Trust, repute and the role of non-profit enterprise

Abstract

This article examines the trust hypothesis: the claim that asymmetric information can explain the existence of non-profit enterprise in certain markets. We argue that this hypothesis, in order to be viable, has to meet three challenges: ‘reputational ubiquity’, ‘incentive compatibility’ and ‘adulteration’. Drawing on modern agency theory, we conclude that the trust hypothesis stands on shaky ground. It can be sustained only under particular conditions that have been neither carefully described in theory nor subject to empirical assessment. The available evidence, patchy and inadequate as it is, seems to suggests that there are some ownership-related differences in aspects of organisational performance connected with asymmetric information. However, there is little evidence that this relates to trustper se or provides a rationale for the existence of non-profit ownership in these industries. We conclude with a plea for substantial research on consumer expectations and provider motivations.