Examining the impact of socialization and information sharing and the mediating effect of trust on innovation capability

Purpose - The purpose of this paper is to investigate the interrelationship between trust, socialization, and information sharing on the buying firm's innovation capability in the context of the buyer-supplier relationship (BSR). A nomological model is developed that examines the mediating role of relational capital (supplier trust) on the relationship between structural capital (socialization and information sharing) and innovation capability. Design/methodology/approach - A survey was conducted on 357 US executives. Structural equation modeling was used to analyze the hypothesized relationships. Findings - Information sharing and formal socialization activities increased the buying firm's trust in its key supplier. However, formal socialization activities within the context of the business environment did not have a significant direct impact on buyer's innovative capabilities; but when mediated by trust, it positively impacted innovation capabilities. Informal socialization within the context of the social environment directly impacted innovation capabilities but trust did not mediate the relationship. Information sharing impacted trust and innovation significantly and trust mediated the impact of information sharing on innovation capabilities. Originality/value - This study defines the formal and informal aspects of socialization and investigates its impact on trust and buyer innovation capabilities. This is one of the few studies that highlights the mediating role of trust between firms to facilitate innovation capability.