Innovation and Adoption in Emerging Industrial Markets: The Role of Trust and Commitment in Interfirm Relationships: An Abstract

Abstract

While business-to-business (B2B) firms proactively pursue global opportunities, doing business in emerging markets (EMs) obligates B2B managers to strategize specifically around the conditions prevalent in such settings (Mohan et al. 2018; Simões et al. 2015).

B2B marketing research has made significant inroads into examining emerging market (EM) phenomenon, which as the theoretical and empirical evidence shows, operates differently than developed markets. This is especially true of interfirm relationship dynamics, where social contracts, local culture, unique institutions, and special forms of relationships (e.g., Guanxi in China) that are unique to EMs require distinct relationship management protocols. However, our understanding of how interfirm relationships in EM settings influence one firm’s (i.e., supplier) decision to be innovative and another firm’s (i.e., customer) decision to adopt innovations is lacking. This is a significant concern as innovation decision making among suppliers and customers is important for both multinationals and domestic firms doing business in EMs because of its influence on firms’ innovation, relational, and performance prospects (Wu et al. 2016).

The purpose of this research, therefore, is to addresses how interfirm relationship dynamics among suppliers and customers in EMs influences key innovation-related decisions. Specifically, relying on commitment-trust theory (Morgan and Hunt 1994), the current research examines the relationship between supplier innovativeness and a customer’s innovation adoption behaviors among Chinese B2B firms. This social exchange perspective suggests that implied social contracts between B2B partners in EMs can establish a powerful mechanism that establishes norms and expectations in a relationship (Lee et al. 2015; Morgan and Hunt 1994). This regulating force or social capital includes relational resources like trust and commitment (Ireland et al. 2002), which can influence a customer’s ad hoc innovation adoption decisions (Asare et al. 2016).

Specifically, data collected from a large sample of top-level Chinese B2B executives shows that when interfirm communications are weak, supplier innovativeness can serve as a basis on which customers build trust in a supplier. This is due to the voluntary, innovative investments that a supplier commits that can benefit a customer. This, in turn, forges a reciprocal obligation or commitment on the part of customers which manifests in favorable adoption decisions. Overall, the findings present a unique picture of how the relationship management in EMs has a bearing on firms’ innovation-related decisions.