The role of interpersonal trust for entrepreneurial exchange in a transition economy

Abstract

PurposeWhile trust is widely recognized as central to the establishment of an effective market economy, research on transition economies has not examined sufficiently its role in promulgating economic development. This study seeks to ascertain the links between supplier trust, asset specificity, and uncertainty reduction in the context of a transition economy, and to validate a measure of trust developed in a Western developed market economy in the conditions of a transition economy.Design/methodology/approachA confirmatory factor analysis of trust, asset specificity and uncertainty reduction was performed with a sample of Bulgarian small business owners.FindingsCommensurate with expectations, supplier trust is significantly and positively associated with both asset specificity and uncertainty reduction. The six‐item measure of supplier trust is a valid measure for new and small ventures in the context of a transition economy.Originality/valueThis paper demonstrates that private entrepreneurs in transition economies compensate for the lack of institutional support through embeddedness in their relational exchange network.