IDEAS home Printed from https://ideas.repec.org/a/eee/inecon/v100y2016icp1-13.html
   My bibliography  Save this article

Trust, firm organization, and the pattern of comparative advantage

Author

Listed:
  • Cingano, Federico
  • Pinotti, Paolo

Abstract

Interpersonal trust favors the delegation of decisions and tasks within firms, allowing the expansion of more productive units. We show that this interaction between trust and firm organization contributes to shaping the pattern of comparative advantage: high-trust regions and countries exhibit larger value-added and export shares in delegation-intensive industries relative to other industries. Consistent with the idea that trust allows firms to expand beyond a narrow circle of family members and friends, such effects are driven by an increase in average firm size, reflecting in turn a shift of the size distribution away from the smallest firms and toward the small-to-medium ones. According to our estimates, trust is no less relevant than human or physical capital, or institutions in shaping the pattern of comparative advantage.

Suggested Citation

  • Cingano, Federico & Pinotti, Paolo, 2016. "Trust, firm organization, and the pattern of comparative advantage," Journal of International Economics, Elsevier, vol. 100(C), pages 1-13.
    • Handle: RePEc:eee:inecon:v:100:y:2016:i:c:p:1-13
    DOI: 10.1016/j.jinteco.2016.01.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0022199616300034
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jinteco.2016.01.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Andrea Bassanini & Luca Nunziata & Danielle Venn, 2009. "Job protection legislation and productivity growth in OECD countries [Appropriate growth policy: a unifying framework]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 24(58), pages 349-402.
    2. Ferguson, Shon & Formai, Sara, 2013. "Institution-driven comparative advantage and organizational choice," Journal of International Economics, Elsevier, vol. 90(1), pages 193-200.
    3. Jakub Kastl & David Martimort & Salvatore Piccolo, 2013. "Delegation, Ownership Concentration and R & D Spending: Evidence From I taly," Journal of Industrial Economics, Wiley Blackwell, vol. 61(1), pages 84-107, March.
    4. Luigi Guiso & Tullio Jappelli & Mario Padula & Marco Pagano, 2004. "Financial market integration and economic growth in the EU [‘International measures of schooling years and schooling quality’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 19(40), pages 524-577.
    5. Raymond Fisman & Virginia Sarria Allende, 2010. "Regulation of entry and the distortion of industrial organization," Journal of Applied Economics, Universidad del CEMA, vol. 13, pages 91-111, May.
    6. Nathan Nunn, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 569-600.
    7. Thompson, Samuel B., 2011. "Simple formulas for standard errors that cluster by both firm and time," Journal of Financial Economics, Elsevier, vol. 99(1), pages 1-10, January.
    8. Raghuram G. Rajan & Luigi Zingales, 2001. "The Firm as a Dedicated Hierarchy: A Theory of the Origins and Growth of Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(3), pages 805-851.
    9. Daron Acemoglu & Philippe Aghion & Rachel Griffith & Fabrizio Zilibotti, 2010. "Vertical Integration and Technology: Theory and Evidence," Journal of the European Economic Association, MIT Press, vol. 8(5), pages 989-1033, September.
    10. Daron Acemoglu & Philippe Aghion & Claire Lelarge & John Van Reenen & Fabrizio Zilibotti, 2007. "Technology, Information, and the Decentralization of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(4), pages 1759-1799.
    11. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
    12. John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, vol. 94(1), pages 67-97, March.
    13. Andrei A. Levchenko, 2007. "Institutional Quality and International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(3), pages 791-819.
    14. La Porta, Rafael, et al, 1997. "Trust in Large Organizations," American Economic Review, American Economic Association, vol. 87(2), pages 333-338, May.
    15. Patrick Bolton & Mathias Dewatripont, 1994. "The Firm as a Communication Network," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 809-839.
