The effect of unethical behavior on trust in a buyer-supplier relationship: The mediating role of psychological contract violation

Research on trust in buyer-supplier relationships has tended to focus on the performance outcomes of a trusting relationship, as well as the processes that serve to build trust. Largely absent from the buyer-supplier literature is an in-depth examination of activities that break down trust, and the resulting effect on supplier trust in the buyer. The authors propose and test a model that evaluates psychological contract violations between a buyer and a supplier as a mediating variable of the effect of unethical activities on trust within a partnership. Survey data was collected from 110 tier one suppliers of major corporations in the state of Ohio. Our results show how a supplier's perception of a violation of the psychological contract either partially mediates or fully mediates the relationship between the buyers unethical activity and the suppliers trust in that buyer. We discuss how suppliers may demonstrate bounded ethicality when they overlook perceived unethical behaviors by the buyer. (C) 2008 Elsevier B.V. All rights reserved.