Trust, Social Networks and Enterprise Development

International Entrepreneurship and Management Journal 1, 367–379, 2005 c 2005 Springer Science + Business Media, Inc. Manufactured in The United States.

Trust, Social Networks and Enterprise Development: Exploring Evidence from East and West Germany FRIEDERIKE WELTER∗ [email protected]; [email protected] University of Siegen, Chair “ProKMU”, FB 5, Hölderlinstr. 3, D-57068 Siegen, & RWI, Essen, Germany TEEMU KAUTONEN [email protected] University of Newcastle Business School, 2nd Floor Armstrong Building, Newcastle upon Tyne, NE1 7RU, UK

Abstract. This paper examines the role of social networks in enterprise development by comparing personal trust (as inherent in social relationships) to collective and institutional trust (derived from the wider cultural, political and legal environment). The findings indicate that there is a shift from personal towards institutional trust as the firm develops and grows, but they also confirm enterprise behaviour being based on a mixture of different trust forms. Moreover, the findings underline the difficulty of studying trust empirically, recommending longitudinal qualitative approaches for further research. Keywords:

entrepreneurship, trust, networks

Introduction Social networks of entrepreneurs have been found to play an important role in the estab¨ ¨ lishment, development and growth of small businesses (e.g., Bruderl and Preisendorfer, 1998; Chell and Baines, 1998; Greve, 1995; Jenssen, 2001). Social networks can assist in mobilising resources, getting support and help, creating legitimacy during start-up and growth, and establishing viable business relations. However, social networks, which are based on personal trust, also have limitations. The development and growth of a firm may be hampered by an over-extensive reliance on social networks, for example in cases where the business would benefit from professional assistance from a source outside the known group of friends and partners. In this context, the availability of collective and institutional trust in the cultural, political and legal environment plays a crucial role, as these forms of trust enable the firm to enter into transactions also with previously unknown actors. Based on this argumentation, the present paper investigates the role of social networks and personal trust vis-à-vis collective and institutional trust in enterprise development, discussing advantages and limitations of the concepts as well as their implications to further entrepreneurship research. The exploratory empirical discussion draws on both qualitative and quantitative data collected in East and West Germany as part of an international collaborative ∗ Corresponding author. University of Siegen, Chair “ProKMU”, FB 5, Holderlinstr. ¨ 3, D-57068 Siegen, & RWI, Essen, Germany.

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research project sponsored by the VW-Foundation, in which colleagues from Estonia, Italy, Russia and the UK participated. A particularly interesting aspect in the regional comparison is the possible effect of the socialist legacy on trust milieus in East Germany. The focus of our analysis is on the sources of help and support in different stages of enterprise development, as previous research lets us assume that social networks and trust play an important role in this context. Both the survey data drawn from a non-representative sample of 197 companies and the supplementary 16 case studies allow us to examine these issues by comparing East and West German environments. Trust, social networks and enterprise development The particular focus of this paper is on examining the roles of different trust categories in selecting the sources to which entrepreneurs turn in order to access resources or assistance. Before proceeding to discuss the trust categories, however, it is necessary to establish what we mean by trust. Gambetta’s (1988, p. 217) frequently cited definition determines trust as a subjective probability of the trustee performing “an action that is beneficial or at least not detrimental to us,” which is “high enough for us to consider in engaging in some form of co-operation with him.” The assessment of the subjective probability can be described as reflected trustworthiness (Nooteboom, 2002). Hence, the subjective probability is based on the trustor’s assessment of the reasons why the trustee would behave in a trustworthy manner. This assessment, on the other hand, is based on the information that the trustor has about the trustee, the situation and the surrounding environment. This information forms the basis on which we distinguish three trust categories: personal trust, collective trust and institutional trust. These categories and their implications for enterprise development are elaborated in the following sections. Personal trust and social networks Few studies have researched the role of trust in creating and developing a new venture, whilst most related research has focused on the importance of social networks for venture creation and business growth. However, this research allows us to assess the role of personal trust in an indirect way, as social networks are considered an indicator of a certain degree of personal trust. The information used as a basis for the trust decision in this context can be derived from previous experiences with the trustee or information about the trustee received from third parties known to the trustor. Both of these information sources are related to social networks, which we define as the group of directly and indirectly (“friend of a friend”) known people. We refer to this as personal trust, which is generally the strongest form of trust (Sztompka, 1999). When personal trust is based on information received from a direct acquaintance in the social network other than the trustee, this acquaintance acts as a go-between and becomes the target of trust (Coleman, 1990; Nooteboom, 2002). In other words, the original trustor decides that he can trust the trustee based on information received from the trusted go-between.

