Abstract
Considerable extant research demonstrates the benefits of trust in buyer-seller relationships. More recent research points out downsides of the vulnerability inherent with trust. Recognizing this dilemma of trust, partners may offset the vulnerability of trust with verification strategies—efforts to produce information relevant to the exchange relationship. This research examines the use of three types of verification strategies—monitoring, assurances, and corroboration—which may be employed to safeguard against the vulnerability of trust. When control mechanisms like trust and information are combined, they may complement one another and enhance performance or function as substitutes, be redundant or compete, and consequently detract from performance. Emerging theory on combined modes of governance provides insights. We draw on this theory and develop hypotheses proposing that combinations of trust and verification may enhance or detract exchange performance—depending on the specific verification strategy. The hypotheses are tested on a sample of 230 buyer-supplier relationships. Results of the research provide some support for the proposed relationships and yield implications for the management of cooperative exchange relationships.
Similar content being viewed by others
Notes
The Madoff Ponzi scheme uncovered in 2008 relied on customers’ trust of Bernard Madoff.
These factors are further exacerbated given that as found by these researchers, “partners also remain surprisingly loyal within business relationships... dealers who believe their trusted supplier has abused them often react with resignation, silence and even loyalty” (Anderson and Jap 2005, p. 76).
The international relations literature has relevance for the study of marketing exchange relationships given it addresses “strategic situations ... involving a relationship of interdependence among a relatively small number of actors” (Abbott 1993, footnote 4). Many exchange relationships involve such circumstances, e.g., marketing channel, buyer-seller.
“Trust but verify” was made famous through President Ronald Reagan’s approach and statement to then General Secretary Mikail Gorbachev during talks concerning strategic arms control in the late eighties. When asked whether he trusted the overtures being made by Gorbachev, Reagan replied “Doveryai, no proveryai,” translated as “trust but verify” (New York Times, June 12, 1987, A12). Illustrating Reagan’s appreciation for the complexities of trust, the phrase went on to become a lexicon of U.S. arms control policy during the Reagan era. The phrase has since served as a touchstone for scholars and others fascinated by the anomalies of trust and its relationship to other strategies of governance within interdependent exchanges (cf., Krass 1985).
Indirect evidence of the performance enhancing benefits of at least one form of monitoring is provided by Noordewier et al. (1990). In their study of OEM purchasers, monitoring during the execution of an exchange agreement was conceptualized to be an element of relational governance. Their results suggest increasing the relational governance (including monitoring) of an exchange under conditions of high uncertainty leads to enhanced inventory and administrative performance.
References
Abbott, K. W. (1993). Trust but verify: the production of information in arms control treaties and other international agreements. Cornell International Law Journal, 26, 1–58.
Agustin, C., & Singh, J. (2005). Curvilinear effects of customer loyalty determinants in relational exchange. Journal of Marketing Research, 96–108.
Ahearne, M., Jelinek, R., & Jones, E. (2007). Examining the effect of salesperson service behavior in a competitive context. Journal of the Academy of Marketing Science, 603–616.
Aiken, K. D., & Boush, D. M. (2006). Trustmarks, objective-source ratings, and implied investments in advertising: investigating online trust and the context-specific nature of internet signals. Journal of the Academy of Marketing Science, 308–323.
Aiken, L. S., & West, S. G. (1991). Multiple regression: Testing and interpreting interactions. Newbury Park: Sage.
Anderson, J. C., & Gerbing, D. W. (1988). Structural equation modeling in practice: a review and recommended two-step approach. Psychological Bulletin, 103(3), 411–423.
Anderson, E., & Jap, S. D. (2005). The dark side of close relationships. MIT Sloan Management Review, 46, 75–82.
Anderson, E., & Oliver, R. L. (1987). Perspectives on behavior-based versus outcome-based salesforce control systems. Journal of Marketing, 76–88.
Anderson, E., & Weitz, B. A. (1989). Determinants of continuity in conventional industrial channel dyads. Marketing Science, 8, 310–323.
Armstrong, J. S., & Overton, T. S. (1977). Estimating nonresponse bias in mail surveys. Journal of Marketing Research, 14, 396–402.
Atuahene-Gima, K., & Li, H. (2002). When does trust matter? Antecedents and contingent effects of supervisee trust on performance in selling new products in China and the United States. Journal of Marketing, 66, 61–81.
