TRUSTWORTHINESS AS A SOURCE OF COMPETITIVE ADVANTAGE

Three types of trust in economic exchanges are identified: weak form t rust, semi-strong form trust, and strong form trust. It is shown that weak form trust can only be a source of competitive advantage when com petitors invest in unnecessary and expensive governance mechanisms. Se mi-strong form trust can be a source of competitive advantage when com petitors have differential exchange governance skills and abilities, a nd when these skills and abilities are costly to imitate. The conditio ns under which strong form trust can be a source of competitive advant age are also identified. Implications of this analysis for theoretical and empirical work in strategic management are discussed.