Contextual Trustworthiness of Organizational Partners: Evidence from Nine School Networks

Abstract

Problem definition: Trustworthy partners in procurement and service relationships are an asset. How can organizations discern trustworthy from untrustworthy partners, especially early on, so as to not waste time or resources on bad relationships? Academic/practical relevance: Like prior studies, we take the perspective that organizations rarely know whether a partner is trustworthy, but also that organizations often have some evidence of a partner’s trustworthiness, even before interacting. We argue a qualitative study is needed to understand how people discern a partner’s trustworthiness and the consequences of initial perceptions on the relationship trajectory. Methodology: We conduct an interview-based study of how people discern trustworthy partners in a setting where doing so is challenging: the education sector. Kindergarten-through-12th-grade schools must choose outside partners to rely on for resources or services the school cannot afford. Potential partners are numerous and of variable trustworthiness. Results: We find people use contextual factors as evidence of a potential partner’s trustworthiness, such as the partner’s institutional affiliations, physical proximity, and relationships with other schools. Sometimes the evidence indicates that a partner acts intrinsically trustworthily, regardless of these contextual factors. In other cases, the evidence indicates a partner acts contextually trustworthily, meaning partners follow through in some conditions but not others. Intrinsically trustworthy partners provide valuable but standardized resources or services. Contextually trustworthy partners provide the competitive advantage: customized resources that are not easily accessible by other schools. Managerial implications: People in organizations identify trustworthy partners via contextual factors, which helps them determine whether a partner acts trustworthily independent of context or conditional on context. The value of intrinsically trustworthy partners derives from their low risk and high quality, whereas the value of contextually trustworthy partners derives from their willingness to customize resources or services to some—but not all—organizations.

The signaling effect of supplier's customer network instability on service price: Insights from the container shipping charter market

“…To mitigate information asymmetry, “both scholars and practitioners have begun considering the importance of evaluating suppliers' values in a network context ” (Yan et al, 2015, p. 53, italics added; Narasimhan & Narayanan, 2013). In this vein, a buyer's prior relational ties with the potential supplier itself serve as an important channel for information gathering about the supplier (Keppler et al, 2021; Krause et al, 2007). Relatedly, scholars have exhorted that buyers need to pay more attention to a supplier's network position and underscored the influence of supply network structure on buyer performance (Bellamy et al, 2014; Kim et al, 2011; Yan et al, 2015).…”

“…In fact, in a more general study, one of five buyers considered supplier failure to be the primary cause of reputation damage, customer trust loss, insurance premium increase, and regulatory fines (Mitchell, 2017). To avoid such undesirable costs, buyers aspire to partner with reliable suppliers, offering higher prices to them (Beer et al, 2018; Keppler et al, 2021).…”

Social embeddedness and supply chains: Doing business with friends versus making friends in business

“…In a socially embedded supply chain, the managerial ties between the senior leaders of the partner firms are bound by social exchange codes of mutual support, mutual trust, and mutual commitment (Gulati & Sytch, 2007). These social exchange codes will informally stipulate the economic exchanges between the supply chain partners and drive them to be more generous and supportive toward each other (Keppler et al., 2021). In such a manner, compared with arm's‐length transactions that are solely grounded on two firms' reliance on each other's resources and their calculation and competition to secure needed resources (Corbett et al., 2004; Lee et al., 2000), partner firms in socially embedded supply chains can more effectively coordinate their operations, resolve conflicts, and create joint value.…”

“…Prior network research has widely documented the benefits of such social embeddedness in interfirm relationships. Specifically, the social norms of mutual support and reciprocity attached to managerial ties steer two firms to act more cooperatively, generously, and trustworthily toward each other in their economic exchanges and collaboration (Keppler et al., 2021). As a result, such arrangements can closely bind two firms together, facilitating their coordination and communication, fostering mutual trust, mitigating conflicts, and advancing the value the two firms can jointly create (Dasgupta et al., 2021; Gulati & Sytch, 2007).…”