Trusting Behavior Following a Violation of Trust: The Immunization Effect of Control System Transparency

Customer-supplier relationships depend in a crucial way on the trust that the customer has in the supplier. We propose that two supplier internal control (IC) design choices – type of IC and transparency of the IC to the customer – interact to affect a supplier’s ability to build and maintain customer trust. In a 12-round 2x2 laboratory experiment employing a repeated trust game, we examine the impact of supplier IC type and IC transparency on customer trust and trusting behavior across three phases of the customer-supplier relationship: (1) a trust formation phase, (2) a trust violation phase, and (3) a post-violation trust repair phase. We manipulate supplier IC type based on whether the IC results in supplier service that exceeds customer expectations (e.g., customer satisfaction performance incentives) or whether the IC results in service that falls short of customer expectations (e.g., budgetary controls). We manipulate IC transparency as high or low. We find that supplier ICs resulting in service that exceeds customer expectations during the trust formation phase of the relationship engender greater customer trusting behavior than ICs that result in service that falls short of customer expectations. However, we also find that the difference in customer trusting behavior between these two types of supplier ICs is smaller when IC transparency is high as compared to when transparency is low. Further, while a significant trust violation damages customer trusting behavior regardless of the supplier IC employed, we find the least amount of damage to trusting behavior from a trust violation when the customer is exposed to prior repeated IC-induced service disappointments and the presence of the IC was transparent. We refer to this as the IC transparency “immunization effect.” This difference in trusting behavior between IC types persists through the post-violation trust repair phase. This study contributes to prior research by examining the effects of differences in supplier ICs on customer trusting behavior throughout the trust environment phases of the supplier-customer relationship.