Description
For Gulati (1995b: 93), trust avoids contracting costs, lowers the need for monitoring, and facilitates contractual adaptation. Trust counteracts fears of opportunistic behavior and as a result, is likely to limit the transaction costs associated with an exchange. This means that trust can substitute for contracts in many exchanges. Uzzi (1997) however holds that the embedding or fixing of exchanges within social structures circumvents and thus economizes on time otherwise spent in costly contract renegotiations, while Larson (1992) argues that formal contracts are rather unimportant in the exchange agreements examined. Poppo et al (2002) also opine that informal social controls push formal contracts to the background. If one party trusts the other, there is simply little need for contractually specifying actions and that relational governance lo