Effects of Dependence and Trust on Channel Satisfaction, Commitment and Cooperation

Mohammed Abdur Razzaque Tan Gay Boon

ABSTRACT. Although researchers in the area of channel behavior have examined issues of dependence and trust on satisfaction, commitment and cooperation independently, the joint effects of dependence and trust on the listed dependent variates have received little attention in the literature. This study seeks to fill that void via an experiment conducted in Singapore. Extending on the work of Andaleeb (1996), an experimental design to create treatment groups with differing levels of dependence and trust was used to establish the relationships between the dependent and independent constructs. Research results highlight the important mediating effect of trust on dependence in determining attitudinal and behavioral outcomes. Specifically, all three dependent constructs were rated highly under conditions of high trust, regardless of the level of dependence, pointing to the overbearing influence of trust in shaping channel dynamics. [Article copies available for a fee from The Haworth Document
Delivery Service: 1-800-HAWORTH. E-mail address: <docdelivery@haworthpress. com> Website: <http://www.HaworthPress.com> 2003 by The Haworth Press, Inc. All rights reserved.] Mohammed Abdur Razzaque is affiliated with the School of Marketing, The University of New South Wales. Tan Gay Boon is a Logistics Executive with a Singapore Company. Address correspondence to: Mohammed Abdur Razzaque, School of Marketing, The University of New South Wales, Sydney, NSW 2052, Australia (E-mail: ma. razzaque@unsw.edu.au). Journal of Business-to-Business Marketing, Vol. 10(4) 2003 http://www.haworthpress.com/store/product.asp?sku=J033 2003 by The Haworth Press, Inc. All rights reserved. 10.1300/J033v10n04_02

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KEYWORDS. Distribution Channels, dependence, trust, satisfaction, commitment, cooperation, Singapore

INTRODUCTION This research investigation seeks to empirically test some of the existing propositions about channel behaviors mainly derived from the US experiences in the context of an Asian market and thereby provide an opportunity to validate them from a broader perspective. Essentially a replication and extension of an earlier work by Andaleeb (1996), it examines the effects of different levels of dependence and trust on channel satisfaction, commitment and cooperation in the context of Singapore. More specifically, it seeks to reveal interaction effects between dependence and trust. Globalization of business and an ever-increasing level of competition have been forcing business firms all around the world to change their mode of operations. Traditional exchanges involving discrete inter-firm interactions and impersonal buyer-seller transactions (Macneil, 1980) are being replaced by relational type of exchanges characterized by high level of personal involvement, joint actions and long-term commitment. This marks the rise to prominence of relationship marketing, a paradigm shift that advocates inter-firm partnership and collaboration as the way to compete in a global marketplace. The transition described above is perhaps most vividly manifested in the conventional distribution channels where the participants specializing in different functions have to depend on each other for the channel to function effectively. In response to the constantly changing business environment of today, participants in many channel arrangements have changed their bases of competition. Adoption of supply chain management, which calls for even higher levels of coordination and commitment (Dertouzos et al., 1989; Houston and Gassenheimer, 1987), has yielded higher channel performance and satisfaction and resulted in stronger dependence amongst channel members. Usually channel relations are of long duration (Frazier and Summers, 1984) during which each member expects numerous interactions with another (Young and Wilkinson, 1989) and behave cooperatively. Trust, which underpins the collaborative relationships associated with relational exchanges and allows firms in the relationship to look beyond short-term returns (Ganesan, 1994), has a mediating effect on the behavioral outcomes in dependence relationships (Andaleeb, 1995). Dependence, with its different aspects such as types of influence strategies, symmetry of dependence, etc., plays a central role in determining behavioral

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outcomes and thus affects channel dynamics. For example, the use of coercive influence strategies results in greater dissatisfaction and conflict among channel members (Brown et al., 1983). Similarly, presence of trust or lack of it distinguishes relational partnerships from functional relationships (Levy and Weitz, 1995; Weitz et al., 1995); the high degree of cooperation and commitment in relationship marketing requires the presence of trust (Achrol, 1991). Literature presents a somewhat divergent stand on the relationships between some of the constructs referred to above. The effect of dependence on satisfaction, for instance, has been a long-standing moot point; while some (El-Ansary and Stern, 1972; Pfeffer and Salancik, 1978; Kotter, 1979) see dependence as detrimental to satisfaction, others (Lewis and Lambert, 1985; Andaleeb, 1996) suggest a positive relationship between the two. It is, however, important to note that there could be different types of relationships; satisfaction of one partner with the other and evaluation of one partners performance by the other vary across these various types (Cannon and Perrault, Jr., 1999). OBJECTIVE OF THE STUDY The trends discussed above have warranted a reexamination of concepts such as cooperation, commitment, trust, satisfaction and dependence in the context of channels since the ever-changing business environment of today may have altered the relationship between them substantially. Although much has been written about these concepts (Dwyer et al., 1987; Spekman, 1988; Anderson and Weitz, 1989, 1992; Anderson and Narus, 1990; Heide and John, 1990; Lorange and Roos, 1991), (i) most researchers have conducted their studies in the West; and (ii) none has incorporated all of them in a single study. Channel behaviors do vary between different cultural settings, and culture affects behavioral cooperation through mechanism selection or modification (Chao et al., 1998). Objective of this investigation, which integrates all the focal points, is to study these constructs in the context of an Asian market (Singapore), unravel new relationships, if any, and thereby provide an opportunity to test the validity of the theory in a non-US context. DEVELOPMENT OF HYPOTHESES To facilitate the development of the hypotheses to be tested in this study, a clear understanding of dependence, trust and their individual and joint effects

