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

AuthorKristijan Mirkovski, Robert M. Davison, Maris G. Martinsons
DOIhttps://doi.org/10.1108/IJLM-06-2017-0155
Pages892-926
Publication Date12 Aug 2019
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 Peoples 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
buyersupplier 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,
Buyersupplier 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
892
IJLM
30,3
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 buyersupplier 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.
893
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 Peoples 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 buyersupplier 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 partnersadherence 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,
894
IJLM
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