Trust and Institutions

Abstract: This paper deals with the role of institutions in the development of trust among individual actors (managers), among collective actors (firms), and between individual and collective actors. We review various strands of literature on organizational trust and examine the assumptions made about how trust building processes are influenced by institutional arrangements. Building on this discussion, we develop a perspective on the interrelationship between trust and institutions. We examinefour situations where the influence of institutions can be conducive to building trust in business relationships: in the early stages of the development of a trust-based relationship; when institutions are relatively strong; when trust needs to be established swiftly; and when the transaction is idiosyncratic rather than based on routine behavior.;