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on satisfaction, commitment and cooperation constitutes a logical starting point. Dependence: In this study, the term dependence refers to a firms need to maintain an exchange relationship with other firms to achieve desired goals. This conforms to the definitions proposed by Emerson (1962), Pfeffer and Salancik (1978), Frazier (1983), Buchanan (1992) and Andaleeb (1996). An organization must develop and maintain relationships with another organization that controls the scarce resources necessary to achieve its goals (Buchanan 1992). Dependence, and its inverse, power, are often viewed as key concepts in explaining organizational and interpersonal behaviors (Thorelli, 1986; Morgan and Hunt, 1994). Resource dependence theory describes channel relationships as a set of power relations arising from the acquisition and exchange of economic resources; channel member X controlling resources required by member Y acquires power to influence Y (Emerson, 1962; Pfeffer, 1981). Trade partners providing critical resources are difficult to substitute while those providing less important resources are easily replaceable (Buchanan, 1992). Therefore, the significance of the relationship and the firms ability to replace its partner are deemed to be closely related (Frazier, 1983). The symmetry of the relationshipanother important aspect of dependenceis determined by the extent to which partners value one anothers resources. A symmetric relationship values the resources of the two parties equally and exhibits high-to-low dependence levels. In an asymmetric relationship the resources are valued unequally and a less dependent party dominates the relationship. A symmetric high-dependence relationship engenders valuable resources as well as cooperation between partners. In an asymmetric relationship, dependence represents a tradeoff; the dominant partner provides valuable resources but may refuse to do so if supplying resources undermines its own programs and efforts (Buchanan, 1992). These differences between the two states may imply attitudinal differences with regard to satisfaction, commitment and cooperation. Trust: The term trust has been defined variously as ones beliefs about the motives and intent of another party (Pruitt, 1981; Butler and Cantrell, 1984; Rempel and Holmes, 1986), ones confidence in exchange partners reliability, integrity (Morgan and Hunt, 1994) and goodwill (Ring and Van De Ven, 1992). This investigation, however, concurs with Andaleebs (1996) interpretation of trust and views it as the willingness of a party to rely on the behaviors of others, especially when these behaviors have outcome implications for the party bestowing trust. Presence of trust between parties makes one confident and contented about the relationship by reducing the uncertainty about the outcomes in the relationship; absence of trust does just the opposite. Relationships

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lacking trust are typically unfulfilling and likely to be severed. Hence, trust is crucial in determining dependence relationships. Interactions between Dependence and Trust: The vulnerability resulting from high degrees of interdependence between channel members (Gundlach and Cadotte, 1994; Kumar et al., 1995) has motivated researchers to study trust in the context of distribution channels (Anderson and Weitz, 1989; Anderson and Narus, 1990; Morgan and Hunt 1994). However, not many of them studied the effects of dependence and trust separately (Kale, 1986; Keith et al., 1990) perhaps because of the implicit, but erroneous, assumption that dependence relations are characterized by trusting relations. Despite lack of trust, parties involved in a dependence relationship may continue the relationship because of the benefits it provides to both the parties (Arrow, 1974). As an illustration, consider an exchange relationship involving buyer B who depends on seller S for a critical resource. When B depends on but does not trust S, exchange can continue. But if S exploits B, which is possible in the absence of trust, the relationship is likely to worsen. However, the risks associated with and the uncertainties inherent in the dependence relationship become more acceptable in a trusting relationship because of an assuranceimplicit or even explicitthat expected outcomes will be achieved. On the contrary, when B does not depend on S due to the availability of alternative sources of supply (weak dependence), continued interaction is suspect. In this situation, trust may be the deciding factor in determining the outcome, although current marketing literature has yet to provide sufficient indication to support it. It is, therefore, proposed that high-low dependence perceptions will interact with high-low trust perceptions to define qualitatively different types of relationships that exhibit varying degrees of satisfaction, commitment (Andaleeb 1996) and cooperation. Main and Interaction Effects of Dependence and Trust on Satisfaction Satisfaction, which affects channel members morale, encourages participation in collective activities (Schul et al., 1985), prevents members from leaving the channel and seeking protective legislation (Hunt and Nevin, 1974), is crucial in understanding channel relationships. Although it has been defined in many different ways (Gaski and Nevin,1985; Ruekert and Churchill, 1984) this investigation views satisfaction as a positive affective state resulting from the appraisal of all aspects of a firms working relationship with another (Frazier et al., 1989; Gaski and Nevin, 1985). Literature supports a positive relationship between trust and satisfaction (Dwyer et al., 1987; Anderson and Narus, 1990) suggesting that presence of trust raises levels of performance and causes greater satisfaction (Kumar, 1996). One may question these on the grounds that for trust to be present, trust-

