Social Trust Towards Risk in International Business: A Cross-Country Analysis

Abstract

There is a growing body of research on social trust in the literature in business and economics. This study adopts the conceptual and empirical relationship between trust behaviour and risk-taking propensity, and further extends the frontier of research on social trust by examining whether social trust can influence country risk in international business settings. Using a panel data set consisting of developing and developed countries over the period 1995–2019, the study performs a battery of empirical tests, and finds robust evidence that developing countries with a higher level of social trust appear to display a greater degree of financial uncertainty. The findings are consistent with recent experimental studies documenting a significant positive association between trust and risk-taking behaviour. The study provides new insights into the role of social trust in country risk assessment, and offers meaningful implications for international business.