Journal of Business & Industrial Marketing

The impact of a distributor's trust in a supplier and use of control mechanisms on relational value creation
in marketing channels
Yi Liu Lei Tao Yuan Li Adel I. El-Ansary

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Yi Liu Lei Tao Yuan Li Adel I. El-Ansary, (2007),"The impact of a distributor's trust in a supplier and use of control mechanisms
on relational value creation in marketing channels", Journal of Business & Industrial Marketing, Vol. 23 Iss 1 pp. 12 - 22
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The impact of a distributors trust in a supplier

and use of control mechanisms on relational
value creation in marketing channels
Yi Liu and Lei Tao
Marketing Department, Management School, Xian Jiaotong University, Shaanxi, P.R. China

Yuan Li
Technology and Economics Department, Management School, Xian Jiaotong University, Shaanxi, P.R. China, and

Adel I. El-Ansary
Downloaded by UNIVERSITI MALAYSIA TERENGGANU At 23:07 28 February 2015 (PT)

Coggin College of Business, University of North Florida, Jacksonville, Florida, USA

Abstract
Purpose The purpose of this paper is to explore empirically how a distributors trust in a supplier and its use of control mechanisms affect the values
it gains from the relationship.
Design/methodology/approach Factor analysis and a structural equation model were used to test the framework in a sample of 251 distributors in
the household appliances industry in China.
Findings The findings show that a distributors honesty trust in a supplier enhances the direct value gained through the use of both contract and
relational norms, but hinders and promotes the indirect value gained through the use of contract and relational norms respectively. A distributors
benevolence trust promotes the direct and indirect value gained through the use of relational norms, but impedes the direct value and enhances the
indirect value gained through the use of contracts.
Research limitations/implication A distributors trust in a supplier may involve competence trust besides honesty trust and benevolence trust.
Hence, the framework can be further studied in the situations where the distributors trust in the suppliers competence is considered. Moreover, the
sample of the empirical study only comes from the household appliances industry, and research in future may be extended to include multiple
industries.
Practical implications The paper may help distributors choose and use the proper control mechanism as well as foster a suitable kind of trust in
suppliers to realize the objectives of maximizing the relationship value.
Originality/value The results permit an in-depth look into the effects of trust and control mechanisms on the relational values in a channel
relationship context.
Keywords Channel relations, Distributors, Suppliers, Distribution channels and markets, China
Paper type Research paper

The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0885-8624.htm

transaction costs (Noordewier et al., 1990). Hence, trust has

assumed a central role in marketing theory and practice
(Doney and Cannon, 1997), and has attracted many
researchers attention since the 1980s.
In studies on trust in a channel relationship context, many
scholars have explored the connotations (Doney and Cannon,
1997; Morgan and Hunt, 1994; Anderson and Narus, 1990)
and antecedents of trust (Doney and Cannon, 1997;
Geyskens et al., 1998; Miyamoto and Rexha, 2004), as well
as its consequences (Morgan and Hunt, 1994; Anderson and
Weitz, 1992; Ganesan, 1994; Anderson and Narus, 1990;
Geyskens et al., 1998; Crosby et al., 1990; Dion, 1991). For
instance, Doney and Cannon (1997, p. 36) define trust as
the perceived credibility and benevolence of a target of
trust. Geyskens et al. (1998) argue that environment
uncertainty, channel decision structure, use of channel

Journal of Business & Industrial Marketing

23/1 (2008) 12 22
q Emerald Group Publishing Limited [ISSN 0885-8624]
[DOI 10.1108/08858620810841452]

The authors would like to acknowledge the financial support provided by

the National Science Foundation Committee of the Chinese Government
and the Program for New Century Excellent Talents in Universities
(70272023; 70572037; 70121001; NECT-04-0933).

An executive summary for managers and executive

readers can be found at the end of this article.
Faced with an increasingly drastic competitive environment,
firms are paying more and more attention to building longterm and steady relationships with their customers and
suppliers to respond to various challenges (Doney and
Cannon, 1997). Scholars argue that trust is the basis of
building and sustaining a cooperative inter-firm relationship
(Dwyer et al., 1987; Morgan and Hunt, 1994). Only if the
collaborative parties trust in each other are they able to build
and develop mutually beneficial relationships (Ganesan,
1994), enhance their competitiveness, and reduce their

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The impact of a distributors trust