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ing parties must be vulnerable to some extent; decision outcomes must be uncertain but important to the trusting party (Deutsch,1962; Moorman et al., 1992; Schlenker et al., 1973); and it must be possible for the partner to abuse the trust (Luhmann, 1979). However, it is the ability of the parties to make a leap of faith (Kumar, 1996) that helps overcome these problems implying that each party is concerned about the others welfare and that neither will do something that can hurt the other. Schul et al. (1985) have suggested that the composite of trust, mutual respect and support is associated with higher satisfaction. These views tend to suggest that the presence of trust will engender a sense of security arising from the expectation that the bestowal of trust will result in positive outcomes, or not result in negative outcomes and should lead to greater satisfaction. Hence, it is posited that: H1: The greater the level of buyers trust in a supplier, the greater will be the buyers satisfaction in the relationship. Researchers attempts to establish some linksdirect or indirectbetween dependence and satisfaction (Dwyer 1980; Frazier et al., 1989; Anderson and Narus, 1990; Keith et al., 1990), have failed to yield any conclusive result. However, there is no denying that trade partners controlling resources important to the focal firm can influence latters strategic decisions (El-Ansary and Stern, 1972; Pfeffer and Salancik, 1978) adversely affecting its performance (Porter, 1980). Hence, such relationships are characterized by high degrees of conflict and dissatisfaction (Reve and Stern, 1979; Gaski, 1984). Literature tends to suggest that direct effect of dependence on channel members satisfaction is nebulous (Andaleeb, 1996); perhaps some other construct acts as moderating variable between them. Andaleeb (1996) notes that introduction of trust in dependence relationships better explains satisfaction through observation of the interaction effects. If in a situation involving limited alternative sources of a critical resource a buyer has to depend on a particular supplier, the buyers satisfaction in the relationship is likely to be affected by the extent of trust present in the relationship. High level of trust in the supplier is likely to exhibit low uncertainty associated with the expected outcomes and vice versa. Consequently, satisfaction is expected to be greater in the high dependence-high trust condition than that in the high dependence-low trust condition. If, on the contrary, the buyer is not dependent on the supplier as there are alternative sources of supply, the level of trust in the supplier will be less important in determining the buyers satisfaction. As a result, satisfaction will not be influenced by different levels of trust. Therefore, the following is hypothesized:

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H2a: When a buyer is dependent on a supplier, satisfaction of the buyer will be influenced by the level of buyers trust in the supplier. H2b: When a buyer is not dependent on a supplier, satisfaction of the buyer will not be influenced by the level of buyers trust in the supplier. Main and Interaction Effects of Dependence and Trust on Commitment Commitment is especially relevant in conventional distribution channels. Like other constructs discussed earlier, it has also been conceptualized in different ways. While Morgan and Hunt (1994) viewed it is the maximum effect toward maintaining a relationship, Iverson and Roy (1994) focused on turnover or attachment as the key factor. Gundlach et al. (1995), on the other hand, explained the construct as an aggregate of some form of investment, a psychological attachment, and a temporal phenomenon indicating that the relationship exists over time. This research synthesizes all these diverse views and defines commitment as an enduring desire to maintain a valued relationship, with expectation of continuity and intention to strengthen the relationship. If trust and commitment were viewed as mediators (Morgan and Hunt, 1994), the former would be a precursor of the latter; it is unlikely to establish commitment if trust is deficient as commitment usually involves potential vulnerability and sacrifice. Since short-term inequities are inherent in any relationship (Williamson, 1985), mutual trust is needed to develop confidence which will correct these inequities over time and yield long-term benefits (Dwyer et al., 1987). Trust also represents value (Arrow, 1974) that provides enhanced benefits to both parties in a relationship (Barber, 1983) by allowing them to take risks because ones partner is unlikely to act opportunistically (Morgan and Hunt,1994). Furthermore, the trusting party need not monitor its partners behaviors to safeguard self-interests (Andaleeb, 1996) which should foster mutual attachment and contribute to the continuity of the relationship. It is therefore posited that: H3: The greater the level of a buyers trust in a supplier, the greater will be the buyers commitment to the supplier. A buyers commitment to a supplier may also be influenced by the extent to which the latter fulfills its needs, as well as the availability of needed resources from alternative sources (Andaleeb, 1996). The dependent party in an exchange should therefore value the relationship and want to maintain it. It is generally believed that trade partners will realize benefits by establishing long-term relationships (Anderson and Weitz, 1989) and the relational norms

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needed to govern these relationships (Dwyer et al., 1987; Macneil, 1980). To establish these long term relationship and norms, trade partners may signal their intention by making credible commitments such as investment of their own resources. From this perspective, dependence should reinforce a partys commitment to the relationship, suggesting that: H4: The greater the buyers dependence on a supplier, the greater will be the buyers commitment to the relationship. By positing an interaction effect of trust and dependence on commitment, Andaleeb (1996) observed that the level of trust in low-dependence condition affected commitment while that in high-dependence condition did not. He argues that in a high dependence situation where the buyer has trust in the supplier, commitment should be high leading to identification with the partner. Even when the buyer has no trust in the supplier, anticipation of greater outcome uncertainties need not necessarily weaken commitment because essential resources are available from the relationship. However, in a low-dependence relationship lacking trust between the partners, commitment to the relationship is weak and the alliance is likely to be discontinued under the slightest prompting. Presence of trust in a low-dependence condition, on the contrary, influences commitment positively. Hence, the following hypotheses are postulated: H5a: When the buyer is dependent on the supplier, commitment of the buyer will be high, and unaffected by different levels of trust in the supplier. H5b: When the buyer is not dependent on the supplier, commitment of the buyer will be affected by different levels of trust in the supplier. Effects on Cooperation The fact that no businesses can be competitive and efficient without developing relationships with other members of the industry and distribution channel (Young and Wilkinson, 1989) underlies the importance of cooperation. Hence it is not surprising that almost four decades ago, Alderson (1965) voiced the need for the development of a corresponding cooperative theory like the competitive theory. Anderson and Narus (1990) define cooperation as similar or complementary coordinated actions taken by firms in interdependent relationships to achieve beneficial outcomes with expected reciprocation over time. Some early researchers (e.g., Pearson and Monoky 1976; Gattorna 1978; Ross et al., 1982) tended to perceive cooperation as the inverse of conflict. However,

