Partnering Implementation in SMEs: The Role of Trust

• Published in: Systems
• Main Authors: Arvind Kumar Vidyarthy, Thyagaraj S. Kuthambalayan
• Format: Article
• Language: English
• Published: MDPI AG 2024-10-01
• Subjects: power; partner match; trust; partnering implementation; resource dependence theory; structural equation modeling
• Online Access: https://www.mdpi.com/2079-8954/12/10/432

Resource Dependence Theory suggests that (a) power balance with resource interdependency, (b) formal/informal procedures for resource exchange, and (c) matching in goals and operational philosophies positively affect partnering implementation (information exchange and joint decision-making). Additionally, improved partnering implementation positive affects commitment fulfillment and dispute resolution. In a setting where SMEs supply to small local retailers, the SMEs do not suffer from low bargaining power and rely on informal contracts, and both firms are compatible. The small trading partners in this study predominantly have face-to-face and telephonic interactions with each other (possible due to the small number). Knowledge of one another and a simple transaction process reduces risk and uncertainty, and leads to trust. In this study, trust is a contextual factor, and we aim to determine if there is a positive effect of (a), (b), and (c) on partnering implementation, and if the effect strengthens with an increase in the level of trust. Survey data are used to calibrate and validate a structural equation model independently. Through empirical research, we aim to identify deviations in results, determine the cause of deviation in the study characteristics, and add explanatory power to research findings. Except for the influence of trust on the positive relationship between informal procedures and partnering implementation, the finding fits with the theoretical bases. With a high level of trust, clarity in time, accuracy, and relevance of information exchanged may be lacking, compromising decision-making and adding to the ambiguity of partnering implementation with an informal agreement.