Journal of Business & Industrial Marketing

Yi Liu, Lei Tao, Yuan Li and Adel I. El-Ansary

Volume 23 Number 1 2008 12 22

decision influence patterns, power/dependence patterns, and

some action factors such as communication and cooperation
may influence trust. And Morgan and Hunt (1994) find that
retailers trust in their suppliers will increase their own
commitment and decrease decision-making uncertainty, as
well as increase their cooperation and functional conflict with
their suppliers.
Although in reviewing the previous literature, we find that
extant literature can help us to understand the roles of trust
clearly, there are still the following limitations.
First, the relationship between trust and contract control in a
channel relationship context has been neglected. Transaction
cost economists have found that unconditional trust is not
wise, and it is necessary for firms to use compelling control
mechanisms to be on guard against the hazard of
opportunism (Williamson, 1993). But sociologists have
suggested that trust eliminates the need for contracts (Zand,
1972; Lane, 2000) and research in strategic alliances also
demonstrates that low trust requires formal control while high
trust allows for a limited extent of formal control (Knights et al.,
2001). These research findings suggest that there seem to exist
contradictory opinions regarding the effects of trust on contract
control, as seen from different research fields. Hence it is
necessary to make clear what are the effects of trust on contract
control in a channel relationship context.
Second, previous researchers have neglected to investigate
the effect of trust on non-contract control mechanisms, such
as relational norms (Zand, 1972; Lane, 2000; Williamson,
1993; Knights et al., 2001). Heide and John (1992) argue that
relational norms play a central role in structuring the
relationship between firms. And because of the conceptual
and pragmatic limits of the law, relational norms have been
receiving increasing attention in the literature of marketing,
sociology, organization theory and law (Achrol and Gundlach,
1999). Hence, investigating the impact of trust on relational
norms will afford a comprehensive understanding of the
relationship between trust and control mechanisms.
Third, previous research has examined the effects of a firms
trust in its partner on its own commitment (Morgan and
Hunt, 1994) and satisfaction (Geyskens et al., 1998) and on
its partners performance (Crosby et al., 1990; Dion, 1991),
but has not investigated the effects of a firms trust in its
partner on its own value creation. Acquiring relational value
is, of course, a firms purpose in establishing a relationship
with a partner. Anderson (1995, p. 349) points out that
value creation and value sharing can be regarded as the raison
detre of collaborative customer-supplier relationships.
Therefore, exploring the effect of a firms trust in its partner
on its own value creation will have important managerial
implications and make new contributions to the channel
relationship literatures and practice.
To address these challenges, this paper discusses the
relationships among a distributors honesty trust and
benevolence trust in its supplier, its use of contract and
relational norms controls, and the direct and indirect values it
gains from the relationship with its supplier. The objective of
the study is to explore empirically how a distributors trust in
a supplier and its use of control mechanisms affect the values
it gains from the relationship.
The paper is divided into three parts. In the first part, we
develop a conceptual framework with hypotheses. Then we
describe our methodology and test the framework with data
collected from 251 distributors in the household appliances

industry in China, and obtain the results. Last, we present the

theoretical and managerial implications of the research, and
discuss the limitations and future research directions of the
study.

Theoretical background
Trust is defined as a willingness to rely on an exchange partner
in whom one has confidence (Moorman et al., 1992). It is
about positive expectations regarding the other party in a risky
situation (Das and Teng, 2001). In most channel relationship
studies, trust is defined as the extent to which a firm believes
that its exchange partner is honest and/or benevolent, or some
variant thereof (Ganesan, 1994; Kumar et al., 1995; Geyskens
et al., 1998). The distributors honesty trust in its supplier is its
belief that the supplier is sincere, reliable, stands by his word,
and fulfils promised role obligations (Anderson and Narus,
1990; Dwyer and Oh, 1987). A distributors benevolence trust
in a supplier, on the other hand, is the belief that the supplier is
genuinely interested in its interests or welfare and is motivated
to seek joint gains (Crosby et al., 1990). Johnston et al. (2004)
pointed out that these two facets of trust both represent a
distributors belief that the supplier is dependable or reliable
and will stand by his word. The difference between them is that
a distributors benevolence trust in the supplier is based on the
distributors belief that even if there is no way of checking on or
policing behavior, the supplier will not take advantage of an
opportunity to gain at the distributors expense (Ganesan,
1994; Baker et al., 1999; Zaheer et al., 1998; Sako, 1992).
Scholars believe that a firms trust in its partner may affect
its use of control mechanisms (Zand, 1972; Woolthuis et al.,
2002). Also, Jap and Ganesan (2000) point out that control
mechanisms are the safeguards that firms put in place to
specify the responsibilities, ensure that the cooperative parties
perform their obligations, protect TSIs, and minimize
exposure to opportunism. Heide (1994) once suggested that
two sources are available for a firm to enforce an ongoing
channel relationship. The first source is the legitimate
authority that comes from the contract agreement between
the two firms. The second is the norm of behavior flows from
the social nature of the relationship. Based on his views,
control mechanisms used by a distributor can be divided into
contract control and relational norms control. Contract
control is a unilateral coordination process (Gilliland and
Bello, 2002) which is coercive and has legal force. Contracts
may detail roles and responsibilities to be performed, specify
procedures for monitoring and penalties for noncompliance,
and determine outcomes or outputs to be delivered (Poppo
and Zenger, 2002). A distributor can motivate compliance by
reminding the supplier of clauses in the contract (Boyle et al.,
1992) or by addressing expectations of the standard operating
relationship (Celly and Frazier, 1996). Relational norms
control, on the other hand, is not coercive, and enhances
exchange performance by focusing on the shared value of the
partners and relying on peer pressure and social sanctions to
mitigate the hazard of shirking and opportunism (Cannon
et al., 2000). Relational norms reflect the mutual attitudes
and behaviors parties have in working cooperatively together
to achieve mutual and individual goals which are based on
integrity, equity, and fairness (Gundlach and Murphy, 1993).
It is a bilateral coordination process and includes flexibility,
solidarity, information exchange, participation and so on.
Flexibility means that the signed contracts can be enforced
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The impact of a distributors trust

Journal of Business & Industrial Marketing

Yi Liu, Lei Tao, Yuan Li and Adel I. El-Ansary

Volume 23 Number 1 2008 12 22

Benevolence trust and control mechanism

flexibly according to changes in the market, exchange

relationships, and the well-being of the partner. Solidarity is
a bilateral expectation that the behavior of the two parties will
be directed toward relationship maintenance. Information
exchange is the expectation that the parties will provide useful
information to each other freely and actively. And
participation refers to the joint expectation that both parties
will share, make decisions, and set goals regarding all aspects
of the exchange.
According to transaction cost theory, control can mitigate
the risk of a partners opportunistic behavior (Williamson,
1993) and motivate performance (Poppo and Zenger, 2002).
Cannon et al. (2000) argue that performance is a kind of
direct economic value that a firm obtains from a relationship
with a partner, and it can be viewed as one part of relationship
value. Relationship value is defined as the benefits brought by
the relationship from the perspective of relationship marketing
(Payne and Holt, 2001). Based on a focal relationship from
the relationship network perspective, Walter et al. (2003)
divided the relationship value into two parts, i.e. direct value
and indirect value. Direct value means the benefit of a
relationship which has been realized by the distributor and
does not depend on other relationships or other actors, and it
includes cost reduction value, quality value, quantity value
and supply safeguard value. Indirect value, on the other hand,
refers to a distributors benefit which is acquired from other
relationships or in the future which involves market value,
scout value, innovation development value, and social value
(Walter et al., 2003).

