Building the supplier's trust: Role of institutional forces and buyer firm practices

Abstract

We advance the knowledge on trust building in supply chains by studying the interplay between institutional forces and firm level practices. Based on institutional theory, we propose a conceptual model for investigating the influence of institutional forces on building the supplier's trust, mediated by buyer firm practices. Through an extensive review of the literature in various disciplines, we extract key latent variables of our research constructs. We consider legal protection, government support, and social networks as institutional forces, and assistance, procedural justice, and distributive justice as buyer firm practices. Based on survey data obtained from 122 suppliers in the South Korean manufacturing sector, the partial least squares (PLS) analysis result without mediating buyer firm practices shows that legal protection and government support, not social networks, are positively related to supplier's trust. However, the result with mediating buyer firm practices indicates that the influence of legal protection on trust is mediated by all three buyer firm practices, while the impact of government support is mediated by assistance and procedural justice. Moreover, social networks have an indirect effect on building the supplier's trust through its buyer firm's distributive justice. Overall, the study contributes to the literature on institutional theory and trust building, by examining how institutional forces enhance the supplier's trust via buyer firm practices. (C) 2016 Elsevier B.V. All rights reserved.