Trust and Political Economy: Institutions and the Sources of Interfirm Cooperation
Year: 2005
Type: preprint
Abstract: It is difficult for political science theories of trust and cooperation to account for the radical levels of dis-integration found in classical industrial districts. However, the existence of apparently economically irrational forms of trust in the political economy, as well as the failure of political culture theory to explain why high-trust forms of production can be found in a low-trust country, can be explained by institutions.Simply put, if institutions have important independent effects on trust and cooperation, variation in institutions will be associated with variations in trust between actors. Two case studies of cooperation between firms in industrial districts are used to test this hypothesis.The two districts studied were the packaging machinery district in Bologna, Italy, and the machine tool district of Stuttgart, Germany.In Bologna, informal institutions gave actors incentives to behave in a trustworthy manner and led to the dissemination of information, which in turn allowed actors to trust each other.In the German case study, the absence of informal institutions made it difficult for firms to trust each other enough to cooperate through the kinds of extensive subcontracting found in Italy.When German firms did rely on subcontracting, it appeared to involve formal institutions. Taken together, the case studies support the hypothesis: a rational choice institutionalist approach provides a good explanation of observed patterns of cooperation. (SAA)
Source: SSRN Electronic Journal
Author: Henry Farrell
Institution: George Washington University
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3123932713