Abstract

The relationship between trust and venture performance has been systematically examined on samples from developed economies, frequently producing positive associations. However, it is not clear if trust plays a similar positive role in base-of-the-pyramid (BOP) markets, which are characterized by weak formal institutions and can leave entrepreneurs with little recourse if others act opportunistically. In this paper, we examine: (a) entrepreneurs’ trust in their exchange partners and its influence on entrepreneurial venture performance in BOP markets and (b) key conditions that moderate this relationship. We focus on three theoretically relevant exchange conditions that center on entrepreneurs’ ability to: (1) draw upon legal recourse in cases of opportunism (i.e., a venture’s legal (in)formality), (2) absorb losses when experimenting with trust (i.e., the availability of slack resources), and (3) know when to trust (i.e., the entrepreneurs’ level of education).

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