Trust in Japanese Interfirm Relations: Institutional Sanctions Matter

Abstract

Trust is a critical component of interfirm relations, and scholars have pointed to Japan as an environment where trusting business relationships flourish. Rather than viewing trust as an inherent and driving force in Japanese interfirm relations, we propose that a combination of institutional and societal sanctioning mechanisms is largely responsible for the apparently trust-induced cooperation there. Our examination of buyer-supplier relations in the Japanese auto industry demonstrates the important role of these sanctions. We recommend focusing on sanctions in further explorations of interfirm trust.