within the relationshipwith little chance of jointly created innovation. But, Colleagueseems unwilling to engage in activities to alleviate this form ofembeddedness. This ‘lock-in’ was a clear pattern across all its keysupplier relationships, leading us to suggest a considerable challenge

presents itself in circumstances of closely coupled harmonious rela-tionships. In the case of Colleague this is deliberate co-creationunder-achievement; in other firms the gradual building of a patternof harmonious interactions with suppliers may lead to less obviousmissed opportunities.

Our study is only one of few seeking to describe and explore thedual role of trust as a supportive and detrimental feature of relation-ships. The case approach yields depth of insight into trust patterns,its key features and resulting outcomes. This lays the foundationfor future studies which can empirically generalize these findingsby developing specific measurement scales for trust patterns, rela-tionship intensity and relationship performance. Variables impor-tant to consider resulting from this study will be the emergence ofopportunism in key supplier relationships, the gradual loss of objec-tivity through relationship inertia, and the root motives of buyersand suppliers.

Building on the approach used in this research to study thepatterns of trust development over time, it may be fruitful to deploymethods aimed at longitudinal studies of relationships. Our studyadopts a conservative methodology in the sense that we did notseek to track the full life of relationships and relied on reflectionfrom multiple participants. An extended approach may be to uselongitudinal multiphase designs (Rousseau et al., 1998). AlthoughAnderson and Jap (2005) allude to likelihood of a difference in theprevalence of features reflective of trust-based risks in a given firm'skey supplier relationships, it would be useful to assess whether, bytracking the complete life of a relationship, it inevitably suffers fromclose relationship risk.

More generally, we have chosen a research strategy, which due toits data intensive nature, was best undertaken by studying dyads be-tween one buyer and multiple suppliers. It may be useful to considernetworked studies of the effect of trust. This may result in a clearerunderstanding of whether relationship inertia has a blinding effecton direct as well as indirect ties, and the breadth of relationships inan extended network, which can be resourced at one time. It willalso allow the further elaboration of our research results concerningthe consistency witnessed in the motives behind the patterns oftrust development in Colleague and Coach.

Firm Managerial level Firm industry Firm size

Coach • Senior vicepresidents• vice presidents• buyers

Retail Verylarge

Dorel Account manager Household products MediumL'Oreal Account manager Cosmetics Very

largeEvenflo Account manager

ReplenishmentmanagerInventory manager

Household products Small

Levi Account managerReplenishmentmanagerInventory manager

Apparel Medium

Bell Sports Account managerReplenishmentmanager

Athletic Small

Birds Eye Account manager Food SmallHartz Account manager

Replenishmentmanager

Pets Small

KIK International Account manager Consumer packagedgoods

Small

3M Account manager Industrial products Verylarge

Henkel Account manager Healthcare Verylarge

Vi-Jon Lab Account manager Healthcare SmallVF Account manager

ReplenishmentmanagerInventory managerAccount managerAccount manager

Apparel Large

UAV Account manager Entertainment SmallClorox Account manager

Inventory managerConsumer packagedgoods

Large

Sherwin Williams Account manager Household products LargeLeap Frog Account manager Toys SmallMohawk Account manager Flooring LargeMasco Account manager Building products Very

largeRevlon Account manager Cosmetics MediumNavarreCorporation

Account manager Logistics services Small

Stanley Account manager Tools MediumProcter & Gamble Account manager


Consumer products Verylarge

Infinity Account manager Apparel SmallGillette Account manager


Consumer products Verylarge

Kimberly Clark Account manager Consumer products Verylarge

J.M. Smuckers Account managerInventory manager

Food Medium

Targus Account manager Consumer products SmallSunbeam Account manager Electronics MediumNestle Purina Account manager Pets Very

largeSara Lee Account manager Food LargeJ&J Account manager Consumer products Very

largeHines Horticulture Account manager Horticulture products SmallColgate Palmolive Account manager Consumer products Very

largeGroton/Cheyenne Account manager Household products SmallGE Account manager

Inventory managerAppliances Very

largeKodak Account manager Consumer products LargeMaxell Account manager Entertainment Medium

