To build trust in a cooperative relationship, both firms can:
A) rely on competitive bidding.
B) make mutual investments in specialized assets.
C) write short-term contracts that must be renewed frequently.
D) increase their vertical integration.
E) use outsourcing of noncore activities.

Question

Quizplus · Accepted Answer

Mutual investments in specialized assets create a sense of interdependence between the firms and demonstrate a willingness to commit to the long-term success of the relationship. This can help build trust between the two firms. In contrast, competitive bidding, short-term contracts, and outsourcing may emphasize self-interest and opportunistic behavior, which can undermine trust. Vertical integration can also create mistrust, as it may lead to one firm dominating the relationship.

To Build Trust in a Cooperative Relationship, Both Firms Can