Numerous definitions of trust and trustworthiness have been presented in the literature (Gambetta 1988; Bradach and Eccles 1989; Lewicki and Bunker 1994). For purposes of this chapter, Sabel’s definition of trust (1993: 1133) has been adopted: trust is the mutual confidence that no party to an exchange will exploit another’s vulnerabilities.
Parties to an exchange can be vulnerable in several different ways. For example, when parties to an exchange find it very costly to accurately evaluate the quality of the resources or assets others assert they will bring to an exchange, these economic actors are subject to adverse selection vulnerabilities (Akerlof 1970). When parties to an exchange find it very costly to accurately evaluate the quality of the resources or assets others are actually offering in an exchange, these economic actors are subject to moral hazard vulnerabilities (Holmstrom 1979). Also, when parties to an exchange make large, asymmetric transaction-specific investments in an exchange, they are subject to holdup vulnerabilities (Klein, Crawford, and Alchian 1978). According to Sabel, when parties to an exchange trust each other, they share a mutual confidence that others will not exploit any adverse selection, moral hazard, holdup, or any other vulnerabilities that might exist in a particular exchange.
A definition of trustworthiness follows directly from Sabel’s definition of trust. As the word itself implies, an exchange partner is trustworthy when it is worthy of the trust of others. An exchange partner worthy of trust is one that will not exploit other’s exchange vulnerabilities. Note that while trust is an attribute of a relationship between exchange partners, trustwor- thiness is an attribute of individual exchange partners.
In many ways opportunism is the opposite of trust. A firm’s actions are opportunistic to the extent that they take advantage of another’s exchange vulnerabilities. Williamson (1979) emphasizes firms exploit- ing holdup vulnerabilities of exchange partners, caused by asymmetric transaction-specific investment. However, the exploitation of other exchange vulnerabilities, including adverse selection and moral hazard vulnerabilities, can also be opportunistic in nature.
Source: Barney Jay B., Clark Delwyn N. (2007), Resource-Based Theory: Creating and Sustaining Competitive Advantage, Oxford University Press; Illustrated edition.