Trust, Trustworthiness, and Information Sharing in Supply Chains Bridging China and the U.S.

Whether and how trust and trustworthiness diﬀer between a collectivist society, e.g., China, and an individualistic one, e.g., the U.S., generate much ongoing scientiﬁc debate and bear signiﬁcant practical values for managing cross-country transactions. We experimentally investigate how supply chain members’ countries of origin – China versus the U.S. – aﬀect trust, trustworthiness, and strategic information sharing behavior in a cross-country supply chain. We consider a two-tier supply chain in which the upstream supplier solicits demand forecast information from the retailer to plan production; but the retailer has an incentive to manipulate her forecast to ensure abundant supply. The levels of trust and trustworthiness in the supply chain and supplier’s capability to determine the optimal production quantity aﬀect the eﬃcacy of forecast sharing and the resulting proﬁts. We develop an experimental design to disentangle these three aspects and to allow for real-time interactions between geographically distant and culturally heterogeneous participants. We observe that, when there is no prospect for long-term interactions, our Chinese participants consistently exhibit lower spontaneous trust and trustworthiness than their U.S. counterparts do. We quantify the diﬀerences in trust and trustworthiness between the two countries, and the resulting impact on supply chain eﬃciency. We also show that Chinese individuals exhibit higher spontaneous trust towards U.S. partners than Chinese ones, primarily because they perceive that individuals from the U.S. are more trusting and trustworthy in general. This positive perception towards U.S. people is indeed consistent with the U.S. participants’ behavior in forecast sharing. In addition, we quantify that a Chinese supply chain enjoys a larger eﬃciency gain from repeated interactions than a U.S. one does, as the prospect of building a long-term relationship successfully sustains trust and trustworthiness by Chinese partners. We advocate that companies can reinforce the positive perception of Westerners held by the Chinese population and commit to long-term relationships to encourage trust by Chinese partners. Finally, we also demonstrate that both populations exhibit similar pull-to-center bias when solving a decision problem under uncertainty (i.e., the newsvendor problem). * We used a 2 (self country of origin: China versus the U.S.) × 2 (partner’s country of origin: China versus the U.S.) × 2 (high versus low production cost) between-subject design; i.e., we had eight treatments in total. The treatment labels follow the convention S i R j C k . The subscript for S (R) indicates the supplier’s (retailer’s) country of origin, and the subscript for C indicates the cost condition. These treatments represent four supply chain conﬁgurations regarding country of origin: a U.S. supply chain, a Chinese supply chain, a Chinese supplier – U.S. retailer supply chain, and a U.S. supplier – Chinese retailer supply chain. We examine two cost conditions to study the robustness of the country eﬀects. Each participant part in only one of the treatments. In each treatment, participants ﬁrst