(continued)


Lifetime Brands Account manager Household products SmallUnilever Account manager Consumer products LargeChurch & Dwight Account manager Consumer packaged

goodsMedium

Electronic Arts Account managerInventory manager

Electronics Medium

Spring Industries Account manager Household products MediumWrights Account manager Apparel SmallPerrigo Account manager Pharmaceutical MediumJacmel Account manager Jewelry SmallRubbermaid Account manager Household products LargeOxford industries Account manager

ReplenishmentmanagerInventory manager

Apparel Small

Panasonic Account manager Electronics Verylarge

Atari Account manager Electronics SmallImperial Toy Account manager Toys SmallOutdoor Cap Account manager Apparel SmallPico/Main Knitting Account manager Apparel SmallUnited Sugar Account manager Food MediumMad Catz Account manager Electronics SmallTHQ Account manager Entertainment SmallMaidenform Account manager Apparel SmallSteriliteCorporation

Account manager Household products Medium

Pfizer ConsumerGroup

Account manager Pharmaceuticals Verylarge

Russell-Newman Account manager Apparel SmallMcNeilNutritionals

Account manager Nutritionals Small

Vivendi Account manager Entertainment Verylarge

Phillips/Gemini Account manager Electronics Verylarge

General Mills Account manager Food LargeActivision Account manager


Entertainment Large

American Sugar Account manager Food MediumGRACO Account manager Household products SmallBlack and Decker Account manager Tools LargeHasbro Account manager Toys Medium

Small=Less than $1 Billion, Medium=Up to $5 B; Large=Up to $10 B; Very Large=Greater than $10 B.

Appendix A (continued)Appendix A. Background information on interview participants forCoach.


Background information on interview participants for Colleague


Colleague • VP supply chain• Commodity man-agers• VP marketing

Services/retail Medium

Zane's Cycles Account manager Athleticequipment

Small

Power Merchandizing Account manager Consumer goods SmallLinks Unlimited Account manager Athletic

equipmentSmall

Oneida Silversmith Account manager Jewelry SmallBomac International Account manager Jewelry SmallSpaFinder Account manager Services SmallBulova Watch Account manager Jewelry SmallTRG Group Inc. Account manager Consumer

productsSmall

Dunlop Sports Group Account manager Athleticequipment

Medium

Sharp Electronics Account manager Electronics Verylarge

Sony Electronics Account manager Electronics Verylarge

(continued)


Samsonite Corp. Account manager Consumerproducts

Medium

Victorinox Account manager Sports equipment SmallThomson, Inc. Account manager Electronics SmallBenchmark Clock Co. Account manager Consumer goods SmallSanford B2B Account manager Consumer goods SmallVisions Awards Account manager Consumer goods SmallSpectra Merchandizing Account manager Consumer goods SmallMikasa Account manager Consumer goods SmallBrainstorm Logistics Account manager Consumer goods SmallSun Lithographing Account manager Printing services SmallOlympus Account manager Electronics Very

largeWeber-StephenProductions

Account manager Consumer goods Small

Royal Chain Inc. Account manager Jewelry SmallClava Account manager Consumer goods SmallRastar Digital Med Account manager Printing services SmallBlack & Decker Account manager Tools LargeTTE Technology Account manager Distribution

servicesSmall

Imperial-Deltah Account manager Jewelry SmallIncentive Concepts Account manager Consulting SmallHoward Miller Clocks Account manager Furniture SmallKim International Account manager Jewelry SmallMajorica Account manager Jewelry SmallReflective Images Account manager Jewelry SmallExcell Manufacturing Account manager Consumer goods SmallCastle Merchandising Account manager Jewlery SmallBushnell Account manager Athletic