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since their differences have been demonstrated empirically (Lusch and Ross, 1981), a few others viewed them as two separate concepts (Pearson, 1972; Robicheaux and El-Ansary, 1976). Social scientists emphasized the importance of trust in different cooperative social situations. For example, Twomey (1974) demonstrated a positive association between trust and conflict resolution while Reve (1981) has shown the importance of norms of exchangethe extent to which channel transactions are based on mutual trust in which the parties share a unit bondingin fostering channel cooperation. Similarly, Anderson and Narus (1990) observed that with the establishment of trust, firms learn that cooperation leads to outcomes exceeding what the firm would achieve acting for its own interest. In social psychology, trust has often been viewed as a precondition of cooperation; an individual must trust another to act in good faith before the former decides to cooperate with the latter (Deutsch, 1962) or to undertake high risk (Pruitt, 1981). However, Anderson and Narus (1990) have re-specified cooperation as being causally antecedent, rather than consequent to trust since trust in a partner develops as a result of past cooperation with the partner. Matthews and Shimoff (1979), Frazier (1983) and Dwyer and LaGace (1986) have endorsed this view. Notwithstanding whether cooperation is antecedent or consequent of trust, the positive association between the two remains consistent. Hence, the following hypothesis is posited: H6: The greater the level of the buyers trust in a supplier, the higher will be the buyers tendency to cooperate with the supplier. Dependence and power relations have long been linked to cooperation. The exercise of power is instrumental in fostering cooperation within a marketing channel (Stern and El-Ansary, 1992) while the importance of dependency results from resource scarcity or performance distress in producing inter-organizational cooperation (Schermerhorn 1975). Frazier and Summers (1984, 1986), Frazier and Rody (1991) and Skinner et al. (1992) have advocated the positive role of dependence in promoting effective coordination in exchange relationships. Bonoma (1976) suggests that levels of cooperation tend to be high in a unilateral power system, whereby one strong party exercises influence over a considerably weaker one. However, the notion of cooperativeness in this unilateral context often forces the weaker party to satisfy undue demands of its stronger counterpart. In marketing channels where each participant performs specific tasks, specialization creates significant functional interdependence compelling participants to cooperate (Robicheaux and El-Ansary, 1976). For example, manufacturers, who generally specialize in production, national promotion

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and physical distribution, and retailers, who specialize in local merchandising, assortment building and local promotion depend on each other to reach the final consumers. This dependency promotes joint actions from both parties in attaining goals such as reducing lead times, increasing responsiveness and lowering costs. On the other hand, large power retailers or category killers may not be as cooperative with the manufacturers since they may not be dependent on them. These arguments lead to the following hypothesis: H7: The greater the buyers dependence on a supplier, the higher will be the buyers tendency to cooperate with the supplier. Desirability of cooperation often comes in conflict with organizations preference for high levels of independence and autonomy (Stern and Brown 1969) and is constrained by time and effort the organization can devote to joint action with other organizations. This implies that firms will cooperate only under circumstances of necessity, particularly when dependency in the relationship is pronounced; levels of trust in the supplier has no affect on the buyers propensity to cooperate. Hence, no interaction effect is posited and following hypotheses are put forward: H8a: When the buyer is dependent on the supplier, the propensity of the buyer to cooperate will be high, and unaffected by different levels of trust in the supplier. H8b: When the buyer is not dependent on the supplier, the propensity of the buyer to cooperate will be low, and unaffected by different levels of trust in the supplier. RESEARCH DESIGN AND PROCESS To test the hypotheses presented above, this research uses an experimental design in line with similar studies conducted in the past (Sullivan and Peterson, 1982; Schurr and Ozanne, 1985; Andaleeb, 1996). This approach affords control over the research situation by facilitating evaluation of causal relationships among the variables and ensuring internal validity (Zikmund 1997). A 2 2 between group factorial design that combines two levels of dependence (highlow) with two levels of trust (high-low) to produce four experimental groups is chosen to allow the observation of both main and interaction effects. Following Andaleeb (1996), dependence and trust are manipulated using a set of four of short-case like scenarios describing situations reflecting the four treatment

