Trust Asymmetry and Changes in Supplier Performance: An Institutional View

Abstract

Despite the long recognition of the dyadic nature of interfirm trust, prior studies have not examined how trust asymmetry affects relationship outcomes. This study examines trust asymmetry in buyer-supplier exchanges from a dyadic perspective, predicting that when buyer trust is greater than supplier trust, trust asymmetry leads to a decrease in supplier performance over time. However, when suppliers trust more than buyers, the prediction is that trust asymmetry results in an increase in supplier performance. The study further incorporates an institutional view to examine the moderating roles of legal support and regulatory uncertainty. An analysis of a two-wave survey of 229 buyer-supplier dyads provides support for the effects of trust asymmetry. Moreover, legal support weakens the negative impact of buyer trust asymmetry and the positive role of supplier trust asymmetry, while regulatory uncertainty magnifies the influence of buyer trust asymmetry. These findings provide fresh insights into the dyadic nature of trusting relationships and offer important implications for trust research and for better management of firm exchange relationships.