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In a review on business networks, Blundel and Smith (2001) conclude that during venture creation most entrepreneurs rely on informal sources in their personal networks in order to mobilise resources, especially so before the venture is set up. In his study of 106 Norwegian entrepreneurs, Greve (1995) found that while it is important for entrepreneurs to maintain a number of weak ties in order to obtain non-redundant information (see also Burt, 2000), it is also important to belong to a relatively dense network, where the relationships contain trust. Trust, the author argues, is important in the foundation process in particular because the entrepreneurs have to discuss their idea with several people, whereby the risk of one of these people copying the idea arises. Furthermore, Jenssen (2001) emphasises the role networks play in creating legitimacy for new ventures. This is directly trust-related, as the lack of legitimacy reflects a lack of trust insofar as new firms are not known, i.e. not being “trusted” by their potential customers and suppliers. In this context, Aldrich (2000) indicates that successful new entrepreneurs are more likely to build networks of trust, which assist them in creating legitimacy within the market. He refers to an earlier, unpublished paper by Gartner and Low (1990, cited in Aldrich, 2000, p. 217), where the authors argue that “organizations emerge when entrepreneurs are successful in achieving an understanding among the trusting parties—potential customers, creditors, suppliers, and other individuals and organizations—that things will work out.” This is done through trust-building activities, which thus gain particular importance during the venture creation stage.

Collective and institutional trust However, whereas social relations based on personal trust are functional as a basis for business in the initial phase, an over-extensive reliance on social networks can become a liability when the business develops. As Raiser (1999) points out, the main disadvantage of personal trust is its exclusiveness. If an enterprise acts only within a network of known actors, it may miss out on opportunities (Lageman, 2001). This becomes apparent in studies researching entrepreneurial behaviour in a transition context, where the environment is often outright hostile and subject to frequent and unexpected changes (Welter and Smallbone, 2003). A typical example reported by the authors concerns recruitment practices in Russian enterprises, where entrepreneurs emphasised the advantages of informal recruitment amongst family, friends and former colleagues in contributing to the high commitment of their employees to the business. However, they also stressed the difficulties of finding suitably qualified personnel within these circles, which would be needed to grow their enterprises in the long run. Hence, in order to maintain growth, businesses will eventually need to trust actors that they do not know via their social networks. But trust can exist also without previous experiences with the trustee (McKnight, Cummings and Chervany, 1998). To account for this characteristic of trust and in order to analyse entrepreneurs’ choices of sources of resources and assistance also from a wider “embedded” perspective (see Granovetter, 1985; Johannisson, Ramirez-Pasillas and Karlsson, 2002), we defined two further trust categories, namely collective trust and institutional trust.

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The concept of collective trust is two-fold. On the one hand, it refers to general reputations, which may be based on hearsay through networks (but where the informant does not have personal experiences with the trustee), but also on information from articles in newspapers and trade journals. Also general presence in the media, for example through visible and regular advertising, can act as a signal of trustworthiness. On the other hand, collective trust is akin to Zucker’s (1986) concept of characteristicsbased trust. It refers to group behaviour based on formal and informal codes of conduct, for instance within business associations, business fields or sectors. For example, if an entrepreneur approaches a chartered accountant for support, he may assume that the accountant’s business conduct will be in adherence to the norms of the trade such as maintaining confidentiality. Thus, the main difference to reputation is that the decision to trust is not based on information regarding a person or organisation as such, but on stereotypes that the trustor associates with the members of a group. These, of course, may or may not be correct. Given the availability of either reputation or certain group affiliations, collective trust allows entrepreneurs to enter into business relations with previously unknown people. However, in modern market economies this needs to be complemented by institutional trust (Raiser, 1999; Zucker, 1986). Similarly to collective trust, institutional trust is based on formal and informal codes of conduct. But instead of being associated with a specific group, institutional trust applies across a region such as a city, state or country. One could assume that the same laws and cultural norms are valid within a single country, regardless of whether the trusting parties belong to certain industrial sectors or trade associations. Institutional trust and in particular the framework of laws and regulations enforced by the state enable the entrepreneur to engage in business activity with any person or organisation, regardless of group memberships, by means of formal contracts. Contracts are perhaps the most common manifestation of institutional trust in the business world, and their effectiveness depends on sanctions and well-functioning enforcement mechanisms such as courts as well as the willingness and capability of entrepreneurs to recur to such measures. This might prove too costly especially for very small businesses.

