Commitment in BOP Markets: The Interaction Effects of Contracting and Product Market Voids

Abstract

Sourcing from BoP suppliers is material for sustainable sourcing practices in the food supply chain. Buying firms need to develop the commitment of their suppliers to capture value from supplier development programs, and also to hedge their operations against climate change and food security issues. In this regard, this research contributes to the literature of sustainable sourcing by addressing how buying firms can build supplier’s commitment in BoP markets. This paper tests a model in which trust, and power, the main predictors of commitment, are conditioned by the presence of product, and contracting voids. The results indicate that trust is more effective to earn commitment when the presence of contracting voids are higher. On the other hand, coercive power is a useful mechanism to earn supplier’s commitment in contexts of high product market voids. Furthermore, there are mixed results for trust in contexts of high product market voids. In this regard, similar to findings in the Chinese context, buying firms substitute the absence of formal institutions with relational norms of governance. Hence, this research adds empirical evidence to the explanatory power of trust and power for developing collaborative relationships.