Trust and dependence are elementary qualities in customer–supplier relationships of networked organizations. Some level of trust is a necessary condition for all repeated interorganizational transactions (Das and Teng, 1998a and Ring and Van de Ven, 1992), and as a relationship develops further the interdependence between the partners is likely to increase (Pfeffer & Salancik, 1978). However, the increasing dependence may contribute the fear of partner's opportunistic behavior, the magnitude of expected coordination costs, and the difficulties of the relationship coordination (Gulati and Singh, 1998 and Krishnan et al., 2006). Indeed, due to the bounded rationality and uncertainty, it may be difficult to distinguish cooperative and trustworthy actors from those who will behave opportunistically (Williamson, 1985). In the worst case, the deepening of the relationship may end up to the self interest seeking of the partner firm causing the termination of the relationship if proper development of interfirm trust is not ensured. Thus, the complex relationship between trust and dependence produces a crucial challenge for successful relationship coordination and ultimately firm performance.
Earlier research focused on interfirm relationships (see e.g. Das and Teng, 2000, Dyer and Singh, 1998, Krishnan et al., 2006 and Ring and Van de Ven, 1992) is unanimous of the importance of trust in interfirm relationships in the increasingly complex and knowledge intensive business environment (Adler, 2001 and Smith et al., 1995). However, the relational and dynamic aspects of this construct, the relationship between trust and dependence in particular, have not received sufficient attention (cf. Doz, 1996, Summer, Inkpen and Currall, 2004 and Ring and Van de Ven, 1994).
Therefore, the aim of this paper is to address this research gap by examining how interfirm trust and dependence co-evolve in customer–supplier relationships. Building on a case study and earlier literature, we suggest a model that illustrates how inter-organizational trust and dependence are interlinked and co-evolve through the different phases of customer–supplier relationships. The proper understanding of the qualities of different evolutionary phases of an interfirm relationship provides us better possibilities to avoid the opportunistic behavior of the partner and to distinguish cooperative firms from the opportunistic ones. Thus, in addition to the theoretical contribution the model has direct implications for practice.
Comparing with earlier relationship literature, such as interorganizational relations in marketing and distribution channels (cf. Reve and Stern, 1979 and Stern and Reve, 1980, Summer), strategic alliance formation (cf. Das and Teng, 1998b, Doz, 1996, Summer and Parkhe, 1993), and joint venture arrangements (cf. Hennart, 1988, Inkpen and Currall, 2004 and Pfeffer and Nowak, 1976), this research focuses on industrial supplier relationships. Valuable research in the field of network relationships has been carried out, for instance, by Uppsala school for several years (see Håkansson & Snehota, 1989). In this study we partially exploit these theories, but still recognize the importance of transaction cost approach (see e.g. Williamson, 1979, October and Williamson, 1985) for industrial organizations. In contrast to earlier literature, we position this study between network and transaction cost approach to extensively understand the dynamics between trust and dependence.
The rest of paper is organized as follows: In the second section we describe the conceptual background of the study and elaborate the specific research questions. The research design and data are illustrated in the third section. In the fourth section we present the empirical evidence of the case study, identify the evolutionary dynamisms of trust and dependence in customer–supplier relationships, and develop a cyclical development model. Finally, we discuss about the contributions, limitations and managerial implications of the paper.
