DOES TRUST MATTER?—A CROSS CULTURAL VIEW ON ENTREPRENEURSHIP IN DIFFERENT TRUST MILIEUS
Friederike
Welter, Rhine-Westfalia Institute for Economic Research Essen
Teemu
Kautonen, RWI Essen
Alexander
Chepurenko, RIISNP, Moscow
Elena Malieva,
University of Bremen
Urve Venesaar,
Technical University, Tallinn
Principal Topic
In an unstable environment with a weak state deficient legal regulations, non-existent financial systems, etc., informal networks and contacts often play a key role in helping entrepreneurs to mobilise resources, and to cope with the constraints imposed by the environment. This indicates the importance of personal trust for entering entrepreneurship as well as for consequent business development and growth. Whereas personal trust can exist regardless of any formal institutions, institutional trust requires stability and predictability of the environment. More specifically, the paper will explore the role trust plays in influencing entrepreneurship and business development in different environments.
Method
The paper is based on an ongoing international collaborative research project (financed by the Volkswagen Foundation) which includes researchers from Estonia, Germany, Great Britain, Italy and Russia. Data comes from a survey of entrepreneurs in Germany (197), Russia (400) and Estonia (105) in selected manufacturing, trade and service sectors. This data allows to analyze the characteristics of enterprises, entrepreneurs and their business relationships across countries and sectors and the specific role of trust.
Results and Implications
The analysis demonstrates a specific role for personal trust with sectoral, regional and some national differences. Generally, personal trust which manifests itself in the reputation of possible business partners, plays an important role in preparing new deals, in Estonia and Russia also when solving business problems or for credit transactions. The respective roles of personal and institutional trust also depend on the environment. In a functioning institutional environment (e.g., Germany, core regions in transition economies) personal trust mainly plays a complementary role for entrepreneurs whilst in inadequate environments (e.g., periphery regions in Estonia, Russia and East Germany) it substitutes for some of the institutional deficiencies, thus explaining distinctive forms of entrepreneurial behaviour.
The main contribution of our research is twofold: The paper allows us to compare entrepreneurship across different trust milieus on sectoral, regional and national level. Thus, it can contribute to a better understanding of entrepreneurship and its development in relation to its specific environment(s) which will benefit both academicians and those involved in supporting enterprises.
CONTACT: Friederike Welter, RWI Essen, 45128, Germany; (T) +49 (201) 8149-268; (F) +49 (201) 8149-200; welter@rwi-essen.de
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