Trust as a source of sustained competitive advantage*

Significant differences in assumption and method exist between behaviorally oriented and economically oriented organizational scholars (Barney 1990; Donaldson 1990). While these differences manifest themselves in a wide variety of research contexts, nowhere are they more obvious than in research on the role of trust in economic exchanges. On the one hand, behaviorally oriented researchers often criticize economic models that assume exchange partners are inherently untrustworthy (Mahoney, Huff, and Huff 1993) and constantly tempted to behave in opportunistic ways (Donaldson 1990). These scholars are dissatisfied with economic analyses that suggest trust will only emerge in an exchange when parties to that exchange erect legal and contractual protections (called governance mechanisms) which make it in their self-interest to behave in a trustworthy manner (Williamson 1975). This rational, calculative, economic approach to trust, many behavioral scholars argue, is empirically incorrect (since most exchange partners are, in fact, trustworthy), socially inefficient (since it leads to an overinvestment in unnecessary governance), and morally bankrupt (Etzioni 1988). A more reasonable approach, it is argued, would adopt the assumption that most exchange partners are trustworthy, that they behave as stewards over the resources they have under their control (Donaldson and Davis 1991), and thus that trust in exchange relationships—even without legal and contractual governance protections—will be common.