The role of trust and control in co-exploitation and co-exploration buyer supplier relationships

Abstract

We investigate the importance of trust and control-based governance in co-exploration and co-exploitation buyer-supplier relationships. We argue that alliance partners need to balance trust building and control mechanisms and that the optimal combination of control and trust varies with the relative emphasis on co-exploration and co-exploitation activities within any given buyer-supplier relationship. We conduct our study with a sample of 125 manufacturing firms located in Spain. Our work provides a more fine-grained understanding of the role of trust and control in different contexts. We also contribute to supply chain literature by uncovering a rather intriguing and counter-intuitive negative relationship between trust and supply chain integration. While the role of trust in generally believed to be positive in the formation of inter-organizational relationships, we found that in the day to day operation of the alliances (i.e., supply chain integration), the dominant governance mechanism is control whilst the impact of trust is negative.