“Trust but verify”? The performance implications of verification strategies in trusting relationships

Considerable extant research demonstrates the benefits of trust in buyer-seller relationships. More recent research points out downsides of the vulnerability inherent with trust. Recognizing this dilemma of trust, partners may offset the vulnerability of trust with verification strategies—efforts to produce information relevant to the exchange relationship. This research examines the use of three types of verification strategies—monitoring, assurances, and corroboration—which may be employed to safeguard against the vulnerability of trust. When control mechanisms like trust and information are combined, they may complement one another and enhance performance or function as substitutes, be redundant or compete, and consequently detract from performance. Emerging theory on combined modes of governance provides insights. We draw on this theory and develop hypotheses proposing that combinations of trust and verification may enhance or detract exchange performance—depending on the specific verification strategy. The hypotheses are tested on a sample of 230 buyer-supplier relationships. Results of the research provide some support for the proposed relationships and yield implications for the management of cooperative exchange relationships.