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Handbook of Trust Research

Edited by Reinhard Bachmann and Akbar Zaheer

The Handbook of Trust Research presents a timely and comprehensive account of the most important work undertaken in this lively and emerging field over the past ten to fifteen years. Presenting a broad range of approaches to issues on trust, the Handbook features 22 articles from a variety of disciplines on the study of trust in both organizational and societal contexts. With contributions from some of the most eminent names in the field of trust research, this international collaboration is an imaginative and informative reference tool to aid research in this engaging area for years to come.
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Chapter 17: An Ethical Analysis of the Trust Relationship

Sanjay Banerjee, Norman E. Bowie and Carla Pavone


Sanjay Banerjee, Norman E. Bowie and Carla Pavone Introduction Discussions of trust and trustworthiness are under intense discussion in management. Both practitioners and academics are parties to the conversation. With respect to the analysis of these two concepts, especially in a business context, most discussants adopt either an economic analysis of the concept or a sociological analysis.1 Jones and Bowie (1998) have argued that neither analysis fully captures the nature of the concepts. An economic account of trust looks at the conditions under which it is rational (in one’s selfinterest) to trust. The economic account also emphasizes the efficiency of trust. A growing literature of trust underscores its importance to economic life (e.g. Gambetta, 1988; Misztal, 1996; Rousseau et al., 1998; Smith et al., 1995). Trust seems to be beneficial to firms and organizations: it lowers agency and transaction costs (Frank, 1988; Jones, 1995), promotes efficient market exchanges (Arrow, 1974; Smith et al., 1995), improves cooperation (Mayer et al., 1995; Ring and Van de Van, 1992; Smith et al., 1995) and indeed enhances firms’ ability to adapt to complexity and change (Korsgaard et al., 1995; McAllister, 1995). Trust also is described as an essential ingredient for innovation (Hosmer, 1994) and scientific collaboration. Flores and Solomon (1998, p. 208) agree that a strictly economic definition of trust is inadequate and that, at its core, trust is an ethical concept: Economic approaches to trust, while well-intended and pointing in the right direction, are dangerously incomplete and misleading....

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