Trust categories and enterprise development across different environments How does the reliance on personal trust compared to collective and institutional trust differ over the course of enterprise development? Several research studies have demonstrated that networks are important during the establishment, development and growth ¨ ¨ of small businesses (e.g., Bruderl and Preisendorfer, 1998; Chell and Baines, 1998; Greve, 1995; Jenssen, 2001). The model of network evolution developed by Butler and Hansen (1991) indicates that trust forms evolve alongside stages of business development. During the pre-start-up phase entrepreneurs mainly rely on social networks, which implies a dominant role for personal trust. When the business is set up, the networks become more business-oriented. The role of go-betweens in generating personal trust is apparent in recommendations and reputations of business partners complement


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personal trust. This is supported by a recent study by Lechner and Dowling (2002) in the Munich IT cluster, where the authors found that interviewed firms would not have been able to establish business relationships without their existing social networks, which were usually created when working for the former employer. Therefore, we propose that during venture creation and the initial stages of business development personal trust dominates, whilst in later stages the role of the other trust categories increases. Moreover, we assume that the roles of the trust categories vary between different environments. Although East Germany adopted the political and legal framework of West Germany, the socialist legacy can be assumed to play a role. For example, Schwarz (2000) found that East German entrepreneurs tend towards formal arrangements more often than their West German counterparts. One explanation is that this practice is rooted in the socialist past of strongly institutionalised and regulated relations outside one’s social sphere in East Germany (Nuissl, Schwarz and Thomas, 2002), which underlines the role of path-dependence in the evolution of informal institutions (North, 1990).

Data and method Social networks and the different forms of trust are explored based on survey and case-study data for small firms in East and West Germany. While our quantitative survey focused on describing and analysing trusting behaviour in different regional and sectoral environments, the purpose of the case studies was to enlighten the embeddedness of trust and its dynamic properties as well as to allow a “peek behind the figures.” With regard to operationalising the trust concepts developed above, we chose an indirect approach, because direct questions asking “how much trust do you have in. . . ”, would require that individuals were capable of identifying, evaluating and quantifying the level of trust in their actions. Furthermore, direct phrasing would run the risk of receiving socially desirable answers (Nuissl et al., 2002) and it would also neglect the role of tacit knowledge in trusting behaviour. Therefore, we adopted an indirect approach in our study. Relevant questions in our survey asked for the nature, extent and regulation of inter-firm relations with customers, suppliers, and business partners and intra-firm relations with employees as well as for relations with the external environment, which refers to banks, links with the regulatory environment, sources of assistance taken. We also included questions on criteria used to select business partners, customers, suppliers, the governance mechanism and the sources of assistance. In this article, we report results for different sources of help and support used and the reasons for addressing these particular sources. The survey sample consisted of 197 enterprises in East and West Germany (Greater Dresden and the Ruhr Area, respectively), concentrating on owner-managers and key decision-makers in micro and small businesses (micro firms with less than 10, small firms with 10–49 employees) in three sectors: food industry, trade and business services. The sample is not representative of the small business sector in the respective regions, sizes

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or sectors, but the choice of key variables and the structure of the sample were chosen in order to allow an investigation of different trust milieus based on a replication logic. Most of the surveyed firms are mature, while only five firms have been founded in the past two and a half years. This reflects the overall decrease in business creation in Germany since 1999 (Mittelstandsmonitor, 2003). Most West German firms were established between 1946 and 1979 (40%), while East German enterprises were founded mainly between 1990 and 1994 (62%). Interestingly 27% of the East German companies have been operational during the socialist period. Surveyed entrepreneurs are mainly between 40 and 59 years old, which reflects the over-representation of older companies in our sample. Most entrepreneurs have had a private business background before setting up their own venture, while 11% had had previous entrepreneurial experiences. The survey data are supplemented by a multiple-case study of 16 firms, eight in both East and West Germany. The survey was conducted as a telephone survey (CATI) in spring 2002, whilst the case studies were carried out as personal in-depth and semistructured interviews in winter 2002/2003. The case-study firms were chosen according to the same principles as in the survey, that is, to allow for cross-regional, cross-sectoral and size-based comparisons. Besides these theoretical replications, also literal replications were catered for through the inclusion of two or more cases in each regional, sectoral and size-based category (Yin, 2003). Three of the interviewed firms are in the food industry, five in trade and seven in business services. Furthermore, there is an additional case study of a craft firm, whose entrepreneur we decided to use as a key expert. The food industry cases include a brewery and two bakeries, the trade cases consist of two book shops, a pet shop and two IT firms, while the interviewed business-service firms are engaged in consultancy, IT, R&D engineering and harbour services. Nine of the case-study firms are small businesses, while seven are micro enterprises. As in the survey sample, most of the East German firms in our case studies were founded around 1990. However, there are two firms that were functional throughout the socialist period and one firm that was established in 2002. The West German firms are mostly established ones, only two of them were founded recently, in 2002/2003. Most of the firms are de-novo start-ups (two of them family businesses in the second or third generation), while only two had been bought.

