Influence of power asymmetry, commitment and trust on sme retailers’ performance

Abstract

The purpose of this study is to analyze the effect of power asymmetry, commitment and trust to business performance. In a business relation, the role of power asymmetry, commitment and trust are importance to maintain the quality of a relationship. Business performance is an important factor to decide whether a business relation should be continued or terminated. We conducted a survey with traditional SME retailers in Indonesia as the respondents, which were obtained through purposive sampling methods. This study involved 245 SME retailers who have business relation with modern companies as their supplier. We adopted Morgan and Hunt’s (1994) model of relationship marketing for business to business in order to analyze the relationship among companies in business network. The result shows that power asymmetry, commitment and trust have significant, positive effects on business performance. The implication of this study is: power asymmetry between modern companies and SME potentially accelerates their performance, while commitment and trust will provide firm foundation for the companies involved in the business relation. In overall, power asymmetry has impact for firm with lack of bargaining position in business relation, thus instead of being exploited, SME retailers can increase their business performance due to partner’s pressure and demand to their performance.