When a distributor has benevolence trust in a supplier, the

distributor believes that the supplier will care about its
interests and not take advantage of an opportunity to gain at
the other partys expense (Johnston et al., 2004). Hence, it is
not necessary for a distributor to go to much expense to use a
detailed contract to guard against its suppliers opportunism
and ensure its own benefits. Dyer and Chu (2003) also argue
that benevolence trust is based on non-contractual
mechanisms and may eliminate the need for formal
contracts used by the distributor.
Additionally, when a distributor has benevolence trust in a
supplier, the distributor believes that the supplier will not steal
its ideas or share them with competitors. Hence, the
distributor will always expect that the cooperative
relationship with a benevolent supplier will last and develop
stably (Ganesan, 1994; Anderson and Weitz, 1992), an
expectation which makes the distributor more willing to share
useful information with the supplier (Dyer and Chu, 2003)
and to deal more flexibly with unpredictable matters or
existing problems in a cooperative relationship. Helper (1991)
suggests that a high level of trust may lead to joint problem
solving. Therefore, we propose that:
H3. The higher the level of a distributors benevolence trust
in a supplier, the less likely that a contract will be used
by the distributor.
H4. The higher the level of a distributors benevolence trust
in a supplier, the more likely that relational norms will
be used by the distributor.

Hypotheses
Honesty trust and control mechanisms
When a distributor trusts in a suppliers integrity, it doesnt
necessarily mean that the supplier will consider the retailers
benefit and forbear opportunism without some supervision
(Johnston et al., 2004), especially under conditions where the
cost of moral risk will be low if the supplier does engage in
opportunistic behavior. Hence, it is necessary for a distributor
to use a contract which is coercive to specify matters
concerning the cooperation of the two parties, to monitor and
restrict the suppliers behavior, and to safeguard TSIs. Once a
detailed contract has been signed between a distributor and a
supplier, the supplier will obey the contract terms and
perform the specified duties. Hence, contract control is a very
effective means for a distributor who has honesty trust in a
supplier to coordinate the suppliers behavior.
At the same time, when a distributor trusts in a suppliers
honesty, it will interpret the suppliers behavior more
positively (Uzzi, 1997), and will look forward to sustaining
a long-term cooperative relationship with the supplier. In this
situation, the distributor will be more willing to share useful
information with the supplier, to give advice to the supplier on
selling, servicing, and producing, and to deal more flexibly
and cooperatively with the problems and difficulties brought
by the relationship (Helper, 1991). Therefore, we propose
that:
H1. The higher the level of a distributors honesty trust in a
supplier, the more likely that a contract will be used by
the distributor.
H2. The higher the level of a distributors honesty trust in a
supplier, the more likely that relational norms will be
used by the distributor.

Contract control and relationship value

The distributors use of a contract will guarantee the
categories and functions of the commodities a supplier
offers, will ensure that the supplier stands by its long-term
supplying commitment, and eventually effectively will
guarantee the benefits the distributor obtains from the
cooperative relationship with the supplier. Lusch and Brown
(1996) suggest that a contract can increase the profit margin
of the whole channel when environment uncertainty can be
managed. Cannon et al. (2000) also argue that a detailed
contract can enhance a firms performance effectively under
conditions where exchange uncertainty is low.
Meanwhile, the distributors use of a contract always makes
the supplier think that the distributor does not trust it
(Macaulay, 1963), a belief which decreases the suppliers
expectation of the distributors loyalty and the duration of the
relationship. Hence, the use of a contract is disadvantageous
to the long-term development of the relationship (Goshal and
Moran, 1996), may negatively affect the friendship between
the distributor and the supplier, and may lead to the suppliers
unwillingness to help the distributor to contact potential
customers or other cooperative partners, further hindering the
distributor from getting benefits from other relationships.
Therefore, we propose that:
H5. A distributors use of a contract increases the likelihood
that the distributor will realize direct relationship
value.
H6. A distributors use of a contract decreases the
likelihood that the distributor will realize indirect
relationship value.
14

The impact of a distributors trust

Journal of Business & Industrial Marketing

Yi Liu, Lei Tao, Yuan Li and Adel I. El-Ansary

Volume 23 Number 1 2008 12 22

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Relational norms and relationship value