Results and discussion In order to explore the role of different trust categories and possible changes over time, we started by examining which constraints the surveyed firms had faced in the start-up stage and whether and what sources of help and support they had turned to in overcoming these obstacles. Furthermore, in order to analyse the development of trust, we also investigated the sources of help and support that the entrepreneurs turn to in dealing with their current business problems. Not surprisingly, the major constraints faced when starting the business reflect the prevailing macroeconomic conditions as well as the heavily regulated business


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environment in Germany. Similar results have been reported in other studies as well (Mittelstandsmonitor, 2003; Sternberg and Bergmann, 2003). Interestingly, East German firms indicated the macroeconomic situation and regulations to be a problem more often than West German companies. The former illustrates the fact that East German businesses have to cope with a worse macroeconomic situation than their West German counterparts (Nuissl et al., 2002). The latter is reflected in the case studies, where East German entrepreneurs showed a more negative attitude towards authorities and regulations. One explanation for the higher frequency of regulations as a source of constraints might be, as argued in other studies, that public institutions in general are trusted less in East Germany (Grix, 1999; Meier, 1996). This would imply a lower level of institutional trust, which can be explained partly by the uncertainties associated with the transformation to a market economy and democracy in Eastern Germany. However, this argument is not supported in our case studies. Based on the interviewees’ comments, the most common complaint regarding authorities is “overbureaucratisation,” and concerning regulations their lack of transparency. This demonstrates a later stage in transition where institutional trust has been built up, and where entrepreneurs are mainly concerned with a too heavily regulated environment. Not surprisingly, the personal biographies and background of the entrepreneurs seem to play a role here. Entrepreneurs who had had positive experiences or at least lacked negative experiences with authorities and regulations also had a more positive opinion on them. For example, a book-shop owner in East Germany described his dealings with authorities when starting in 2002 as “joyously simple,” continuing that there are so few start-ups in his area nowadays that authorities handle them with care. Interestingly, entrepreneurs who had started their business during the years of re-unification (1989/1990), when East Germany experienced a boom of newly registered firms, had a more negative attitude towards authorities and regulations. This results from regulations and rules being new at that time, not known to either administrators or entrepreneurs, which left room for misinterpretation and consequently resulted in less institutional trust. One entrepreneur, who had had bad experiences and who is also involved in politics, went as far as describing authorities as “the only large business in East Germany,” adding that authorities “treat small firms badly and unfairly, degrade them and even lie to them.” This evidence supports the proposition that personal experiences of entrepreneurs affect their disposition to trust (Nuissl et al., 2002), and it also illustrates how trust into institutions changed over time. However, it does not support the aforementioned argument of a general lower level of institutional trust in East Germany. Around a third of the surveyed entrepreneurs looked for outside help in dealing with problems at start-up (Table 1). Here, the choice of “helpers” indicates that social networks and thus personal trust played an important role. Most entrepreneurs turned to regular business partners or family, followed by consultants and employees. However, care must be taken in interpreting this result solely as an indication of the predominance of personal trust, because factors such as convenience and spatial proximity of the source are also important in this context. For example, the aforementioned East

374 Table 1.

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Sources of help and support (%). Problems at start-up1

Current business problems2

Total

Business partner Family and friends3 Consultant, lawyer Employee Business development agency Business association, Chamber of Commerce Total number (n)

West Germany

East Germany

(%)

44.7 50.0 44.7 28.9 13.2

60.5 47.4 39.5 36.8 31.6

–

–

38

38

Total

no

West Germany

East Germany

(%)

no

52.6 48.7 42.1 32.9 22.4

40 37 32 25 17

45.8 35.4 35.4 26.0 17.7

69.7 33.7 42.7 27.0 29.2

57.3 34.6 38.9 26.5 23.2

106 64 72 49 43

–

–

63.5

50.6

57.3

106

76

96

89

185

Own survey. Multiple answers. Only the categories with the highest frequencies are included in the Table 1—Includes only firms that had taken help. 2—12 respondents did not answer this question and are excluded from n. 3—In case of problems at the start-up stage, this category contains only family.

