The Influence of Interfirm Trust on Monitoring and Performance in Uncertain Environments

Abstract

An important question for manufacturers is the extent to which

control over the suppliers should be maintained when the interaction

occurs in an uncertain environment. It is proposed in this paper that

the level of trust(high and low) affect the manufacturers level of

monitoring and perceived supplier performance in uncertain

environments. The empirical results from US manufacturers indicate

the following: 1) When the trustworthiness of exchange partners is

questionable, manufacturers tend to increase the level of monitoring

over the supplier as they feel environmental uncertainty. On the other

hand, those who place a high level of trust in a partner may need to rely

on monitoring to a lesser extent regardless of environmental

uncertainty. 2) Supplier performance, as perceived by manufacturers, is

negatively associated with environmental uncertainty when a

manufacturers trust in its supplier is low, but it has no relationship

with environmental uncertainty when there is high trust.