Aulakh, P. S., Kotabe, M., & Sahay, A. (1996). Trust and performance in cross-border marketing partnerships: a behavioral approach. Journal of International Business Studies, 27(5), 1005–1032.
Bagozzi, R. P., & Yi, Y. (1988). On the evaluation of structural equation models. Journal of the Academy of Marketing Science, 16(1), 74–97.
Belsley, D. A., Kuh, E., & Welsh, R. E. (1980). Regression diagnostics: Identifying influential data and sources of collinearity. New York: Wiley and Sons.
Bergen, M., Dutta, S., & Walker, O. C., Jr. (1992). Agency relationships in marketing: a review of the implications and applications of agency theory and related theories. Journal of Marketing, 56, 1–24.
Blois, K. J. (1999). Trust in business to business relationships: an evaluation of its status. Journal of Management Studies, 36, 197–215.
Boyle, B., Dwyer, R. F., Robicheaux, R. A., & Simpson, J. T. (1992). Journal of Marketing, 29(4), 462–474.
Bradach, J. L., & Eccles, R. G. (1989). Price, authority, and trust. Annual Review of Sociology, 15, 97–118.
Bunn, M. D., & Clopton, S. W. (1993). Patterns of information source use across industrial purchase situations. Decision Sciences, 24(2), 457–478.
Campbell, D. T. (1955). The informant in quantitative research. American Journal of Sociology, 60, 339–342.
Cannon, J. P., & Homburg, C. (2001). Buyer-supplier relationships and customer firm costs. Journal of Marketing, 65, 29–43.
Cannon, J. P., & Perreault, W. D., Jr. (1999). Buyer-seller relationships in business markets. Journal of Marketing Research, 36, 439–461.
Cannon, J. P., Achrol, R., & Gundlach, G. T. (2000). Contracts norms, and plural form governance. Journal of the Academy of Marketing Science, 28, 180–194.
Celly, K. S., & Frazier, G. L. (1996). Outcome-based and behavior-based coordination efforts in channel relationships. Journal of Marketing Research, 33(2), 200–211.
Chiou, J.-S., & Droge, C. (2006). Service quality, trust, specific asset investment, and expertise: direct and indirect effects in a satisfaction-loyalty framework. Journal of the Academy of Marketing Science, 34(4), 613–627.
Churchill, G. A., Jr. (1979). A paradigm for developing better measures of marketing constructs. Journal of Marketing Research, 16, 64–73.
Clopton, S. W. (1984). Seller and buying firm factors affecting industrial buyers’ negotiation behavior and outcomes. Journal of Marketing Research, 21, 39–53.
Cohen, J., & Cohen, P. (1983). Applied multiple regression/correlation analysis for the behavioral sciences (2nd ed.). Hillsdale: Lawrence Erlbaum Associates.
Crosby, L. A., Evans, K. A., & Cowles, D. (1990). Relationship quality in services selling: an interpersonal influence perspective. Journal of Marketing, 54(3), 68–82.
Dahlstrom, R., & Nygaard, A. (1995). An exploratory investigation of interpersonal trust in new and mature market economies. Journal of Retailing, 339–362.
Deutsch, M. (1958). Trust and suspicion. Journal of Conflict Resolution, 2, 265–79.
Deutsch, M. (1962). Cooperation and trust: Some theoretical notes. In M. R. Jones (Ed.), Nebraska symposium on motivation (pp. 275–320). Lincoln: University of Nebraska Press.
Diamantopoulos, A., & Winklhofer, H. M. (2001). Index construction with formative indicators, An alternative to scale development. Journal of Marketing Research, 38, 269–277.
Dirks, K. T. (1999). The effects of interpersonal trust on work group performance. Journal of Applied Psychology, 84(3), 445–455.
Doney, P. M., & Cannon, J. P. (1997). An examination of the nature of trust in buyer-seller relationships. Journal of Marketing, 61, 35–51.
Dore, R. (1983). Goodwill and the spirit of market capitalism. British Journal of Sociology, 34, 459–482.
Emshwiller, J. R. (1991). Suppliers struggle to improve quality as big firms slash their vendor rolls. Wall Street Journal, B1, B2.
Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement errors. Journal of Marketing Research, 18, 39–51.
