The Moderating Role of Trust in Determining Inter-Firm Governance Mechanism and Perceived Performance

Although TCA has been a dominant framework in explaining inter-firm cooperation and control (cf. Rindfleisch and Heide 1997), TCA has been criticized for ignoring social contexts in which exchange parties are deeply embedded (Hagen and Choe 1998; Hill 1990; Granovetter 1985). Since exchange partners are social entities, they are likely to develop social relationships based on such relational factors as trust, commitment, interdependence, etc. (Dwyer, Schurr, and Oh 1987; Ring and Van de Ven 1994). Especially, trust has emerged as a central component in the channels literature (Wilson 1995). Trust is defined as a firm’s willingness to rely on an exchange partner whose behavior is not under its control (Mayer, Davis, and Shoorman 1995; Moorman, Zaltman, and Deshpande 1992; Swan, Trawick and Silva 1985; Zand 1972). Trust involves a firm’s belief that its exchange partner will perform actions that will result in positive outcomes as well as not take actions that will result in negative outcomes for the firm (Anderson and Narus 1990).