Trust and duration of buyer-seller relationship in emerging markets

Abstract

PurposeThis study aims to examine how various components of interpersonal trust (affective and cognitive) influence the duration of buyer-seller relationships in the emerging market (EM) context of a heterogeneous market structure dominated by small, fragmented sellers/suppliers.Design/methodology/approachThe study proposes a hazard model for analyzing duration effects of interpersonal trust in the EM context. The model was validated using data on buying agents provided by 340 cocoa sellers/producers in Ghana, gathered from extensive field interviews.FindingsResults of the survival analysis reveal a limited but significant positive duration effect of cognitive (ability) trust only. Further analysis of sellers’ duration intentions (intention to remain with a buyer) also reveals a positive impact of affective trust but no impact of cognitive (ability and integrity) trust. Cocoa bean sellers’ evaluation of buying firms’ purchasing agents suggests that buying firms underperform on emotional/affective components of interpersonal trust, and that private firms outperform state buying agents on ability trust as well.Research limitations/implicationsWhile this study focused on the fragmented nature of sellers in the EM context, and the scope was limited to the sellers’ interpersonal trust perception of the buyer-seller, future research should examine both buyer and seller perceptions to obtain complete insight into the buyer-seller dyad in the EM context. In addition, the results of the duration effects identified in this study may not be generalizable to other EM export commodities, where channels have long been fully privatized. Ghana’s cocoa export marketing system was only recently privatized, and potentially has more sellers at the risk of adopting/switching relationships with their buyers than would be expected in more privatized expert commodity marketing systems.Practical implicationsManagers of export commodity buying firms in EMs can take advantage of the positive duration effects of cognitive trust by constantly improving the capabilities of their purchasing agents throughout the lifetime of their suppliers to sustain their relationship. However, sellers’ intention to switch can be mitigated by formalizing policies that encourage emotional bonds with sellers, especially small-scale producers in highly vulnerable bargaining positions. The aggregate output of small-scale producers could be of strategic importance in the future.Originality/valueManagers need systematic empirical evidence of the nature of duration effects of interpersonal trust given anecdotal evidence suggesting that managers have a tendency to emphasize cognitive trust over affective/emotional trust. Further, the applicability of such evidence in the EM context is critical given unique conditions such as highly fragmented sellers dealing with relatively large corporations.