Revisiting Interorganizational Trust: Is More Always Better or Could More Be Worse?

This study conducts an investigation of interorganizational trust and its positive and negative effects. We consider how positive and negative effects operate differently under two types of uncertainties-buyer dependence and market instability. Trust is studied in the buyer-supplier relationship (BSR) context from the buyer's perspective. The analysis is conducted based on survey data and secondary archival data from a sample of 133 BSRs. Results show that trust follows an inverted-U shape with performance. There is a point at which the negative effects of trust offset its benefits, and beyond that point, performance declines. The results also suggest that the positive and negative effects of trust become more pronounced when buyers are highly dependent on suppliers or when environmental uncertainty surrounding buyers is low. Trust's negative effects are more severe for those buyers that are highly dependent and operate in stable markets.