Perceived trust in contractual channel dyads: an exploratory investigation of Finnish food retailers

Distributor firms have found long-term contracting an effective means of gaining competitive advantage. To realize these benefits, the alliance should involve trusting others. However, contracts can also be one-sided rather than reciprocal, favouring the larger business partner. Should trust develop naturally where there are formal contracts defining the terms of the relationship? And what inducements should a supplier take to gain retailers' trust? The trade-off is further complicated when the retailers operate in a small market with few suppliers and high barriers to entry. This study focuses on these questions. We use original field data from Finnish food retailers who have signed a written agreement with their focal wholesaler. We find that maintaining autonomy increases trust in the relationship. We also find that regular communication in the dyad and balance between perceived rewards and contributions are associated with higher levels of trust. In turn, intrachannel competition strongly reduces retailers' trust in the dyad.