Frazier, G. L., & Sheth, J. N. (1985). An attitude-behavior framework for distribution channel management. Journal of Marketing, 49(3), 38–49.
Frazier, G. L., & Summers, J. O. (1984). Interfirm influence strategies and their application within distribution channels. Journal of Marketing, 48, 43–55.
Frey, B. (1997). A constitution for knaves crowds out civic virtues. Economic Journal, 107, 1043–1053.
Gambetta, D. (1988). Can we trust trust. In D. Gambetta (Ed.), Trust (pp. 213–237). Oxford: Basil Blackwell.
Ganesan, S. (1994). Determinants of long-term orientation in buyer-seller relationships. Journal of Marketing, 58, 1–19.
Geyskens, I., Steenkamp, J.-B. E. M., & Kumar, N. (1998). Generalizationas about trust in marketing channel relationships using meta-analysis. International Journal of Research in Marketing, 15(3), 223–248.
Ghoshal, S., & Moran, P. (1996). Bad for practice: a critique of the transaction cost theory. Academy of Management Review, 21(1), 13–47.
Gilliland, D. I., & Bello, D. C. (1997). The effect of output controls, process controls, and flexibility on export channel performance. Journal of Marketing, 61, 22–38.
Golembiewski, R. T., & McConkie, M. (1975). The centrality of interpersonal trust in group processes. In Theories in group process. New York: John Wiley.
Granovetter, M. (1985). Economic action and social structure: the problem of embeddedness. American Journal of Sociology, 91(3), 481–510.
Grayson, K., & Ambler, T. (1999). The dark side of long-term relationships in marketing services. Journal of Marketing Research, 36, 132–141.
Grayson, K., Johnson, D., & Chen, D. F. R. (2008). Is firm trust essential in a trusted environment? How trust in the business context influences customers. Journal of Marketing Research, 241–256.
Gundlach, G. T. (1994). Exchange governance: the role of legal and nonlegal approaches across the exchange process. Journal of Public Policy & Marketing, 13(2), 246–258.
Gundlach, G. T., & Achrol, R. S. (1993). Governance in exchange: contract law and its alternatives. Journal of Public Policy & Marketing, 12, 141–155.
Gundlach, G. T., Achrol, R. S., & Mentzer, J. T. (1995). The structure of commitment in exchange. Journal of Marketing, 59, 78–92.
Hamel, G. (1991). Competition for competence and inter-partner learning within international strategic alliances. Strategic Management Journal, 12, 83–103.
Heide, J. B. (1994). Inter-organizational governance in marketing channels. Journal of Marketing, 71–85.
Heide, J. B., & John, G. (1990). Alliances in industrial purchasing: the determinants of joint action in buyer-supplier relationships. Journal of Marketing Research, 27, 24–36.
Heide, J. B., & John, G. (1992). Do norms matter in marketing relationships? Journal of Marketing, 32–45.
Heide, J. B., Wathne, K. H., & Rokkan, A. I. (2007). Interfirm monitoring, social contracts and relationship outcomes. Journal of Marketing Research, 44, 425–433.
Ittner, C. D., Larcker, D. F., Nagar, V., & Rajan, M. V. (1999). Supplier selection, monitoring practices, and firm performance. Journal of Accounting and Public Policy, 18, 253–281.
Jap, S., & Anderson, E. (2003). Safeguarding interorganizational performance and continuity under ex-post opportunism. Management Science, 49(12), 1684–1701.
Jaworski, B. J. (1988). Toward a theory of marketing control: environmental context, control types, and consequences. Journal of Marketing, 52, 23–39.
Jensen, M. C., & Meckling, W. H. (1979). Rights and production functions an application to labor-managed firms and codetermination. Journal of Business, 52(4), 469–506.
Jöreskog, K. G., & Sörbom, D. (1993). LISREL 8, A guide to the program and applications. Chicago: SPSS Inc.
Kramer, R. M. (2009). Rethinking trust. In Harvard business review. 87, 68–87.
Kramer, R. M., Brewer, M. B., & Hanna, B. A. (1996). Collective trust and collective action: The decision to trust as a social decision. In R. M. Kramer & T. R. Tyler (Eds.), Trust in organizations: Frontiers of theory and research (pp. 357–389). London: Sage.
Krass, A. S. (1985). Verification and trust in arms control. Journal of Peaceful Resolution, 22, 285–288.