appliances manufacturer whose distributors are nationwide

and can represent mass distributors in China.
According to the name list of distributors provided by the
manufacturer, we mailed 900 questionnaires to distributors
who distribute refrigerators, TVs and air-conditioners, with
an explanation of the objectives and requirements of this
survey and a promise that we would not give suppliers the
information that distributors provided. Every set of
questionnaires involved three parts a copy of the
questionnaire, a return envelope, and a guide for completing
the questionnaire. Three weeks after the first wave of
questionnaires, we contacted the distributors who had not
replied to remind them to complete the questionnaires, and
mailed another copy of the questionnaire to them. Three
weeks after the second wave of questionnaires, we called the
non-response distributors again to remind them to finish the
questionnaires as soon as possible. The survey was
administered over a period of five months extending from
February to June, 2004. We received 314 replies, of which
251 questionnaires were completed and acceptable, for a
response rate of 28 per cent, and 63 questionnaires were
eliminated because of incomplete information. Among valid
questionnaires, 75 came from the refrigerator industry
(accounting for 29.9 per cent), 89 came from the color TV
industry (accounting for 35.5 per cent), and 87 came from the
air-conditioning industry (accounting for 34.6 per cent).
Distributors with fewer than 200 employees accounted for
31.8 per cent, those with 200 to 500 accounted for 23.9 per
cent, and those with more than 500 accounted for 44.3 per
cent. The average life of a company was about 8.1 years
(s.d. 5.3). Furthermore, the average time length of the
distributor-supplier relationships was 5.8 years (s.d. 2.81),
with the longest relationship continuing 20 years and the
shortest about one year.
We used the key informant method in this survey and
designed some items to ensure that the informant was
knowledgeable about the survey content and could complete
the questionnaire easily. First, we focused on the distributors
most recent relationship with a supplier, so that the
distributors key informant could be familiar with details of
the selected relationship and also could avoid memory
confusion because of long intervals. Second, we specifically
inquired about the extent of informants knowledge about the
cooperative relationship, using a five-point Likert scale. The
mean was 4.21 (s.d. 0.67), which indicates that the
informants were knowledgeable about the relationship with
the supplier. Third, 75.3 per cent of the informants were
managers responsible for the relationship, and 24.7 per cent
were staff members who directly dealt with the business with
the supplier. Fourth, the average time length of the
informants having the duty was 4.7 years (s.d. 2.81). And
finally, the time length of their involvement in the relationship
with the supplier was 3.78 years (s.d. 2.49). All these
results indicate that the informants were familiar with the
distributor-supplier relationship.
In order to ensure that the questionnaires received were
representative, we did several non-response bias checks. First,
we compared the early and late returned questionnaires in
several respects: how long the key informants had been doing
the job, the duty of the key informants, the number of years
the key informants were involved in the relationship with the
supplier, the size, the annual sales, the location and the
ownership status of the firm the key informants were working

The distributors use of relational norms may be

advantageous to ensure that the two parties of the channel
relationship can cooperate successfully, and the distributor
can obtain benefit from the relationship if the two parties
identify and comply with the behavioral norms. The reasons
are that: flexibility may promote adaptation to unforeseeable
events; solidarity offers a bilateral approach to problem
solving and creates commitment to joint action through
mutual adjustment; information exchange facilitates problem
solving and adaptation because both parties are willing to
share private information with each another, including shortterm plans and goals (Poppo and Zenger, 2002); and
participation may help the cooperative parties to understand
and adapt to each other better. Literature on management has
suggested that flexibility, information sharing, and
commitment are helpful to avoid the potentially high costs
of exchange hazards (Macaulay, 1963; Bradach and Eccles,
1989; Jones et al., 1997; Adler, 2001). Cannon et al. (2000)
argue that relational norms have a positive effect on
performance no matter whether the environment
uncertainty is high or low.
Additionally, the distributors use of relational norms leads
the cooperative parties to focus on strategies and goals
beneficial to both parties and on long-term orientation (Heide
and John, 1992; Macaulay, 1963; Macneil, 1980), which
encourages the cooperating parties to foster continuance and
bilateralism when change and conflict arise (Macneil, 1978).
Hence, a distributors use of relational norms may encourage
the relationship between a distributor and a supplier to
develop continuously, and be helpful for the distributor to
acquire benefits from the relationship in the future. Moreover,
since relational norms are the common expectation of
cooperative behaviors and are the reflection of shared value
of the two cooperative parties (Cannon et al., 2000), the
distributors use of relational norms always encourages the
two collaborative parties to foster a cooperative atmosphere
and increase the loyalty of the supplier. As a result, the
supplier may be willing to introduce potential customers or
other cooperative partners to build relationships with the
distributor so that the distributor can get benefits from those
relationships. Therefore, we propose that:
H7. A distributors use of relational norms helps the
distributor to acquire direct relationship value.
H8. A distributors use of relational norms helps the
distributor to acquire indirect relationship value.

Methodology
Sample and data collection
Based on previous literature, a pretest was conducted in a
sample of eight companies in Xian city by face-to-face
interviews. Feedback from in-depth interviews with the
persons responsible for distributor-supplier relationships led
to minor changes to the phrasing and order of some of the
questionnaires items.
We chose the Chinese household appliances industry to test
our research hypotheses, because this industry has become
marketized to a great extent since the 1980s and can
adequately reflect the actual characteristics of channel
relationships. And we also chose a powerful household
15

The impact of a distributors trust

Journal of Business & Industrial Marketing

Yi Liu, Lei Tao, Yuan Li and Adel I. El-Ansary

Volume 23 Number 1 2008 12 22

in, the distributor-supplier relationship length, and so on. On

the basis of t-tests, we found no statistically significant
differences across early and late responses. Then we randomly
choose 50 distributors that had not replied to the
questionnaire and asked for information such as the age of
the firm, the time length of the relationship between the
distributor and the supplier, firm size, sales, location,
ownership status, etc. All t-statistics were insignificant. The
results of the t-test showed no significant differences between
responding and non-responding firms.

the course of this relationship are treated by the parties as

joint rather than individual responsibilities.
Direct value
Based on the study by Walter et al. (2003), three items were
used to measure the construct of direct value: the supplier
makes long-term delivery promises for the products delivered;
the supplier can offer complete coverage of the products the
distributor requires; and the products delivered by the
supplier have good functionality.
Indirect value
Following the research of Walter et al. (2003), we measured
the construct of indirect value by four items: the supplier is
the intermediator for contacts with prospective customers of
the distributor; the supplier is the intermediator for contacts
with relevant third parties; the supplier often helps the
distributor develop new products or services; and the
relationship with the supplier can enhance employment
security for employees of the distributor.

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Measurement
All measurements of the constructs are borrowed from the
previous literature. To enhance the translation equivalence,
the original English version of the questionnaire was
translated into Chinese by three marketing doctoral students
and then translated back into English by another three
marketing doctoral students. Any difference that emerged was
reconciled. The constructs were measured by Likert sevenpoint multiple-item scales.