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effectshigh dependence-high trust, high dependence-low trust, low dependence-high trust, and low dependence-low trust. Experimental Manipulations Each scenario describes a contrived relationship involving a manufacturer (supplier) and a distributor (buyer) which has been in place for about a year. A one-year duration is considered ideal for the investigation because too long a period may not be conducive for the low trust manipulation while a shorter duration is deemed inappropriate for the high trust manipulation (Andaleeb, 1996). The high dependence scenarios presented the supplier as a monopolist producing crucial components for the industry and the buyer as a small and insignificant customer who is dependent on the supplier for the components which are critical to the buyers production. Subjects perception of the buyers heavy dependence on the supplier is further accentuated by stressing that there are no ready substitutes for the components in question; and it is too expensive and thus infeasible for the buyer to switch to a new supplier. Low dependence is manipulated by reversing the above information. The supplier is portrayed as one of many producers in the industry, while the buyer is a big-time customer that all the suppliers in the industry want to do business with. The components are described as undifferentiated generic products that vary little from one supplier to the other. Hence, it is easy for the buyer to switch suppliers, creating a condition of low dependence on the supplier. In the high trust scenarios, the supplier is portrayed as very honest and reliable in its dealings with the buyer. It is highlighted that a close working relationship based on trust and communication has been built with the supplier. Underscoring communication is important because it is viewed as an antecedent of trust (Anderson et al., 1987). To reinforce perceptions of strong trust, subjects are told that the supplier has been conferred an award recognizing its integrity and trustworthiness by a contrived publication. Subjects are, however, not informed that the publication is fictitious to enhance the realism of the depictions. The opposite is projected in the low trust manipulation, where the supplier is described as dishonest, lacking integrity and unethical in its conduct with the buyer. Before responding to the questions following the scenarios, subjects are informed that there are no right or wrong answers. Sampling Procedure The subjects comprised 120 Singaporean managers and executives with corporate buying and selling experience representing a broad spectrum of industries. Using a judgmental sampling, they were selected from a class of 189

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participants attending a professional program in sales and marketing management. Questionnaires along with prepaid self-addressed envelopes were distributed to the subjects requesting them to return the completed questionnaires within a stipulated date. All the questionnaires were received in two weeks time. Subjects were randomly assigned to one of the four experimental groups to exclude any bias or undesired extraneous variables. Measurement Scales Five items are used to measure each of the five constructs namely, dependence, trust, satisfaction, commitment and cooperation. All the 25 items, each numbered for easy reference, are shown in Exhibit 1. One of the items in each of the scales has been reversed to test for subjects internal consistency. Most items used in the survey have been adopted or adapted from past studies. The five items measuring dependence reflect the criticality of the components needed and the availability of alternative supply sources. The notion that firms dependence in a channel is inversely related to the number of alternatives available to the channel (Robicheaux and El-Ansary, 1975) underlies items 1, 5 and 9 reflecting the buyers ability to switch between alternative suppliers and thus, its resultant dependence on a particular supplier. The argument that dependence is a function of the resources held by one party (Pfeffer and Salancik, 1978); and that criticality of the resources is a manifestation of the focal companys dependence on its supplier has also been operationalized [item 19]. Following this, the perceived importance of the supplier to the focal company has been viewed as a measure of the latters dependence in the exchange [item 16]. This is a new measure developed specifically for this study. However, its correlations with the other dependence measures have been deemed acceptable. Literature on trust (Larzelere and Huston, 1980; Dwyer and LaGace, 1986) suggests that the trusting partys confidence results from the belief that the trustworthy party is reliable [item 21] and helpful [item 11]. The expectation that one partner will not exploit the other [items 2, 24] demonstrates an act of trustthe belief that a partner will only do things that result in positive outcomes for the company and refrain from taking any action that may result in negative outcomes (Anderson and Narus, 1990). The argument that willingness to act is implicit in the conceptualization of trust (Morgan and Hunt, 1994) is reflected by item 8 measuring the focal firms willingness to make crucial purchasing decisions based on its suppliers suggestions. Satisfaction with the supplier has been measured by performance and the achievement of goals [item 6] (Robicheaux and El-Ansary, 1975; Skinner et al., 1992) and the propensity to make positive recommendations after satisfy-

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EXHIBIT 1. Statements Used to Operationalize the Variables (M Refers to the Supplier)

VARIABLES DEPENDENCE TRUST COMMITMENT COOPERATION DEPENDENCE SATISFACTION COOPERATION TRUST DEPENDENCE SATISFACTION TRUST COMMITMENT SATISFACTION COMMITMENT COOPERATION DEPENDENCE COOPERATION SATISFACTION DEPENDENCE COMMITMENT TRUST SATISFACTION COOPERATION TRUST COMMITMENT No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. Statements operationalizing the variable My alternate sources of filter component supply are limited. There is a need for me to monitor every aspect of transactions with M because he cannot be trusted. It is a good idea for me to commit to a long-term contract with M for my supply of filter components. My success is dependent on maintaining a good working relationship with M. It is easy for me to switch to another filter components supplier. I am satisfied with M's performance. My future goals are best reached by working with rather than against M. I can be confident of making crucial purchasing decisions based on M's suggestions. It is very difficult for me to switch to other suppliers even if I want to. I like the way M conducts his business relationship with me. I believe M will render help when needed, even when he has nothing to gain from helping me. It is not necessary for me to switch to a new supplier yet. I would not recommend M to my fellow manufacturers. I think it is good to further strengthen my ties with M. I will try my best to resolve any conflict with M. M is important to my business. There is no need for me to cooperate with M. I am satisfied with my relationship with M. The components supplied by M are critical to my operations. I would be better off if I terminate my relationship with M. I can rely on M to keep his promises. I consider M a good company with which to do business. I will tend to go along with M's wishes. I do not expect M to take advantage of me. I believe that my relationship with M is worth maintaining indefinitely.

