I know it when I see it: the nature of trust, trustworthiness signals, and strategic trust construction

• DOI: https://doi.org/10.1108/IJLM-11-2016-0268
• Published date: 13 November 2017
• Pages: 914-938
• Date: 13 November 2017
• Author: Stanley E. Fawcett,Yao Henry Jin,Amydee M. Fawcett,Gregory Magnan
• Subject Matter: Management science & operations,Logistics

I know it when I see it: the nature

of trust, trustworthiness signals,

and strategic trust construction

Stanley E. Fawcett

Department of Business Administration, Weber State University,

Ogden, Utah, USA

Yao Henry Jin

Department of Management, Miami University, Oxford, Ohio, USA

Amydee M. Fawcett

Department of Business Administration, Weber State University,

Ogden, Utah, USA, and

Gregory Magnan

Department of Marketing, Seattle University, Seattle, Washington, USA

Abstract

Purpose –Trust has long been viewed as a potential governance mechanism. However, recent research

discloses substantive incongruities in trust conceptualization and operationalization –especially in the supply

chain buyer/supplier context. The purpose of this paper is to develop an empirically grounded

conceptualization of trust and to explore the trust-construction process.

Design/methodology/approach –The authors used the communications rationality approach to elaborate

a three-stage qualitative study of supply chain trust. The authors first monologically examine trust by

interviewing managers from over 50 companies (as described). The list of trust behaviors are then dialogically

refined through 11 focus studies comprised of over 250 managers into different trust dimensions (as agreed

upon). Finally, the authors used two in-depth, dyadic case studies to examine the dynamic trust construction

process (as witnessed).

Findings –The authors find divergence in the way academics define trust and the way companies

operationalize trust. Missing in action is the notion of benevolence. In the supply chain setting, managers

describe trust as consisting of credibility and relationship commitment. Companies use an iterative approach

to signal trustworthiness. However, ambiguity increases the costs and decreases the effectiveness of

proactive trust construction as a form of supply chain governance.

Originality/value –The authors specify and evaluate novel constructs used to signal trustworthiness and

document why and how companies struggle to use the signaling process efficiently and effectively. For some,

this is an issue of managerial commitment. For others, this represents a lack of understanding of

trustworthiness signals and the trust-construction process. Ultimately, the authors develop a more robust

conceptualization of inter-organizational trust and present a roadmap for proactive trust construction.

Keywords Trust, Value co-creation, Case studies, Supply chain governance

Paper type Research paper

Companies are just beginning to learn what nations have always known: in a complex, uncertain

world filled withdangerous opponents, it is best not to go it alone (Kenichi Ohmae,McKinsey & Co.).

Introduction

Supply chain collaboration can help companies combine capabilities to co-create value and

earn relational rents (Fawcett et al., 2012; Mentzer et al., 2008; Devaraj et al., 2007).

Many firms, however, struggle to create distinctive value across organizational boundaries

(Power, 2005; Fawcett and Magnan, 2004; Jones et al., 2010; Fawcett et al., 2012). Constrained by

organizational conflict as well as by fearof opportunisticbehavior, managers findit difficult to

govern resource-sharing relationships ( Jones et al., 2010; Fawcett and Magnan, 2001;

The International Journal of

Logistics Management

Vol. 28 No. 4, 2017

pp. 914-938

© Emerald PublishingLimited

0957-4093

DOI 10.1108/IJLM-11-2016-0268

Received 17 November 2016

Revised 11 January 2017

Accepted 12 January 2017

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0957-4093.htm

914

IJLM

28,4

Read et al., 2014; Revilla and Knoppen, 2015). Specifically, managers do not effectively employ

trust as a governance mechanism to build relational capital and effective resource-sharing

routines (McEvily and Tortoriello, 2011; Mesquita, 2007; Li et al., 2014). Managers

must therefore rely on contracts to safeguard relationships or they forego investments in

relation-specific assets, avoiding the entanglements inherent in interdependent, integrated

capabilities (Hoyt and Huq, 2000; Roehrich and Lewis, 2014). A bsent trust, collaborative supply

chain alliances do not emerge and relational returns are lost (Wallenburg et al., 2011).

Extant research has shown that high levels of trust can improve profitability (Cao and

Zhang, 2011; Fawcett et al., 2012), enhance innovation effectiveness (Cao and Zhang, 2011;

Wang et al., 2011), and promote more collaborative, higher-performing supply chain

relationships (Fawcett et al., 2006; Wang et al., 2011; Jones et al., 2014; Ha et al., 2011).

By contrast, researchhas documented the cost of lost trust (Chenet al., 201 1). For example, in

the egregious case of General Motor’s J. Ignacio Lopez, the early 1990s decision to tear up

existing supplier contracts in order to pit suppliers against each other damaged GM’s

reputation among suppliers for over a decade (Magnan et al., 2011; Jin et al., 2013). Now, the

conundrum: theextant research as well as managerialanecdotes demonstratestwo vital gaps

in our understanding of how to use trust as an effective governance mechanism:

(1) Conceptualizationgap: although academics havelong and frequentlyinvestigated trust

as a foundational relational building block (Narasimhan et al., 2008; Fawcett et al., 2012),

recent research argues that trust conceptualizations lack consistency (Whipple et al.,

2013; McEvily and Tortoriello, 2011). Moreover, trust measurement is rudimentary

(McEvily and Tortoriello, 2011) and trust scales are underdeveloped (Ferrin , 2013).

(2) Construction gap: although managers talk “knowingly”about trust as a precursor to

alliance success, they admittedly do not grasp how to proactively cultivate trust as an

effectivegovernance mechanism (Jones et al., 2014; Day et al., 2013; Fawcett et al., 2012).

Given that trust enables collaborative gains, the time has come to close both gaps by taking

a closer look at trust conceptualization in the supply chain context as well as at the

processes and behaviors inherent in the trust-construction process.

Therefore, our purpose is twofold: first, to empirically conceptualize trust as a

governance mechanism and collaborative enabler (i.e. what is trust?) and second, to explore

the dynamics of the trust-construction process (how does trust emerge?). To do this, we use

a longitudinal, multi-method approach to revisit trust conceptualization in supply chain

relationships. We contribute to the study of trust’s role in relational advantage in three

ways. First, we propose a refined, capabilities-based conceptualization of inter-organization

trust. Second, we develop a proactive, signaling-based framework for constructing supply

chain trust. Third, we document bias in the way managers assess and interpret

trustworthiness signals, demonstrating a need to research trust using multiple key

informants across relationships.

Relational advantage and trust construction

The capabilities literature clarifies trust’sroleasagovernancemechanismaswellasits

contribution to collaboration and competitive advantage. Three points are particularly relevant:

(1) Distinctiveness: the essence of the resource-based view is that to outperform rivals,

firms must possess valuable, inimitable, rare, and non-substitutable (VRIN)

resources (Wernerfelt, 1984; Barney, 1991).

(2) Resource access: Dyer and Singh (1998, p. 650) emphasize that the capabilities

needed to achieve a VRIN advantage are often “embedded in inter-firm resources

and routines.”

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Strategic trust

construction