Reliability and validity

Honesty trust
Based on the research by Kumar et al. (1995), three items
were used to measure a distributors honesty trust in a
supplier: the distributor believes that the supplier will keep its
promises; the distributor believes that the supplier is
competent to keep the promises; and the distributor believes
in the supplier because of its good reputation.

First, the items were refined by item-to-total correlation, and

those below 0.4 were dropped. We also conducted exploratory
factor analyses using both orthogonal and oblique rotations to
ensure high loadings on hypothesized factors and low loadings
on cross-loadings, and items having high cross-loadings were
dropped. The correlations, means and standard deviations for
the measures that were finally used are indicated in Table I
and Table II.
The second step involved reliability analysis of multiple
items for each construct. In every instance the Cronbach a of
each construct was over 0.7 (see Table III), showing that all
the factors are reliable. Based on the previous test work, a
confirmatory factor analysis was conducted, with the
following results: x2 278.738, x2/df 1.659, p 0.000,
GFI 0.930, AGFI 0.904, NFI 0.909, IFI 0.962, and
TLI 0.951, which shows that the construct structure is a
good fit.
Next, convergent and discriminant validity analysis was
conducted. We used Amos 4.0 to analyze the factor loading of
every variable. The results showed that the factor loading of
every variable was above 0.7, indicating construct validity.
Then we analyzed the explained total variance of the
constructs, and the results showed that all explanations
exceeded 50 per cent, indicating that the constructs reflect the
information of the structure of original data. All results are
shown in Table III.
Finally, we chose two constructs randomly and compared
the change in chi-square to test the discriminant validity. The
results showed a significant difference between the chi-square
of the two constructs, indicating that the construct has good
discriminant validity (see Table IV).
In addition, since there may be common method bias
variance for all the constructs from the same questionnaire,
we tested for common methods bias using the procedures
recommended by Podsakoff and Organ (1986). If that were a
serious problem, we would expect a single factor to emerge
from a factor analysis or one general factor to account for
most of the covariance in the independent and criterion
variables (Podsakoff and Organ, 1986). We performed factor
analysis on items related to the predictor variables and

Benevolence trust
Based on the study by Kumar et al. (1995), we used four items
to measure a distributors benevolence trust in a supplier: the
distributor believes the supplier will be ready and willing to
offer assistance and support even when circumstances are
changing; the supplier is concerned about the distributors
welfare when making important decisions; the distributor
knows that the supplier will respond with understanding when
sharing its problems with the supplier; and the distributor can
count on the supplier to consider how its decisions and actions
will affect the distributor in the future.
Contract control
Based on the study by Jap and Ganesan (2000), we developed
three items to measure the construct of contract control
according to the definition: the distributor has developed ways
of doing things with the supplier that never need to be
expressed formally; the distributor is bound by oral
commitments rather than by formal agreements which
would have detailed the obligations of both parties; and the
distributor has no formal agreement with the supplier but
only oral commitments.
Relational norms control
Based on the study by Jap and Ganesan (2000) and Antia and
Frazier (2001), four items were used to measure the construct
of relational norms control: both the distributor and the
supplier keep each other informed about events or changes
that may affect the other party; the distributors ideas for
selling, servicing and producing are welcomed by the supplier;
both the distributor and the supplier would rather work out a
new deal together than hold each other to original terms when
some unexpected situation arises; and problems that arise in
16

The impact of a distributors trust

Journal of Business & Industrial Marketing

Yi Liu, Lei Tao, Yuan Li and Adel I. El-Ansary

Volume 23 Number 1 2008 12 22

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Table I Means, standard deviations, and correlations

HT1
HT2
HT3
BT1
BT2
BT3
BT4
CC1
CC2
CC3
RN1
RN2
RN3
RN4
DV1
DV2
DV3
IV1
IV2
IV3
IV4
Mean
SD

HT1

HT2

HT3

BT1

BT2

BT3

BT4

CC1

CC2

CC3

1.00
0.620 * *
0.526 * *
0.317 * *
0.439 * *
0.414 * *
0.366 * *
0.235 * *
0.344 * *
0.329 * *
0.299 * *
0.478 * *
0.359 * *
0.318 * *
0.316 * *
0.342 * *
0.348 * *
0.295 * *
0.132 *
0.166 * *
0.210 * *
5.21
1.21

1.00
0.635 * *
0.403 * *
0.497 * *
0.466 * *
0.427 * *
0.192 * *
0.289 * *
0.365 * *
0.319 * *
0.463 * *
0.418 * *
0.388 * *
0.338 * *
0.395 * *
0.456 * *
0.293 * *
0.147 * *
0.241 * *
0.266 * *
5.43
1.03

1.00
0.500 * *
0.415 * *
0.399 * *
0.382 * *
0.249 * *
0.293 * *
0.372 * *
0.328 * *
0.455 * *
0.391 * *
0.383 * *
0.366 * *
0.345 * *
0.502 * *
0.354 * *
0.176 * *
0.299 * *
0.286 * *
5.50
1.10

1.00
0.468 * *
0.462 * *
0.410 * *
0.184 * *
0.183 * *
0.181 * *
0.281 * *
0.259 * *
0.270 * *
0.232 * *
0.407 * *
0.376 * *
0.400 * *
0.370 * *
0.285 * *
0.311 * *
0.368 * *
5.23
1.06

1.00
0.526 * *
0.424 * *
0.141 * *
0.180 * *
0.199 * *
0.284 * *
0.326 * *
0.305 * *
0.303 * *
0.370 * *
0.383 * *
0.389 * *
0.355 * *
0.243 * *
0.390 * *
0.403 * *
5.26
0.99

1.00
0.523 * *
0.069
0.114 *
0.136 *
0.369 * *
0.311 * *
0.312 * *
0.327 * *
0.348 * *
0.336 * *
0.340 * *
0.287 * *
0.216 * *
0.363 * *
0.308 * *
5.34
0.98

