Birds of a feather: Building trust in customer-supplier relationships

Abstract

This study examines the effect of board similarity on customer-supplier relationships using a sample of Chinese listed companies from 2007 to 2020. We introduce a novel measurement comprising six key dimensions of director characteristics to gauge board similarity. Our findings indicate that increased board similarity enhances cooperation between customers and suppliers. However, this effect is weakened by long distances, making trust-building challenging, and in highly marketized environments, where trust has less influence on business interactions. This study contributes to the existing literature on supply chain relationships, highlighting the role of effective governance mechanisms like board similarity in fostering inter-firm cooperation. Additionally, it offers practical insights for managers aiming to cultivate strategic partnerships and investors seeking a deeper understanding of supply chain dynamics.