DOES TRUST PROMOTE ENTREPRENEURSHIP IN A DEVELOPING COUNTRY?

Kitae Sohn and Illoong Kwon ()
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Kitae Sohn: Department of Economics, Konkuk University, 120 Neungdong-ro, Gwangjin-gu, Seoul 05029, South Korea

The Singapore Economic Review (SER), 2018, vol. 63, issue 05, 1385-1403

Abstract: Trust was found to promote entrepreneurship in the US. We investigated whether this was true in a developing country, Indonesia. We failed to replicate this; this failure was true whether trust was estimated at the individual or community level or whether ordinary least squares (OLS) or two stage least squares (2SLS) was employed. We reconciled the difference between our results and those for the US by arguing that the weak enforcement of property rights in developing countries and the consequent hold-up problem make it more efficient for entrepreneurs to produce generic goods than relationship-specific goods—producing generic goods does not depend on trust.

Keywords: Trust; entrepreneurship; institution; hold-up problem; Indonesia (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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DOI: 10.1142/S0217590816500144

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