Effects of experience and contract on relational norms and performance in SCM

We examine how experience and contract affect firm performance and relational norms in the small and medium enterprise (SME) buyer and supplier relationship. Analysing the survey data from 192 buyers and suppliers in the fire industry in Korea, we derive analysis results as follows. As a relational experience, trust positively affects both relational norms such as solidarity and flexibility as well as perceived performance, whereas conflict, another relational experience, negatively affects performance without any significant effect on relational norms. Although contractual formality has no effect on performance, it positively affects solidarity. While performance has direct positive effects on both relational norms, it also mediates the relationship between trust and relational norms. In sum, trust turns out to be the most significant factor in that it has not only a short-term effect on performance, but also a long-term effect by positively affecting relational norms, whereas conflict negatively affects short-term performance only and contract has a long-term effect only by affecting solidarity. We will further discuss managerial implications of these outcomes in detail.