Accumulating trust in networks: The interplay between social structure and networking behavior

Abstract

The predominant focus of the organizational literature on trust has been the direct interactions between ego and other actors, which has solidified our understanding of the dyadic foundations of trust. We have learned far less, however, about the formation of trust in the context of an extended network of actors whose interactions are more limited, diffuse, and distal. In this paper, we build on the emerging literature on network forms of trust to argue that actors accumulate trust by both leveraging their position in social structure and by engaging in networking behavior. We test our predictions using a sample of data from an online trading platform consisting of 28,000 traders across 48 weeks. Our data allows us to observe the accumulation of trust in the form of “copy trading” whereby traders risk their own financial capital by allocating a portion of their portfolio to be automatically based on the investments of other designated traders. We find that traders who occupy positions of higher status in the network and traders who signal positive sentiments in their communication behaviors accumulate higher levels of trust. Furthermore, the positive effect of networking behavior on accumulation of trust is amplified by network status. In sum, we contribute to the organizational literature on the formation of trust by demonstrating that network structure acts as a prism of social cues and as pipes of signaling behavior about trustworthiness that combine to explain the accumulation of trust.