The effects of trust and distrust on ICT-enabled information sharing in supply chains. Evidence from small- and medium-sized enterprises in two developing economies

• DOI: https://doi.org/10.1108/IJLM-06-2017-0155
• Pages: 892-926
• Date: 12 August 2019
• Published date: 12 August 2019
• Author: Kristijan Mirkovski,Robert M. Davison,Maris G. Martinsons
• Subject Matter: Management science & operations

The effects of trust and distrust

on ICT-enabled information

sharing in supply chains

Evidence from small- and medium-sized

enterprises in two developing economies

Kristijan Mirkovski

Department of Information Systems and Business Analytics,

Deakin University, Melbourne, Australia

Robert M. Davison

Department of Information Systems, College of Business,

City University of Hong Kong, Hong Kong, and

Maris G. Martinsons

Department of Management, College of Business,

City University of Hong Kong, Hong Kong

Abstract

Purpose –Drawing on transaction cost economics (TCE) and social exchange theory (SET), the purpose of

this paper is to explain why and how external environment, governance structures and interpersonal

relationships influence information and communication technology (ICT)-enabled information sharing in

supply chains (SCs) of small- and medium-sized enterprises (SMEs) from developing economies.

Design/methodology/approach –Theauthors adopt a theory-building approachusing a multiplecase study

design, including four SMEs operating in SCs from two developing economies (i.e. Republic of North Macedonia

and People’s Republic of China), in which the authors conductboth within-case and cross-case analyses.

Findings –Social bonds (known as vrski in Macedonian and guanxi in Chinese) were found to govern

buyer–supplier exchanges by supporting the establishment of personal trust and the reduction of distrust.

These social bonds compensate for the institutional deficiencies in developing economies and thus encourage

ICT-enabled information sharing by SMEs in their SCs.

Research limitations/implications –By applying the theoretical perspectives of TCE and SET to the

cross-case analysis, the authors develop nine propositions to explain ICT-enabled information sharing and its

interdependencies with external environment, governance structures and interpersonal relationships in

developing economies. Further research is recommended to refine and test the generalizability of the

theoretical model.

Practical implications –Firms have to develop and nurture social bonds with their suppliers from

developing economies to reduce risks related to the environmental uncertainty and institutional voids. This

can increase trust and decrease distrust associated with ICT-enabled information sharing.

Originality/value –The study examines why and how external environment (environmental uncertainty

and institutional environment), social bonds (vrski and guanxi) and interpersonal mechanisms (trust and

distrust) influence ICT-enabled information sharing of SMEs operating in developing economies.

Keywords China, Europe, Small- to medium-sized enterprises, Case study, Information technology,

Buyer–supplier relationships, Food logistics

Paper type Research paper

Introduction

Developing economies often receive technology, particularly for industrialization,

automation and infrastructure. Most developing economies still face crises due to poor

governance, high population growth, political instability and structural dependence on

developed economies (Yeager, 2018). Their structural and contextual deficiencies make it

difficult for small- and medium-sized enterprises (SMEs) to achieve and sustain competitive

The International Journal of

Logistics Management

Vol. 30 No. 3, 2019

pp. 892-926

© Emerald PublishingLimited

0957-4093

DOI 10.1108/IJLM-06-2017-0155

Received 17 June 2017

Revised 10 May 2019

Accepted 19 May 2019

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

www.emeraldinsight.com/0957-4093.htm

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IJLM

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advantages (Tang and Hull, 2012). Nevertheless, organizational survival in hyper-

competitive and dynamic markets largely depends on integrated supply chains (SCs) with

smooth information, material and financial flows, which lead to improved operational and

strategic performance (Leuschner et al., 2013). Thus, SMEs from developing economies need

to integrate their internal processes with SC partners to improve the overall SC performance

through intensive information sharing and collaboration (Rezaei et al., 2015).

Advancesin informationand communicationtechnologies (ICTs),especially enterprise-level

communication and collaboration technologies (e.g. e-mail, VoIP, web file hosting and video

conferencing) and SCmanagement technologies (e.g. electronic datainterchange, bar codesand

RFIDs), make it easier for firms to share timely information and thus collaborate effectively

with suppliers and customers (Zaheer and Trkman, 2017), integrating information across SCs

(Tseng and Liao, 2015). However, SMEs operating in developing economies still face the

challenge of ICT-enabled information sharing with SC partners, mainly due to the inherent

environmental uncertainty (Mirkovski et al., 2016). Furthermore, ICT-enabled information

sharing is notthe single most important determinantof successful SC integration. In isolation,

information sharing is insufficient to improve the SC performance as a whole (Fabbe-Costes

and Jahre, 2008), especially amid environmental tur bulence and institutional voids.

