Trust, Institutions, and Institutional Change: Industrial Districts and the Social Capital Hypothesis

Much current work in the social sciences seeks to understand the effects of trust and social capital on economic and political outcomes. However, the sources of trust remain unclear. In this article, the authors articulate a basic theory of the relationship between institutions and trust. The authors apply this theory to industrial districts, geographically concentrated areas of small firm production, which involve extensive cooperation in the production process. Changes in power relations affect patterns of production; the authors suggest that they also have knock-on consequences for trust and cooperation among actors.