    16. repec:pri:rpdevs:gamespaper.pdf is not listed on IDEAS
    17. Andrea Ichino & Giovanni Maggi, 2000. "Work Environment and Individual Background: Explaining Regional Shirking Differentials in a Large Italian Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(3), pages 1057-1090.
    18. Paolo Pinotti, 2012. "Trust, Regulation and Market Failures," The Review of Economics and Statistics, MIT Press, vol. 94(3), pages 650-658, August.
    19. Federico Cingano & Marco Leonardi & Julián Messina & Giovanni Pica, 2010. "The effects of employment protection legislation and financial market imperfections on investment: evidence from a firm-level panel of EU countries [Technology and labour regulations]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 25(61), pages 117-163.
    20. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "The Role of Social Capital in Financial Development," American Economic Review, American Economic Association, vol. 94(3), pages 526-556, June.
    21. Francesco Caselli & Nicola Gennaioli, 2013. "Dynastic Management," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 971-996, January.
    22. Cameron, A. Colin & Gelbach, Jonah B. & Miller, Douglas L., 2011. "Robust Inference With Multiway Clustering," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(2), pages 238-249.
    23. David Thesmar & Mathias Thoenig, 2000. "Creative Destruction and Firm Organization Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(4), pages 1201-1237.
    24. Paola Giuliano & Antonio Spilimbergo, 2009. "Growing Up in a Recession: Beliefs and the Macroeconomy," NBER Working Papers 15321, National Bureau of Economic Research, Inc.
    25. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
    26. Luigi Guiso & Giuseppe Parigi, 1999. "Investment and Demand Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 185-227.
    27. Dean S. Karlan, 2005. "Using Experimental Economics to Measure Social Capital and Predict Financial Decisions," American Economic Review, American Economic Association, vol. 95(5), pages 1688-1699, December.
    28. Carlin, Bruce Ian & Dorobantu, Florin & Viswanathan, S., 2009. "Public trust, the law, and financial investment," Journal of Financial Economics, Elsevier, vol. 92(3), pages 321-341, June.
    29. Nicholas Bloom & Raffaella Sadun, 2012. "The Organization of Firms Across Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(4), pages 1663-1705.
    30. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    31. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
    32. Antonio Ciccone & Elias Papaioannou, 2009. "Human Capital, the Structure of Production, and Growth," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 66-82, February.
    33. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2008. "Trusting the Stock Market," Journal of Finance, American Finance Association, vol. 63(6), pages 2557-2600, December.
    34. Philippe Aghion & Yann Algan & Pierre Cahuc, 2011. "Civil Society And The State: The Interplay Between Cooperation And Minimum Wage Regulation," Journal of the European Economic Association, European Economic Association, vol. 9(1), pages 3-42, February.
    35. Nicholas Bloom & Raffaella Sadun & John Van Reenen, 2010. "Recent Advances in the Empirics of Organizational Economics," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 105-137, September.
    36. Stijn Claessens & Luc Laeven, 2003. "Financial Development, Property Rights, and Growth," Journal of Finance, American Finance Association, vol. 58(6), pages 2401-2436, December.
    37. Chun-Fang Chiang & Brian Knight, 2011. "Media Bias and Influence: Evidence from Newspaper Endorsements," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(3), pages 795-820.
    38. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    39. Marianne Bertrand & Antoinette Schoar, 2006. "The Role of Family in Family Firms," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 73-96, Spring.
    40. Staiger, Robert W., 1988. "A specification test of the Heckscher-Ohlin theory," Journal of International Economics, Elsevier, vol. 25(1-2), pages 129-141, August.
