Understanding trust in international alliances

Many firms are discovering that formal contracts, while necessary, are nor a substitute for informal understandings. Trust plays an important (often dominant) role in successful alliances, and managers often cite lack of trust as a key reason for failed alliances. This paper attempts to deepen our understanding of trust, by systematically examining the psychological, sociological, and economic components of trust, intercultural differences in the notion of trust, and the various mechanisms through which trust may be generated. A follow-up paper, "Building Trust in International Alliances," shows how partners can proactively manage an alliance relationship in order to develop trust.