Does trust matter? Exploring the effects of interorganizational and interpersonal trust on performance

A conceptual challenge in exploring the role of trust in inter-organizational exchange is translating an inherently individual-level concept – trust – to the organizational-level outcome of performance. We define interpersonal and interorganizational trust as distinct constructs and draw on theories of interorganizational relations to derive a model of exchange performance. Specifically, we investigate the role of trust in interfirm exchange at two levels of analysis and assess its effects on negotiations costs, conflict, and ultimately performance. Propositions were tested with data from a sample of 107 buyer–supplier interfirm relationships in the electrical equipment manufacturing industry using a structural equation models. The results indicate that interpersonal and interorganizational trust are related but distinct constructs, and play different roles in affecting negotiations processes and exchange performance. Further, the hypotheses linking trust to performance receive some support, although the precise nature of the link is somewhat different than initially proposed. Overall, the results show that trust in inter-organizational exchange relations clearly matter.