Trust and duration of buyer-seller relationship in emerging markets

Abstract

Purpose This study aims to examine how various components of interpersonal trust (affective and cognitive) influence the duration of buyer-seller relationships in the emerging market (EM) context of a heterogeneous market structure dominated by small, fragmented sellers/suppliers. Design/methodology/approach The study proposes a hazard model for analyzing duration effects of interpersonal trust in the EM context. The model was validated using data on buying agents provided by 340 cocoa sellers/producers in Ghana, gathered from extensive field interviews. Findings Results of the survival analysis reveal a limited but significant positive duration effect of cognitive (ability) trust only. Further analysis of sellers’ duration intentions (intention to remain with a buyer) also reveals a positive impact of affective trust but no impact of cognitive (ability and integrity) trust. Cocoa bean sellers’ evaluation of buying firms’ purchasing agents suggests that buying firms underperform on emotional/affective components of interpersonal trust, and that private firms outperform state buying agents on ability trust as well. Research limitations/implications While this study focused on the fragmented nature of sellers in the EM context, and the scope was limited to the sellers’ interpersonal trust perception of the buyer-seller, future research should examine both buyer and seller perceptions to obtain complete insight into the buyer-seller dyad in the EM context. In addition, the results of the duration effects identified in this study may not be generalizable to other EM export commodities, where channels have long been fully privatized. Ghana’s cocoa export marketing system was only recently privatized, and potentially has more sellers at the risk of adopting/switching relationships with their buyers than would be expected in more privatized expert commodity marketing systems. Practical implications Managers of export commodity buying firms in EMs can take advantage of the positive duration effects of cognitive trust by constantly improving the capabilities of their purchasing agents throughout the lifetime of their suppliers to sustain their relationship. However, sellers’ intention to switch can be mitigated by formalizing policies that encourage emotional bonds with sellers, especially small-scale producers in highly vulnerable bargaining positions. The aggregate output of small-scale producers could be of strategic importance in the future. Originality/value Managers need systematic empirical evidence of the nature of duration effects of interpersonal trust given anecdotal evidence suggesting that managers have a tendency to emphasize cognitive trust over affective/emotional trust. Further, the applicability of such evidence in the EM context is critical given unique conditions such as highly fragmented sellers dealing with relatively large corporations.

Power Imbalance and the Dark Side of the Captive Agri-food Supplier–Buyer Relationship

“…The paper concerns the relationship between buying agents, who are intermediaries between cocoa growers and the buying firms. Several events have been reported of unscrupulous conduct by various buying agents who undervalue sales from cocoa growers (Dadzie et al, 2018 ). The financial loss caused by inaccurate weighing of produce can be a source of cognitive distrust (Dadzie et al, 2018 ).…”

“…Several events have been reported of unscrupulous conduct by various buying agents who undervalue sales from cocoa growers (Dadzie et al, 2018 ). The financial loss caused by inaccurate weighing of produce can be a source of cognitive distrust (Dadzie et al, 2018 ). The global cocoa-chocolate market is estimated to reach $140 billion by 2024.…”

“…The global cocoa-chocolate market is estimated to reach $140 billion by 2024. Ghana is the second leading exporter of cocoa globally (Dadzie et al, 2018 ; Oomes et al, 2016 ). The national supply market has strong interconnections to the global cocoa-chocolate market.…”

Building Trustworthy Relationships with Smallholder(Small-scale) Agro-commodity Suppliers: Insights from the Ghana Cocoa Industry

“…Buyers can take several actions to enhance sellers’ perceptions of buyer integrity and ability. Dadzie, Dadzie, and Williams (2018) suggest that buyers could make efforts to share records and accounts associated with the produce weighing and purchasing transactions. Such an action is increasingly becoming a critical requirement as emerging markets liberalise their agro-commodity supply markets and exporting firms compete for market share in local export produce such as cocoa and coffee (Dadzie, Dadzie, and Williams 2018, p.137).…”

“…Dadzie, Dadzie, and Williams (2018) suggest that buyers could make efforts to share records and accounts associated with the produce weighing and purchasing transactions. Such an action is increasingly becoming a critical requirement as emerging markets liberalise their agro-commodity supply markets and exporting firms compete for market share in local export produce such as cocoa and coffee (Dadzie, Dadzie, and Williams 2018, p.137). Moreover, lead firms can train and align the objectives, incentives, and motivations of their sourcing managers, frontline staff and intermediaries who deal directly with SHACS as “accredited ethical agents” or “value chain connectors” (Buxton and Vorley 2012; Vorley and Thorpe 2014).…”