Does Trust Matter? Exploring the Effects of Interorganizational and Interpersonal Trust on Performance

TLDR

Trust, an inherently individual-level concept, poses a conceptual challenge when applied to interorganizational exchange to explain organizational performance. The study defines interpersonal and interorganizational trust as distinct constructs and examines their influence on negotiation costs, conflict, and exchange performance across two levels of analysis. Propositions were tested with a structural equation model on data from 107 buyer‑supplier relationships in the electrical equipment manufacturing industry. Results show that interpersonal and interorganizational trust are distinct, affect negotiation processes differently, and that trust overall positively influences exchange performance, though the link varies from initial expectations.

Abstract

A conceptual challenge in exploring the role of trust in interorganizational exchange is translating an inherently individual-level concept—trust—to the organizational-level outcome of performance. We define interpersonal and interorganizational trust as distinct constructs and draw on theories of interorganizational relations to derive a model of exchange performance. Specifically, we investigate the role of trust in interfirm exchange at two levels of analysis and assess its effects on negotiation costs, conflict, and ultimately performance. Propositions were tested with data from a sample of 107 buyer-supplier interfirm relationships in the electrical equipment manufacturing industry using a structural equation model. The results indicate that interpersonal and interorganizational trust are related but distinct constructs, and play different roles in affecting negotiation processes and exchange performance. Further, the hypotheses linking trust to performance receive some support, although the precise nature of the link is somewhat different than initially proposed. Overall, the results show that trust in interorganizational exchange relations clearly matters.