The Role of Trustworthiness in Reducing Transaction Costs and Improving Performance: Empirical Evidence from the United States, Japan, and Korea

Abstract

Abstract The issue of trust in economic exchanges has recently received considerable attention in the academic literature (Barney and Hansen 1994, Mayer et al. 1995, Zaheer et al. 1998) as well as the popular press (Business Week 1992, Economist 1996, Fukuyama 1995). Trust in exchange relationships has been hypothesized to be a valuable economic asset because it is believed to: (1) lower transaction costs and allow for greater flexibility to respond to changing market conditions (Gulati 1995, Barney and Hansen 1994, Uzzi 1997, Dyer 1997) and (2) lead to superior information sharing that improves coordination and joint efforts to minimize inefficiencies (Aoki 1988, Clark and Fujimoto 1991, Nishiguchi 1994). Some scholars even claim that national economic efficiency is highly correlated with a high-trust institutional environment (North 1990, Casson 1991, Fukuyama 1995). For example, Fukuyama (1995, p. 7) argues that the economic success of a nation, ‘as well as its ability to compete, is conditioned by . . . the level of trust inherent in the society.’ Indeed, numerous scholars have suggested that interorganizational trust is a key factor in explaining alliance success (Dyer 1996b, Doz and Hamel 1998). These claims have increased our attention to the important role of trust in economic exchanges.