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Spotlight: Trustworthiness Change and Relationship Continuity After Contract Breach in Financial Supply Chains

In this weeks Spotlight we are joined by Dr. Ha Ta, Assistant Professor at Clarkson University , Dr Terry L. Esper, Associate Professor of Logistics at The Ohio State University and Dr. Sebastian Garcia-Dastugue, Clinical Assistant Professor at University of Arkansas
Their recently accepted paper to JSCM discusses trustworthiness change in the wake of a contract breach.


Trustworthiness change and relationship continuity after contract breach in financial supply chains


"The management of financial flows in the supply chain is an integral part of effective SCM 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. While 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 non-breaching 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."

Full Article can be found here: https://onlinelibrary.wiley.com/doi/abs/10.1111/jscm.12180
https://doi.org/10.1111/jscm.12180

 

Jacqueline Jago