Kumar, N., Stern, L. W., & Achrol, R. S. (1992). Assessing reseller performance from the perspective of the supplier. Journal of Marketing Research, 29, 238–253.
Kumar, N., Scheer, L. K., & Steenkamp, J.-B. E. M. (1995). The effects of perceived interdependence on dealer attitudes. Journal of Marketing Research, 32, 348–356.
Lazzarini, S. G., Miller, G. J., & Zenger, T. R. (2004). Order with some law: complementarity versus substitution of formal and informal arrangements. Journal of Law Economics and Organization, 20(2), 261–298.
Lehmann, D. R., & O’Shaugnessy, J. (1974). Difference in attribute importance for different industrial products. Journal of Marketing, 38, 36–42.
Lewis, D. J., & Weigert, A. (1985). Trust as a social reality. Social Forces, 63(4), 967–985.
Liker, J. K., & Choi, T. Y. (2004). Building deep supplier relationships. Harvard Business Review, 82, 104–113.
Lindell, N. K., & Whitney, D. J. (2001). Accounting for common method variance in cross-sectional research designs. Journal of Applied Psychology, 86, 114–121.
Lippman, S. S., & McCall, J. J. (2001). Information, economics of. International Encyclopedia of the Social & Behavioral Sciences, pp. 7480–7486.
Lorenz, E. H. (1988). Neither friends nor strangers: Informal networks of subcontracting in French industry. In D. Gambetta (Ed.), Trust (pp. 194–210). Oxford: Basil Blackwell.
Luhmann, N. (1979). Trust and power. Chichester: Wiley.
Luhmann, N. (1988). Familiarity, confidence, trust: Problems and alternatives. In D. Gambetta (Ed.), Trust (pp. 94–107). Oxford: Basil Blackwell.
Macaulay, S. (1963). Non-contractual relations in business: a preliminary study. American Sociological Review, 28(1), 55–67.
Macneil, I. R. (1980). The new social contract: An inquiry into modern contractual relations. New Haven and London: Yale University Press.
Magnet, M. (1994). The new golden rule of business. Fortune, 60–64.
Malhotra, N. K., Kim, S. S., & Patil, A. (2006). Common method variance in IS research: a comparison of alternative approaches and a reanalysis of past research. Management Science, 52, 1865–1883.
Maltz, E., & Kohli, A. K. (1996). Market intelligence dissemination across functional boundaries. Journal of Marketing Research, 33, 47–61.
Mayer, R. C., Davis, J. H., & Schoorman, F. D. (1995). An integrative model of organizational trust. Academy of Management Review, 20(3), 709–734.
Merchant, K. (1990). The effects of financial controls on data manipulation and management myopia. Accounting, Organizations, and Society, 15(4), 297–313.
Mohr, J., Fisher, R. J., & Nevin, J. R. (1996). Collaborative communication in interfirm relationships: moderating effects of integration and control. Journal of Marketing, 60, 103–115.
Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2008). Purchasing and Supply Chain Management. South-Western Publishing.
Moorman, C., Deshpande, R., & Zaltman, G. (1993). Factors affecting trust in market research relationships. Journal of Marketing, 57, 81–101.
Morgan, R. M., & Hunt, S. D. (1994). The commitment-trust theory of relationship marketing. Journal of Marketing, 58, 20–38.
Murry, J. P., & Heide, J. B. (1998). Managing promotion program participation within manufacturer-retailer relationships. Journal of Marketing, 62, 58–69.
New York Times (1987). The President in Venice: Economics, contra aid and the gulf, Associated Press, A12, C2.
Noordewier, T., John, G., & Nevin, J. (1990). Performance outcomes of purchasing arrangements in industrial buyer-vendor relationships. Journal of Marketing, 54, 80–93.
Ouchi, W. G. (1979). A conceptual framework for the design of organizational control mechanisms. Management Science, 25, 833–848.
Ouchi, W. G. (1980). Markets, bureaucracies and clans. Administrative Science Quarterly, 25, 129–142.
Palmatier, R. W., Scheer, L. K., Evans, K. R., & Arnold, T. J. (2008). Achieving relationship marketing effectiveness in business-to-business exchanges. Journal of the Academy of Marketing Science, 174–190.
Podsakoff, P. M., MacKenzie, S. B., Jeong-Yeon, L., & Podsakoff, N. (2003). Common method biases in behavioral research: a critical review of the literature and recommended remedies. Journal of Applied Psychology, 88, 615–657.