1.00
0.092
0.079
0.086
0.316 * *
0.378 * *
0.378 * *
0.380 * *
0.361 * *
0.235 * *
0.275 * *
0.402 * *
0.238 * *
0.335 * *
0.361 * *
5.21
1.10

1.00
0.549 * *
0.521 * *
0.097
0.121 *
0.077
0.068
0.101
0.175 * *
0.182 * *
0.131 *
0.021
0.090
0.142 * *
4.01
1.55

1.00
0.675 * *
0.131 *
0.167 * *
0.099
0.135 *
0.083
0.246 * *
0.249 * *
0.164 * *
20.041
0.101
0.099
4.36
1.78

1.00
0.131 *
0.231 * *
0.179 * *
0.193 * *
0.172 * *
0.300 * *
0.309 * *
0.084
20.138 *
0.025
0.090
4.96
1.91

Notes: *Correlation is significant at the 0.05 level (2-tailed); * *Correlation is significant at the 0.01 level (2-tailed)

Table II Means, standard deviations, and correlations

RN1
RN2
RN3
RN4
DV1
DV2
DV3
IV1
IV2
IV3
IV4
Mean
SD

RN1

RN2

RN3

RN4

DV1

DV2

DV3

IV1

IV2

IV3

IV4

1.00
0.446 * *
0.379 * *
0.392 * *
0.233 * *
0.300 * *
0.304 * *
0.256 * *
0.158 * *
0.250 * *
0.180 * *
5.06
1.13

1.00
0.511 * *
0.514 * *
0.360 * *
0.256 * *
0.346 * *
0.352 * *
0.232 * *
0.230 * *
0.325 * *
5.29
1.13

1.00
0.501 * *
0.306 * *
0.249 * *
0.316 * *
0.259 * *
0.208 * *
0.226 * *
0.298 * *
5.34
1.05

1.00
0.239 * *
0.233 * *
0.265 * *
0.338 * *
0.170 * *
0.226 * *
0.214 * *
5.57
1.01

1.00
0.524 * *
0.502 * *
0.400 * *
0.311 * *
0.381 * *
0.350 * *
5.30
1.20

1.00
0.657 * *
0.419 * *
0.207 * *
0.340 * *
0.281 * *
5.57
1.02

1.00
0.470 * *
0.233 * *
0.337 * *
0.263 * *
5.58
1.05

1.00
0.432 * *
0.417 * *
0.454 * *
5.24
1.26

1.00
0.475 * *
0.430 * *
4.95
1.28

1.00
0.527 * *
5.14
1.25

1.00
5.13
1.27

Notes: *Correlation is significant at the 0.05 level (2-tailed); * *Correlation is significant at the 0.01 level (2-tailed)

Results

criterion measures. No general factor was apparent in the

unrotated factor structure. Therefore, no common method
variance problem was detected.

As expected, all hypotheses proposed in this study were

supported. The results indicate that a distributors honesty
trust in a supplier was found to have a positive effect on the
use of contract control (H1: b 0:690, p 0:000 , 0.01) and
relational norms (H2: b 0:582, p 0:000 , 0.01). A
distributors benevolence trust in its supplier has a negative
effect on the use of contract control (H3: b 20:334, p
0:003 ,0.01) but has positive a effect on the use of relational
norms (H4: b 0:289, p 0:004 ,0.01). The use of contract
control has a positive effect on direct value (H5: b 0:169,

Hypothesis tests
We used Amos 4.0 with the function of Structure Equation
Model analyses to get the good-fitness and the structural
relations results of the Model. The results, shown in Table V,
lead us to conclude that all the hypotheses proposed are
supported. The final results of the model are shown in
Figure 1.
17

The impact of a distributors trust

Journal of Business & Industrial Marketing

Yi Liu, Lei Tao, Yuan Li and Adel I. El-Ansary

Volume 23 Number 1 2008 12 22

Table III Factor analysis summary

Cronbach
a

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Item

Honesty trust
HT1 We believe that the supplier will keep the promises they make to our firm on time
HT2 We believe that the supplier is competent to keep the promises they make to our firm
HT3 We believe in the supplier because it has a good reputation

0.810

Benevolence trust
BT1 Though circumstances change, we believe that the supplier will be ready and willing to offer us
assistance and support
BT2 When making important decisions, the supplier is concerned about our welfare
BT3 When we share our problems with the supplier, we know that they will respond with
understanding
BT4:In the future, we can count on the supplier to consider how its decisions and actions will affect us

0.777

Contract control
CC1 We have developed ways of doing things with the supplier that never need to be expressed
formally
CC2 We are actually bounded by our oral commitments rather than formal agreements without detail
obligations of both parties
CC3 We have no formal agreement with the supplier but oral commitments

0.806

Relational norms control

RN1 We keep each other informed about events or changes that may affect the other party
RN2 Our ideas for selling, servicing and producing are welcomed by the supplier
RN3 When some unexpected situation arises, we would rather work out a new deal together than hold
each other to original terms
RN4 Problems that arise in the course of this relationship are treated by the parties as joint rather
than individual responsibilities

0.770

Direct value
DV1 The supplier makes long-term delivery promises for the products delivered
DV2 The supplier can offer complete coverage of your total demand for the products
DV3 The products delivered by the supplier have good functionality

0.787

Indirect value
IV1 The supplier is the intermediator of contacts with prospective customers of our company.
IV2 The supplier is the intermediator of contacts with relevant third parties (e.g. technology
companies, consultants, marketing service providers, etc.)
IV3 The supplier often helps our company to develop new products or services
IV4 The relationship with the supplier can enhance employment security for employees

0.770

Factor
loading

Explained total
variance (%)
72.954

0.835
0.885
0.842
60.235
0.748
0.781
0.818
0.756
72.188
0.801
0.879
0.867
59.424
0.702
0.811
0.780
0.786
70.827
0.790
0.871
0.861
59.224
0.741
0.756
0.791
0.788

Notes: All scale anchors are as follows: 1 strongly disagree, 7 strongly agree

p 0:003 , 0.01) but has a negative effect on indirect value

(H6: b 20:440, p 0:000 , 0.01) while the use of
relational norms has a positive effect on both direct value
(H7: b 0:645, p 0:000 , 0.01) and indirect value (H8:
b 0:693, p 0:000 ,0.01).