    41. repec:pri:rpdevs:gamespaper is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Antonio Ciccone & Elias Papaioannou, 2016. "Estimating Cross-Industry Cross-Country Interaction Models Using Benchmark Industry Characteristics," NBER Working Papers 22368, National Bureau of Economic Research, Inc.
    2. Hasan, Iftekhar & Manfredonia, Stefano & Noth, Felix, 2020. "Cultural resilience and economic recovery: Evidence from Hurricane Katrina," IWH Discussion Papers 16/2020, Halle Institute for Economic Research (IWH).
    3. Fan, Haichao & Li, Chang & Xue, Chang & Yu, Miaojie, 2023. "Clan culture and patterns of industrial specialization in China," Journal of Economic Behavior & Organization, Elsevier, vol. 207(C), pages 457-478.
    4. Ron H. Chan & Edward Manderson & Fan Zhang, 2022. "Indirect Energy Costs and Comparative Advantage," Economics Discussion Paper Series 2206, Economics, The University of Manchester.
    5. Christophe J. Godlewski & Hong Nhung Le, 2024. "Family ties and firm performance empirical evidence from East Asia," Post-Print hal-04435944, HAL.
    6. Brandon N. Cline & Claudia R. Williamson, 2020. "Trust, regulation, and contracting institutions," European Financial Management, European Financial Management Association, vol. 26(4), pages 859-895, September.
    7. Roberto Ganau & Andrés Rodríguez‐Pose, 2023. "Firm‐level productivity growth returns of social capital: Evidence from Western Europe," Journal of Regional Science, Wiley Blackwell, vol. 63(3), pages 529-551, June.
    8. Amore, Mario Daniele & Epure, Mircea, 2021. "Riding out of a financial crisis: The joint effect of trust and corporate ownership," Journal of Comparative Economics, Elsevier, vol. 49(1), pages 92-109.
    9. Abdelsalam, Omneya & Chantziaras, Antonios & Batten, Jonathan A. & Aysan, Ahmet Faruk, 2021. "Major shareholders’ trust and market risk: Substituting weak institutions with trust," Journal of Corporate Finance, Elsevier, vol. 66(C).
    10. Keefer, Philip & Vlaicu, Razvan, 2022. "Employee Trust and Performance Constraints in Public Sector Organizations," IDB Publications (Working Papers) 12572, Inter-American Development Bank.
    11. Cumming, Douglas & Ge, Ying & Lai, Huiwen, 2020. "Trust and quality uncertainty in global value chains," Journal of Multinational Financial Management, Elsevier, vol. 57.
    12. Zhu, Ling & Kong, Dongmin, 2022. "Does government transparency shape firm decentralization? Evidence from a natural experiment in China," Emerging Markets Review, Elsevier, vol. 53(C).
    13. Dongmin Kong & Ling Zhu & Ni Qin, 2022. "Does corruption shape firm centralisation? Evidence from state‐owned enterprises in China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(3), pages 3365-3395, September.
    14. García-Vega, María & Huergo, Elena, 2017. "Trust and technology transfers," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 92-104.
    15. Davide Rizzotti & Claudia Frisenna & Roberta Mazzone, 2017. "The impact of family owners’ monitoring on CEO turnover decisions and the role of trust," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 21(3), pages 599-621, September.
    16. José De Sousa & Amélie Guillin & Julie Lochard & Arthur Silve, 2020. "Trust and Specialization: Evidence from U.S. States," Cahiers de recherche 2010, Centre de recherche sur les risques, les enjeux économiques, et les politiques publiques.
    17. Rodríguez-Pose, Andrés & Ganau, Roberto, 2023. "Firm-level productivity growth returns of social capital: Evidence from Western Europe," CEPR Discussion Papers 17979, C.E.P.R. Discussion Papers.
    18. Majocchi, Antonio & D’Angelo, Alfredo & Forlani, Emanuele & Buck, Trevor, 2018. "Bifurcation bias and exporting: Can foreign work experience be an answer? Insight from European family SMEs," Journal of World Business, Elsevier, vol. 53(2), pages 237-247.
    19. Asuyama, Yoko, 2020. "Delegation to workers across countries and industries: Interacting effects of social capital and coordination needs," International Journal of Industrial Organization, Elsevier, vol. 69(C).
    20. Ren, Meixu & Zhao, Jinxuan & Zhao, Jingmei, 2023. "Why is it difficult for Chinese companies to operate across regions in China?—Evidence from zombie companies," International Review of Financial Analysis, Elsevier, vol. 87(C).
