Trustworthiness as an Economic Asset
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in part, on their identity. Formal and informal contracts are agreed on; business
values and beliefs are shared and understood.
Second, the predominant business relationships have a degree of semistrong
trust as their central feature. Contrary to the standard production theory of the
firm, the agribusiness world is characterized by exchanges where vulnerabilities
exist, and the executive is protected via formal or informal contracts, reputation,
or by a third party enforcing compliance. This finding challenges the widely
taught view of the firm as primarily a technological relationship (i.e., production
function) stripped of all human identity. Interaction with input suppliers and
customers is the major activity of the business firm, according to these six
owner/operators.
In response to Barney and Hansen’s (1994) “guess” about strong trust, we
found that strong trust is found in the three types of business relationships to
varying degrees. A set of shared values, principles, and standards do not protect
the executive in all, or even most, exchanges, but the existence of internalized
trustworthiness exists and is not “rare.” As previously noted, strong trust is most
evident with economically important employees who share responsibility for
managing the firm.
Of the six businesses, only the retail nursery was directly interacting with the
consumer of the final product in the agribusiness distribution chain. We hypoth-
esize that the closer the business is to large numbers of the final consumers, the
more prevalent weak trust will become in these business relationships. The
owner/operator of the retail nursery in this study viewed all his customer
relationships as commodity-like where there is limited support for opportunism.
Price dominates all sales in this firm.
Selected Implications for Agribusiness Managers and
Researchers
These six business experiments revealed that
• Investments in trust-based relationships can produce competitive advantages
based on noncalculative behavior.
• Strong-form trust relationships with employees, although not always possible or
appropriate, are a legitimate means for achieving superior economic perfor-
mance.
• The portfolio of governance mechanisms ranging from the market to strong-form
trust should be evaluated continuously in an effort to reduce transaction costs.
• Ex ante and ex post facto contracting talents serve the agribusiness executive
well because most key business transactions are characterized by some degree of
semistrong-form trust.