Table IV Discriminant validity: chi-square differences between fixed

and free models
Factors
Honesty trust (HT)
Benevolence trust (BT)
Contract control (CC)
Relational norms (RN)
Direct value (DV)
Indirect value (IV)

HT
39.557
25.474
40.968
18.607
45.553

BT

CC

RN

DV

IV

Discussion

47.205
46.943 43.097
37.327 27.374 44.987
37.096 24.174 41.456 27.132

This study has examined the impact of a distributors trust

in a supplier, and its use of control mechanisms, on the
value it gains from the relationship with the supplier. The
empirical results generally support the conceptual
framework. The results of the study show that a

Note: All chi-square differences were significant at p , 0.01 level (for 1 d.f.)

18

The impact of a distributors trust

Journal of Business & Industrial Marketing

Yi Liu, Lei Tao, Yuan Li and Adel I. El-Ansary

Volume 23 Number 1 2008 12 22

Table V Estimation results

Hypotheses

Path

H1
H2
H3
H4
H5
H6
H7
H8

Honesty trust ! Contract control

Honesty trust ! Relational norms
Benevolence trust ! Contract control
Benevolence trust ! Relational norms
Contract control ! Direct value
Contract control ! Indirect value
Relational norms ! Direct value
Relational norms ! Indirect value

Estimate (standard)

P-value

0.690
0.582
20.334
0.289
0.169
20.440
0.645
0.693

0.000
0.000
0.003
0.004
0.003
0.000
0.000
0.000

Conclusion
Support
Support
Support
Support
Support
Support
Support
Support

Notes: Chi-square 206.377; d.f. 153; chi-square/d.f. 1.349; GFI 0.946; AGFI 0.919; RMSEA 0.032; IFI 0.982; TLI 0.975; CFI 0.982

relationship between trust and other informal control

mechanisms, and it offers a more comprehensive
appreciation of the effect of a distributors trust in a
supplier and its use of control mechanisms.
H5 and H7 pertain to the impact of a distributors use of
control mechanisms on the direct value it gains from a
relationship. The results show that there are positive effects
of a distributors use of both contract and relational norms
on the direct value it gains from the relationship. These
findings support the conclusions of previous researchers
(Masten, 1993; Cannon et al., 2000; Aulakh et al., 1996),
and further demonstrate that these previous positive
conclusions also apply in the context of marketing
channels of household appliances in China, thus providing
a new empirical thinking to the current research on the
relationship between the use of control mechanism and
direct relationship value.
H6 and H8 pertain to the impact of a distributors use of
control mechanisms on the indirect value it gains from a
relationship. The findings suggest that the more a distributor
makes use of contracts, the less indirect value the distributor
gains from the relationship, and the more the distributor
makes use of relational norms, the greater the indirect value it
gains from the relationship. Few scholars have examined the
impact that control mechanisms have on indirect relationship
value. This finding reveals the opposite impacts of contract
and relational norms on indirect value, and thus sheds new
light on the conceptual link of use of control mechanisms and
relationship value.

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Figure 1 Testing results of the conceptual model

distributors honesty trust in a supplier enhances the direct

value it gains through its use of both contract and relational
norms, hinders the indirect value it gains through the use of
contracts, and enhances the indirect value it gains through
its use of relational norms. On the other hand, a
distributors benevolence trust enhances both the direct
and indirect value gained through its use of relational
norms, but impedes the direct value and promotes the
indirect value gained through its use of contracts. These
findings constitute new contributions to the literature on the
relationship marketing and channel relationships.
H1 and H3 pertain to the impact of a distributors trusts
on its use of contract. The results indicate that the higher
the level of a distributors honesty trust in a supplier, the
greater the likelihood that a contract will be used by the
distributor, and that the higher the level of a distributors
benevolence trust in a supplier, the less likelihood that a
contract will be used by the distributor. Previous studies on
the relationship between trust and the use of contract have
produced inconsistent conclusions (Lane, 2000; Williamson,
1993). In this study, by dividing a distributors trust into
honesty trust and benevolence trust, we show that these
different kinds of trust will have opposite impacts on the
distributors use of a contract. These findings may explain
the cause of the discrepancy of the previous studies to a
certain extent, and may be helpful in understanding more
deeply the relationships between the trust and the use of
contracts.
H2 and H4 pertain to the impact of a distributors two kinds
of trust on its use of relational norms. The results support the
positive effects of a distributors honesty trust and
benevolence trust in a supplier on its use of relational
norms, and demonstrate that both honesty trust and
benevolence trust on the part of a distributor will encourage
its use of relational norms. This is a new exploration into the

Managerial implications
This research presents evidence of the relationships among
trust, control mechanisms, and the relational values. The
findings help distributors to understand that both trust in
suppliers and use of control mechanisms can affect direct and
indirect value gained from a relationship, and therefore
distributors should choose and use the proper control
mechanism as well as foster a suitable kind of trust in
suppliers to realize the objectives of maximizing the
relationship value. Specifically, the findings have the
following important managerial implications.
First, concerning the positive effects of relational norms
on direct and indirect values, and the negative effect of
contracts on indirect value and its positive effect on direct
value, this research suggest that, in a channel relationship,
distributors should decide whether direct value or indirect
value gained from a relationship is more important. If direct
19

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The impact of a distributors trust

Journal of Business & Industrial Marketing

Yi Liu, Lei Tao, Yuan Li and Adel I. El-Ansary

Volume 23 Number 1 2008 12 22

References

value is more important, the distributor should pay more

attention to increasing its use of both contract and relational
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relationship.
Second, comparing the results of causal effect analysis (see
Table VI), this research demonstrates that the effects of
honesty trust and benevolence trust on direct value through
contract and norms are 0.492 and 0.13 respectively, while the
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gained from the relationship is more important than the
indirect value for the distributor, the distributor should pay
more attention to cultivating honesty trust in the supplier,
whereas if the indirect value gained from the relationship is
more important than the direct value for the distributor, the
distributor should focus its attention on establishing
benevolence trust in the supplier.

