Cooperative strategies in customer–supplier relationships The role of interfirm trust.pdf

ARTICLE IN PRESS Int. J. Production Economics 120 (2009) 79–87 Contents lists available at ScienceDirect Int. J. Production Economics journal homepage: /locate/ijpe Cooperative strategies in customer–supplier relationships: The role of interfirm trust Toni Laaksonen a, Toni Jarimo b,, Harri I. Kulmala c a ABB Service Inc., Finland b Nokia Corporation, P.O. Box 226, FI-00045 Nokia Group, Finland c FIMECC Ltd., Finland a r t i c l e i n f o a b s t r a c t Article history: In this paper we model the real cost structures of three customer–supplier relationships Received 1 September 2007 through a game theory approach. The three cases demonstrate the benefits of mutual Accepted 1 July 2008 interfirm trust in financially measurable terms. Indeed, interfirm trust can decrease Available online 18 October 2008 the transaction costs of the relationship, thus providing competitive advantage for the Keywords: partners. Moreover, we present a pricing arrangement that partially compensates the Cooperation possible lack of mutual trust. A practical implication is that managers should pay more Cost management attention to the role of interfirm trust in partner selection processes. Game theory 2008 Elsevier B.V. All rights reserved. Inter-organizational relationship Trust 1. Introduction