Poppo, L., & Zenger, T. (2002). Do formal contracts and relational governance function as substitutes or complements? Strategic Management Journal, 23, 707–726.
Rao, A., & Monroe, K. B. (1996). Causes and consequences of price premiums. Journal of Business, 69, 511–536.
Rindfleisch, A., & Heide, J. B. (1997). Transition cost analysis: past, present and future applications. Journal of Marketing, 61, 30–54.
Rindfleisch, A., & Moorman, C. (2003). Interfirm cooperation and customer orientation. Journal of Marketing Research, 40, 421–436.
Ring, P. S., & Van de Ven, A. H. (1992). Structuring cooperative relationships between organizations. Strategic Management Journal, 13, 483–498.
Rose, C. M. (1995). Lecture: trust in the mirror of betrayal. Boston University Law Review, 75, 531–558.
Sako, M. (1992). Prices, quality and trust: Inter-firm relations in Britain and Japan. Cambridge: Cambridge University Press.
Sanchez, J. I., & Brock, P. (1996). Outcomes of perceived discrimination among hispanic employees: is diversity management an luxury or a necessity? Academy of Management Journal, 39, 704–719.
Scanzoni, J. (1979). Social exchange and behavioral interdependence. In R. L. Burgess & T. L. Huston (Eds.), Social exchange in developing relationships. New York: Academic.
Selnes, F., & Sallis, J. (2003). Promoting relationship learning. Journal of Marketing, 67, 80–95.
Slater, S. F., & Atuahene-Gima, K. (2004). Conducting survey research in strategic management. In D. Ketchen & D. Bergh (Eds.), Research methodology in strategic management (Volume 1, p. 227–250). JAI Press/Elsevier.
Smith, B., & Barclay, D. W. (1997). The effects of organizational differences and trust on the effectiveness of selling partner relationships. Journal of Marketing, 61, 3–21.
Snidal, D. (1985). The game theory of international politics. World Politics, 38(1), 25–57.
Spence, M. (1973). Job market signaling. Quarterly Journal of Economics, 87(3), 355–374.
Stein, A. A. (1982). Coordination and collaboration: regime in an anarchic world. International Organization, 36(2), 299–324.
Stinchcombe, A. I. (1985). Contracts as hierarchical documents. In A. L. Stinchcombe & C. Heimer (Eds.), Organization and project management (pp. 121–171). Oslo: Norwegian University Press.
Stump, R. L., & Heide, J. (1996). Controlling partner opportunism in industrial relationships. Journal of Marketing Research, 33, 431–441.
Wang, Q., Kayande, U., & Jap, S. (2008). The consequences and boundaries of incoherence in buyer-supplier relationships. Working Paper, August.
Wathne, K. H., & Heide, J. B. (2000). Opportunism in interfirm relationships: forms, outcomes and solutions. Journal of Marketing, 64, 36–51.
Williamson, O. E. (1985). The economic institutions of capitalism. New York: The Free.
Williamson, O. E. (1991). Comparative economic organization: the analysis of discrete structural alternatives. Administrative Science Quarterly, 36, 289–296.
Wilson, E. J. (1994). The relative importance of supplier selection criteria: a review and update. International Journal of Purchasing and Materials Management, 30, 35–41.
Zand, D. E. (1972). Trust and managerial problem solving. Administrative Science Quarterly, 17(2), 229–239.
Author information
Authors and Affiliations
Corresponding author
Additional information
Gregory T. Gundlach is Coggin Distinguished Professor in Marketing at the University of North Florida. Joseph P. Cannon is Associate Professor of Marketing at Colorado State University. The authors have contributed equally to this project and the order of authorship is random. The authors appreciate support from the National Association of Purchasing Management and the Purchasing Management Association of the Carolinas and Virginia. The authors appreciate comments from Kevin Bradford and Dave Gilliland on an earlier version of this manuscript.
Appendix
Appendix
Rights and permissions
About this article
Cite this article
Gundlach, G.T., Cannon, J.P. “Trust but verify”? The performance implications of verification strategies in trusting relationships. J. of the Acad. Mark. Sci. 38, 399–417 (2010). https://doi.org/10.1007/s11747-009-0180-y
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11747-009-0180-y