equipmentSmall

Tourneau Inc. Account manager Jewelry SmallMovado Account manager Apparel SmallFestina USA Account manager Jewelry SmallReed & Barton Account manager Consumer goods SmallAlpine Art Account manager Arts and crafts SmallBrinkman Corporation Account manager Consumer goods SmallReplogle Globes Account manager Consumer goods SmallBlack Pearl Luxury Account manager Travel agency SmallStuller Inc. Account manager Jewelry SmallAdvance Corporation Account manager Consumer goods SmallTag Heuer Account manager Jewelry SmallRidgeway Clocks Account manager Furniture SmallPremiumBag LLC Account manager Consumer goods SmallVivitar Account manager Electronics SmallICON Health & Fitness Account manager Athletic

equipmentSmall

Oregon Scientific Account manager Consumer goods SmallSeiko Time Corporation Account manager Jewelry SmallOrrefors Kosta Account manager Consumer goods SmallWaterford Crystal Account manager Consumer goods SmallJVC Account manager Electronics MediumPower Sales & Adventure Account manager Travel SmallDale & Thomas Popcorn Account manager Foods SmallAmerican Express Account manager Financial services Very

largeCoby Electronics Co. Account manager Electronics SmallTRG Group Inc. Account manager Consumer goods Small

Small=Less than $1 Billion, Medium=Up to $5 B; Large=Up to $10 B; Very Large=Greater than $10 B.

Appendix A (continued)


Appendix B. Interview protocol (supplier version)

Assessing trust in your relationship with Coach/Colleague

Reflecting on your experience working with Coach/Colleague as acustomer, please help us understand how Coach/Colleague either promotesor hinders trust development and collaboration in your relationship.Throughout our discussion, we will invite you to provide specific examplesof behaviors and practices that illustrate Coach's/Colleague's approach to

the trust development process. Please feel free to ask for clarification atany time during our discussion.

How would you characterize or describe trust?How much trust is there in your typical relationship with

customers?Howmuch trust is there in your relationship with Coach/Colleague?What does Coach/Colleague do to promote trust in its relationship

with your company? Please provide specific examples. (Promptregarding specific behaviors, practices, policies, cultural influences,and resource dedication.)

What does Coach/Colleague do that erodes trust in its relationshipwith your company? Please provide specific examples. (Prompt regardingspecific behaviors, practices, policies, cultural influences, and resourcededication.)

What best practices employed by your other customers shouldCoach/Colleague consider adopting to enhance trust in its relationshipwith your company? Please provide specific examples.

What else would you like to see Coach/Colleague do to build amore-collaborative, trust-based relationship with your company?Please provide specific examples.

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MarcDay is Professor of OperationsManagement at Henley Business School, University ofReading. He is Director of the Executive Full-Time MBA and teaches/researches in thefields of operations and supply management. He holds a PhD from Keele University andis an active consultant in the area of purchasing and supply management.

Stanley E. Fawcett is the John B. Goddard Endowed Chair of Global Supply Chain Man-agement at the Goddard School of Business and Economics at Weber State University.He obtained his PhD at Arizona State University and taught atMichigan State and BrighamYoung University before joining the faculty atWeber State University. Stan is an active re-searcher and has published over 100 articles as well as five books. He has also taught pro-fessional development in SCM design and collaboration in Europe, North America, andSouth America.

Amydee M. Fawcett is a doctoral Candidate in Supply Chain Management at theWalton College of Business at the University of Arkansas. She is the managing directorfor Lateral Line Analytics. She obtained her MPA from the Romney Institute for PublicManagement at Brigham Young University.

Gregory M. Magnan is Professor at Albers School of Business and Economics at SeattleUniversity. He received his PhD in Production/Operations Management from MichiganState University. Greg's current teaching and research interests involve enhancing effec-tiveness and performance through supply chain integration strategies and leading changein organizations. Dr. Magnan was recently voted the Professor of the Year (2005) in SU'sAlbers School of Business and Economics. Greg regularly speaks and gives presentationson a wide variety of supply chain-related topics.

Documents

Trust and relational embeddedness: Exploring a paradox of trust pattern development in key supplier relationships