ing encounters [item 13]. The remaining three items [10, 18, 22] measure satisfaction connected with various aspects of relationship. To measure overall commitment as indicated by a desire to continue the relationship this study uses a four-item scale [items 3, 12, 14 and 20] consistent with Morgan and Hunt (1994) and an additional new measure [item 25] which showed acceptable correlation with the other established measures. Organizational interdependencya basic concept representing cooperation (Schermerhorn, 1975)is captured by item 4 which emphasizes the importance

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of a good relationship with the partner. The scale also operationalizes the notion that resolution of conflict is a prerequisite for cooperation among channel members and efficient channel operations [item 15] (Frazier, 1983; Robicheaux and El-Ansary, 1975). The desire for having relationship between autonomous organizations [items 7, 17] is also a manifestation of inter-organizational cooperation (Schermerhorn, 1975). Item 23a new measure specifically developed for this study, reveals satisfactory correlation with the other four items. Since some new measures were used in developing the scales, a small scale pretest of the instrument was conducted using 24 BBA final year students from the National University of Singapore. Based on the feedback of the pretest, minor modifications were made to the research instrument to facilitate clarity and ease of understanding. For each of the 25 (5 5) items referred to above, subjects are required to respond to five-point Likert scales anchored at Strongly Agree (5) and Strongly Disagree (1). Reliability and Validity Analyses Reliability of the measures used in the study has been first confirmed by acceptable inter-item-correlation which for each scale exceeded the 0.30 suggested by Robinson et al. (1991). In addition, Cronbach alpha () values for each of the scales were computed. These values ranged between 0.76 and 0.93 indicating high internal consistency (Nunnally 1978) and thus, reliability of the scales. Items in the instrument were also assessed for content and construct validity. The fact that 20 out of 25 items adapted to the current context from other works with proven content validity, and that the pre-test yielded satisfactory results for all the 25 items (including the five specially developed for this study) confirms content validity of the measures. To measure the construct validity of the scales, item-total correlation [ITC] analysis and factor analysis [FA] using principal component analysis with varimax rotation were conducted. In each of the scales, item-to-total correlation values for all items exceeded 0.71 indicating that all the items contributed meaningfully to the respective scales they defined. Also, factor analysis confirmed unidimensionality of each scale with loadings greater than 0.72. Manipulation Checks Manipulation checks were conducted to assess the effectiveness of the experimental design and to ensure that subjects have correctly perceived the high

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and low conditions of dependence and trust so that valid conclusions can be drawn from the study. The items measuring dependence and trust were first subjected to a univariate analysis of variance (ANOVA) to uncover the significance of group differences. Results of the test indicated significant differences between the four treatment groups for both trust and dependence. Scheffes test revealed that subjects in the high-dependence condition rated the dependence scales significantly higher than those in the low-dependence condition. Similarly, subjects in the high-trust condition rate the trust scales significantly higher than those in the low-trust condition. These imply the success of experimental manipulations attempted in this research. At the overall alpha value (using 0.5 as acceptable), means within the same group are not significantly different with each other, while means in different subgroups are. Hypotheses Testing Efficacy Multivariate analysis of variance (MANOVA) is employed to test the main and interaction effects of dependence and trust on satisfaction, commitment and cooperation due to its efficacy in detecting the overall differences brought about by interactions amongst the dependent variables. In addition to controlling experiment-wide error rate (Hair et al. 1992), MANOVA can also provide dimensions of differences that can distinguish among the composite of variables better than individual variables. Research data satisfied the assumptions of linearity, normality, homogeneity of variance-covariance matrices for all treatment groups, and multi-collinearity between the dependent variables which are prerequisites for using MANOVA. The experiment has been conducted such that subjects responses were independent of one another and no time-ordered effects were present. It is reasonable to assume that observations were independent of one another. Summary results of MANOVA and ANOVA are shown in Table 1. RESULTS AND DISCUSSIONS Assessment of Overall Multivariate Differences Results of MANOVA reveal significant multivariate main effect of dependence (F = 26.456, p < .05), trust (F = 163.699, p < .05) and their interaction effect (F = 4.539, p < .05) in terms of Pillais trace and Wilks lambda which are widely regarded as the measures most immune to violation of the assumptions while still preserving the greatest power. It is important to note that these results merely indicate the existence of differences of group means on a set of de-

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TABLE 1. Summary Results of Multivariate Tests [MANOVA] and Univariate Tests [ANOVA] of Between-Subject Effects
Source of variation
DEPENDENCE Dependent Variables

Multivariate F-Ratio
26.456

Univariate F Ratio

Degrees of Freedom
3,114

Significance
.000 .239 .000 .000 .000 .000 .000 .000 .005

Satisfaction Cooperation Commitment

TRUST Dependent Variables Satisfaction Cooperation Commitment INTERACTION [DEPENDENCE* TRUST] Dependent Variables Satisfaction Cooperation Commitment 4.539 163.699

