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Archives of Business Review – Vol. 8, No.7

Publication Date: July 25, 2020

DOI: 10.14738/abr.87.8551.

Aseh, K., Kenny, K., & Pathmanathan, R. (2020). Exploring Multidimensional Constructs Of Trust In Procurement Practices: An

Evidence From Malaysia. Archives of Business Research, 8(7). 32-38.

Exploring Multidimensional Constructs Of Trust In Procurement

Practices: An Evidence From Malaysia

Khairi Aseh

UNIES Education Group

Kamal Kenny

UNIES Education Group

Ravindran Pathmanathan

UNIES Education Group

ABSTRACT

During the last two decades, the study of procurement practices

impacts on business performance has generated interest among many

researchers. Yet very little literature deals specifically with how

company success is affected by the procurement activities of

companies. In fact, most of the papers reviewed on procurement

activities are qualitative rather than empirical in nature. As a result,

several businesses are starting to pursue further aspects of business- performing procurement activities. Against this backdrop, this work

aims to fill this vacuum by performing empirical case studies at 28

companies operating in the worst ever chaotic climate in the world. The

results of this research study attempt to determine the interconnection

between the procurement practices of companies and business

performance related to the seven trust attributes (commitment;

openness; integrity, proximity, competence; reliability and security).

Key Words: Trust, Procurement Practice, Business Performance.

INTRODUCTION

Most organizations are aware of how necessary it is to handle internal processes as well as external

operating processes in an integrated manner to ensure that companies gain sustainable

competitive advantage (Hadrawi, 2019).It is also evident from the literature examined that

companies are deeply engaged in various supplier procurement schemes (Lysons and Farrington,

2006) to ensure efficient and successful delivery of narrowly defined products and services to

business requirements. Many analysts argue that the organization is under immense pressure to

influence its procurement practices. As a result, there is growing interest in the study of success

and significance of procurement methods in shaping company performance (Baily et al, 2005).

Nonetheless, numerous companies have differing views of the value and significance of

procurement procedures because of their diverse environments and contexts. Several research

studies have been performed over the years to investigate the effects of procurement practices in

the efficiency of the buyer and supplier companies (Lysons and Farrington, 2006). Essentially,

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Archives of Business Research (ABR) Vol.8, Issue 7, July-2020

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organisation of procurement has been an important part of success stories for businesses over the

year (Carter and Narasimhan, 1996).

As such, research on the actual operationalization of procurement practices is required, and the

relationship between the performance of the company and the value of prevalent procurement

practices is established. This study will examine the different procurement practices that are

prevalent in buyers and suppliers in the banking industry in Klang Valley to provide more insight

into firm expectations of success and the importance of confidence in procurement practices that

affect company survival.

LITERATURE REVIEW

The theory of social exchange is said to have been the product of cultural, psychological and

sociological interactions. Given the fact that the theory exists in many ways, somewhat similar to

other theories is the fact that the theory of social exchange is often motivated by the same core

principle of actors exchanging trust through a relation of social exchange. Several sources have

established confidence in the exchange of connection. Meyers and his colleagues (2019) defined a

very classical concept of trust as an attitude displayed in solutions where one person relies on

another. Other researchers in the 1990s reported that trust can be described as "one party's

expectation that the actions taken by the other party will meet its needs in the future." Anderson

and Weitz (1989). Definition of confidence by Fukuyama and his colleagues in year 1995)

encompassed the essential elements of behavioral regularity, integrity and cooperation. Similarly,

Rousseau et al. (2002) stressed in the definition the positive behavior of the parties. Mishra (1998)

discussed problems of honesty, transparency, concern and trustworthiness. In his paper Hasnain

(2019) concluded that seeing it as a tool for the smooth functioning of nations and organizations.

Some researchers are eager to study the confidence dimension. One of the early confidence

researchers are Fukuyama and his colleagues (1996), and they attempted to address confidence in

the context of regularity, fairness and cooperation. Mishra (1998) described faith in competence,

transparency, concern and trustworthiness. Other researchers later put in a few dimensions such

as efficiency and predictability (Dyer and Chu, 2000) Inevitably, procurement processes and

agreements will have conflicts of interest as well as commonalities between partners in exchange.