German book-shop owner explained that his main reason for starting the business in the city where he had grown up (although he had lived elsewhere in the meantime) was due to the availability of friends and family to help him, among others, to refurbish shop facilities and finance the start-up. In other words, even though social networks are clearly important here, trust is not necessarily the main factor in the decision to turn to a previously known source of assistance. Consistent with the other results of this survey, business partners and business development agencies are a more important source of support for East than West German firms. One explanation is the argument put forward by Nuissl et al. (2002) that East German businesses maintain closer and stronger relations with other businesses in order to sustain their current market position against competition from large (West German) companies, which becomes apparent in the decision to whom to turn if help and support is required. Moreover, since the East German economy is still recovering from the economic transition, it is not surprising that business development agencies play a more important role as a source of help and support. In fact, one of the East German firms we interviewed in our case studies even based its business on support offered by business development agencies. The entrepreneur described his business as an “innovation service”: his firm plans and implements product innovations related to mechanical engineering for client firms. These innovations are paid for by business development agencies, and the interviewed firm offers a service package, which includes taking care of the related paperwork for its clients. The entrepreneur stated that without the funding from business development agencies his firm would go out of business, but his clients also would not be able to fund any innovations. Although the same entrepreneur complained about the long processing times for funding applications and the amount of


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paperwork involved in the process, he did not express any doubt about the intentions of the agencies or the people working in them. Hence, this may be interpreted as a sign of institutional trust in the integrity of the system. In order to assess possible changes in trust forms over time, we now turn to look at sources of help and support in solving current business problems. Here, business associations and Chambers of Commerce as well as regular business partners are the most important sources entrepreneurs turn to in case they need assistance and support. This indicates an important role for both personal and collective trust. The high number of firms turning to business associations and Chambers of Commerce for help supports the conclusion reached in other studies regarding the important role of these organisations in the German environment (Bachmann, 2001; Lane, 1997). It is not surprising that business partners become an increasingly important source of support, as once a firm establishes itself in the market it also sets up a business network consisting of regular customers, suppliers and other cooperation partners. Although factors such as convenience play a role here too, there is evidence indicating that trust is a major issue in this context. For example, a West German electronic installation company cooperates with ten direct competitors in regular information and support exchange. These cooperations have emerged in the local guild (division of the Chamber of Crafts) as the respective people have got to know each other. In this sense, collective trust supplied by the guild has provided a platform for personal trust to emerge. The entrepreneur stated “personal chemistry” and “keeping confidence” as his most important criteria for choosing these partners. He also added that if confidence is broken, the cooperation will cease. Hence, trust is clearly a major factor in choosing and maintaining the information and support exchange linkage. Furthermore, private consultants and solicitors play an important role. In general, these sources hint at a mix of collective trust and institutional trust with the specific sources of trust information including reputations, images of the profession, standards set by professional associations and laws governing the profession. However, case-study evidence also indicates that in long-term relationships with consultants we can observe a mixture of collective and personal trust. For example, this interviewee from a West German pet shop explained that when she required help, she turned to a consultant who had been advising her firm for the past 15 years. The consultant was initially chosen because of his reputation (he had worked for a major consultancy) and recommendations from colleagues in the same industry, but a closer relationship has developed over the years. In other words, the initial relationship based mainly on collective trust had developed into one based predominantly on personal trust. The same entrepreneur gave another example of an interesting intermediary arrangement to create an atmosphere of trust, which demonstrates a mixture of collective and institutional trust. An external consultant had organised a group of firms to exchange information and experiences, in which the entrepreneur had participated for six years. The group was facilitated by the consultant who, according to the entrepreneur, received a “relatively high” fee for the service. The group met on weekends every now and then and information and experiences, including financial figures, were shared very

