A multi‐theoretic perspective on trust and power in strategic supply chains

• Date: 01 March 2007
• Author: R. Duane Ireland,Justin W. Webb
• Published date: 01 March 2007
• DOI: http://doi.org/10.1016/j.jom.2006.05.004

A multi-theoretic perspective on trust and

power in strategic supply chains

R. Duane Ireland *, Justin W. Webb

1

Texas A&M University, Mays Business School, Department of Management, College Station, TX 77843-4221, United States

Available online 27 June 2006

Abstract

Strategic supply chains serve as a potential source of competitive advantage for firms. The ability of a strategy supply chain to

engender cultural competitiveness, or joint entrepreneurship and learning aimed at filling market gaps, is a key path through which a

strategic supply chain may become a competitive advantage. A balance of trust and power within the supply chain offsets

uncertainty and risks associated with the behaviors underlying cultural competitiveness. Using a multi-theoretic perspective, we

discuss four strategies that firms use to balance a climate of trust and power in a strategic supply chain. Identifying an authority,

generating a common supply chain identity, utilizing boundary spanning ties, and providing procedural and interactive justice are

the strategies we discuss.

#2006 Elsevier B.V. All rights reserved.

Keywords: Supply management; Organizational issues; Innovation

1. Introduction

Supply chains may serve as a source of competitive

advantage. A supply chain’s ability to synchronize

demand, supply, and innovation processes (Cecere

et al., 2004), optimize delivery speed and frequency (Ha

et al., 2003) and increase efficiency and service/product

quality (D’Avanzo et al., 2003; Morash et al., 1996) are

each possible reasons for this. Firms attempting to

develop supply chains as a source of competitive

advantage do so partly in recognition of the fact that

supply chain costs account for a large portion of

operating budgets (McKone-Sweet et al., 2005). Hence,

even minor declines in supply chain performance have

the potential to significantly decrease firm performance

(Hendricks and Singhal, 2003). While some firms

understand the practices leading to successful supply

chains, the complexity of supply chain management

leaves performance improvements elusive for many

others (Ellram et al., 2002). Failing to fully commit to

effectively using and managing their supply chain is a

major source of inefficiencies for firms. Low commit-

ment may be caused by a lack of available slack

resources and/or the fear of opportunism (Arend and

Wisner, 2005).

Strategic supply chains, the focus of this work, are

‘‘chains whose members are strategically,operationally,

and technologically integrated,’’ underscored by long-

term relations based on stability yet flexibility (Hult

et al., 2004, p. 241). When trust and power are

simultaneously managed between and/or among mem-

bers in strategic supply chains, firms become more fully

committed to supply chain efficiency and effectiveness.

As a unique type of interorganizational relationship,

www.elsevier.com/locate/jom

Journal of Operations Management 25 (2007) 482–497

* Corresponding author. Tel.: +1 979 862 3963.

E-mail addresses: direland@mays.tamu.edu (R.D. Ireland),

jwebb@mays.tamu.edu (J.W. Webb).

1

Tel.: +1 979 219 3399.

0272-6963/$ – see front matter #2006 Elsevier B.V. All rights reserved.

doi:10.1016/j.jom.2006.05.004

strategic supply chains realize increased efficiency and

effectiveness with moderately high levels of trust and

power among partners.

Herein, we integrate social capital theory, resource

dependency theory, and transaction costs theory to

present a framework for managing trust and power in

strategic supply chains. Utilizing the framework, we

examine strategies through which trust and power may

be appropriately balanced among those participating as

members of a strategic supply chain. As shown in Fig. 1,

identifying an authority, generating a common supply

chain identity, utilizing boundary spanning ties, and

providing procedural and interactive justice are

strategies that facilitate the evolution of a climate of

trust and power within strategic supply chains. This

climate creates a context within which the behaviors

that are necessary to develop cultural competitiveness,

or ‘‘the degree to which chains are predisposed to

[efficiently] detect and fill gaps between what the

market desires and what is currently offered’’ (Hult

et al., 2002, p. 577), is promoted.

We make three contributions to the supply chain

literature. First, in contrast to earlier supply chain work,

we examine trust and power as interdependent rather

than independent constructs. To do this, we initially

discuss the dynamics of trust and power at the dyadic-

level as the foundation for exploring how these variables

interact to form a network-level trust and power climate.

The second contribution is framed around the fact that

the existing supply chain research has primarily used an

economic lens to examine trust and power. Conversely,

we discuss how the integration of social considerations

with economic reasoning is pivotal to understanding

trust and power in supply chains. Examining trust and

power together through a socioeconomic lens allows us

to describe how strategic supply chains achieve cultural

competitiveness. This analysis leads to our third

contribution. Individual firms enter supply chain

relationships with varying interests and contexts. As

we argue, developing norms of reciprocity is the path

through which strategic supply chain partners mutually

interact to resolve their differences as well as their

concerns about potential opportunistic behavior. We

present and explain four strategic supply chain

strategies that may be used to form these highly

desirable norms of reciprocity. Over time, these

strategies can simultaneously facilitate a climate of

power that is needed to encourage change and action as

well as the trust that is required to elicit and support

cooperation and collaboration.

2. Theory development

Trust is a significant predictor of positive perfor-

mance within interorganizational relationships (Parkhe,

1993; Volery and Mensik, 1998; Currall and Inkpen,

2002; Garcia-Canal et al., 2002; Koka and Prescott,

2002). Evidence of this extends across multiple theories

of organization research. Within transaction cost

economics, for example, trust is viewed as a substitute

for costly control and coordination mechanisms

(Bromiley and Cummings, 1995). Social capital theory

argues that trust is a relational lubricant, allowing

greater benefits of knowledge transfer, joint learning,

and the sharing of risks and costs associated with

exploring and exploiting opportunities (Inkpen, 2001;

Nahapiet and Ghoshal, 1998). Each of these theories

describes somewhat different benefits garnered by trust

in interorganizational relationships; in each case

though, the form of trust primarily responsible for

such benefits is goodwill trust (defined later). Most

organizational theories fail to adequately describe how

goodwill trust emerges and is managed in organizations.

Compared to trust, power remains a more elusive

concept. Nonetheless, power plays a role in many

organizational theories such as resource dependency

theory and transaction cost economics. Power’s most

prominent theoretical position is as a key dependent

variable in resource dependency theory. In other

theoretical contexts, power is largely discussed in

terms of control, coercion, or legitimacy. Furthermore,

within all organizational theories, including resource

dependency, power is a unidimensional concept and is

wholly separate from trust. This is problematic, in our

view, in that several organizational theories such as

social capital theory and institutional theory argue that

social forces (e.g., trust and power) interact with

economic forces to predict the nature of interorganiza-

tional relationships.

In the following sections, we use several theoretical

lenses to discuss trust and power, highlighting the multi-

dimensional nature of and interactions between trust

and power. Initially, we discuss trust and power at the

R.D. Ireland, J.W. Webb /Journal of Operations Management 25 (2007) 482–497 483

Fig. 1. Strategies for creating a trust/power climate in strategic supply

chains, leading to cultural competitiveness.