1.402 77.720 35.801

1,116 1,116 1,116 3,114

472.501 26.575 179.633

1,116 1,116 1,116 3,114

4.415 9.846 4.302

1,116 1,116 1,116

.038 .002 .040

pendent variables; they do not pinpoint the location of the difference. To find the source of the difference, first the dependent variables contributing to the overall difference indicated by MANOVA are identified by conducting univariate tests for the dependent variables. Results of ANOVA in Table 1 reveal significant main effects of dependence on cooperation (F = 77.72, p < .05) and commitment (F = 35.801, p < .05) but not on satisfaction (F = 1.402, p > .05). Significant main effects of trust are also noted for all three dependent variables. In addition, significant interaction effects are observed for all three dependent variables. The univariate tests only identify the significance of the main and interaction effects. To further understand the nature of the differences, and to finally test the hypotheses, the cell means of each dependent variable shown in Table 2 are examined. Main and Interaction Effects on Satisfaction There is a significant main effect of trust on satisfaction (F = 472.501, p < .05). An examination of the cell means (Table 2) reveals that the satisfaction is rated higher under conditions of high-trust. Thus, H1 [The greater the level of the buyers trust in a supplier, the greater will be the satisfaction of the buyer in the relationship] is supported. In other words, higher levels of trust lead to higher levels of satisfaction.

Mohammed Abdur Razzaque and Tan Gay Boon TABLE 2. Descriptive Statistics: Cell Means of Dependent Variables
Dependence Trust high low Total high Satisfaction Mean 3.8200 2.1067 2.9633 3.9000 1.8200 2.8600 3.8600 1.9633 2.9117 3.7600 3.5800 3.6700 3.2533 2.5133 2.8833 3.5067 3.0467 3.2767 3.8467 2.9000 3.3733 3.5200 2.2267 2.8733 3.6833 2.5633 3.1233 Std. Deviation .4046 .6617 1.0208 .3353 .4468 1.1195 .3706 .5781 1.0680 .5443 .5047 .5283 .3748 .5138 .5814 .5291 .7377 .6797 .3884 .5298 .6633 .3881 .5058 .7906 .4187 .6156 .7688 N 30 30 60 30 30 60 60 60 120 30 30 60 30 30 60 60 60 120 30 30 60 30 30 60 60 60 120

39

high

low

low Total high

Total

low Total high

high

low Total high

Cooperation

low

low Total high

Total

low Total high

high

low Total high

Commitment

low

low Total high

Total

low Total

Results also reveal a significant interaction effect of dependence and trust on satisfaction (F = 4.415, p < .05). The cell means show that satisfaction is much more sensitive to (i.e., influenced by) different levels of trust under low-dependence conditions, supporting H2b [When a buyer is not dependent on a supplier, satisfaction of the buyer will be influenced by the level of buyers trust in the supplier.] However, there is no support for H2a. [When a buyer is dependent on a supplier, satisfaction of the buyer will not be influenced by the level of buyers trust in the supplier] i.e., satisfaction has been found to be lower under high-dependence conditions and is in fact influenced by different levels of trust under the high-dependence condition. This may be an indication that the importance of trust as a determinant of satisfaction has been underesti-

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mated in the formulation of the hypotheses. In fact, trust exercises a greater influence over satisfaction than dependence; satisfaction is consistently rated higher under conditions of high trust regardless of the level of dependence. Main and Interaction Effects on Cooperation Figures in Table 1 show significant main effect of dependence on cooperation (F = 77.72, p < .05), supporting H7 [The greater the buyers dependence on a supplier, the higher will be the buyers tendency to cooperate with the supplier]. Controlling for high-trust, a significant difference in means is found between subjects in the high- and low-dependence conditions. Hence, the results conform to the literaturehigher levels of commitment are associated with high-dependence relationships. Results also reveal significant main effect of trust on cooperation (F = 26.575, p < .05). Controlling for high-dependence, a significant difference in means is found between subjects in the highand low-trust conditions, implying that H6 [The greater the level of trust a buyer has in a supplier, the higher will be the buyers tendency to cooperate with the supplier] is supported. More specifically, cooperation is higher under conditions of high trust. Finally, significant interaction effects of dependence and trust on cooperation have been noted (F = 9.846, p < .05). Controlling for high-dependence, a significant difference in means has been found between subjects in the highand low-trust conditions. Hence, H8a [When the buyer is dependent on the supplier, the propensity of the buyer to cooperate will be high, and unaffected by different levels of trust in the supplier] is rejected. Although the propensity to cooperate is high under high-dependence conditions, it is still affected by the level of trust reinforcing the argument that trust plays a deciding role in determining behavioral outcomes. The rejection of H8b [When the buyer is not dependent on the supplier, propensity of the buyer to cooperate will be low, and unaffected by different levels of trust in the supplier] provides further support for this. Since cooperation is not critical in a low-dependence relationship, it is highly plausible for firms in such a relationship to refrain from cooperating and thus save resources and additional effort. However, presence of trust seems to reverse this inclination by presumably instilling a sense of togetherness, which in turn spurs the desire for joint actions. Main and Interaction Effects on Commitment Results also demonstrate significant main effect of dependence on commitment (F = 35.801, p < .05). Controlling for high-trust, a significant difference in means is found between subjects in the high- and low-dependence condi-

