Trust as a determinant of upstream and downstream long-term orientation in SME business relationships
Over the last two decades, business-to-business (b-to-b) relationships have received considerable attention through the recognition that it is possible to increase profitability through relational (exchange governed by norms of long-tern co-operation, mutual satisfaction, trust and open communication) rather than discrete (exchange that is arms-length, short-term and centred on self-interest) exchanges. One of the construct's which has received considerable attention within the b-to-b exchange process is trust. Several studies have highlighted trust as a central construct in understanding, building, maintenance and growth of business relationships. The role of trust in business exchanges between large organisations has been extensively researched and reported. However, very little research has been undertaken in terms of the impact of trust in SME relationships. The proposed research attempts to contribute towards this omission. An approach utilising a modification of Ganesan's (1994) model of retailer's and, vendor's long-tern orientation that looks at the antecedents of trust and their effect on long-term orientation is adopted. Change to the model, as suggested by Ganesan (1994), is incorporation of behavioural antecedents (relational norms) of trust. The result is a testable model that has been applied for assessing the relative impact of cognitive and behavioural trust on the upstream (supplier) and downstream (customer) long-term orientation (LTD) in SMEs when they are engaged in overall/mutual, symmetric and asymmetric exchanges. Hence the model is tested within the relational set-up that involved 8MEs and other partner organisations (i.e., SMEs and Medium-to-large organisations). The analysis conducted at three relational levels showed the following key outcomes: 1. The overall upstream and downstream analysis (where SME was involved in both symmetric and asymmetric relationships) indicates a major overlap between the proposed research findings and reported trust findings (profoundly related to large organisation studies). There was clear evidence that both cognitive and behavioural trust lead to LTO. 2. Within the symmetric (i.e., SME-to-SME) relationship analysis there was clear evidence that it was the presence of cognitive trust that led to LTO. Therefore relationships were largely driven by the credible proof (i.e., reputation and skill) of suitability. 3. In asymmetric (i.e., Small to Medium-to-large organisation) relationship analysis there was no clear evidence of either cognitive or behavioural trust being determinant of LTO. However both transaction specific investments (cognitive trust antecedent) and flexibility (behavioural trust antecedent) had a significant effect on inter-organisational trust.