Trustworthiness Change and Relationship Continuity after Contract Breach in Financial Supply Chains

Ha Ta, Terry L. Esper, Kenneth Ford and Sebastian Garcia‐Dastuge

Journal of Supply Chain Management, 2018, vol. 54, issue 4, 42-61

Abstract: The management of financial flows in the supply chain is an integral part of effective supply chain management and is an emerging research area. A breach in the relationships between firms and financial providers may not only affect the financial health of the focal firms, but also disrupt the financial stability of their supply chains. Building on life‐cycle theory, this research examines the critical role of trustworthiness in the financial supply chain relationships in the event of a contract breach. Although literature has established that trustworthiness is vital to interfirm supply chain relationships, we further propose that changes in trustworthiness are particularly relevant when interfirm relationships are impacted by negative shocks such as contract breaches. Trustworthiness change (TC), therefore, is likely to serve as a key determinant in the nonbreaching party's decision to continue on in a relationship. Using archival data from multiple data sources, we find evidence that TC significantly influences the likelihood of relationship continuity in the aftermath of contract breaches, and that the effect is not linear. In addition, the effect is stronger for breaches that occur earlier in the duration an interfirm relationship, and when the breaches are less severe. These findings offer several important implications for both financial supply chain relationship theory and practice, which are discussed in the paper.

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://doi.org/10.1111/jscm.12180

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jscmgt:v:54:y:2018:i:4:p:42-61

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1523-2409

Access Statistics for this article

Journal of Supply Chain Management is currently edited by Lisa Ellram, Craig Carter and Chad Autry

More articles in Journal of Supply Chain Management from Institute for Supply Management
Bibliographic data for series maintained by Wiley Content Delivery ().