Low-trust Environment Research Articles

Problems of Cross-Border Regional Integration

In the framework of European integration there is a growing interest in the development of border re gions in East Central Europe. This article deals with the problems of regional integration in the German- Polish border region, following an approach that emphasizes the regions' economic organization, in stitutional fabric and sociocultural environment. New economic links between Western European and East-Central European firms do not necessarily lead to a revaluation of the border region or to the formation of transborder integrated economic regions. Instead, there is a tendency towards the de velopment of new economic links which overlook the border region. Up to now, cooperation between regional firms is weak within the border region. The region's sociocultural environment in terms of a 'low trust environment' and a specifically shaped social distance between the neighbouring regions are a fur ther hindrance to regional integration. These findings are being related to strategic options of re gional development policy in the border region.

Trust and Growth

Why does trust vary so substantially across countries? How does trust affect growth? This paper presents a general equilibrium growth model in which heterogeneous agents transact and face a moral hazard problem. Agents in this world may trust those with whom they transact, but they also have the opportunity to invest resources in verifying the truthfulness of claims made by transactors. We characterize the social, economic and institutional environments in which trust will be high and show that low trust environments reduce the rate of investment and thus the economy's growth rate. Further, we show that very low trust societies can be caught in a poverty trap. The predictions of the model are examined empirically for a cross-section of countries and have substantial support in the data. Trust is higher in more ethnically, socially and economically homogeneous societies and where legal and social mechanisms for constraining opportunism are better developed. High-trust societies, in turn, exhibit higher rates of investment and growth.

Family Firms and Business Networks: Textile Engineering in Yorkshire, 1780–1830

Recent accounts of nineteenth-century industrial organisation have presented the family firm as a secure environment in an essentially low-trust business environment. This article considers the transition of the textile engineering industry from an artisan trade of the late eighteenth century to one centred upon factories from the 1820s. Business networks were much more than casual links outside individual firms, but made up a central part of the industrial structure and operated in a collaborative, rather than a competitive, framework. In contrast, experiences of engineers within family firms illustrate that relationships within those firms were not guaranteed to be less problematic than with members of the surrounding community.

Trust and Managerial Problem Solving Revisited

The centrality of interpersonal trust for effective managerial problem solving was illustrated by inducing either a high-trust or a low-trust mental set in experimental groups. The results indicated that subjects operating in a high-trust environment were significantly more effective in problem solving than those working in a low-trust environment.