Power, buyer trustworthiness and supplier performance: evidence from the Armenian dairy sector

Abstract

The paper presents a Multiple Indicators and MultIple Causes (MIMIC) model for explaining the relationships between buyer-seller power, buyer trustworthiness and supplier satisfaction / performance. The model draws on an organizational supply chain perspective of power and is verified using data relating to dairy farmers’ relationships with their main buyer in Armenia. The analysis indicates that buyers are more trustworthy where there is greater competition for supplies. Buyer trustworthiness is also positively correlated with both the size of a supplier, as well as a supplier being a member of a marketing cooperative. Buyer trustworthiness has a positive impact on suppliers’ satisfaction (regarding their relationship with their main buyer) and enhances the quality and quantity of suppliers’ output.