One of the main challenges in procurement activities may tend to be the motivation for

opportunistic conduct with the shifting power balance at different stages of the business cycle. That

is when business is easy sailing in times of boom and buyers are tempted to play off one supplier

after another to get the best deals. The power swings in a depression towards the supplier, which

the buyer will see as offering the best terms, and the supplier will be tempted to walk away from

hard bargaining buyers.

While formal processes including contracts and qualification procedures have often been used as

a substitute for trust in procurement practices, they are mostly used in a symbolic rather than

heavy-handed, legalistic way. Sitkin and Roth (1993) have argued that the symbolic solution is used

to legalistically resolve violations of confidence. However, this strategy also fails since symbolic

strategies paradoxically reduce the degree of confidence instead of reproducing confidence, and

place a psychological and or interactional barrier between the parties that triggers an increasing

cycle of formality and distance that leads to the need for further laws. While the functional task of

regulation should be clear, catastrophic failures have occurred which have harmed both buyers

and sellers.

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URL: http://dx.doi.org/10.14738/abr.86.8551 34

Aseh, K., Kenny, K., & Pathmanathan, R. (2020). Exploring Multidimensional Constructs Of Trust In Procurement Practices: An Evidence From

Malaysia. Archives of Business Research, 8(7). 32-38.

Many studies indicate that buyers have time to identify which providers to grow and which are

responsible for investing in order to maintain an ongoing partnership. Such investments include

specialized equipment, skills and training, process development to satisfy both parties' needs and

the length of the partnership's lifetime. The model is based on the premise that the perceived

performance of a firm procurement function is positively linked to the perceived importance of the

procurement function (Lopes et.al, 2020).As such, we believe that a firm overall perception of

success and value of procurement practices affect business survival is positively linked to the single

maturity of the seven trust attributes (commitment; openness; integrity, closeness, competence;

dependability, and security).

RESEARCH METHODOLOGY

Individual-depth interviews (IDIs) taken from 20 different individuals related to this investigation.

The interview was based on open-ended questions that made it possible for the interviewees to be

flexible in asking their respondent any kind of question relevant to the case. Data saturation point

is a stage when a project researcher no longer receives new information, and at this point the

process of data collection must stop. These 20 interviewees are first line managers, midsize

management and senior management involved in the process of relational exchange. The

participants consulted included, Chief Procurement Officers, Procurement Executives; Marketing

and Sales Directors; Chief Executive Officers; Chief Operating Officers; Procurement,

Administration and Operations Team Leaders. The respondents were identified across all levels of

the business including team leaders and supervisors involved in the formation and development

of relationship exchanges in Klang Valley banking industry between buyers and supplier

companies. The project's researcher had asked his interviewees seven questions. The questions

were based as bellow on confidence domains:

1. To what degree are buyers and suppliers dedicated to establishing and improving inter- organizational relationships in Klang Valley banking industry?

2. Do the importance of buyers and suppliers open contact as they communicate with one

another?

3. How honest are purchasers and suppliers in the banking industry at Klang Valley to each

other?

4. In what way do buyers and suppliers in their everyday business relate to each other?

5. Do buyers and suppliers in the banking industry in Klang Valley perceive the establishment

and growth of inter-organizational relations as a dynamic and complicated process

requiring any specific skills and capabilities?

6. Will purchasers and suppliers in the banking industry at Klang Valley value dependability

issues?

7. In what degree do Klang Valley's banking industry buyers and suppliers regard market risks

as a danger to the establishment and growth of inter-organisation relationships?

FINDINGS

This study offered a comprehensive overview of case-by-case review by stakeholders of Cases C01

– C22 as representatives of consumers and suppliers chosen for this report, including multinational

global and local banks, producers of high-tech products – ATMS, telecommunications equipment;

producers and dealers of automobiles and motor vehicles; construction firms – properly

assembled. Included in the case profiles are also cases of general context information, such as the

type and size of case organizations and whether they are local, global, multinational or regional.