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

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 manufacturer’s 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 manufacturer’s trust in its supplier is low, but it has no relationship with environmental uncertainty when there is high trust