The environmental turbulence and institutional voids of developing economies can

hinder SC operations (Silvestre, 2015). Highly turbulent business environments can cause

organizational inertia that impedes organizational learning and innovation in SCs (March

and Olsen, 1975), whereas weak or absent institutions create voids that can increase

environmental uncertainty (Chadee and Roxas, 2013). Thus, SCs from developing economies

are prone to relational contracting, in which interpersonal mechanisms, such as trust and

distrust, facilitate or impede buyer–supplier exchanges (Monios and Bergqvist, 2016). This

is especially true in the highly fragmented and artisan-oriented wine SCs from developing

economies, where wineries work with various suppliers, such as grape farmers and

manufacturers of glass bottles, bottle capsules and corks, to create aesthetically appealing

bottled wines (Golicic et al., 2014).

Prior research has examined the influence of technological, organizational and

environmental factors on ICT adoption and use for information sharing and collaboration of

SMEs in developing economies. However, limited research exists on how the interplay

between external environment, governance structures and interpersonal mechanisms in

developing economies impacts the ICT-enabled information sharing of SMEs that is an

important constituent of SC collaboration. To the best of our knowledge, only one previous

study (Mirkovski et al., 2016) has explored the influence of environmental uncertainty,

contractual governance and relational governance on the ICT-enabled information sharing

of SMEs in developing economies. However, Mirkovski et al. (2016) only implicitly

considered the institutional environment, which partially depicts the complex external

environment in developing economies. They also did not consider the relationships between

interpersonal mechanisms and ICT-enabled information sharing, which are crucial for

information flows of SCs in developing economies.

To address this research gap, we modify Mirkovski et al.’s (2016) model to explicitly

consider the institutional environment and explore its relationship with governance

structures to provide a more comprehensive explanation of the external environment in

developing economies. Also, we investigate the relationships between interpersonal

mechanisms and SC collaboration to improve our understanding of how trust and distrust

moderate ICT-enabled information sharing in SCs from developing economies. Our main

contribution is the development of a comprehensive theoretical model that explains why and

how the external environment (environmental uncertainty and institutional environment),

social bonds (vrski and guanxi) and interpersonal mechanisms (trust and distrust) influence

ICT-enabled information sharing of SMEs operating in developing economies.

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ICT-enabled

information

sharing

Liu and Mckinnon (2016, p. 976) argued that due to “its economic, political and cultural

settings, [SC] development in China has presented new research challenges.”They

emphasized that existing western-developed theories have limited applicability and lack

contextualization, and thus called for development of more home-grown theories “through

emergence of new concepts which, with subsequent elaboration, integration, and validation,

would gain the status of a theory”(p. 990). In line with this call, we adopt a theory-building

approach using a multiple case study design. We studied four SMEs within the wine SCs of

two developing economies[1] –the Republic of North Macedonia and the People’s Republic

of China (hereafter referred as to Macedonia and China, respectively). From applying the

theoretical lenses of transaction cost economics (TCE) and social exchange theory (SET) to

the cross-case analysis, we develop nine propositions to explain how the interdependencies

between the external environment, governance structures and interpersonal mechanisms

impact ICT-enabled information sharing of SMEs in developing economies. Accordingly, we

attempt to answer the following research questions:

RQ1. How and why do environmental uncertainty and institutional environment impact

the governance structures of SMEs operating in SCs from developing economies?

RQ2. How do trust and distrust moderate the relationship between information

sharing and ICT-enabled information sharing of SMEs operating in SCs from

developing economies?

The rest of the paper is organized as follows. First, we review the literature to define the

research gap and establish our theoretical foundations. Second, we describe our research

methodology. Third, we present the within-case and cross-case analyses and then develop

our propositions. Last, we discuss our propositions in relation to existing literature and

summarize the contributions and limitations of our study.

Literature review

Environment, governance and interpersonal mechanisms in SCs

from developing economies

Environmental uncertainty and institutional environment are critical macro-conditions for

managing buyer–supplier relationships in developing economies (Luo and Yu, 2016).

Environmental uncertainty is the degree of change and instability in the environment (Dess

and Beard, 1984), which complicates the coordination between buyers and suppliers due to

incomplete and asymmetric i nformation (Krishnan et al., 2006). The institutional

environment is defined as the “elaboration of rules and requirements to which individual

organizations must conform in order to receive legitimacy and support”(Scott, 1995, p. 132).

Developing economies often lack rule-based institutional systems and are dominated by

relationship-based personalized exchanges that increase risk and transaction costs

(Williamson, 1985).

Prior research identifies two governance structures for regulating market exchanges:

contractual bonds and social bonds. Contractual bonds refer to SC partners’adherence to

specific written or oral agreements (Coleman, 1966), in which suppliers agree to manufacture

and deliver goods and are compensated for their work in accordance with the contact terms

(Wuyts and Geyskens, 2005). Social bonds are “the degree of mutual personal friendship and

liking shared by the buyer and seller”(Wilson, 1995), which are unwritten agreements

unenforceable by formal authority and power but rather reflect the aspiration to establish

and nurture a reputation of integrity and trust (Gligor and Holcomb, 2013).

In developing economies, such as Macedonia and China, where the rule of law and

enforcement of rights are weak, firms often rely on social bonds to achieve strategic

flexibility (Cao and Lumineau, 2015). Developing and nurturing social bonds with suppliers,

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