The effects of suppliers' trust on manufacturers' innovation capability: an analysis of direct versus indirect relationships

The study offers an alternative explanation for the role of trust in economic exchange, answering the critical research questions of how and under what conditions suppliers’ trust affects manufacturers’ innovation capability. The study adopts a transaction value approach suggesting to combine strategy and organizational economic literature to fully investigate the processes through which joint value is generated and developed by interacting partners. Using survey data from a sample of 235 supplier-manufacturer relationships, we find broad support for the model hypotheses. The results confirm the mediating role of asset specificity and knowledge sharing as procedural dimensions in the relation between suppliers’ trust and manufacturers’ innovation capability. However, the direct path between trust and innovation capability was not confirmed. The study provides theoretical and practical implications for firms seeking to translate inter-firm trust into innovation-based competitive advantage.