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Table VI Causal effect analysis
Path
HT-CC DV
HT-RN DV
HT-CC IV
HT-RN IV
BT-CC DV
BT-RN DV
BT-CC IV
BT-RN IV

Effect scale
0.690 0.169 0.117
0.582 0.645 0.375
0.690 (20.440) 20.304
0.582 0.693 0.403
(2 0.334) 0.169 20.056
0.289 0.645 0.186
(2 0.334) (2 0.440) 0.147
0.289 0.693 0.200

Total
0.492
0.1
0.13
0.347

Notes: HT Honesty trust; BT Benevolence trust; CC Contract control;

RN Relational norms; DV Direct value; IV Indirect value

20

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The impact of a distributors trust

Journal of Business & Industrial Marketing

Yi Liu, Lei Tao, Yuan Li and Adel I. El-Ansary

Volume 23 Number 1 2008 12 22

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21

The impact of a distributors trust

Journal of Business & Industrial Marketing

Yi Liu, Lei Tao, Yuan Li and Adel I. El-Ansary

Volume 23 Number 1 2008 12 22

Zand, D.E. (1972), Trust and managerial problem solving,

Administrative Science Quarterly, Vol. 17 No. 2, pp. 229-39.

a contract agreement and, the second, the norm of behavior

flows from the social nature of the relationship.
They also consider the direct value of a relationship (the
benefit of a relationship which has been realized by the
distributor and does not depend on other relationships or
other actors, and includes cost reduction value, quality value,
quantity value and supply safeguard value) and indirect value
(which refers to a distributors benefit which is acquired from
other relationships or in the future which involves market
value, scout value, innovation development value, and social
value.)
They demonstrate that a distributors honesty trust in a
supplier enhances the direct value it gains through its use of
both contract and relational norms, hinders the indirect value
it gains through the use of contracts, and enhances the
indirect value it gains through its use of relational norms.
On the other hand, a distributors benevolence trust
enhances both the direct and indirect value gained through
its use of relational norms, but impedes the direct value and
promotes the indirect value gained through its use of
contracts.
The higher the level of a distributors honesty trust in a
supplier, the greater the likelihood that a contract will be used
by the distributor, and that the higher the level of a
distributors benevolence trust in a supplier, the less
likelihood that a contract will be used by the distributor.
The results also support the positive effects of a
distributors honesty trust and benevolence trust in a
supplier on its use of relational norms, and demonstrate
that both honesty trust and benevolence trust on the part of a
distributor will encourage its use of relational norms.
In a channel relationship, distributors should decide
whether direct value or indirect value gained from a
relationship is more important. If direct value is more
important, the distributor should pay more attention to
increasing its use of both contract and relational norms to
manage the relationship. If indirect value is more important,
the distributor should decrease its use of contracts and put
more effort on its use of relational norms to deal with the
problems and difficulties from the relationship.
If the direct value gained from the relationship is more
important than the indirect value for the distributor, the
distributor should pay more attention to cultivating honesty
trust in the supplier, whereas if the indirect value gained from
the relationship is more important than the direct value for
the distributor, the distributor should focus its attention on
establishing benevolence trust in the supplier.

Corresponding author
Yi Liu can be contacted at: liuyi@mail.xjtu.edu.cn

Executive summary and implications for

managers and executives

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This summary has been provided to allow managers and executives

a rapid appreciation of the content of the article. Those with a
particular interest in the topic covered may then read the article
in toto to take advantage of the more comprehensive description of
the research undertaken and its results to get the full benefit of the
material present.
You are a distributor and you have a trusted supplier. Thats
to say you trust the supplier firm because it has a good
reputation and you believe it will keep the promises it makes,
and is competent to do so.
Thats great, but is it enough to lower your guard and put
your faith in that trust, rather than rely on control
mechanisms such as firm contracts? In other words, can you
bank on that trust?
Maybe the trust goes further and you believe that, even
though circumstances change, the supplier will be ready and
willing to offer help and support and that, in making
important decisions, the supplier is concerned about your
organizations welfare. Maybe you trust them to respond with
understanding when you share problems with them and that,
in the future, you can count on the supplier to consider how
its decisions and actions will affect you.
Now isnt that better? A bit like the lady on the fruit and
vegetable stall who can be trusted to serve you wholesome
food at a fair price, but can also be expected to leave the stall
and rush after you if she discovers shes accidentally shortchanged you or youve left something maybe even your
wallet or purse on her stall.
Trust comes in different forms. The first described above,
and what some would consider being somewhat limited, is
honesty trust: the second is benevolence trust and
understanding the difference can help get the best gains in
value creation. Put simply, the difference is that a distributors
benevolent trust in the supplier is based on the distributors
belief that, even if there is no way of checking on or policing
behavior, the supplier will not take advantage of an
opportunity to gain at the distributors expense.
In exploring how a distributors trust in a supplier and its
use of control mechanisms affect the value it gains from the
relationship, Yi Liu, Lei Tao, Yuan Li and Adel I. El-Ansary
consider two sources of enforcement on an ongoing channel
relationship one the legitimate authority which comes from

(A precis of the article The impact of a distributors trust in a

supplier and use of control mechanisms on relational value creation
in marketing channels. Supplied by Marketing Consultants for
Emerald.)

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