Trust in Transition: Cross-Country and Firm Evidence

Posted: 16 Sep 2008

See all articles by Martin Raiser

Martin Raiser

European Bank for Reconstruction and Development

Alan Rousso

European Bank for Reconstruction and Development (EBRD)

Franklin Steves

European Bank for Reconstruction and Development (EBRD)

Utku Teksoz

Credit Suisse

Multiple version iconThere are 2 versions of this paper

Date Written: October 2008

Abstract

Using data from a large survey of firms across 26 transition economies, this article assesses the extent of trust in business relationships by measuring the level of prepayment demanded by suppliers, which we interpret as a measure of (dis)trust. We investigate a range of potential determinants of trust and find that trust among businesses is higher where confidence in third party enforcement through the legal system is higher. We also find that different types of business networks have a differential impact on the degree of trust between enterprises: networks based around family and friends help to build trust among firms, whereas networks based around enterprise insiders and government agencies appear to undermine trust. Our conclusion, based on the use of a unique multicountry enterprise data set, is that enterprises' room for maneuver in overcoming opportunism and distrust is much more limited by countrywide systemic factors than previously believed. (JEL D23, D92, P26, P31, Z13)

Suggested Citation

Raiser, Martin and Rousso, Alan and Steves, Franklin and Teksoz, Utku, Trust in Transition: Cross-Country and Firm Evidence (October 2008). The Journal of Law, Economics, & Organization, Vol. 24, Issue 2, pp. 407-433, 2008. Available at SSRN: https://ssrn.com/abstract=1268656 or http://dx.doi.org/10.1093/jleo/ewm060

Martin Raiser (Contact Author)

European Bank for Reconstruction and Development ( email )

One Exchange Square
London EC2A 2JN
United Kingdom
+44 20 7338 7231 (Phone)
+44 20 7338 6110 (Fax)

Alan Rousso

European Bank for Reconstruction and Development (EBRD) ( email )

One Exchange Square
London, EC2A 2EH
United Kingdom

Franklin Steves

European Bank for Reconstruction and Development (EBRD) ( email )

One Exchange Square
London EC2A 2JN
United Kingdom

Utku Teksoz

Credit Suisse ( email )

One Cabot Square
London E14 4QJ
United Kingdom
+44 207 888 1000 (Phone)
+44 207 888 1600 (Fax)

HOME PAGE: http://www.credit-suisse.com/uk

Register to save articles to
your library

Register

Paper statistics

Abstract Views
383
PlumX Metrics