Effects of Trust and Governance on Relational Risk

Abstract

In transaction cost economics, trust has been treated as redundant or even misleading. This study tested the effects of governance and trust on the risk perceived by agents of firms in alliances. Two dimensions of relational risk were assessed: the probability that something will go wrong and the size of the loss incurred when it does. Hypotheses, tested with survey data on the customer relations of ten suppliers of electrical/electronic components, were well corroborated, with trust-related variables as well as others found to have significant effects.