Trust and Its Alternatives

Abstract

Most scholarly work on trust recognizes its importance as part of a non-market form of governance in exchanges between firms. However, trust is only one such governance device that can be used, other devices such as reputation, bargaining power, and contracts can also be used to govern exchanges. This paper empirically examines the relationships between trust, reputation, bargaining power, and contracts as governance devices in agreements between smaller entrepreneurial firms and larger more established firms. The findings suggest that while role of trust is an important one, it may be more effective when combined with other governance devices.