    21. Miller, Danny & Le Breton-Miller, Isabelle & Amore, Mario Daniele & Minichilli, Alessandro & Corbetta, Guido, 2017. "Institutional logics, family firm governance and performance," Journal of Business Venturing, Elsevier, vol. 32(6), pages 674-693.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Federico Cingano & Paolo Pinotti, 2012. "Trust, Firm Organization and the Structure of Production," Working Papers 053, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi.
    2. Algan, Yann & Cahuc, Pierre, 2014. "Trust, Growth, and Well-Being: New Evidence and Policy Implications," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 2, pages 49-120, Elsevier.
    3. Martin Strieborny & Madina Kukenova, 2016. "Investment in Relationship-Specific Assets: Does Finance Matter?," Review of Finance, European Finance Association, vol. 20(4), pages 1487-1515.
    4. Yann Algan & Pierre Cahuc, 2014. "Trust, Well-Being and Growth: New Evidence and Policy Implications," Post-Print hal-01169659, HAL.
    5. Bloom, Nicholas & Van Reenen, John, 2011. "Human Resource Management and Productivity," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 19, pages 1697-1767, Elsevier.
    6. Yann Algan & Pierre Cahuc, 2014. "Trust, Well-Being and Growth: New Evidence and Policy Implications," Post-Print hal-01169659, HAL.
    7. repec:hal:spmain:info:hdl:2441/33o86cn6qp83dot08iir97915s is not listed on IDEAS
    8. Antonio Ciccone & Elias Papaioannou, 2016. "Estimating Cross-Industry Cross-Country Interaction Models Using Benchmark Industry Characteristics," NBER Working Papers 22368, National Bureau of Economic Research, Inc.
    9. Matthias Bürker & G. Alfredo Minerva, 2014. "Civic capital and the size distribution of plants: short-run dynamics and long-run equilibrium," Journal of Economic Geography, Oxford University Press, vol. 14(4), pages 797-847.
    10. Antonio Ciccone & Elias Papaioannou, 2010. "Estimating cross-industry cross-country models using benchmark industry characteristics," Economics Working Papers 1235, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2016.
    11. Matthias Bürker & G. Alfredo Minerva, 2014. "Civic capital and the size distribution of plants: short-run dynamics and long-run equilibrium," Journal of Economic Geography, Oxford University Press, vol. 14(4), pages 797-847.
    12. José De Sousa & Amélie Guillin & Julie Lochard & Arthur Silve, 2020. "Trust and Specialization: Evidence from U.S. States," Cahiers de recherche 2010, Centre de recherche sur les risques, les enjeux économiques, et les politiques publiques.
    13. Nicholas Bloom & Raffaella Sadun, 2012. "The Organization of Firms Across Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(4), pages 1663-1705.
    14. Randall Morck, 2011. "Finance and Governance in Developing Economies," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 375-406, December.
    15. Brandon N. Cline & Claudia R. Williamson, 2020. "Trust, regulation, and contracting institutions," European Financial Management, European Financial Management Association, vol. 26(4), pages 859-895, September.
    16. Athanasouli, Daphne & Goujard, Antoine, 2015. "Corruption and management practices: Firm level evidence," Journal of Comparative Economics, Elsevier, vol. 43(4), pages 1014-1034.
    17. Nurullah Gur, 2015. "Trust and the wealth of nations," Progress in Development Studies, , vol. 15(2), pages 107-124, April.
    18. Guido Tabellini, 2007. "Institutions and Culture," Working Papers 330, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    19. Beutler, Toni & Grobéty, Mathieu, 2019. "The collateral channel under imperfect debt enforcement," European Economic Review, Elsevier, vol. 111(C), pages 336-359.
    20. Papaioannou, Elias, 2007. "Finance and growth: a macroeconomic assessment of the evidence from a European angle," Working Paper Series 787, European Central Bank.
    21. Amore, Mario Daniele & Epure, Mircea, 2021. "Riding out of a financial crisis: The joint effect of trust and corporate ownership," Journal of Comparative Economics, Elsevier, vol. 49(1), pages 92-109.

    More about this item

    Keywords

    Trust; Delegation; Comparative advantage; Firm size;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:inecon:v:100:y:2016:i:c:p:1-13. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505552 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.