Mohammed Abdur Razzaque and Tan Gay Boon

41

tions supporting H4 [The greater the buyers dependence on a supplier, the greater will be the buyers commitment to the relationship]. This is consistent with the notion that commitment is greater in exchange relationships that exclusively provide critical resources. The result also shows significant main effect of trust on commitment (F = 179.633, p < .05). Controlling for high-dependence, a significant difference in means has been found between subjects in the high- and low-trust conditions, providing support for H3 [The greater the level of the buyers trust in a supplier, the greater will be the buyers commitment to the supplier]. More specifically, commitment is higher under conditions of high-trust. Finally, the results also show significant interaction effects of dependence and trust on commitment (F = 4.302, p < .05). Controlling for low-dependence, a significant difference in means is found between subjects in the high- and low-trust conditions, lending support for H5b [When the buyer is not dependent on the supplier, commitment of the buyer will be affected by different levels of trust in the supplier]. However, H5a [When the buyer is dependent on the supplier, the buyers commitment will be high, and unaffected by different levels of trust in the supplier] is rejected. This implies that trust again plays a crucial role in fostering commitment. This can be observed from the fact that commitment is higher in the low-dependence-high-trust condition, than in the high dependence-low trust condition. The results have, therefore, demonstrated that the presence or lack of trust overrides the effect of dependence in determining the level of commitment in a relationship. Implications of the Study Seven of the 11 hypotheses tested in the study have been supported. Dependence and power relationslong been regarded in the West as important constructs in explaining inter-organizational interactions and their influencehas been found to be important in an Asian context as well. The fact that dependence brings about high levels of commitment and cooperation amongst channel partnerswhich appears to be a cross-cultural phenomenonimplies that increasing the importance and exclusivity of ones resources can have positive effects on a partners exhibited level of cooperation and commitment to the relationship. Indeed, dependence-balancing strategies (Emerson 1962) that seek to accentuate trade partners dependence by increasing the importance of the resources held by the focal firm (Heide and John, 1988) or by reducing the alternatives available to the partners have been documented. The principle objective of the dependence-balancing strategies is to gain power, often through coercive or pre-emptive means, so as to create dependence on the part of ones partners. Although these strategies have long been

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used to control or dominate business partners and promote self-interest, their efficacy has been questioned as empirical evidence of dissatisfaction toward such strategies gains prominence. Moreover, the power inequalities caused by increasing the level of dependence tend to create an undesirable destabilizing effect within the channel (Anderson and Weitz, 1989). Hence, managers should recognize that relying solely on power is unlikely to guarantee long-term success; greater importance needs to be attached to the fostering of trust in inter-organizational relationships. The results of this investigation clearly support the view that the presence of trust is instrumental in bringing about positive attitudes and behaviors. Given the value of trust in a relationship, the challenge facing managers is naturally the identification of ways to nurture trusting relationships with business partners. This is especially important in relationships characterized by power imbalances. For trust to take root in the relationship, the powerful party has to instill both distributive and procedural justice in its dealing with its weaker partner (Kumar 1996). Since absence of trust may lead to the termination of the relationship (Pelton et al., 1997), companies must possess the resolve to make trust an integral part of the organizational culture. However, such emphasis on the importance of trust does, in no way, mean that managers should build trust-intensive relationships with all business partners as it reflects a distinct lack of understanding of the varying relational tendencies exhibited by different business partners (Fournier et al., 1998). This is particularly true in the Asian context. A firm may need to practice both relational and transactional marketing strategies to address the different attitudes toward trust amongst its trade partners (Anderson and Narus, 1991; Berry, 1995; Jackson, 1985). The relationships between constructs uncovered in this study contributes to the literature in three important ways. First, empirical support is gained for the robustness and generality of relationships predicted from past research. Second, the relationships revealed in this study have provided an avenue for further investigation leading to theoretical development. And third, the study serves as a useful basis for future channel studies in the context of Asia, an area hitherto neglected by researchers. Limitations of Study and Recommendations for Future Research Like all experimental studies, the possible lack of external validity of the measures used in the study may negate generalization of the findings to other subjects in the population under study (Zikmund, 1997). Internal validity may have been attained at the expense of external validity as a result of the deliberate manipulations within a carefully controlled experimental environment.

Mohammed Abdur Razzaque and Tan Gay Boon

43

Despite the care exercised in making the contrived scenarios used in this research as realistic as possible, the experimental conditions may not have been truly representative of the reality. The highly parsimonious approach adopted in the study by keeping the number of questions in the instrument may have made the subjects more receptive toward the instrument at the expense of scale robustness. Also, the assumption that subjects are competent to understand and interpret the depicted scenarios by virtue of their past experience in inter-firm transactions could have been wrong. The study has left out several important attitudinal, behavioral and other constructs such as conflict, level of communication and age of the dyad which may have obscured certain aspects of channel dynamics. Inclusion of these could have better reflected the complexities of the real world channel dynamics and enriched the study. In view of the recognition afforded to trust in recent years, future researchers will find it interesting to find ways and means to resolve issues such as the possible tradeoffs between dependence and trust. For instance, can a company build trust while maintaining or even increasing its power over a partner, or does the fostering of trust necessarily involve a sacrifice of power? Given the rising importance of relationship marketing, more attention should be devoted to the strategies for developing trust within and between organizations. Specifically, future studies can investigate the efficacy of various trust-building strategies in different cultural and business settings. REFERENCES
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