The need of trust between partners is the most important key and a basic requirement in maintaining a relationship between buyer and supplier because it indicates a person’s reputation for trustworthiness on both a professional and personal level as well as credibility in a business situation (Melody et al). Moreover, in the research of Luciana, Ely, Andrew and Rafael (2013), trust is a key for the development of partnerships between the different agents of a supply chain, distinguished between interpersonal and inter-firm trust.
According the research of Melody et al, personal trust and organizational trust are the two major aspects of trust. Personal trust basically less formally defined rights and obligations whereas the proper contracts are just as a backing of legal commitment. For that reason, some researchers conclude that the non-use of written contracts characterize the mutual trust among the channel members. For organizational trust, it usually ensures their first-time customer’s credit history before business transactions and credit position. In a nutshell, credibility or trustworthiness is the based to further ensure the security and reliability in business dealing, while also a significant effect on long-term relationship.
When buyer and supplier trust each other in dealing business, the degree of complexity in their negotiations will reduce. Therefore, both parties save time and resources. Besides, if a high level of trust exists in both parties, buyer will tends to increase purchases from the suppliers which have the resources and commitment to produce a quality product of value for their customer (Stephen, Jeff and Laurent, 1999). In addition, higher levels of trust should result in improved financial performance, greater market penetration and enhanced customer relationships (Ian et al, 2009). As a result, they are on the path to build a long term buyer-supplier relationship among them which in a win-win situation. Moreover, trust in the buyer and supplier relationship can be transformed into a source of competitive advantage, this is due to the possible reduction in transactional costs, decisions making support regarding investments in the relationship specific assets and the possibility of sharing information between the partners will increase (Rogerio and Paulo, 2009).
Besides that, according to the research of Rogerio et al (2009), trust can be define as “one person’s confidence that the other person in the exchange relationship will not exploit its vulnerabilities”. Besides, trust in the buyer and supplier relationship can be seen as an important root of competitive advantage due to three aspects: (1) it lowers transaction costs, (2) facilitates investment in relation-specific assets, and (3) leads to superior information sharing routines among the partners. Therefore, trust is the central aspects for the supply chain relationship success (Ely et al, 2008). Therefore, we hypothesize that
H1: Trust is positive...