Trust – a Substitute or Complement for Control? Evidence from Germany

Abstract

Co-operative agreements are often characterized as unstable, risky or dangerous due to the uncertainty regarding a partner’s future behaviour. However, firms still enter into cooperative relationships as governance structures that promote safety and stability theoretically exist. While standard co-operation theory encourages the use of control measures to reduce the risk of exploitation, scholars have increasingly criticized the strong emphasis on control and stressed the importance of trust. The concepts of trust and control are both well understood. However, little consensus exists regarding whether trust and control are substitutes or complements. This paper attempts to determine the relationship between trust and control by analyzing data from co-operative relationships of 67 German small and medium-sized enterprises. Results indicate that a substitutive relationship between control and trust exists.