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openly. The openness was enabled by a written contract, which specified a high monetary sanction for any misuse of the information shared in the group. The entrepreneur eventually quit the group because of the high participation fee and because there was not enough new information, as many firms were “taking rather than giving” in terms of the information exchange, which illustrates the difficulties of creating trust through formal arrangements. In this context, some of the case studies also demonstrated “collective distrust” against consultants as a profession. One East German entrepreneur engaged in ICT trade said that he would never consider hiring consultants. The reason he provided is that he feels consultants would just cause problems, because “they are not really interested in small customers.” He also thought consultants are rather dishonest and merely look for a chance to make some quick money, which in this case reflects the consulting scene in East Germany directly after re-unification (the firm was founded in 1990), where several “black sheep” turned to the new Länder. To sum up: what role(s) does trust play for entrepreneurs when looking for external support to set up and develop their firm? Here, our results confirm a picture which is familiar from previous research, that is personal trust as reflected in social networks and informal sources of assistance plays the most important role during the early stages of enterprise development. Formal sources of assistance become more important in the later stages of business development, while the importance of informal sources apart from regular business partners decreases. In our case studies, the most common manifestation of the need for formal support as the business grows is the use of tax accountants. Almost every mature firm that we interviewed relies on tax accountants, mainly due to the complexity and opaqueness of German tax regulations. A good example of the development towards formal sources is the aforementioned West German electronics installation service, whose bookkeeping was initially done by an accountant friend. But as the firm grew, the entrepreneur established a need for a professional accountant who would be available on a fulltime basis (as opposed to a friend doing bookkeeping on weekends). However, this behaviour does not imply a lack of personal trust in later business development, nor does it refer to increasing institutional trust. It describes a typical “strategic” behaviour where business founders first of all try to use their own information and those types of assistance that are easily accessible, also due to their limited (financial) resource base, and only in later stages of business development do they develop more complex strategies which involve turning to professional help (Welter, 2003). Instead of indicating fundamental changes in forms of trust, this behaviour reflects learning, as during business development entrepreneurs learn to value both the possible contribution of external formal support and they get to know their support needs. Nevertheless, the availability of collective and institutional trust in the business environment is essential in order for this behaviour to be feasible. Based on our results, both East and West Germany can be characterised as milieus where both collective and institutional trust are extensively available.


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Conclusions On the whole, the empirical evidence for sources of assistance supports the proposition formed based on previous studies that there is a shift from personal towards collective and institutional trust in business relationships during the life-cycle of the firm. However, this does not imply that collective or institutional trust substitute for personal trust, but merely that personal trust plays a less important role for the business as the firm develops and grows and entrepreneurs develop their strategic awareness (Gibb and Scott, 1985). Over time, entrepreneurs gain a better knowledge of business partners and the business environment, and they also come to know their own support needs. All of this contributes to the replacement of informal sources of assistance with more formal ones. The question remains, however, to what extent it is trust that determines the relationships analysed in this paper. Our evidence indicates that even though trust appears to play an important role especially in new firms, there are additional factors influencing the choice of helpers such as proximity and convenience of the source. Moreover, case evidence shows a mixture of different trust forms in entrepreneurial behaviour. Here, our results clearly indicate the embeddedness of entrepreneurship, but they less clearly illustrate the roles the different trust categories play in enterprise development. This is partly due to the fact that both East and West Germany are characterised by a functional institutional environment, where institutional trust is generally high compared to many other environments (Bachmann, 2001). This, on the other hand, allows entrepreneurs the use of formal contractual arrangements if required. Moreover, this indicates limitations in our research in particular with regard to the reasons for trusting related to collective and institutional trust. Our experiences show that these cannot be explored in depth within a standardised cross-sectional survey, as such trust information is often part of tacit knowledge. Moreover, the development of personal trust cannot be examined without a longitudinal (qualitative) approach. Thus, implications from our research mainly concern the operationalisation and empirical method, that is, how to study trust in the context of entrepreneurship research. In particular, what is lacking is a process perspective, which takes into account individual learning as well as focuses more explicitly on the emergence of trust. The most important question for further research would be to look into the “how,” that is how trust is built up. Not surprisingly, survey and case data indicate that mutual experiences gained in dealing with each other are one of the key factors in trust relationships. The institutional environment might well play a decisive role insofar as personal trust might develop quicker in certain contexts which provide a foundation of collective and institutional trust, such as business associations or a joint shared understanding evolving from a common history as in East Germany. It is here where further research is needed, which however—learning from our experiences in operationalising trust in empirical entrepreneurship research—needs to employ a longitudinal and mainly qualitative research approach.

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